Originations

First Alliance Corp., Irvine, Calif., has reported earnings of $0.8 million ($0.04 per share) for the second quarter, compared with $7.9 million ($0.36 per share) a year ago.The company attributed the sharp falloff in earnings to a prepayment-related writedown, a reduction in net origination fees, and the postponement of the planned securitization of loans originated in the United Kingdom. The writedown of approximately $4.5 million in the value of First Alliance's residual interests -- as well as an $0.8 million increase in accelerated amortization on mortgage servicing rights -- stemmed mainly from "significant increases" in prepayments on adjustable-rate loans, the company said. The approximately 20% reduction in net origination fees resulted from lower-than-expected retail loan production, although it totaled $100 million, up 8% from $92 million a year earlier, First Alliance said.

A federal appeals court is reviewing a lower court's decision to dismiss a lawsuit challenging the legality of the Federal Home Loan Bank of Chicago's "mortgage partnership finance" pilot program.Federal District Court Judge Sam Sparks recently ruled that the Federal Housing Finance Board did not exceed its authority when it approved the MPF pilot in May 1997. However, the plaintiffs in the case did not agree with the ruling and filed an official appeal Thursday with the U.S. Fifth Circuit Court of Appeals, according to their attorney, Harris Weinstein, a lawyer with Covington & Burling, Washington. The plaintiffs include the Texas Savings and Community Bankers; World Savings & Loan, Oakland; Charter One Bank, Cleveland; and the Western League of Savings Institutions. To date, the Chicago FHLB has granted roughly $550 million in master commitments and funded $231 million in residential product through the MPF pilot. The program makes the Chicago bank a direct competitor of Fannie Mae and Freddie Mac. The program allows depositories that are FHLB members to use the bank's funds to originate conventional mortgages. The loans are placed on the balance sheet of the FHLB.

The average 30-year fixed mortgage rate crept up to 6.97% for the week ending July 31 from 6.96% the week before, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate inched up to 6.63% from 6.62% the previous week, and the average rate for one-year Treasury-indexed adjustable-rate mortgages dipped to 5.62% from 5.65%. Fees and points averaged 1.1 for fixed-rate mortgages and 1.2 for ARMs. "Mortgage interest rates continue to hold steady and affordable," said Robert Van Order, Freddie Mac's chief economist. "This is surely a major factor in figures released [Thursday] by the Commerce Department showing a rise in the sales of new homes in June. Combined with no sign of rising inflation rates on the horizon and little chance the Fed will raise rates any time soon, all signs point to a continuing healthy housing market." A year ago, the average 30-year and 15-year fixed rates were 7.36% and 6.90%, respectively, and the average one-year ARM rate was 5.49%. Freddie Mac's website address is http://www.freddiemac.com.

Standard & Poor's has affirmed its ratings on Ocwen Financial Corp., West Palm Beach, Fla., in the wake of Ocwen's announcement that it had taken a prepayment-linked $77.6 million writedown in the second quarter, resulting in a net loss of $37.9 million.Ocwen reported that "unprecedented" prepayment levels and "a continued inversion in the shape of the yield curve" had caused it to write down the book value of its interest-only and inverse IO securities and to "discontinue this investment activity." S&P attributed its rating action to Ocwen's continued strength. "Although the realized loss in the IO portfolio represented nearly 15% of consolidated capital, capital levels remain commensurate with the company's rating and credit profile," S&P said, citing high internal capital generation and strong financial performance from core operations. S&P also noted Ocwen's announcement that it has engaged an investment bank to identify strategic partners for further expansion of its core business lines. S&P's website address is http://www.ratings.standardpoor.com.

FT Mortgage Cos., Dallas, has agreed to buy the Seattle-based Keystone Mortgage in a stock transaction, Keystone has announced.The terms of the deal were not disclosed. FT Mortgage already has a major presence in the Washington market as a result of its 1994 acquisition of Emerald Mortgage, Keystone noted. The combination of Keystone's and Emerald's origination volumes will make FT Mortgage the fourth largest residential lending institution in the Puget Sound area, Keystone said. FT Mortgage ranked ninth in the U.S. in retail loan originations in the first quarter with $2.413 billion, according to the Database Products Group, a MortgageWire affiliate.

Norwest Mortgage Inc., Des Moines, Iowa, is being sued in a Riverside, Calif. court by a borrower who alleges that the company charged her $26.50 for a credit report the lender obtained for $14.The plaintiff, Dr. Norma Breslaw Saunders, is seeking to make this a class action lawsuit. A spokesperson for Norwest Mortgage said the company had not seen the complaint so was unable to comment on the specific allegations. "We can confirm, however, Norwest Mortgage has a long-standing company policy against marking up any and all third-party costs, including fees for closing services," the spokesperson told MortgageWire. Jordan M. Lewis, one of Dr. Saunders's lawyers, said thousands of borrowers in California and nationwide may have been affected by Norwest's actions. He further claimed that some lenders and loan brokers mark up charges paid to third-party providers and conceal this by failing to disclose to the borrower the actual cost.

New homes sales soared 3.7% in June to another record rate, the Commerce Department reported Thursday morning.Sales of new single-family homes hit a seasonally adjusted annual rate of 935,000, up from a previous record rate of 901,000 sales in May. Considering new sales hit a record 804,000 rate in 1997, the fact that sales are now above the 900,000 rate is a "huge jump," said National Association of Home Builders economist Michael Carliner. The extraordinary strength of the new home sales market has surprised even NAHB economists, who were expecting a slowdown in the second half of the year. But that slowdown may not be coming. "Our surveys of builders don't indicate any slowdown," Mr. Carliner said. The NAHB's website address is http://www.nahb.com.

Midland Loan Services Inc., Kansas City, Mo., has closed a $1.2 billion securitization of commercial mortgages, the first joint deal with its new parent company, PNC Bank Corp. Midland said the deal is important because "it is one of the first times an issuer has successfully combined loan origination, servicing, and subordinate CMBS investing under one roof."In the transaction, Commercial Mortgage Acceptance Corp. Series 1998-C1, Midland and PNC Bank pooled their loans, with Midland acting as depositor and PNC Capital Markets Inc. as selling agent. In addition, Anthracite Capital -- a real estate investment trust sponsored by BlackRock, an affiliate of the bank -- agreed to acquire the subordinate bonds. The securities were backed by 322 fixed-rate commercial and multifamily mortgages secured by properties in 39 states, with the highest concentrations in California, Pennsylvania, and New Jersey. Midland will be the master and special servicer on the transaction. Morgan Stanley Dean Witter was the lead underwriter.

IMC Mortgage Co., Tampa, Fla., has reported earnings of $16.3 million ($0.47 per share) for the second quarter, up 52% from $10.7 million ($0.36 per share) a year ago.Loan originations totaled $1.9 billion, up 39% from $1.4 billion a year ago. IMC delivered $1.6 billion of loans into securitizations and $274 million into whole loan sales for the quarter, the company said. The serviced loan portfolio totaled approximately $9.4 billion as of June 30, up from $4.0 billion a year earlier. Loans delinquent more than 30 days (including those in foreclosure or bankruptcy) represented 7.43% of the portfolio as of June 30, compared with 7.29% on March 31, IMC said.

United Companies Financial Corp., Baton Rouge, La., has reported net income of $4.3 million ($0.13 per share) for the second quarter, down 82% from $23.8 million ($0.73 per share) a year ago.Home equity loan production totaled $802.5 million for the quarter, up 14% from $703.4 million a year ago, while total loan production was $968.6 million, up from $756.9 million, UCFC said. The earnings figure fell within the $3-5 million range the company predicted July 21 when it announced the retention of Salomon Smith Barney to assist in seeking a "strategic partnership." The falloff in earnings was attributed partly to a prepayment-related $10 million charge to the value of UCFC's interest-only and residual certificates. As a result of the July 21 announcement, UCFC's ratings were placed under review by Standard & Poor's and Duff & Phelps Credit Rating Co. UCFC's website address is http://www.unitedcompanies.com.

Mortgage applications crept up 0.6% for the week ended July 24, according to the Mortgage Bankers Association of America's weekly Mortgage Application Survey.The Purchase Index fell 0.7%, the Refinancing Index rose 2.2%, the Conventional Index increased 1.8%, and the Government Index declined 3.6%, the survey indicated. On a seasonally adjusted basis, the Market Index rose slightly from 407.2 the previous week to 409.0; the Purchase Index decreased from 255.0 to 252.4; the Refinancing Index climbed from 1292.2 to 1320.2; the Conventional Index was up from 511.8 to 519.7; and the Government Index fell from 232.7 to 224.4. Refinancings represented 45.3% of total applications, up from 44.6% the previous week, while adjustable-rate mortgages accounted for 8.1%, down from 8.2% the week before. Overall, applications were up 53.7% compared with those for the same week last year. The address of the MBA's website is http://www.mbaa.org.

Amresco Inc.'s commercial mortgage banking unit, Holliday Fenoglio Fowler LP, has acquired Vanguard Mortgage Co., a commercial mortgage banking firm in Newark, N.J. The acquisition brings Holliday's servicing portfolio to more than 1,300 loans totaling about $7.7 billion, Amresco said."Our company has been acquainted with Tony Cuccia of Vanguard for many years, and we expect Tony to help further capitalize on and penetrate the Northeastern commercial real estate market," said Holliday CEO Richard Cole. Amresco's website address is http://www.amresco.com.

Southern Pacific Funding Corp., Lake Oswego, Ore., has announced the retention of Morgan Stanley Dean Witter to explore "strategic alternatives" that could include a merger or a strategic alliance."The domestic and international nonconforming mortgage lending market opportunities are dynamic and growing," said Robert W. Howard, SPFC's chief executive officer and vice chairman. Mr. Howard said gaining access to capital to support the company's "robust growth" was one reason the board of directors had engaged Morgan Stanley. The home equity lender recently reported record net earnings of $14.5 million ($0.60 per share) for the second quarter. SPFC's website address is http://www.sp-funding.com.

The Internal Revenue Service is considering a change to the Mortgage Interest Statement (1098 Form) that would require lenders to check a box "if this may be a high loan-to-value loan."MortgageWire has obtained a copy of the draft 1098 Form, which has not yet been issued for public comment. The IRS has issued warnings in the past that it is concerned lenders are leading borrowers to believe that all mortgage interest on 125% LTV loans is deductible. Now lenders have to be concerned that they could face penalties if they do not check the box -- even if they are not sure it is a high-LTV loan. And borrowers may get a shock when they receive the new 1098 Form. "Homeowners will intuitively and justifiably believe their probability of an IRS examination has just increased," a source said.

By a vote of 92-6, the Senate has passed a credit union reform bill that allows CUs to continue to expand their membership with some limitations.Senate sponsors are hoping the House will accept their version of the bill so that it can be sent to the president for his signature next week. The CU bill represents a total defeat for the banking and thrift lobbies, which wanted to impose corporate taxes on CUs and restrict their customer base. The Senate even rejected, 59-39, an amendment by Sen. Richard Shelby, R, Ala., to exempt small banks from the Community Reinvestment Act. President Clinton had threatened to veto the bill if it had the CRA amendment.

The AFS Title Search Index dipped 0.8% to 215.8 for the week ended July 24 from 217.4 (revised from 217.5) for the previous week, according to Advance Factor Service.The index averaged 213.3 over the previous four weeks, up 2.6 points from the prior week's four-week moving average. A year ago, the index stood at 167.2, 77.5% of the current level. "The persistence of nominal (without points) mortgage rates below 7.0% as tracked by the Freddie Mac Primary Mortgage Market Survey continues to provide lift to overall title activity," said AFS manager Paul Descloux. "As a leading indicator, the recent profile of title searches points to an extension of the current 1998 prepayment plateau." Mr. Descloux's e-mail address is paul.descloux@cor.dowjones.com.

PanAmerican BanCorp/Purewater, New York, has acquired 100% of Realty Money Center, a Nevada-based single-family mortgage banking company.PanAmerican paid an undisclosed amount of stock and other considerations. Last year Realty Money Center had in excess of $500 million in closings. It has five offices in Nevada, 27 employees, and is licensed to do business in 10 states, including California, New York, Florida, and Arizona. Dave Williams, Realty Money Center's founder and president, will now be in charge of PanAmerican's residential mortgage operations.

The Department of Housing and Urban Development used a "conservative" approach in setting the affordable housing goals for Fannie Mae and Freddie Mac, according to a General Accounting Office report released Tuesday.Research conducted by HUD and the Office of Federal Housing Enterprise Oversight "found that additional mortgage purchases required under the goals were modest and would not materially affect the enterprises' financial condition," GAO says in the report. The GAO report also noted that the two government-sponsored enterprises still require lenders to retain most of the credit risks on affordable multifamily loans. And HUD has not conducted research to see if these risk management strategies "impede lenders' willingness" to make multifamily loans. A House Banking subcommittee is scheduled to hold a hearing on the GAO report this Thursday.

Senate Republicans have reached a compromise on Federal Home Loan Bank reform legislation that has the support of most industry trade groups and the FHLBank presidents.Senate Banking Committee Chairman Alfonse D'Amato, R, N.Y., and Sen. Chuck Hagel, R, Neb., recently agreed to incorporate a risk-based permanent capital requirement into the legislation as part of a compromise. This would enable the FHLBanks to free up some of the excess capital currently built into their balance sheets. Despite the support that the Hagel bill has garnered, Clinton administration officials are concerned that the bill does not try to limit arbitrage investments. "Most of the system's investments, which amount to 40% of the system's assets, do nothing to support residential mortgage lending," Treasury Secretary Robert Rubin wrote in a letter to Sen. D'Amato. "We believe that any legislation aimed at reforming the system must resolve this serious problem." Sen. Hagel is expected to attach his FHLB reforms to a more sweeping regulatory relief bill (S. 1405) that the Senate Banking Committee is expected to mark up Wednesday. However, Sen. Hagel's staff told MortgageWire they are still debating how to offer the bill.

Duff & Phelps Credit Rating Co., Chicago, has downgraded four public classes of residential mortgage pass-through certificates and placed a fifth on Rating Watch-Down.Three of the downgraded securities are from transactions issued by DLJ Mortgage Acceptance Corp.: DLJ 1995-Q3 P1, Class IB-1, downgraded from B to CCC and left on Rating Watch-Down; DLJ 1994-Q1 P1, Class IB-1, downgraded from CCC to DD and removed from Rating Watch-Down; and DLJ 1996-Q2, Class B-2, downgraded from CCC to DD and removed from Rating Watch-Down. The fourth downgraded security was issued by MDC Mortgage Funding Corp.: MDC 1994-LB7 G2, Class IIB-1, downgraded from B to CCC and left on Rating Watch-Down. The security placed on Rating Watch-Down was DLJ 1996-Q2, Class B-1, which is now rated A. The downgrades stemmed from "a continued decrease in credit enhancement, in combination with high levels of delinquent loans, foreclosure properties, and REO properties," the rating agency said. The securities are all backed by pools of subprime mortgage loans, originated by Quality Mortgage USA Inc. in the case of the DLJ transactions and by Long Beach Bank FSB in the MDC transaction. Duff & Phelps's website address is http://www.dcrco.com.