Originations

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.

There is a 60% chance that the economy will slide back into recession this year and a 40% chance of a “slow recovery,” according to Ken Rosen, a professor at the University of California, Berkeley.Speaking at the Commercial Mortgage Securities Association’s CMBS Investors Conference in Miami, Mr. Rosen said the key to real estate demand is job creation and that another round of job cuts could cause the U.S. economy to slip back into recession. Even in case of a recovery, though, Mr. Rosen said he believes the unemployment rate will edge up to 6.5% this year. A war in Iraq will also affect the economy, he noted. “If things go well in Iraq, oil prices could go down, and this is an indicator that things will go well [with the U.S. economy] in the second half,” Mr. Rosen said. The bad news for the mortgage industry is that as the economy recovers, today’s very low interest rates will not be sustained. Mr. Rosen said he expects the interest rate on the 10-year Treasury to rise to 5.5%-6.0% under this scenario, or to fall to 3.0%-3.5% if the economy does not recover. Mr. Rosen said he does not believe the Bush administration proposal to eliminate the taxation of dividends will affect real estate investment trusts, since most investors invest in REITs through pension funds.

Peter T. Paul, the founder of Headlands Mortgage, has been elected chairman of the board of Sequoia National Bank, San Francisco.Mr. Paul purchased a controlling interest in Sequoia in the third quarter of 2002. He is a member of the board of the Federal Agricultural Mortgage Corp., commonly known as Farmer Mac.

Greenlight Financial Services, a West Coast-based retail mortgage originator, has reported the opening of its East Coast headquarters in Green Brook, N.J., as part of an effort to expand its national presence.Steve Loges has been named the head of the East Coast office, where he will serve as operations manager. Mr. Loge was previously a consultant to advisory services at PB Associates and lead underwriter at GMAC/Ditech.com.

Berkshire Income Realty Inc., Boston, a newly formed affiliate of the Krupp Funds Group, has announced that it will make exchange offers to the holders of interests in six Krupp funds for its 9% series A cumulative redeemable preferred stock.Berkshire said a separate exchange offer will be made for the interests in each of the following funds: Krupp Government Income Trust; Krupp Government Income Trust II; Krupp Insured Mortgage LP; Krupp Insured Plus LP; Krupp Insured Plus II LP; and Krupp Insured Plus III LP. The exchange offers will expire on Feb. 20, unless extended. Berkshire, which intends to acquire, own, and operate multifamily residential properties, can be found on the Web at http://www.berkshire-group.com.

Two classes of DLJ Mortgage Acceptance Corp.'s commercial mortgage pass-through certificates, series 1997-CF2, have been downgraded by Standard & Poor's.The downgrades were as follows: class B-4, from CCC-plus to CCC-minus; and class B-5, from CCC-minus to D. S&P attributed the downgrades to appraisal reductions and special servicing fees that have caused interest shortfalls. Interest shortfalls are expected to continue in class B-5, with no near-term recovery expected, while class B-4 "does not appear to be permanently impaired," the rating agency said. S&P can be found online at http://www.standardandpoors.com/ratings.

The Aimbridge Group, a Denver-based provider of financial products to credit unions, has announced an agreement with Loans at Wholesale that creates a new mortgage division, Aimbridge Home Loan.Aimbridge said credit unions that select Aimbridge Home Loan will be linked to the Aimbridge mortgage website via their own websites and will be able to offer their members two pricing options. The first allows the credit union to price a loan without a 1% origination fee, and the second reflects the credit union's internal mortgage pricing, Aimbridge said. "The mortgage industry has become cluttered with large retailers and small brokerages that don't seem willing or able to shed expenses by embracing technology that will allow them to offer improved pricing and cleaner service to customers," said Keith Brown, president of Aimbridge Home Loan. ".... It is our goal to provide credit union members with an easily navigable environment where they can quickly find reliable, relevant information, flexible loan analysis functions, and compelling savings compared to other mortgage sources." Aimbridge can be found online at http://www.aimbridge.com.

Center Trust Inc., Manhattan Beach, Calif., has announced a proposed settlement of litigation regarding its proposed merger with Pan Pacific Retail Properties Inc., Vista, Calif.Center Trust has entered into a memorandum of understanding concerning a settlement of the lawsuit, which was filed by Paul Berger on behalf of "a putative class" of Center Trust stockholders, the real estate investment trust said. In connection with the proposed settlement, Center Trust said it provided additional disclosures about the merger, and Pan Pacific, an equity REIT, has agreed to reduce the termination fee (payable by Center Trust to Pan Pacific under certain circumstances) from $7.5 million to $6.0 million. Under the merger agreement, Pan Pacific would acquire Center Trust, and each Center Trust share would be exchanged for 0.218 of a share in Pan Pacific.

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.

Housing affordability in California was down by five percentage points in November from the level recorded a year earlier, according to the California Association of Realtors.Housing affordability stood at 30% in November, down from 35% in November 2001, although it was unchanged from the level recorded in October 2002, CAR said. (The index indicates the percentage of households that can afford to buy a median-priced home.) The minimum household income needed to buy a median-priced home in California (at $328,310) was $78,630 in November, the association said. CAR can be found on the Web at http://www.car.org.