Originations

Upgrades of commercial mortgage-backed securities transactions exceeded downgrades in the third quarter, according to Standard & Poor's.It marked the first time that positive rating changes exceeded negative ones for the CMBS sector this year, S&P said. In the third quarter, 43 deals were upgraded and 40 were downgraded.

An agreement has been reached to sell Wilmington Finance Inc., a nonconforming mortgage originator based in Plymouth Meeting, Pa., to American General Finance Inc., Evansville, Ind.Wilmington Finance is a joint venture between thrift holding company WSFS Financial Corp., Wilmington, Del. -- which owns 80% -- and the company's management. The terms of the transaction were not fully disclosed, but WSFS said its share of transaction proceeds should be around $78 million. For the 12 months ended Sept. 30, Wilmington Finance added $8.1 million ($0.86 per share) to WSFS's bottom line. While the unit is profitable, Marvin N. Schoenhals, chairman and president of WSFS, said the holding company decided to focus its resources and capital on its core community bank in and around Delaware. AGF is a subsidiary of American International Group Inc., New York, the parent company of United Guaranty Corp., the Greensboro, N.C.-based mortgage insurer.

The average 30-year fixed mortgage rate dipped to 6.11% for the week ending Nov. 8 from 6.13% the previous week, and rates for one-year adjustable-rate mortgages fell to an eight-year low, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 5.51% to 5.48%, while the average rate for one-year Treasury-indexed ARMs dropped from 4.25% to 4.15%, its lowest level since February 1994. Fees and points averaged 0.6 points for fixed-rate mortgages and 0.7 points for ARMs. "Recent economic indicators show a lackluster economic climate," said Frank Nothaft, Freddie Mac's chief economist. "And that led to the surprise 50-basis-point rate cut by the Fed [on Nov. 6]. Anticipation of a 25-basis-point rate cut pushed mortgage rates downward in this week's survey, and we expect to see further downward drifts over the coming week or so as the market moves on the actual larger rate cut itself." A year ago, the average 30-year and 15-year fixed rates were 6.45% and 5.94%, respectively, and the average one-year ARM rate was 5.30%, Freddie Mac said. Freddie Mac can be found on the Web at http://www.freddiemac.com.

MidAmerica Bank of Clarendon Hills, Ill, has launched the Affordable Access program, a new $1 billion lending initiative designed to facilitate homeownership to low- and moderate-income families and customers with blemished credit in the Chicago metropolitan area.Options include 100% loan-to-value mortgages of up to $300,700, downpayments ranging from $500 and up to 3% maximum on a single-family home, and no requirement for mortgage insurance if the buyer cannot qualify for it. According to MidAmerica president Ken Koranda, the program "provides prime interest to borrowers with subprime credit." It also provides 95% LTV loans of up to $384,900 for two-unit homes.

Ramco-Gershenson Properties Trust, Southfield, Mich., has priced a public offering of 1.0 million shares of 9.5% series B cumulative redeemable preferred shares at $25 per share.The real estate investment trust said the net proceeds will be used to pay down outstanding balances under the company's credit facility, after which it will borrow against the facility to acquire its joint venture partners' interest in Crossroads Centre in Toledo, Ohio, and East Towne Plaza shopping center in Madison, Wis. Proceeds will also be used to buy the fee interest for a vacant Kmart acquisition adjacent to the REIT's Naples Towne Centre. The REIT said it has granted the underwriters -- McDonald Investments Inc. and U.S. Bancorp Piper Jaffray -- a 30-day option to buy up to an additional 150,000 shares of the series B preferred stock to cover any overallotments.

Two classes of Deutsche Mortgage & Asset Receiving Corp.'s commercial mortgage pass-through certificates, series 1998-C1, have been downgraded by Fitch Ratings.Class L was downgraded from B to B-minus, and class L was downgraded from CCC to CC. The ratings on 11 other classes in the deal were affirmed. Fitch attributed the downgrades to continuing deterioration in the pool's collateral performance and expected losses for many loans. As of the October 2002 distribution date, 22 loans representing 7.8% of the pool were in special servicing, the rating agency said. Of those, three were more than 30 days delinquent, six were more than 90 days delinquent, and nine had reached the status of real estate owned, Fitch said.

Fitch Ratings says it expects the average loan-loss severity in commercial mortgage-backed securities transactions to increase to 50% this year.In addition, the rating agency expects the frequency of CMBS loan defaults to double this year. Fitch noted that this will be the second year of rising losses from CMBS defaults. In 2001, the loss severity rose to 34% from 19% the year before. Fitch said loans that remain in special servicing the longest -- particularly those in servicing for 24 months or more -- take the biggest hit. Fitch can be found online at http://www.fitchratings.com.

Pan Pacific Retail Properties, a San Diego-based retail real estate investment trust, is acquiring Center Trust, another California retail REIT, in a transaction valued at $600 million (including the assumption of debt and transaction costs).Each Center Trust share will be exchanged for 0.218 of a share in Pan Pacific. The transaction is expected to bring Pan Pacific's holdings to 138 shopping centers across the West Coast, encompassing 19.4 million square feet, the REIT said. "Pan Pacific will now be the only public shopping center REIT focused exclusively on the West Coast and will be uniquely positioned to continue sourcing attractive opportunities, generating consistent growth, and increasing stockholder value," said Stuart Tanz, Pan Pacific's president and chief executive officer. Pan Pacific is assuming approximately $136 million of Center Trust's secured debt and is planning to retire approximately $228 million of Center Trust's secured debt after the closing by issuing new debt and selling assets.

Alliance Capital Partners Inc., Jacksonville, Fla., has completed its purchase of Everbank, an Internet bank from WSFS Financial Corp., a thrift holding company in Wilmington, Del.Alliance Capital Partners, which is privately held, is the parent of Alliance Mortgage Co., which operates joint ventures with priceline.com and Bank of New York and originates loans through a wholesale channel, and OnePipeline, which does business with real estate agents. Alliance services $26 billion and has annual originations of $8 billion. The company also owns a North Florida retail commercial bank, First Alliance Bank, of which Everbank will operate as a division. "The merger represents a compelling combination, bringing together Everbank's nationwide banking and low-cost funding platform and Alliance's powerful home loan generation capability," said Robert Clements, chairman and chief executive of Alliance Capital. "The acquisition is another major milestone in Alliance Capital Partners' transition from a leading national mortgage company to a leading national financial services company."

Mortgage applications rose 13.1% on a seasonally adjusted basis for the week ended Nov. 1, according to the Mortgage Bankers Association of America's Weekly Mortgage Applications Survey.On an unadjusted basis, applications were up 12.7% on the week but down 1.0% from the level recorded a year earlier. On a seasonally adjusted basis, the Purchase Index rose from 338.6 to 369.5, while the Refinance Index jumped from 4240.4 to 4875.1. Refinancings represented 70.6% of total applications, up from 69.2% the previous week, while adjustable-rate mortgages accounted for 13.4%. The average contract interest rate for 30-year fixed-rate mortgages rose slightly from 6.01% to 6.03%, and points (including the origination fee) decreased from 1.55 to 1.40 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mbaa.org.

In a Monday MortgageWire item regarding subprime lender Delta Financial exiting the Georgia "high cost" loan market, it should have been specified that although some lenders (Countrywide and others) have stopped funding or buying high cost loans in Georgia, they are still funding other types of mortgages in the state.

Equity Residential has reported funds from operations of $180.3 million ($0.60 per share) for the third quarter, compared to $201 million ($0.67 per share) for last year's third quarter.Net income for the third quarter was $88.661 million ($0.23 per share), down from $93.851 million ($0.26 per share) for the third quarter of 2001. Douglas Crocker II, CEO of the Chicago-based multifamily real estate investment trust, said, "The multifamily industry continues to be hurt by non-existent job growth and the availability of financing for both the purchase of single-family homes and multifamily development." He added, "While these factors will continue to have a negative impact on the multifamily industry through 2003, the stabilization of multifamily development at historical annual levels of 300,000 to 320,000 units and the predicted job growth in the second half of 2003 and through 2004 should have a positive impact on Equity Residential and the industry."

GMAC-Residential Funding Corp. has reported that its mortgage- and asset-backed securities issuance totaled $9.2 billion in the third quarter, pushing its year-to-date volume to a record $27.3 billion.GMAC-RFC said issuance between July 1 and Oct. 31 marked the second largest quarterly securitization volume in company history. The company can be found on the Web at http//www.gmacrfc.com.

A company is being set up to securitize mezzanine loans -- a loan type that so far has been restricted to the portfolios of lenders-- according to Eric Hillenbrand, a senior vice president with the Chicago-based Banc One Capital Corp.At a panel session relating to "real estate debt: myths and realities" at the Urban Land Institute's annual meeting in Las Vegas, Mr. Hillenbrand said that he expects the company to be operational by early next year.

Moody's Investors Service has reported that it is reviewing for possible downgrade the ratings of about $124.1 million of commercial mortgage-backed securities with ties to collateral leased solely by the troubled Lucent Technologies Inc.The securities affected comprise six classes of GMAC Commercial Mortgage Securities, Inc., Commercial Mortgage Pass-Through Certificates, Series 2002-LT. The possible downgrades were prompted by downgrades of Lucent's long-term corporate debt ratings by Moody's. The Lucent corporate downgrade reflects "the severity of the decline in Lucent's revenue base, the magnitude of its current and prospective cash burn rate, lack of clarity regarding the nature and timing of a rebound in revenue and the reduced liquidity sources following the cancellation of the $1.5 billion bank facility and $500 million accounts receivable securitization vehicle."

Citing legislation intended to curb high cost mortgages, Delta Funding, Woodbury, N.Y., a top 30 ranked subprime funder, has pulled out of the Georgia market. Company general counsel Peter Wagner confirmed to MortgageWire that the subprime residential firm would no longer lend in the state.Delta, he said, is closing its Atlanta office, and laying off 15 people. "There is no secondary there," he said. "Not many are willing to buy any more." Delta securitizes its subprime production but also disposes of product through the whole loan market. Several lenders have exited the state since enactment of the Georgia Fair Lending Act, including Countywide Home Loans, New Century, and Option One, to name a few.

RFS Hotel Investors Inc., Memphis, has amended its $140 million line of credit and extended it for a year, to July 30, 2005.The real estate investment trust said the amendment relaxes certain financial covenants, including the interest coverage, fixed-charge coverage, and total-leverage tests. The interest rate will continue to range from 150 to 250 basis points above the London interbank offered rate. Banc of America LLC acted as the sole lead arranger of the LOC. The REIT can be found online at http://www.rfshotel.com.

The Eleventh Federal Home Loan District Cost of Funds Index for September is 2.759%, virtually unchanged from August's 2.763%.The Federal Home Loan Bank of San Francisco calculates the index based on the cost of mortgage money for the member institutions; this includes what these institutions pay on deposits. According to data kept on the Federal Reserve Bank of St. Louis website, nationwide interest rates for the one-month, three-month and six-month certificates of deposit all spiked upward in March before declining in April and flattening out in May and June. Being a weighted average, COFI typically has a three-to-six month lag. What might be bad news down the road for this index is that CD interest rates increased from August to September.

The National Association of Realtors' composite Housing Affordability Index was at 135.3% during the third quarter of this year, up from 132.4 in the previous quarter. NAR 's chief economist David Lereah attributed the 2.9 percentage points increase to "a favorable change in mortgage interest rates, which are the biggest variable in housing affordability." During the quarter the typical household had 135.3% of the income needed to purchase a home at the median existing-home price of $161,800 if the homebuyer makes a 20% downpayment. (An index of 100 defined as the point where a median-income family has the exact amount of income needed to purchase.) NAR's first-time homebuyer affordability index shows that buyers aged 25-44 years with a $29,943 income had 78.5% of the income needed to purchase a typical starter home with 10% downpayment at a median price of $137,500.

Through the first eight months of the year Countrywide Home Loans, Calabasas, funded $7.3 billion in second liens, already surpassing last year's record volume of $6.3 billion, according to company records.Based on the "run-rate" of the first eight months Countrywide could wind up producing almost $11 billion in second mortgages this year -- a 72% gain from its volume in 2001. Countrywide senior vice president for development Vijay Lala told MortgageWirethat about half of the lender's second lien volume represents home equity loans that are part of "80-10-10" or similar structures. In these type of arrangements lenders offer a second along with a first as a way for the consumer to avoid paying mortgage insurance. (See National Mortgage News issue of November 4 for full details.)