Originations

Fourteen classes from three EMAC Owner Trust franchise loan transactions have been downgraded by Fitch Ratings.The downgrades in series 1998-1 were as follows: classes A and IO, from BBB to B; class B, from BB to CCC; class C, from B to CC; and class D, from CCC to C. Classes A through C remain on Rating Watch Negative. In series 1999-1, classes A and IO were downgraded from BB to CCC, class B from B to CCC, class C from CCC to CC, and class D from CC to C. Classes A and B remain on Rating Watch Negative. In series 2000-1, classes A and IO were downgraded from BB to B, class B from B to CCC, and class C from CCC to CC. Classes A, IO, and B remain on Rating Watch Negative, and the ratings on classes D and E were affirmed. Fitch attributed the downgrades to the deterioration of the collateral performance of the pools. In series 1998-1, 32% of the collateral is delinquent greater than 90 days or defaulted, and the comparable figure for series 2000-1 is 30%. In series 1999-1 -- "by far the most impaired of any of the EMAC deals," Fitch said -- cumulative defaults stand at 65% of the initial pool. Fitch can be found online at http://www.fitchratings.com.

The PMI Group Inc., Walnut Creek, Calif., has announced the formation of PMI Capital Corp., a wholly owned subsidiary that will manage PMI's subsidiaries and investments in the areas of lender services, international mortgage insurance, and financial guaranty.Bradley M. Shuster, president of international and strategic investments at PMI, has been named president of the new subsidiary, which the parent company said will enable it to centralize resources for its diversification efforts. Several other executives were named to new or expanded roles in connection with the move: John Fulford, executive vice president and managing director of lender services; Tony Porter, senior vice president and managing director, international mortgage insurance; Arthur Slepian, senior vice president and managing director, financial guaranty; and Joanne Berkowitz, vice president and chief risk officer. PMI Group can be found online at http://www.pmigroup.com.

Spurred on by demographic factors, the housing boom now under way will last into the third decade of the century, according to a report co-sponsored by Masco Corp. and Pulte Homes Inc.Titled "The Housing Boom: Another 20 Years of Growth," the report takes issue with economists who fear a decline in home values and a major falloff in construction. "Demographics is the single most important element in the housing equation because the number of households create[s] a floor and a ceiling on the number of housing units demanded," writes Al Ehrbar, a partner in the New York-based Stern Stewart and Co. consulting firm and the author of the report. A "careful weighing" of variables such as immigration, aging Baby Boomers, and housing affordability suggests that the new-home market will be "enormously" strong, he said. Projections by the U.S. Census Bureau indicate that households will grow by nearly 24 million from 2000 through 2020, the report says. Mr. Ehrbar said the housing market's performance in the recent recession augurs a "radical new role" for housing. "Housing went from being a safety valve at the inflationary peak of the cycle to acting as a safety net on the downside," he said.

The average 30-year fixed mortgage rate rose to 5.97% for the week ending Jan. 17 from 5.95% the previous week, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate rose from 5.33% to 5.36%, while the average rate for one-year Treasury-indexed adjustable-rate mortgages was unchanged, at 4.03%. Fees and points averaged 0.6 points for fixed-rate mortgages and 0.7 points for ARMs. "Mortgage rates were largely unchanged this week, amid a sobering December jobs report and growing tensions in the Mideast and the Korean peninsula," said Frank Nothaft, Freddie Mac's chief economist. "Disappointing retail sales, a struggling manufacturing sector, and mild business investment are all holding mortgage rates in the 6% range." A year ago, the average 30-year and 15-year fixed rates were 6.83% and 6.31%, respectively, and the average one-year ARM rate was 5.08%, Freddie Mac said. Freddie Mac can be found on the Web at http://www.freddiemac.com.

Precept, a company that pioneered an online loan auction system for the commercial mortgage industry, is now looking at new business avenues, MortgageWire has learned.Precept, set up at the tail end of the dot-com boom, had hoped to differentiate itself by providing an underwriting opinion up front to lenders who would participate in an online auction process. The dot-com had attracted investment from industry leaders such as Standard & Poor's (the rating agency provided an underwriting opinion as well) and Morgan Stanley. Precept had hoped to make the commercial mortgage lending market more efficient with its online auction process. The company is now looking at getting into another arena of the commercial mortgage financing industry, such as mezzanine lending, according to Jack Cohen, chief executive officer of the Chicago-based Cohen Financial, who is also a Precept board member. Precept was set up by Frank Scavone and others from Nomura Securities' commercial mortgage lending group.

Household International, Prospect Heights, Ill., has reported net income of $1.6 billion ($3.22 per share) for 2002, down from $1.8 billion ($3.91 per share) in 2001.Net income totaled $338 million ($0.66 per share) in the fourth quarter, down from $533 million ($1.13 per share) a year earlier. Household said the results reflect a $240 million after-tax loss on a previously announced disposition of the assets and deposits of the company's thrift. The company also noted that it incurred a $333 million after-tax nonrecurring charge in connection with its nationwide settlement with state attorneys general and other regulators in the third quarter, which involved making restitution related to its subprime consumer lending businesses. Household can be found online at http://www.household.com.

Zacks.com, the online edition of Zacks Investment Research, Chicago, has issued a "4(Sell)" ranking to MGIC Investment Corp., Milwaukee.The report notes that MGIC reduced its earnings estimates for 2003. "However, predictions for next year have improved in [the past seven trading days], which bodes well for the company moving forward," said Zacks.com. "Once these economic conditions begin to strengthen, MGIC should see much better results. However, for the moment, times are tough and investors may want to consider refraining from opening or deepening a position in MGIC until its earnings estimate numbers improve." Stocks with a "4(Sell)" rank should be sold or avoided in the next one to three months, according to Zacks. The company can be found online at http://www.zacks.com.

The Enstar Group Inc., Montgomery, Ala., will provide up to $10 million to an affiliate of J.C. Flowers I LP as part of the latter's investment in CFN Investment Holdings LLC, the group that is looking to purchase Conseco Financial Corp.J. Christopher Flowers, the manager of J.C. Flowers I LP, is the vice chairman of Enstar and its largest shareholder. Enstar said approximately $3 million has already been advanced to J.C. Flowers from cash on hand at Enstar. The rest of the commitment will be funded from cash on hand as well. The other investors in CFN are Fortress Investment Group LLC and Cerberus Capital Management LP, both of New York.

Simon Property Group, Indianapolis, has upped its offer for Taubman Centers to $20 per share from $18 a share.Simon, a retail real estate investment trust, has also roped in Westfield America, a U.S. subsidiary of an Australian property trust, as a partner in its bid to acquire the Bloomfield Hills, Mich.-based Taubman, another retail REIT. Simon said it is asking Taubman shareholders to tender their common shares of Taubman at the increased bid price by midnight Feb. 14. The price represents a 50% premium to the price of Taubman shares when Simon made its first formal acquisition proposal, and is 25% above both Taubman's closing price on Jan. 14 and the highest closing price in Taubman's 10-year history as a public company prior to the Simon proposal, according to Simon. Taubman said it will advise stockholders of its position on the offer within 10 business days. If less than two-thirds of Taubman's approximately 52.2 million common shares are tendered by the deadline, Simon and Westfield propose to withdraw the offer and end the efforts to acquire Taubman. The agreement between Westfield and Simon calls for the former to pay 50% of the total consideration paid for the Taubman shares acquired.

Encore Bank, Houston, has announced the formation of Encore Mortgage Co., a residential mortgage lending division that will complement its second-mortgage and construction financing operations.Russell E. Chase has been hired as president of the new division, and Terri Chase has been hired as vice president. The Chases own Golden Financial Services, which they established in 1989 as an originator of home loans, Encore said.

Criimi Mae Inc., Rockville, Md., has announced the closing in escrow of a $344 million recapitalization under which Barry S. Blattman, a managing partner of Brascan Real Estate Finance Fund, will be named chairman and chief executive officer.The recapitalization plan provides for an investment of approximately $44 million by BREF in common equity and subordinated debt and a $300 million secured financing by a unit of Bear, Stearns & Co Inc. The proceeds, together with available cash and liquid assets, will be used to retire Criimi Mae's remaining $373 million in recourse debt, which was incurred in connection with its emergence from Chapter 11 bankruptcy proceedings in April 2001, the company said. William B. Dockser, Criimi Mae's current chairman and CEO, will resign from those positions upon the termination of escrow, but will remain a director. H. William Willoughby, president and a director of the company, will resign both posts, and Donald C. Wood, an outside director, will resign. In addition to Mr. Blattman, Mark R. Jarrell and Joshua B. Gillon will be named to Criimi Mae's board, bringing the number of directors to nine. Criimi Mae can be found on the Web at http://www.criimimaeinc.com.

Mortgage applications fell 2.4% on a seasonally adjusted basis for the week ended Jan. 10, according to the Mortgage Bankers Association of America's Weekly Mortgage Applications Survey.On an unadjusted basis, applications were up 41.0% on the week and 108.7% from the level recorded a year earlier. On a seasonally adjusted basis, the Purchase Index fell from 376.2 to 358.0, and the Refinance Index declined from 5871.1 to 5786.4. Refinancings represented 77.7% of total applications, down from 77.8% the previous week, while adjustable-rate mortgages accounted for 12.6%. The average contract interest rate for 30-year fixed-rate mortgages decreased from 5.85% to 5.84%, and points (including the origination fee) decreased from 1.43 to 1.42 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mbaa.org.

State and local laws aimed at curbing abusive lending practices are premature and potentially harmful, according to a report released by the American Bankers Association.Robert Litan, vice president and director of the Brookings Institution's Economic Studies Program, argues in the report that the effects of recent federal measures need to be monitored before taking further action. "There are better and more targeted ways of attacking predatory lending without restricting the mortgage market," Mr. Litan said. "Federal legislators and regulators have taken action to target and root out loans that are clearly predatory, while ensuring that mortgage loans remain available to subprime borrowers." Those measures include disclosure requirements, the prohibition of certain mortgage provisions, and incentives to serve low-income and minority borrowers. "With a new federal regulatory regime in place, it is too soon to know whether the predatory lending problem requires new state legislation, or more intense enforcement of existing federal laws," he said. Mr. Litan criticized an AARP campaign urging states to adopt model legislation that would further limit the terms of mortgage loans, contending that it is based on evidence that is several years old. The ABA can be found online at http://www.aba.com.

A group of subprime lenders have formed the Coalition for Fair and Affordable Lending in the hope that it can obtain federal legislation to establish national standards for the nonconforming market."We want a consistent set of guidelines that ensure consumers are getting a good deal and that they have enforceable standards to prevent predatory lending," said Scott McAfee, chairman of CFAL. (Mr. McAfee is also president and chief executive of WMC Mortgage, Woodland Hills, Calif., a top-15-ranked subprime lender.) CFAL's members want legislation passed that would pre-empt state and local anti-predatory-lending laws, which are making it difficult for subprime lenders to operate in places like Georgia and Cleveland. (The next battleground could be New Jersey, they say.) CFAL members include New Century, Option One, Household, and Saxon Mortgage, among others. More companies are signing up, said Washington lobbyist Wright Andrews, who is the managing director of the coalition and a partner at the law firm of Butera & Andrews. (See the Jan. 20 issue of National Mortgage News for complete details.)

Fannie Mae's fourth-quarter profits plunged nearly 52% from those of a year earlier (although operating earnings increased), bringing its net income to $4.62 billion ($4.53 per share) for the year, down 21.6% from $5.89 billion ($5.72 per share) in 2001.The results ended a 15-year string of record earnings under generally accepted accounting principles for the government-sponsored enterprise. Fourth-quarter net income totaled $952 million ($0.94 per share), down 51.7% from $1.97 billion ($1.92 per share) in the fourth quarter of 2001. However, net income includes the variability in the market value of purchased options and options embedded in callable debt, so the GSE said its management uses operating net income figures as the "primary performance measures" for the company. Operating net income totaled $6.39 billion ($6.31 per share) for the year, up 19.1% from $5.37 billion ($5.20 per share) in 2001, and $1.67 billion ($1.66 per share) for the quarter, up 16.3% from $1.44 billion ($1.40 per share) a year earlier. "In an extremely difficult business environment that affected virtually every company in America, Fannie Mae's operating results in 2002 were among the best in the company's history," said Fannie Mae chairman and chief executive officer Franklin D. Raines. Fannie Mae's website address is http://www.fanniemae.com.

Boston Properties Inc., a Boston-based real estate investment trust, has reported that its operating partnership, Boston Properties LP, has priced an offering of $175 million of senior unsecured notes.The 6.25% notes, due Jan. 15, 2013, were priced at 99.763 to yield 6.28%. The REIT said the proceeds will be used in part to repay the unsecured bridge loan used to fund the company's acquisition of 399 Park Avenue in Midtown Manhattan last September. The notes represent a reopening of the 10-year, 6.25% senior notes issued Dec. 13, and will, together with those notes, constitute a single series with an aggregate outstanding principal amount of $925 million, the REIT said. The company can be found online at http://www.bostonproperties.com.

American Home Mortgage Holdings Inc., New York, has announced an exclusive agreement with the Apartment Investment and Management Co., Denver, to offer up to a $1,500 closing cost credit for AIMCO residents who buy a home through AIMCO's HomePlanner program.American Home said its Internet lending division, MortgageSelect.com, will be the exclusive mortgage provider for AIMCO, and that Freddie Mac has agreed to purchase mortgages made to HomePlanner users in order to "expand affordable homeownership opportunities." In addition, DCS Relocation will supply real estate services for eligible residents. Under the agreement, MortgageSelect will offer best-price guarantees; a full range of products, including zero-downpayment programs; and streamlined loan approval. American Home can be found online at http://www.americanhm.com and http://www.mortgageselect.com, and AIMCO can be found at http://www.aimco.com.

Fannie Mae has invested $1 million in Broadway Financial Corp., a community-oriented savings bank that originates mortgages in south Los Angeles and an area known as "Mid-City."At Sept. 30, the institution was deemed "well capitalized" by thrift regulators. A Fannie Mae spokeswoman said the investment came out of the secondary giant's "CDFI Fund," which is used to aid small community institutions that operate in what she called "hard-to-finance" areas. Fannie Mae has invested in other depositories over the past few years. The investments tend to be in minority institutions. "We help them gain leverage in their communities," she said. In return for its investment, Fannie receives nonvoting preferred stock in Broadway, which is publicly traded. The stock bears a noncumulative dividend of 5% per year. Fannie Mae can be found on the Web at http://www.fanniemae.com.

Joseph C. Shalla has joined Clarkston State Bank, Clarkston, Mich., in the newly created post of senior mortgage banker, marking the bank's entry into the mortgage sector.Mr. Shalla, 56, was most recently the lending manager at New Century Bank, where he was responsible for all aspects of the mortgage department, Clarkston said. Before that, he held similar responsibilities at Lakeside Community Bank. "Our entry into the mortgage sector is a key step in our strategic plan and aimed at both generating additional fee income and expanding our product portfolio to better serve our customers," said Dawn M. Horner, president and chief executive officer of Clarkston.

The single-family housing market was stable in the fourth quarter, but more areas of the country are showing softness, according to Mortgage Guaranty Insurance Corp.'s national Market Trends Index.The index stood at 6.70 for the quarter, down from 6.90 for the third quarter and 6.92 a year ago. The index uses a scale of 1 to 10, with 10 being the strongest. MGIC said a reading of 6 to 8 indicates a stable market. "The decline in the index from its peak follows a 22-quarter period in which the national MTI stayed above '7', reflecting one of the strongest runs that both the U.S. economy and the nation's housing markets have ever seen," said Neil Siegel, senior market analyst for the Milwaukee-based mortgage insurer. The company looked at 73 metropolitan statistical areas and found seven to be strong, seven weak, and the rest stable. MGIC can be found on the Web at http://www.mgic.com.