Originations

Moody's Investors Service says the ratings of most large lodging corporations and commercial mortgage-backed securities should hold if the war in Iraq is short, although certain highly leveraged hotel companies and real estate investment trusts "could come under more rating pressure."Bill Fahy, a Moody's analyst for speculative-grade hotels, cautions that even a short conflict will affect hotels' operating performance in the near term, and that maintaining adequate liquidity is crucial. Another analyst, E.J. Park of the rating agency's CMBS group, said a brief war "will not have a significant impact on CMBS deals that we rate." However, "a prolonged military conflict or any additional terrorist attacks on U.S. soil may have negative credit implications, as hotels have been under stress for the last two years," he said. In the lodging REIT sector, the REITs are "overall below investment grade" and have about $9 billion of rated debt outstanding, Moody's said. Lesia Bates Moss, a Moody's REIT analyst, said most lodging REITs' credit ratings and profits are weak, and therefore "a prolonged ailing economy and long war would result in further downward pressure on credit ratings." Moody's can be found online at http://www.moodys.com.

Paragon Financial Corp., Ponte Vedra Beach, Fla., has announced the formation of an alliance with Signature GMAC Real Estate, a locally owned real estate company in Central Florida that is the state's largest GMAC franchise.John Nadler, Signature's president and chief operating officer, said Paragon Homefunding Inc., a Paragon subsidiary based in Maitland, Fla., will be Signature's exclusive mortgage lending partner. "With our association with Paragon, we now have the infrastructure in place to sell a home, provide the mortgage financing for that sale, and close the transaction all at one location," Mr. Nadler said. Paragon Financial can be found on the Web at http://www.paragonfinancialcorp.com.

Mack-Cali Realty Corp., Cranford, N.J., will replace McCormick & Co. Inc. in the S&P MidCap 400 Index after the close of trading March 20, Standard & Poor's has announced.Mack-Cali is a real estate investment trust specializing in office and office/flex properties in the Northeast. McCormick, a manufacturer and marketer of spices and seasonings, is being replaced because it is moving to the S&P 500 Index, S&P said. S&P can be found on the Web at http://www.standardandpoors.com.

Washington Mutual Inc., Seattle, has reported $5.8 billion in multifamily portfolio acquisition and loan originations for 2002.The total includes more than $235 million in originations in the New York/New Jersey region, where WaMu set up offices last year, the company said. "While a favorable interest rate environment played a role in our remarkable performance last year, an expanded product menu, including hybrid and adjustable- and fixed-rate financing options, as well as our ability to focus solely on multifamily properties, enabled us to significantly increase our origination volume," said Al Brooks, division executive for WaMu's multifamily lending division. He added that WaMu expects to further strengthen its stronghold in multifamily lending in 2003 by offering commercial mortgage-backed securities and expanding its Fannie Mae DUS and Freddie Mac Program Plus lending. WaMu was ranked the fifth-largest commercial lender by origination volume for 2001 by the Mortgage Industry Directory, a MorgageWire affiliate.

Jim Toulon has been named senior vice president of franchise development for the GMAC Real Estate division of GMAC Home Services, Oak Brook, Ill.Mr. Toulon was most recently executive vice president of Hometouch Centers Inc., a Chicago-based home services company, and he previously served as a regional vice president at Coldwell Banker, GMAC said. At GMAC Home Services, Mr. Toulon will direct the growth of the 1,300-office network, including franchising, and mergers and acquisitions.

Hibernia National Bank, Baton Rouge, La., has become one of only 12 banks in the nation offering a Fannie Mae-sponsored mortgage loan that allows qualified borrowers to skip up to two monthly payments per year and up to 10 payments over the life of the loan.Borrowers who take advantage of the PaymentPower option (available only on conventional 30-year fixed-rate loans) will have their loan recast each time they skip a payment, resulting in a "very small increase" in their monthly payments, Hibernia said. "This is an excellent feature that doesn't cost customers anything up front at closing, but allows them financial flexibility," said Paul Peters, president of Hibernia Mortgage Banking. "There is a small fee charged each time a payment is skipped, but it's totally up to the customer whether to skip a payment and how and when to use the proceeds." Hibernia can be found online at http://www.hibernia.com.

American Residential Investment Trust Inc., San Diego, has announced the termination of its status as a real estate investment trust, effective Jan. 1, 2003.ARIT transformed itself last year from a mortgage REIT into a mortgage bank serving mortgage brokers. The company, which traditionally invested in subprime residential mortgage assets, said it funded $4.2 billion in home mortgages in 2002 through its mortgage banking subsidiary, American Mortgage Network. American Residential can be found on the Web at http://www.amerreit.com.

Malan Realty Investors Inc., a real estate investment trust based in Bingham Farms, Mich., has announced a reduction in its estimate of the expected net proceeds of its liquidation plan.The REIT said the net proceeds are now expected to range from $4.75 to $6.50 per share, compared with an earlier estimated range of $4.75-$8.50. Jeffrey Lewis, Malan's president and chief executive officer, said the upper end of the range was revised to reflect changes in the expected proceeds of property sales in view of the current market environment, environmental remediation issues, and other unanticipated costs. "Although the actual proceeds from property sales to date and expected proceeds from future sales are within 2% of our original estimates, the decline in value has a significantly greater impact on a per-share basis, given the highly leveraged position of the company," Mr. Lewis said. The REIT can be found online at http://www.malanreit.com.

Martin F. Baumann, a 30-year veteran of PricewaterhouseCoopers, has been named executive vice president for finance at Freddie Mac.Mr. Baumann will be responsible for accounting, corporate planning, taxation, shareholder relations, and the oversight of market and operating risk at the government-sponsored enterprise, Freddie Mac said. He will report to David W. Glenn, Freddie Mac's vice chairman and president. During his career at PwC, Mr. Baumann was a partner, deputy chairman of its World Financial Services practice, and its global banking leader.

The political reality is that the Department of Housing and Urban Development will deliver a final RESPA reform rule, probably by this summer, according to Jack Konyk, vice president of National City Corp., Cleveland.Speaking at the Regional Conference of Mortgage Bankers Associations in Atlantic City, N.J., Mr. Konyk said the threat of lawsuits will not deter HUD Secretary Mel Martinez from publishing a final rule on reforming the Real Estate Settlement Procedures Act. He said the industry has a choice: it can sit back and whine about the proposal, or it can examine how to do business under the reform provisions. "This industry will not die," he said. "We will find ways to adjust." Mr. Konyk cautioned that he was expressing his own opinion, not that of his employer or any of the trade groups he is associated with.

Household International Inc. has announced a consent decree with the Securities and Exchange Commission under which the company agreed to end violations of certain federal securities laws but will not be required to pay fines or restate earnings."The SEC's findings in the order, which Household does not admit or deny, include findings that certain prior descriptions of Household's restructuring and other account management policies were incomplete or inaccurate in violation of provisions of the federal securities laws," the Prospect Heights, Ill.-based company said. "Under the order, Household has agreed to cease and desist from any further violations of these provisions." The company said it expects to complete its planned merger with HSBC Holdings plc after receiving shareholder approvals at meetings scheduled for March 28. "We have agreed to the entry of the consent order to resolve the SEC's disclosure concerns relating to Household," said William F. Aldinger, the company's chairman and chief executive officer. Household can be found online at http://www.household.com.

The average 30-year fixed mortgage rate jumped to 5.79% for the week ending March 21 from a survey-record low of 5.61% the previous week, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate rose from a survey-record low of 4.93% to 5.11%, while the average rate for one-year Treasury-indexed adjustable-rate mortgages climbed from a survey-record low of 3.68% to 3.75%. Fees and points averaged 0.6 points for 30-year fixed-rate mortgages and ARMs, and 0.5 points for 15-year FRMs. Frank Nothaft, Freddie Mac's chief economist, said uncertainty related to war in Iraq caused bond market yields to "reverse their downward spiral," and mortgage rates followed suit. "But there are other uncertainties about the length of the conflict and its impact on the economy that will influence mortgage rates in the weeks to come, so this rise in rates may be only temporary," he said. A year ago, the average 30-year and 15-year fixed rates were 7.14% and 6.65%, respectively, and the average one-year ARM rate was 5.11%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

The House has passed a bankruptcy reform bill by a 315-to-113 vote, but the snake-bitten measure faces a more turbulent ride in the Senate.The bill would make it harder for consumers to use bankruptcy to walk away from credit card and auto loan debt. For mortgage lenders, it contains provisions that cut through delaying tactics used in residential foreclosures and expedites foreclosures in single-asset commercial property bankruptcies. In the Senate, Democrats are expected to delay consideration of the measure and insist on a provision that addresses abuses of the bankruptcy code by abortion protesters. The Mortgage Bankers Association of America hailed the House action and urged the Senate to pass the bill. "The provision that removes the $4 million cap on single-asset bankruptcies is very important to MBA's commercial members," said MBA chairman John A. Courson.

Simon Property Group Inc., Indianapolis, has reported the sale of $500 million of senior unsecured notes by its partnership subsidiary, Simon Property Group LP.The real estate investment trust said the two tranches consisted of $300 million of 4.875% notes due in 2010 and $200 million of 5.450% notes due in 2013. The notes were sold through Deutsche Bank Securities and UBS Warburg. The mall and shopping center REIT can be found on the Internet at http://www.shopsimon.com.

Fitch Ratings has announced that it does not plan to downgrade any of the 77 U.S. commercial mortgage-backed securities deals linked to Koninklijke Ahold NV despite its recent downgrade of the retail grocer.Nine of the deals have exposure to Ahold in excess of 5% of their respective transaction balances, the rating agency said. "There is no need to downgrade due to the diversity of the deals, accompanied with the credit enhancement provided by the most subordinate tranches," said Lauren Cerda, a Fitch director. "Generally, the grocer's stores are located within in-fill locations and have large floor plates which would be attractive to another grocery store operator." Grocery chains operated by Ahold include Stop and Shop, Giant, Tops, BI-LO, and Bruno's. Fitch can be found on the Web at http://www.fitchratings.com.

Though many commercial mortgage-backed securities proved to be resilient last year, Standard & Poor's says it has identified numerous deals involving properties once leased to Kmart and other bankrupt retailers that may soon face downgrades.In a recent commentary, "U.S. Retail: What Will CMBS Do With All of the Space?", the rating agency said relatively few transactions involving properties once leased to Ames, Kmart, and Service Merchandise were downgraded in 2002, but that this situation is likely to change. More than 90 S&P-rated CMBS transactions include mortgages on closed or closing properties once leased to the three retailers, S&P said. Realized losses "have been limited" so far, the rating agency said, but there are several delinquent loans related to the more recent bankruptcies of Ames and Kmart. Therefore, S&P "will most likely lower its ratings on more non-investment-grade bonds as some of the weaker assets are liquidated at high losses," the rating agency said. "In addition, with borrowers attempting to re-tenant and/or sell off the closed Kmart, Ames, and the remains of the Service Merchandise stores in a highly saturated retail estate market, the situation will be very challenging to all."

Standard & Poor's Ratings Services has announced "an intensive review" of floating-rate commercial mortgage-backed securities deals that were issued during the peak real estate years of 2000 and 2001.The deals being reviewed are: COMM 2000-FL2, 2000-FL3, and 2001-FL4; CSFB 2000-FL1 and 2000-FL2; GMAC 2000-FL1; JP Morgan Chase 2001-FL1; LB Series 2000-LLF C7 and Series 2001-LLF C4; and MS Series 2001 XLF. "Particular attention is being given to those loans that utilized A/B financing structures, recognizing the high leverage of many of these loans as well as the transitional nature of the collateral in various instances," S&P said. A growing number of floating-rate and A/B loans have used up their extension options and are maturing in the next two years, and "weak real estate markets could hinder their refinanceability," S&P said. "With interest rates at historic lows, actual floating-rate debt service coverage ratios have generally been strong, at times masking deteriorating property fundamentals." The industry generally views loans with positive DSCRs as having low default risk, so they are unlikely to appear on a servicer's watchlist or show up as specially serviced, S&P said. In such cases, a thorough review of a property's operating performance is needed, the rating agency said. S&P can be found online at http://www.standardandpoors.com.

NovaStar Mortgage Inc., Kansas City, Mo., has announced that it will resume business operations in Georgia with its full product line, citing recent developments related to the Georgia Fair Lending Act.The company noted that GFLA's recent revision prompted Standard & Poor's to resume rating residential mortgage-backed securitizations containing Georgia mortgage loans. "NovaStar pulled out of the state of Georgia in January when Standard & Poor’s announced that mortgage securities with collateral originated in Georgia would go unrated by the firm, and would therefore be unmarketable," the company said. NovaStar Mortgage, a division of NovaStar Financial Inc., originates single-family residential mortgage loans and related services.

Mortgage industry icon Felix Beck says the industry will see "spectacular volume" in the first six months of this year.He predicts that $1.25 trillion in originations will be recorded in the first half of 2003, but that volumes will fall to $800-850 billion in the second half. Speaking at the Regional Conference of Mortgage Bankers Associations in Atlantic City, N.J., Mr. Beck reviewed a number of economic scenarios involving a conflict in Iraq. The most likely scenario, he said, is a short war and a difficult occupation. Because of that, Mr. Beck sees a short-term rally in the stock market as the uncertainty is lifted, and a rise in rates. But after the initial euphoria wears off, he said he has concerns about interest rate levels. Mr. Beck is chairman emeritus of Chase Manhattan Mortgage.

The Refinance Index climbed to another record high during the week ended March 14, as did the index measuring the overall mortgage application market, according to the Mortgage Bankers Association of America's Weekly Mortgage Applications Survey.The seasonally adjusted refi index rose from a record 8920.9 the week before to 9387.0, while the seasonally adjusted Market Composite Index climbed from a record 1603.1 to 1673.4, the MBA said. On an unadjusted basis, applications were up 4.4% overall on the week and 254.8% from the level recorded a year earlier. Refinancings represented 80.5% of total applications, up from the previous week's record high of 79.8%, while adjustable-rate mortgages accounted for 12.8%. The average contract interest rate for 30-year fixed-rate mortgages rose from a record low of 5.42% to 5.61%, and points (including the origination fee) decreased from 1.55 to 1.48 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mbaa.org.