Originations

Catellus Development Corp., San Francisco, is going to reorganize its operations to qualify as a real estate investment trust effective Jan. 1, 2004, the company has reported.The real estate development company's main area of operation is in the industrial sector. The REIT conversion has been approved by the company's board of directors and is still subject to shareholder approval, Catellus said. The conversion, which Catellus sees as "the logical next step" for the company, is intended to provide investors with a stable cash return, while "continuing to offer growth opportunities" for the company. Catellus expects to provide a one-time distribution of pre-REIT earnings and profits to shareholders, currently projected to be approximately $100 million in cash and $200 million in common stock. Following the conversion, Catellus expects to operate as an umbrella partnership real estate investment trust with taxable REIT subsidiaries that are expected to hold the assets that have been identified as "development for sale."

Home prices increased at an annualized rate of 3.9% nationwide in the fourth quarter, down from a revised rate of 5.3% in the third quarter, according to Freddie Mac.The annual house price appreciation rate was 6.6% from the fourth quarter of 2001 through the fourth quarter of 2002, according to the Conventional Mortgage Home Price Index released by Freddie Mac. The index showed that the New England states recorded the largest gains in home prices in the fourth quarter, rising at an annualized rate of 7.3%. The Pacific states followed with a 6.1% annualized growth rate, and the Middle Atlantic states of New Jersey, New York, and Pennsylvania finished third with a 4.8% growth rate. "Although the rate of growth in house prices is slowing, the annualized growth rate still remains at or above inflation in all nine census regions," said Frank Nothaft, Freddie Mac's chief economist. The index was jointly developed by Freddie Mac and Fannie Mae. Freddie Mac can be found online at http://www.freddiemac.com.

Entertainment Properties Trust has announced that its subsidiary has issued a deal consisting of $155.5 million worth of commercial mortgage pass-through certificates.The deal was broken up into seven classes, which represent a 10-year fixed-rate loan with an average weighted interest rate of 5.65%. The loan is collateralized by 15 megaplex theater properties in California, Kansas, Louisiana, Florida, North Carolina, South Carolina, Virginia, Michigan, Illinois, and Nebraska.

Two classes of Prudential Securities Secured Financing Corp.'s commercial mortgage pass-through certificates, series 1995-MCF2, have been downgraded by Fitch Ratings.Class G was downgraded from B-plus to CCC and removed from Rating Watch Negative, and class H was downgraded from CCC to C, the rating agency said. Ratings on the remaining Fitch-rated classes of the deal were affirmed. The downgrades followed Fitch's review of the transaction after the master servicer, Midland Loan Services Inc., elected to recover additional advances on three loans with nonrecoverable advance determinations as of the Feb. 25 determination date. Fitch can be found on the Web at http://www.fitchratings.com.

American Financial Realty Trust, Jenkintown, Pa., has filed a registration statement for an initial public offering.The joint book-running managers are Banc of America Securities LLC, Charlotte, N.C., and Friedman, Billings, Ramsey & Co., Richmond, Va. AFRT said it cannot predict when the registration statement will become effective, although it has targeted the second quarter of this year. Among AFRT's management team are its chairman, Lewis S. Ranieri (widely known as "the father of the mortgage-backed security"), and its chief executive, Nicholas S. Schorsch. Net proceeds of the IPO will be used to fund the acquisition of properties owned or leased by financial institutions. The IPO will include shares to be sold by existing nonmanagement shareholders if they exercise registration rights.

Matrix Bancorp Inc., Denver, has reported the sale of the wholesale platform of Matrix Financial Services Corp. to an undisclosed "third-party purchaser."The buyer will pay $3.3 million, plus a production premium of between $4.9 million and $9.1 million. Matrix president and co-chief executive Mark Spencer said the company "made a strategic decision to reduce our capital commitment to the mortgage banking business, and the deal announced today is the culmination of these efforts." The deal does not affect Matrix's mortgage servicing platform. During a six-month transition period that started Feb. 28, the Phoenix-based wholesale platform will remain under the effective control of Matrix Financial and Matrix Bank. However, the buyer has assumed all the economic risks and rewards of the operation.

The Eleventh Federal Home Loan Bank District Cost of Funds Index set another new low in January, declining by 7 basis points from the previous low in December.According to the Federal Home Loan Bank of San Francisco, January's COFI was 2.308%, compared with 2.375% for December and 2.823% for January 2002. However, even though the decline in COFI has slowed, the index is likely to fall even further some three to six months down the line. According to data collected by the Federal Reserve Bank of St. Louis, in July 2002 the rates on certificates of deposit were 1.84% for the six-month CD, 1.79% for the three-month, and 1.78% for the one-month. Six months later (in January 2003) those rates had fallen by about 50 bps, to 1.30%, 1.29%, and 1.29%, respectively.

Average home prices appreciated at an annual rate of 6.89% in 2002, but the appreciation slowed considerably in the second half of the year, according to the Office of Federal Housing Enterprise Oversight.OFHEO said house price growth in the fourth quarter had slowed to an average of only 0.83%. Rhode Island topped the ranking in house price appreciation during 2002 with a 15.72% rate, followed by Washington, D.C. (12.42%), New Jersey (11.79%), California (11.46%), and New Hampshire (11.02%). OFHEO maintains a House Price Index based on sales and refinancing of single-family homes whose mortgages are purchased or securitized by Fannie Mae and Freddie Mac. The agency can be found online at http://www.ofheo.gov.

Standard & Poor's here says it has have received numerous calls and expressions of concern regarding the possible sale of Financial Guaranty Insurance Co. by General Electric Capital Co.The ratings agency, which said it doesn't normally comment on rumors, said in a release, "we believe that several points can be made that should be reassuring with respect to FGIC's 'AAA' financial strength rating." General Electric Co. management has informed Standard & Poor's that, should it be determined in the future that a sale is appropriate, maintaining FGIC's 'AAA' rating would be a condition of the sale, the ratings company said. In a press release, S&P said, "FGIC has underwritten perhaps the most low-risk, conservative insured book of business in the bond insurance industry." FGIC was also rumored to have been up for sale in 1999. Standard & Poor's can be found on the Web at http://www.standardandpoors.com.

Municipal Mortgage & Equity has reported earnings per share of $1.16 for 2002, up from earnings per share of $1.12 per share for 2001.The Baltimore-based company, which originates, services and invests in multifamily debt and equity on its own account and for others, saw its net income for the year rise to $28.949 million, up from $25.882 million for 2001. For the fourth quarter of 2002 MuniMae's net income was $10.746 million. For its portfolio investments, MuniMae is primarily interested in tax-exempt multifamily housing bonds. The company has also reported that it has structured about $1.4 billion in financing for multifamily housing last year, representing a 25% rise over 2001 production levels. Mark. K. Joseph, chairman and CEO of the Baltimore-based Munimae, said that the company had completed a $76 million common equity offering earlier this month, "which will support our 2003 business plan." The company plans to grow further by expanding its investment portfolio and sources of fee income, Mr. Joseph added.

Although the New York City Local Law No. 36 does prohibit the City of New York from entering into any form of business with a financial institution or an affiliate of a financial institution where either entity is deemed a predatory lender as defined by the ordinance, the liability for violation of this ordinance does not flow through to assignees, Fitch Ratings has noted.Since there is no assignee liability risk for RMBS investors, Fitch will continue to rate bonds that include New York City-based mortgages as collateral, the company said. The ordinance was scheduled to go into effect on Feb. 18, 2003, but has been postponed due to a lawsuit filed by New York City Mayor Michael Bloomberg. Fitch's website address is http://www.fitchratings.com.

Consumer groups are pressing the Department of Housing and Urban Development not to allow lenders to offer guaranteed mortgage packages on subprime loans or high cost loans that fall under the Home Ownership and Equity Protection Act.HUD's proposal already excludes HOEPA loans from packaging -- which would allow lenders to guarantee the cost of loan fees and settlement services upfront before a mortgage application is signed. "We are advising HUD to exclude all subprime loans from packaging," Margot Saunders of the National Consumer Law Center told a congressional panel. This would exclude any loan with a prepayment penalty and any loan with a guaranteed price that equals or exceeds 5% of the principal loan amount. The Consumer Federation of America, Consumers Union, U.S. Public Interest Research Group and AARP (American Association of Retired Persons) are taking this position because they are concerned that packaging could camouflaged high cost loans and weaken consumer protections. However, lender groups maintain packaging will increase competition in the subprime market and benefit consumers. They also want HUD to drop the ban on HOEPA loans.

Subprime funders originated a record $241 billion of home mortgages in 2002, according to figures compiled by National Mortgage News and its affiliate, the Quarterly Data Report.The stunning production results came amid historical lows in mortgage rates, but also an increasing consumer and regulatory focus on predatory lending. In 2001 subprime funders originated $180 billion in mortgages, or 8.97% of all loans funded in the year. In 2002 the subprime market share actually fell to 8.39% of all loans produced, even though the overall dollar amount of fundings increased.The top subprime funder in the fourth quarter was CitiFinancial, Baltimore, with $5.97 billion, an increase of 47% from the same quarter last year. After Citi, the top five producers were: Household International ($5.4 billion/up 13%); Washington Mutual ($4.98 billion/up 90%); New Century Financial ($4.5 billion/up 125%); and Ameriquest Mortgage ($4.4 billion/up 115%). (See NMN issue of March 3 for full details.)

The auction of Conseco's manufactured housing and subprime division, scheduled for Feb. 28, has been delayed until the following week due to the number and complexity of the bids submitted, the company said.Moreover, according to a report in the St. Paul Pioneer Press, an investor group that includes Warren Buffet's Berkshire Hathaway is one of several bidders. As MortgageWire went to press, Conseco Finance officials could not be reached for comment. The parent of Conseco Finance is in bankruptcy. Conseco Finance has $23 billion in MH receivables and about $10 billion in subprime. In December CFN Investment Holdings agreed to acquire most of Conseco Finance for a price equal to the unit's outstanding debt. Recently, Fannie Mae made a floor bid of $70 million for Conseco's servicing platform, but since that time the bankruptcy court has received higher bids.

Strategic Hotel Capital has obtained financing of $1.17 billion from Deutsche Bank in a transaction that Strategic believes is "the largest loan ever made to a privately held hotel company."The financing was done through a $910 million commercial mortgage-backed securities offering -- a major portion of which was rated by Moody's Investor Service, Standard & Poor's and Fitch Ratings -- and a $260 million mezzanine loan, according to the Chicago-based Strategic. Fifteen of Strategic's twenty-seven U.S. hotel properties are involved in the securitization, the company reports. Laurence S. Geller, SHC CEO, said that the gap between the expectations of hotel buyers and sellers is beginning to narrow and "should facilitate our search for attractively priced luxury properties with upside potential that can benefit from our style of aggressive asset management." Jon Vaccaro, Deutsche Bank's global head of real estate debt said that the financing -- which is for an initial two-year term, with three one-year extensions -- consists of four tranches: an investment-grade CMBS portion that has been placed with domestic and European life companies, banks, pension funds and money managers; two subordinate mortgage loans placed with U.S. life companies; and a mezzanine loan that has been placed with a Deutsche Bank affiliate and an overseas institutional investor.

Laureate Capital has reorganized its executive team, making changes in response to Laureate's "rapid growth since formation in August 1994," according to Thomas Denard, president and CEO of the Charlotte, N.C.-based commercial mortgage banking/servicing firm.In one reassignment, R. Thomas Gracey has been appointed Laureate's executive vice president of loan originations. Mr. Gracey was previously senior vice president and regional director of Laureate's Naples, Indianapolis, Pittsburgh and Harrisburg offices. In another move, Joseph L. Lovell has been appointed senior vice president of loan administration. Mr. Lovell, who was part of the Laureate start-up team in 1994, was previously vice president and manager of treasury management with the company. Also, Mark Hill, senior vice president, has been assigned to lead Laureate's product and asset management team. Mr. Hill was previously in charge of loan administration, Laureate said. Mr. Hill will be implementing a plan to "enhance capital markets executions" in Freddie Mac, Fannie Mae, conduit and credit tenant lease financing, with Laureate's life insurance company delivery network. And Joseph A. Shaffer, senior vice president and chief financial officer, will also manage compliance and risk management in addition to his current responsibilities in account/financial reporting, human systems and information systems.

The president of the National Association of Realtors blamed homeowner insurance underwriters for creating new barriers to homeownership.Speaking at the National Press Club in Washington, NAR president Cathy Whatley questioned the use by insurers of credit scores and the Comprehensive Loss Underwriting Exchange database. There are consumers who would otherwise qualify for a mortgage are being turned down for homeowners insurance and others are finding that phone calls to their insurance agent recorded on their CLUE file which could possibly jeopardize their coverage, she said. Another problem is increases in premiums. Ms. Whatley cited the Insurance Information Institute statement that the cost of homeowners insurance went up 8% last year and is expected to increase an additional 9% this year. Insurance affordability and availability have also had an effect on the commercial and multifamily sectors, she said.

First American Title Insurance Co., Santa Ana, Calif., has created a new brand, The Talon Group, to provide title and settlement services.The new unit will focus on high volume areas of the country; these areas are where nearly 70% of real estate transactions occur. Parker S. Kennedy, president of First American Corp., said "building parallel title operations allows us to quickly grow market share and leverage our automated title production systems to spread fixed costs, doubling the impact of our sales force and contributing to improved margins." William T. Halvorsen has been named as president of the new division. "The Talon Group will attract new customers to its own unique culture and through a national network of existing business relationships. Our team of industry veterans is experienced in a variety of geographic markets and understands the title business, both as a national underwriter and as a large agent," he said.

The average 30-year fixed mortgage rate slipped to yet another a survey-record low of 5.79% for the week ending Feb. 28 from 5.84% the previous week, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 5.21% to a survey-record low of 5.14%, while the average rate for one-year Treasury-indexed adjustable-rate mortgages inched up from 3.81% to a 3.83%. Fees and points averaged 0.6 points for fixed-rate mortgages and for ARMs. "Debilitating forces, such as looming war clouds in the Mideast, declining consumer confidence and other issues, are making an economic rebound difficult," said Frank Nothaft, Freddie Mac's chief economist. "And when the economy is weak, rates tend to follow suit." A year ago, the average 30-year and 15-year fixed rates were 6.80% and 6.28%, respectively, and the average one-year ARM rate was 4.94%, Freddie Mac said.

New home sales plunged 15.1% in January when economic problems, a possible war with Iraq and falling consumer confidence apparently cooled the hot housing market.The U.S. Commerce Department reported that sales of newly constructed homes dropped from a seasonally adjusted annual rate of 1.08 million units in December to 914,000 units in January. National Association of Home Builder economists were expecting a decline in new home sales but they were surprised by the magnitude -- the largest monthly drop since January 1994. NAHB senior economist Michael Carliner attributes part of the decline to a lack of consumer confidence and another part to the blistering sales pace since last August that may have used up the pool of available homebuyers. "We were probably selling [homes] faster than the underlying potential demand," Mr. Carliner said. NAHB forecasts show that new home sales should be running at a 950,000 rate, but Mr. Carliner does not expect a rebound next month because of severe weather. "We could get a rebound later in the Spring," Mr. Carliner said.