Originations

Existing-home sales continued at a blistering pace in May, jumping 1.2%, according to figures compiled by the National Association of Realtors. May's home sale reading was the third-best ever for the industry.The NAR said sales activity in May rose 4.4% compared with that of the same month last year. NAR chief economist David Lereah said home sales continue to defy earlier expectations. "The pace of home sales so far this year has been higher than projected," he said, adding, "We still expect sales activity to ease a little, but to end this year with a new annual record." Mr. Lereah once again credited historically low mortgage rates as the driving force behind the sales numbers, but noted: "Strong activity by first-time buyers is the key to the overall health of the market because it provides liquidity for people wishing to trade into another home." The NAR can be found on the Internet at http://realtor.org.

Sales of new single-family homes climbed 12.5% in May to a record annual rate of 1.157 million units, according to the U.S. Department of Commerce.Compared with the same month last year, new-home sales rose almost 18%. The record sales pace was sparked by the lowest mortgage rates in 40 years. Meanwhile, the Commerce Department said the median sales price of a new home is now $195,000, and the average sales price is $245,000. "The seasonally adjusted estimate of new houses for sale at the end of May was 336,000 [units]," the agency said. "This represents a supply of 3.5 months at the current sale rate." The Commerce Department can be found online at http://www.doc.gov.

Kimco Realty Corp., New Hyde Park, N.Y., has agreed to sell 1.8 million shares of its common stock to UBS Securities LLC in a public offering.The net proceeds, expected to total approximately $66 million, will be used for general corporate purposes, which may include funding a portion of the capital required for Kimco's expected merger with Mid-Atlantic Realty Trust, the company said. Kimco, a real estate investment trust specializing in shopping centers, has granted the underwriter an option to buy up to an additional 270,000 shares of common stock to cover any overallotments. The REIT can be found online at http://www.kimcorealty.com.

Omega Healthcare Investors Inc., a real estate investment trust based in Timonium, Md., has closed on a new $225 million senior secured credit facility.The new facility, arranged and syndicated by GE Healthcare Financial Services, includes a $125 million term loan and a $100 million revolving line of credit, Omega said. The loan has a four-year term with a one-year extension option. The proceeds will be used to refinance Omega's two existing credit facilities and issue letters of credit, as well as for general corporate purposes. The companies can be found online at http://www.omegahealthcare.com and http://www.gehealthcare.com.

Several Massachusetts banks have agreed to pay approximately 50% of the tax liability, plus interest, imposed by a recent Massachusetts law that made income from real estate investment trust subsidiaries taxable, effective Dec. 31, 1999.This ends a dispute between the banks and the state Department of Revenue. In the late 1990s, 50 to 60 banks in the state took advantage of a tax loophole by receiving tax-free dividends from REITs. Among the banks announcing settlements were Independent Bank Corp., Century Bankcorp, Brookline Bancorp, Falmouth Bancorp, Boston Private, Seacoast Financial Services, Berkshire Hills Bancorp, Capital Crossing Bank, and CCBT.

Prime Hospitality Corp., Fairfield, N.J., has announced the impending resignation of its chief financial officer, Douglas Vicari, and the naming of a temporary successor.The lodging company said Mr. Vicari, who is also a senior vice president and a member of its board of directors, will resign June 26 to "pursue new career opportunities." He will be replaced as CFO by Richard Szymanski, the company's vice president of finance, until a permanent successor is found. Prime Hospitality, which owns, manages, and franchises more than 240 hotels, can be found on the Web at http://www.primehospitality.com.

KeyCorp's real estate capital business and The Norseman Group have launched a credit tenant note program that will allow commercial property owners to monetize their property investments.It will provide financing to commercial properties "with lease terms that are too short to fully leverage the tenant's credit." The program will allow property owners to create "an additional, secondary source of capital by leveraging income from triple-net or bond leases," the Cleveland-based KeyCorp said. The plan is ultimately to bundle the credit tenant notes as assets, securitize them, and sell them to institutional investors. The program structure will enable Key to underwrite single-tenant properties with triple-net or bond leases of 15 years or less, based on their remaining net lease income, the company said. The program, which is nonrecourse for the property owner-borrower, allows them to "monetize 100% of the excess cash flow after servicing senior debt requirements." The program does not have any restrictions on loan-to-value ratios, no lien on the real estate, and carries less refinancing risk than mezzanine financing, according to Key.

A predatory lending law similar to proposed federal legislation went into effect June 24 in Kentucky.The law, an industry bill, uses the same triggers for a high-cost loan as the federal standard under the Home Ownership and Equity Protection Act. It was described by Jon McCain, the executive director of the Kentucky Mortgage Bankers Association, as "almost a mirror" of a federal bill backed by Rep. Bob Ney, R-Ohio. Anne Marie Regan, an attorney for the Kentucky Legal Services, one of the consumer groups that introduced a competing bill, said there were no real negotiations between the two sides over the law's terms. She added that consumer advocates were considering introducing additional legislation in the next session.

A survey of bond market economists shows that they expect accelerating economic growth to push 30-year mortgage rates up to 6.0% by next June, while home sales remain at record levels."Any adverse effect of a rising mortgage rate environment is likely to be counterbalanced by rising income and employment," according to the survey by The Bond Market Association. TBMA senior vice president Michael Decker said the survey did not ask the economists about the recent management shake-up and accounting problems at Freddie Mac. However, he inferred from the results that they do not expect "any significant, systemic disruptions in the U.S. mortgage markets." TBMA president Micah Green pointed out that the global markets for Fannie Mae and Freddie Mac securities have remained strong. However, a long and protracted fight over reform legislation could be unsettling. "Whatever is or is not going to happen, we would just urge that policy-makers be sensitive to market effects and the uncertainty that prolonged activity in a politically charged environment can generate," Mr. Green said.

First Charter Corp., Charlotte, N.C., has beefed up its loan-loss provisions after identifying approximately $12.9 million of residential rental property loans that appear to have questionable appraisals and collateral value."This matter has been reported to authorities and is under investigation," the corporation said. "As a result, the corporation has increased the provision for loan losses by approximately $2.4 million." The corporation also said that, depending on the investigation's findings, "it is possible that an additional provision for loan losses may be required with respect to these loans." First Charter can be found online at http://www.firstcharter.com.

Standard and Poor's will continue to rate structured finance transactions that include loans from Kentucky after the state's predatory lending legislation goes into effect June 24.In a recent report, S&P found that damages were capped for purchasers or assignees of non-high-cost loans. Further, although there is a potential for uncapped assignee liability on high-cost loans, this exists only for "violations apparent on the face of the disclosure and promissory note," S&P said. Because of this safe-harbor provision, the agency will continue to rate transactions containing high-cost loans as well.

Jonathan Kempner has been named president and chief executive officer of the Mortgage Bankers Association of America by the MBA board of directors.The promotion of Mr. Kempner, who formerly held the titles of president and chief operating officer, came at a board meeting during the association's annual Presidents Conference. MBA Chairman John A. Courson credited Mr. Kempner with presiding over "a complete fiscal turnaround" of the organization and the resolution of staffing issues since his arrival in 2001. Mr. Kempner was also credited with balancing the association's budget and strengthening its government affairs, research, education, and communication efforts. The MBA can be found online at http://www.mbaa.org.

Former Freddie Mac executive vice president Vaughn A. Clarke, who left the government-sponsored enterprise during its audit-related management shake-up earlier this month, has resigned from the board of E*Trade Group Inc., according to a recent Securities and Exchange Commission filing.The Menlo Park, Calif.-based broker, lender, and financial services company said in the recently posted 8-K filing that it has been searching to fill the vacancy left by Mr. Clarke. Company news releases indicated that E*Trade Group had originally named Mr. Clarke to chair its board's audit committee in April. E*Trade can be found online at http://us.etrade.com, and the SEC can be found at http://www.sec.gov.

U.S. Restaurant Properties Inc., Dallas, has announced the sale of 16,000 shares of series B convertible preferred stock in a private placement.The sale raised $16 million in gross proceeds, the real estate company said. The stock carries an 8% dividend and is convertible into common shares at a fixed price of $16 per share. The offering also includes a 12-month option under which the institutional investors can invest an additional $4 million (stated value) in the series B stock at the same terms, with certain conversion price adjustments.

The rating on class A-3 of 5400 Westheimer Court Depositor Corp.'s commercial mortgage/lease finance pass-through certificates has been lowered from A-minus to BBB-plus by Standard & Poor's Ratings Services.The rating outlook is negative. In addition, the ratings on classes A-1 and A-2 were affirmed. S&P said the class A-3 certificates are dependent on the corporate credit rating of Duke Energy Corp., which was recently lowered from A-minus to BBB-plus. Duke guarantees the leases on the 5400 Westheimer Court office building in Houston, which serves as its corporate headquarters and as the collateral for the transaction. The ratings on classes A-1 and A-2 are based on the collateral, not on Duke's credit rating, S&P said.

The ratings on two classes of Lehman Brothers Floating Rate Commercial Mortgage Trust 2001-LLF-C4 multiclass pass-through certificates have been lowered by Standard & Poor's Ratings Services.The lowered ratings were as follows: class L, from BBB-minus to BB-plus; and class M, from BBB-minus to BB-minus. In addition, the ratings on four other classes in the deal were raised, and the ratings on the remaining classes were affirmed. S&P attributed the lowered ratings to a deterioration in the performance of four of the remaining 11 mortgages in the transaction: Wyndham International Portfolio, Southfield Office Portfolio, Trinity Centre (111-115 Broadway), and The Ritz Carlton-Pentagon City Hotel. The rating agency can be found online at http://www.standardandpoors.com.

Though mortgage delinquencies and foreclosures to date have been relatively moderate, there is some concern that lenders have liberalized their underwriting standards to the point that loan performance could become problematic, a homebuilder analyst said in a June 20 conference call.As a result, "some believe lenders will tighten standard in the coming year," said Robert Curran, an analyst at Fitch Ratings. He said there have been "major changes in underwriting standards" on the part of lenders, including greater percentages of mortgages with high loan-to-value ratios and higher percentages of income allocated to mortgage payments.

American Home Mortgage Inc., Melville, N.Y., has signed a definitive agreement to purchase American Mortgage LLC, Sycamore, Ill., for $1.6 million in cash.American Mortgage is jointly owned by its chief executive, Bruce Madden, and American National Bank of DeKalb County, also of Sycamore. American Mortgage had a loan volume of $2.25 billion in 2002, of which 60% was wholesale, 25% retail, and 15% online, according to the company. Last year, American Home recorded volume of $12.2 billion. The purchase will include a $550 million pipeline of locked loan applications. Mr. Madden will join American Home as senior vice president.

California's homebuilders will produce more houses this year and next than they have in nearly 15 years, but it still won't be enough to make up for a shortage of new construction that has persisted since the 1990s and to meet future demand, according to two industry groups.The California Industry Research Board expects new construction to reach 180,000 units this year, the most since 1989, and perhaps as many as 186,000 houses and apartments in 2004. Nevertheless, the California Building Industry Association says this year's output is 50,000 houses and apartments shy of the number needed to keep pace with the Golden State's ever-increasing population. "Despite all our problems, California is a great place to live and work," CBIA president Harry Elliott said at the Pacific Coast Builder Conference. "And it will continue to grow, like it or not." Robert Rivinius, chief executive officer of the 6,000-member trade association, put the cumulative housing deficit in his state at close to 1 million units, and warned that it is still growing. "While the housing starts data are good news for the homebuilding industry and the state's economy, it cannot be overemphasized that we're still not building enough housing," he said. PCBC is the nation's largest regional building industry trade show.

Just as mortgage industry prognosticators keep upping the ante for originations this year, National Association of Home Builders economists are in the process of revising their forecasts upward."2003 is becoming a fabulous year that more than likely will set another record," NAHB president Kent Conine said at the Pacific Coast Builders Conference in San Francisco. A revised housing outlook is necessary because loan rates have remained low for longer than expected, the builder-developer from Dallas explained. "Builder confidence is high, builder optimism is high," he told reporters. "Our ability to put product on the ground and our ability to sell it is quite strong."