Originations

Freddie Mac has announced the purchase of an $11 million mortgage on a housing facility for senior citizens in Lincoln, Neb. The mortgage on the 173-unit congregate care and assisted-living facility was originated by First National Bank of Omaha, one of Freddie Mac's Program Plus lenders.Mitch Kiffe, vice president for loan production at Freddie Mac, touted the government-sponsored enterprise's products and network of lenders in the market for affordable housing for seniors. "Senior and assisted-living rental housing lending is an increasing portion of our business," Mr. Kiffe said. "The seniors market is one of the fastest-growing housing markets in the U.S. today." Jerry C. Joyce, a partner in Legacy LP, which owns the facility, said the demand for affordable housing for seniors is "extraordinary." Freddie Mac said it expects to buy more than $200 million in senior housing mortgages by the end of the year. Freddie Mac's website address is http://www.freddiemac.com.

The B ratings on classes F-1 and F-2 of CS First Boston Mortgage Securities Corp.'s multifamily mortgage pass-through certificates, Series 1995-M1 have been placed on RatingAlert Negative by Fitch IBCA Inc. The ratings on five other classes in the series were affirmed.The rating agency said the actions resulted from deteriorating performance by the pool and Fitch IBCA's concern about five delinquent loans that are being specially serviced by GE Capital Realty Group. The pool consists of 26 multifamily mortgage loans that have been allocated low-income housing tax credits, 15 of which have performed poorly, Fitch IBCA said. Based on discussions with GE Capital and the master servicer, GMAC Commercial Mortgage Corp., the rating agency attributed the poor performance to several factors, including the limited number of qualifying tenants and above-average turnover and maintenance expenses. Fitch IBCA's website address is http://www.fitchibca.com.

The housing sector will remain strong and interest rates will hold steady for the remainder of 1998, according to a survey of 19 Wall Street economists by the Bank of America.The consensus forecast of the economists sees housing starts of 1.54 million units for the year, up from a recent estimate that projected a figure of 1.53 million, the survey said. Most of the panel believed that the Federal Reserve Board would hold interest rates steady through the end of the year and their projections of gross domestic product in 1998 averaged 3.4%. The survey, published in the Bank of America's publication Economics Illustrated, also contained forecasts of bad news. A majority of the panel said economic conditions in East Asia have not yet hit bottom and could worsen the U.S. export picture.

Florida existing home sales rose 16% in the second quarter compared with those of a year earlier, setting a second-quarter record of 41,176, the Florida Association of Realtors has reported.It was the fourth straight quarter in which resales outperformed those of the previous year and the first quarter in which the median price has broken the $100,000 barrier, reaching $101,200, the FAR said.

California home sales climbed 18% and the median home price in the state rose 10.8% to $204,680 in the second quarter compared with those of a year earlier, according to the California Association of Realtors and Transamerica Intellitech's MetroScan service.The CAR's website address is http://www.car.org.

Aames Financial Corp., Los Angeles, has reported record earnings of $40.3 million ($1.23 per share) for the fiscal year ended June 30, up 136% from the previous year's $17.1 million ($0.60 per share).Revenues for the year totaled a record $325 million, up 19% from $273 million the year before. Net income for the quarter ended June 30 was $9.8 million, compared with a net loss of $14.1 million a year earlier (mainly attributable to a revaluation of the company's interest-only strip), Aames said. Cary Thompson, the company's chief executive officer, said Aames took advantage of positive market conditions for subprime loans in the past quarter by selling $697 million in loans, of which $625 million were securitized. The quarter's gain on sale totaled $63.3 million. Mr. Thompson said the company's loan servicing portfolio had grown to $4.1 billion as of June 30, up 28% from $3.2 billion a year earlier. "More important to Aames is that loans serviced in house increased to $3.9 billion from $1.5 billion, a 162 percent increase year-over-year," he said. "By calendar year end we plan to eliminate our use of third-party servicers and by fiscal year end we expect to begin subservicing for others."

The average 30-year fixed mortgage rate fell to 6.91% for the week ending Aug. 14 from 6.94% the week before, according to Freddie Mac's Primary Mortgage Market Survey.The last time the rate was lower was the week ended Jan. 16, 1998 when it reached 6.89%, although the same rate of 6.91% was hit during the week ended July 10. The average 15-year fixed mortgage rate dipped to 6.60% from 6.63% the previous week, and the average rate for one-year Treasury-indexed adjustable-rate mortgages drifted down to 5.60% from 5.61%. Fees and points averaged 1.1 for all three categories. "Falling interest rates are largely the result of events in Asia," said Robert Van Order, Freddie Mac's chief economist. "Concern over other currencies and a fear of devaluation lead people to invest money into more stable currencies such as U.S. dollars. This causes bond prices to go up and interest rates to go down. In the months to come, although it will slow down, the housing market will remain strong, as will the overall economy." A year ago, the average 30-year and 15-year fixed rates were 7.54% and 7.07%, respectively, and the average one-year ARM rate was 5.56%. Freddie Mac's website address is http://www.freddiemac.com.

Capstead Mortgage Corp., Dallas, has announced the appointment of Andrew F. Jacobs to the post of executive vice president-finance.Mr. Jacobs will assume the responsibilities of treasurer and secretary previously held by Julie Moore, who is retiring after her maternity leave, Capstead said.

Fannie Mae has announced the opening of a statewide affordable housing office in Oklahoma."The first function of the [Oklahoma] Partnership Office will be to work with our housing partners statewide to develop a comprehensive investment plan addressing Oklahomans' specific housing needs, from Tulsa's urban core to the Sooner State's rural communities," said Fannie Mae chairman and CEO James A. Johnson. "We'll come back in three months to announce the investment plan, which will be implemented by our Partnership Office here in Oklahoma City." The office will focus on expanding the availability of affordable mortgage products, introducing low-downpayment loans, investing in multifamily developments, supporting homebuyer education efforts, and educating consumers about specialized Fannie Mae products, the government-sponsored enterprise said. Ron McCord, chairman of Holliday American Mortgage Co. and past president of the Mortgage Bankers Association of America, was named chairman of the Oklahoma Partnership Office's soon-to-be-formed advisory council. Mr. McCord said the council will emphasize "penetrating hard-to-reach markets that currently have limited access to mortgage finance resources and providing our partners with the resources they need to educate families on credit and mortgage issues." Fannie Mae's website address is http://www.fanniemae.com.

Amresco Inc., Dallas, has announced the closing of its acquisition of Mortgage Investors Corp., St. Petersburg, Fla., and the renaming of one of its divisions.The purchase included an initial payment of 1.8 million shares of Amresco common stock and $2.6 million in cash, as well as a three-year earn-out to be paid in stock (82%) and cash (18%). MIC is the largest producer of VA streamlined refinanced loans, known as interest rate reduction refinance loans. Amresco said its existing Residential Mortgage Banking group has been renamed Home Equity Lending and that MIC now represents the Residential Mortgage Banking unit. Amresco's website address is http://www.amresco.com.

The National Association of Realtors has reported that median prices of existing homes rose 6% over the 12 months ended June 30.Strong sales activity pushed up prices in all four regions of the country, led by the Midwest, where the median price of a home rose 7.9% over the past four quarters to $114,000. Median prices of existing homes rose 7.5% in the West to $172,900, 7.1% in the South to $115,900, and 3.5% in the Northeast to $151,100. "We expect that the resale market across the nation will continue to remain at record levels, while sale prices will continue their moderate gains," said Fred Flick, the NAR's vice president for economic research. The NAR's website address is http://www.realtor.com.

Mortgage applications declined 0.5% for the week ended Aug. 7, according to the Mortgage Bankers Association of America's weekly Mortgage Application Survey.The Purchase Index fell 1.7%, the Refinancing Index rose 1.0%, the Conventional Index increased 0.8%, and the Government Index was down 5.0%, the survey indicated. On a seasonally adjusted basis, the Market Index fell slightly from 407.0 the previous week to 406.8; the Purchase Index decreased from 257.2 to 254.7; the Refinancing Index rose from 1278.8 to 1291.9; the Conventional Index was up from 512.1 to 518.2; and the Government Index fell from 231.6 to 221.2. Refinancings represented 44.8% of total applications, up from 44.1% the previous week, while adjustable-rate mortgages accounted for 7.9%, down from 8.4% the week before. Overall, applications were up 37.4% compared with those for the same week last year. The address of the MBA's website is http://www.mbaa.org.

Loans with high loan-to-value ratios are risky, and high-LTV pools will probably experience losses comparable to those of credit card pools, says a new report by Moody's Investors Service.High-LTV lenders have little margin for error because the loans have little or no equity protection, and therefore servicing is a critical element, according to Linda Stesney, a managing director in residential mortgage finance. As a result, lenders "are likely to suffer a complete loss if they make a mistake in assessing a borrower's credit quality and the borrower defaults," said Ms. Stesney, an author of the report. Despite the risks, lenders have been drawn to the high-LTV market by healthy margins, and Moody's estimated that high-LTV loans will hit $15 billion this year, nearly double 1997's total of about $8 billion. Moody's also said high-LTV lenders lack protections available to credit card lenders, such as credit line reductions and interest rate increases, and noted that high-LTV securitizations lack the early amortization trigger that allows investors to escape from a bad credit card deal within two years. Moreover, since they are longer-term assets than credit cards, high-LTV loans "are even more vulnerable to the 'four Ds of underwriting': downsizing, death, divorce, and disease," Moody's said. The Moody's website address is http://www.moodys.com.

The AFS Title Search Index rose 0.4% to 210.2 for the week ended Aug. 7 from 209.2 the previous week, according to Advance Factor Service.The index averaged 213.1 over the previous four weeks, down 2.6 points from the prior week's four-week moving average. A year ago, the index stood at 167.4, 79.7% of the current level. "Current mortgage rates continue to bolster title searches as a steady stream of mortgagors continue to exercise their refinance option," said AFS manager Paul Descloux. "Look for a continuation of the current pace of title searches as mortgage rates remain near their lows for this refinance cycle." Mr. Descloux's e-mail address is paul.descloux@cor.dowjones.com.

The Comptroller of the Currency is warning that a slowdown in the domestic economy is coming and the resulting credit problems will force banks to increase their provisions for loan losses.In fact, OCC officials expect that second quarter call report data -- to be released in early September -- will slow that banks have already started to increase these reserves. Loan loss reserves are currently at a 10-year low, and the precipitous decline in these reserves during the 1992-94 period has contributed to strong bank earnings over the past several years. The economic slowdown, due to problems in Asia and to some extent the year 2000 computer problem, "will lead to some credit problems in bank portfolios," OCC director of economic analysis Nancy Wentzler told reporters Tuesday morning. The OCC economist would not estimate the magnitude of the economic slowdown, but the OCC has not been this concerned about the economy since 1992, she said. Although bank earnings in the second quarter are near record highs, there has been a slowdown in after-tax corporate profits for all companies, Ms. Wentzler said. Banks and nonbanks are finding it more difficult to reduce expenses, she added.

Associates First Capital Corp., Irving, Tex., has agreed to buy Avco Financial from Textron Inc. for $3.9 billion in cash.Associates, the largest residential subprime lender/servicer in the U.S., is buying Avco to help expand its international business, which includes Canada, Australia, the U.K., New Zealand, France, and other countries. Avco, with $8.9 billion of assets and 2.5 million customers, has 1,265 consumer finance offices worldwide and has the fourth-largest consumer branch network in the U.S. No information was available about Avco's role (if any) in the residential subprime market. Other interested bidders in Avco include G.E. Capital Corp. and Norwest Corp. (Last year Norwest was eyeing United Companies, Baton Rouge, which is currently on the auction block.) At noon today Associates' shares were down $2 to $72 and change.

Union Planters Corp., Memphis, has signed a definitive agreement to acquire Southeast Bancorp, Corbin, Ky., the companies have announced.Under the agreement, shareholders of Southeast would receive 11.87 shares of UPC common stock for each share of Southeast common stock in a tax-free exchange. The transaction would be valued at approximately $65 million and is expected to be accounted for as a pooling of interests. UPC is the parent company of Union Planters Mortgage, Cordova, Tenn., which ranked 87th in retail originations in the first quarter, according to the Database Products Group, a MortgageWire affiliate. Southeast is the parent of First National Bank & Trust Co., Corbin, Ky., and First Bank of East Tennessee NA. UPC's website address is http://www.unionplanters.com.

America's Community Banking Partners Inc., Bala Cynwyd, Pa., has endorsed a program that permits community banks to offer home equity loans to customers who do not meet their lending criteria.Under the Bank Alliance Program, offered by American Business Financial Services Inc., bankers can forward their declined applications to ABFS's Processing Service Center Inc., which processes, underwrites, and arranges for the purchase of the loans. The nationwide program "allows banks to maintain their customer relationships, obtain CRA credit, and earn fee income on business they might normally decline," said ACB Partners, a subsidiary of the America's Community Bankers trade association. The group said the decision to endorse the program followed the completion of due diligence on the product and its compliance with the Real Estate Settlement Procedures Act. Anthony J. Santilli, chairman, president, and CEO of ABFS, said the support from ACB Partners, along with the efforts of Mark J. Weishaar as senior vice president and national sales manager, "will help us better serve participating banks."

The Internal Revenue Service is likely to postpone changes to its "Mortgage Interest Statement" information form (Form 1098) that would require lenders to flag high-LTV loans."Given the realities of the calendar, it is not likely that we would be able to implement this for tax year 1999," said IRS spokesman Don Roberts. The IRS wants lenders to identify possible high-LTV loans on the 1098 form so that borrowers do not believe that all mortgage interest paid is necessarily tax deductible. IRS officials originally wanted to implement the changes for tax year 1999, but now it looks as if the IRS will postpone the changes until tax year 2000.

The Federal Housing Finance Board is clearing the way for more Federal Home Loan Banks to create "mortgage partnership finance"-like pilot programs to purchase or fund conventional loans originated by their members.The Chicago FHLB has issued $550 million in master commitments through its MPF program and funded $231 million in residential product. "Several other FHLBanks have indicated an interest in seeking Finance Board approval to offer pilot MPF programs to their members," according to a notice in the Aug. 7 Federal Register. "Finance Board staff is hereby giving notice of impending Finance Board action and offering an opportunity for public comment regarding the establishment of approval procedures and criteria, terms and conditions for pilot program operation," the Federal Register notice says. MortgageWire has previously reported that the New York and Indianapolis FHLBs are interested in starting MPF-like pilots. The notice clearly states that the Finance Board is not ready to make the MPF pilot program a permanent program. (The Finance Board was sued for approving the MPF program by a Texas thrift trade group and other plaintiffs. The FHFB won the case, but the plaintiffs are appealing.) The Finance Board is considering raising the current $750 million cap on loans originated under the MPF pilot program.