Originations

Long Beach Financial Corp., Orange, Calif., has reported record second quarter earnings of $7.4 million ($0.29 per share), up 52% from $4.9 million a year ago.In addition, loan production hit a record level of $651.7 million, up 69.2% from a year ago, the company said. "Our operating model continues to generate cash revenue, without any residuals from securitization, making our earnings among the highest quality earnings in the subprime mortgage lending industry," said M. Jack Mayesh, Long Beach Financial's chairman and chief executive officer. The company also reported gains from the sale of loans totaling $31.6 million for the second quarter, up 58.6% from $19.9 million a year ago.

California Federal Bank, San Francisco, has reported net income of $339.9 million (before preferred stock dividends) for the second quarter, up from $63.3 million a year ago.The results included a $250 million deferred tax benefit stemming from a reduction in the bank's valuation allowance related to its deferred tax asset. Without the adjustment, earnings would have totaled $89.9 million, up 42% from a year ago. "While margins have declined due to the increased runoff in the bank's mortgage loans and mortgage-backed securities, we were able to increase our balance of earning assets so that net interest income was only modestly lower than [in] comparable periods last year," said Gerald J. Ford, CalFed's chairman and CEO. CalFed's parent, First Nationwide (Parent) Holdings Inc., is expected to complete a merger with Golden State Bancorp Inc., Glendale, Calif., by the end of the third quarter. Golden State, the parent of Glendale Federal Bank, has reported earnings of $39.3 million for its fiscal fourth quarter (ended June 30), compared with $24.3 million a year ago.

The AFS Title Search Index fell 1.4% to 217.5 for the week ended July 17 from 220.5 for the previous week, according to Advance Factor Service.A year ago, the index stood at 168.7, 77.6% of the current level. American General To Buy Warehouse LenderAmerican General Finance Inc., Houston, has agreed to purchase Residential Mortgage Services of Texas Inc., a warehouse lender based in Houston, for $25 million. RMST, now a subsidiary of Houston Savings Bank, is the 18th largest mortgage warehouse lender in the nation. A statement from American General Finance said the acquisition is consistent with the company's strategy to expand its network of third-party residential mortgage originators and to introduce new services to its existing origination network.

Ginnie Mae is worried that it could run out of commitment authority in September, so it is asking lenders to cut back on Ginnie Mae security issuances over the next two months."Effective immediately, Ginnie Mae is instituting temporary procedures to ration commitment authority," according to a July 10 memorandum to all Ginnie Mae participants. Ginnie Mae is asking issuers to estimate their commitment needs in July and August and submit a request. "Ginnie Mae will carefully review all requests from issuers, but may approve requests for less than the full amount," Ginnie Mae executive vice president George Anderson said in the memorandum. Ginnie Mae notified Congress several weeks ago that it had exceeded 75% of its fiscal 1998 commitment authority, which totals $130 billion. The fiscal year ends Sept. 30.

United Companies Financial Corp., Baton Rouge, La., has reported that it expects a significant prepayment-related falloff in second quarter earnings and has announced the retention of Salomon Smith Barney to assist in seeking a "strategic partnership."UCFC's board of directors has appointed a special committee to explore the strategic option as a way of gaining access to additional capital for growth, the company said. Regarding second quarter earnings, UCFC chairman and CEO J. Terrell Brown said results are expected to be "below analyst expectations primarily due to approximately $10 million in charges relating to the valuation of our interest-only strips. While this adjustment is relatively small compared to the size of our portfolio, like many others in our industry, we are seeing prepayment rates that are higher than we have historically experienced." The home equity lender said it expects to report net income of $3 million to $5 million ($0.10-0.15 per share) in the second quarter, compared with $23.8 million ($0.73 per share) a year ago. UCFC's website address is http://www.unitedcompanies.com.

After several months of steady decline, single-family housing starts rose 3% in June to their highest level since February, according to statistics released by the U.S. Commerce Department.[Click here to see the chart.] Government data show that single-family starts were at a seasonally adjusted annual rate of 1.250 million in June, up from May's revised rate of 1.219 million. The last time single-family starts were this high was in February when the rate stood at 1.263 million. "The latest number is consistent with what we expected," said Mike Karliner, senior economist at the National Association of Home Builders. "There is still a strong demand for housing in most portions of the country." Although the housing market remains strong, Mr. Karliner said the NAHB is still forecasting a downturn in the coming months. "We've already seen signs of a slowdown in the economy," he added. Even if a downturn occurs, the NAHB is predicting single-family starts to end the year at around 1.195 million -- the highest rate in 20 years. Total starts, including multifamily, rose 6% in June to 1.615 million. Meanwhile, the NAHB Market Index rose to 72 in July, a one-point rise. The rating for present single-family sales rose two points to 79, while the rating for expected single-family sales in the next six months rose one point to 81, the NAHB reported.

1st Source Corp., South Bend, Ind., has announced the completion of a $400 million securitization to fund the growth of the 1st Source Bank Specialty Finance Group.1st Source is the largest locally owned financial institution based in the northern Indiana-southwestern Michigan area. Its offices include five Trustcorp Mortgage offices in Indiana and Ohio.

The National Home Equity Mortgage Association has adopted voluntary standards aimed at deterring home improvement abuses.The standards call for disclosure of customer rights under federal law, the signing of completion certificates by contractors and homeowners before lenders buy financing, independent property inspections to confirm that home improvements of $7,500 or more have been completed, lender cooperation with law enforcement in prosecuting fraud, and lender response within 60 days of consumer home improvement complaints. "We plan to take a hard line with contractors who violate the homeowner's trust," said Laura Borrelli, president of NHEMA. "These standards are the first step toward a more comprehensive set of voluntary and legislative reforms NHEMA is pursuing to protect homeowners."

The merger market for thrifts in the New York metro area has been busy over the past weekend.Dime Community Bancshares Inc., the Brooklyn-based parent of Dime Savings Bank of Williamsburgh, has agreed to acquire Financial Bancorp, parent of Financial Federal Savings Bank, based in Long Island City, in a $74 million deal. Dime of Williamsburgh has a one- to four-family residential portfolio of $136 million, or 15% of its total loan portfolio, while Financial has a $141 million portfolio, or 81% of its portfolio. Meanwhile, Staten Island-based Richmond County Financial Corp. entered into two transactions in recent days, both involving New Jersey-based institutions. On July 17, Richmond agreed to buy Ironbound Bankcorp NJ, a Newark-based commercial bank holding company, for $26.5 million. On Monday Richmond agreed to buy Bayonne (N.J.) Bancshares Inc. NJ, the holding company for First Savings Bank of New Jersey SLA, for $173 million.

The combination of SunTrust Banks Inc., Atlanta, with Crestar Financial Corp., Richmond, Va., will create the nation's 15th largest mortgage originator.The two announced a $9.5 billion merger transaction Monday morning. According to a statement issued by the parties, one of the strengths Crestar brings to the table in the deal is its residential mortgage operation. Crestar currently is the nation's 26th largest producer of residential mortgages, with annualized volume of $9.2 billion, according to the Database Products Group, a MortgageWire affiliate. SunTrust is ranked 36th, with annualized volume of $6.7 billion. Combined, the two have production of just under $16 billion. On the servicing side, the combination will be the nation's 23rd largest servicer, with a portfolio of $30.45 billion as of March 31, 1998. Individually, SunTrust is the nation's 30th largest servicer, with a $17 billion portfolio, while Crestar is 37th at $13.4 billion.

Golden West Financial Corp., the parent of World Savings, has reported net earnings of $116.95 million ($2.01 per share) for the second quarter, compared with $87.28 million ($1.51 per share) a year ago.The results included a $13 million gain resulting from the redemption of preferred stock. Loan production totaled $2.1 billion in new mortgages, a slight drop from the $2.2 billion produced in the second quarter of 1997. Marion O. Sandler, chairman of the board and chief executive officer of Golden West, said the earnings increase stemmed from the 2% growth of the company's loan portfolio (including mortgage-backed securities) and "further declines in chargeoffs and nonperforming assets brought about by the strong California economy."

The subordinate classes from all of Green Tree Financial Corp.'s 1994 manufactured housing deals and from 13 Green Tree home improvement loan deals have been downgraded by Moody's Investors Service.The actions stemmed from the recent confirmation at Baa3 (with a negative outlook) of the rating on Green Tree's long-term senior-debt securities, Moody's said. The subordinated classes are supported by a 100% guarantee from Green Tree. "Given the relatively low absolute levels of excess spread, limited seasoning, and limited spread to cover expected future losses, the ratings on these subordinated classes rely primarily on Green Tree's corporate guarantee for credit support," the rating agency said of the downgrades on the manufactured housing deals. Similar factors were cited in home improvement loan deal downgrades. In addition to the downgrades, Moody's confirmed the ratings on 34 classes of manufactured housing deals and one class of home improvement loan deal.

The Federal Reserve Board and the Department of Housing and Urban Development have split over ways to curb predatory lending, which is expected to diminish the impact of their mortgage reform recommendations the two agencies presented to Congress Friday.The joint report on modernizing the Real Estate Settlement Procedures Act and Truth in Lending Act calls for amending the Home Owners and Equity Protection Act to prohibit balloon payments and upfront payments of credit insurance premiums on high-cost mortgage loans. HUD parts company with the Fed, however, and goes on to recommend that HOEPA coverage be expanded to cover more loans by lowering the interest rate and fee thresholds and that the financing of closing costs be restricted to prevent loan flipping. In addition, HUD recommends that Congress consider establishing a federal unfair and deceptive practices standard as a private remedy for transactions that are unfair and unconscionable. There is a lot of industry opposition to a UDP standard because lenders are afraid it will lead to more class action lawsuits.

Amresco Inc., Dallas, has agreed to purchase Mortgage Investors Corp. of St. Petersburg, Fla. for an upfront price of $70 million.MIC is the nation's 15th largest originator of FHA/VA loans, specializing in VA streamlined refinance loans (also known as interest rate reduction refinance loans). For the first six months of this year, MIC's production volume totaled $1.3 billion. To originate loans, MIC has a network of 30 retail branches. MIC sells all of its VA originations on a servicing-released basis. In addition to the $70 million payment (of which 82% will be in Amresco common stock), Amresco will pay the former owners of privately held MIC an earnout premium over a three-year period not to exceed $105 million. When the deal is completed, MIC will be Amresco's fifth line of business and will be called Residential Mortgage Banking. The existing residential business at Amresco will be renamed Home Equity Lending.

Triad Guaranty, Winston-Salem, N.C., has reported second quarter net income of $6.0 million ($0.44 per share), up 50% from $4.0 million ($0.30 per share) in the same period of 1997.New insurance written totaled $1.2 billion, compared with $731 million a year ago. Triad's website address is http://www.tgic.com.

CMAC Investment Corp., the parent of Commonwealth Mortgage Assurance Co., has reported second quarter net income of $22.2 million ($0.91 per share), up 20% from $18.6 million ($0.76 per share) a year ago.New insurance written totaled $5.7 billion, an 80% increase from the second quarter of 1997. "This volume growth drove our primary insurance-in-force to more than $50 billion at June 30, 1998, which is particularly significant in this active refinance environment," said CMAC president and chief executive officer Frank P. Filipps.

Dime Bancorp Inc., New York, has reported net income of $58.3 million ($0.50 per share) for the second quarter, up 110% from $27.8 million ($0.26 per share) a year ago.(The results for the second quarter of 1997 included a $14.6 million pretax charge associated with a bulk sale of nonperforming assets.) "Sharply higher non-interest income from our North American Mortgage Co. operation, coupled with double-digit growth in fees and commissions from increased sales of consumer financial services and products, drove non-interest income to $128.0 million, or 49.5% of total revenues," said Lawrence J. Toal, chairman and chief executive officer of Dime Bancorp, the parent of The Dime Savings Bank of New York FSB. He said the company's mortgage banking and commercial real estate operations registered record loan production in the second quarter. As a result of the company's previous restructuring of its balance sheet by reducing lower-yielding mortgage-backed securities, its net interest margin improved to 2.66% in the second quarter, Mr. Toal said.

IMC Mortgage Co., Tampa, Fla., has announced that Travelers Casualty and Surety Co. and Greenwich Street Capital Partners II LP have invested $50 million in the company's Series A convertible preferred stock.The stock bears no dividend and is redeemable by IMC over a three-year period beginning in 10 years (if not previously converted). Greenwich Street, a merchant banking fund in which subsidiaries of Travelers Group Inc. have invested, and Travelers Casualty, itself a Travelers Group subsidiary, have also been given an option to buy, within three years, an additional $30 million of Series B preferred stock at par, with a conversion price into common stock of $22.50. Following the announcement, subprime lender IMC's stock price surged more than 30% to close at $13.50 on Wednesday, and stood at $13.375 at mid-day Thursday. IMC's website address is http://www.industrymortgage.com and Travelers Group's is http://www.travelers.com.

The average 30-year fixed mortgage rate rose to 6.94% for the week ending July 17 from the six-month low of 6.91% the week before, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate was unchanged, at 6.60%, and the average rate for one-year Treasury-indexed adjustable-rate mortgages increased to 5.64% from 5.60%. Fees and points averaged 1.1 for each category. "Mortgage interest rates are comparable to the low levels we experienced in 1993," said Robert Van Order, Freddie Mac's chief economist. "And since the latest economic news shows the economy slowing down, these low rates should remain in effect going into the future." A year ago, the average 30-year and 15-year fixed rates were 7.47% and 7.01%, respectively, and the average one-year ARM rate was 5.55%. Freddie Mac's website address is http://www.freddiemac.com.

From a technology standpoint, the questions of particular interest from the Fannie Mae survey (see item above) were the percentage of borrowers with Internet access and the willingness of borrowers to purchase a mortgage in cyberspace.The results were surprising. Many more Americans have computers today than had them in 1996, but there has been a decrease in the percentage of people that say they would apply for a mortgage online. In 1996, 36% of adults said they had Internet access, either at home or at work. That number has jumped to 52%. Yet while 20% of adults two years ago said they would "probably or definitely try" originating a mortgage online, only 15% say they would do so today, according to Fannie Mae. Interestingly, there is virtually no difference in the percentage of Baby Boomers and Generation Xers who would try to originate a mortgage online.