Originations

Amresco Inc., Dallas, has announced that it does not expect to make writedowns in the value of its retained interests from securitizations in the foreseeable future.Citing its "conservative" valuation and accounting practices, Amresco "reiterated its confidence" in the value of its retained interests despite increased prepayments in its securitized residential pools in the second quarter. A similar pre-earnings statement on prepayments has been issued by Southern Pacific Funding Corp., Oswego, Ore.

New Century Mortgage Corp., Irvine, Calif., has completed a $474 million securitization, its largest to date.New Century Fixed-Rate Certificates, Series 1998-NC3, consisted of nine classes with pass-through rates ranging from 6.00% to 6.93%, according to the company's parent, New Century Financial Corp. Mortgage properties are located in 46 states, with the heaviest concentrations in California, Texas, and Florida. The deal was underwritten by Salomon Smith Barney. New Century Mortgage will act as master servicer, with Comerica Mortgage Corp. as subservicer.

Two new affordable housing initiatives aimed at increasing urban homeownership have been announced by Freddie Mac.In New Orleans, the company has formed an alliance with the city and the AFL-CIO Housing Investment Trust to launch a $20 million revitalization program in several historic districts by providing various low-downpayment mortgage products. Under the program, "At Home in New Orleans," 50 homes will be initially targeted by the city and local nonprofit organizations for rehabilitation, with a long-term goal of building or rehabilitating up to 500 homes. Freddie Mac will buy up to $20 million of mortgages originated by local lenders and repackage them into securities, which will be purchased by the AFL-CIO Housing Investment Trust. The second initiative, in Los Angeles, will offer $15 million of low-downpayment loans under flexible underwriting criteria with the goal of increasing minority homeownership in south central Los Angeles. Freddie Mac will team up with Broadway Federal Bank FSB and Family Savings Bank FSB to make the loans available through various affordable mortgage products, including Freddie Mac's new Community Gold. "Under Community Gold, borrowers who have completed a comprehensive homeownership education program can move into a home with as little as 3% of the home price as the downpayment," Freddie Mac said. Freddie Mac's website address is http://www.freddiemac.com.

Southern Pacific Funding Corp., Lake Oswego, Ore., has reported that loan prepayments in the second quarter were "in line with management expectations."SPFC, which also reported "strong growth" in loan originations, said it made the unusual pre-earnings announcement in view of industry concerns about prepayments. "Management does not anticipate any significant adjustments to assets relative to recent loan prepayment experience," the company said. SPFC also announced the signing of a $50 million subordinate and residual financing facility with Nomura Asset Capital Corp. and Nomura Securities (Bermuda) Ltd. SPFC's website address is http://www.sp-funding.com.

Community First Bancshares Inc., Fargo, N.D., has agreed to sell the operating assets of its subprime mortgage lending subsidiary, Equity Lending Inc., to FirstPlus Financial Group Inc., Dallas.The terms of the cash transaction, and another involving the sale of the assets of the company's subprime auto lending subsidiary, were not disclosed. Community First said it will retain approximately $50 million in loans originated by Equity Lending as well as the servicing rights on another $100 million of Equity Lending loans that have been sold. Equity Lending was acquired via Community First's merger with Mountain Parks Financial Corp. in December 1996 and had been classified as a discontinued operation on the company's 1997 financial statements.

The Consumer Federation of America is warning borrowers not to turn credit card debt into mortgage debt unless they can control their credit card spending.Consumers should "avoid refinancing credit card debt using home equity loans unless they can avoid running up new debts," CFA executive director Stephen Brobeck said at a Wednesday morning press conference. Mr. Brobeck cited a recent study by Brittain Associates Inc., Atlanta, which found that two-thirds of households that use HELs to refinance credit card debt run up new credit card debt. "Many of these households risk losing their homes," the consumer advocate warned. The CFA used the press conference to show that credit card issuers are rapidly extending credit while at the same time pushing Congress to restrict consumer access to bankruptcy protection.

Mortgage applications fell 3.5% for the week ended July 3, but they were up on a seasonally adjusted basis as the Refinancing Index gained nearly 270 points, according to the Mortgage Bankers Association of America's weekly Mortgage Application Survey.The Purchase Index fell 4.7%, the Refinancing Index declined 2.1%, the Conventional Index decreased 2.5%, and the Government Index fell 7.6%, the survey indicated. On a seasonally adjusted basis, the Market Index rose from 382.2 the previous week to 460.1; the Purchase Index increased from 241.3 to 286.4; the Refinancing Index jumped from 1202.0 to 1470.6; the Conventional Index was up from 489.0 to 594.9; and the Government Index rose from 204.1 to 235.2. Refinancings represented 45.2% of total applications, up from 44.6% the previous week, while adjustable-rate mortgages accounted for 8.1%, down from 8.8% the week before. Overall, applications were up 84.3% compared with those for the same week last year. The address of the MBA's website is http://www.mbaa.org.

Senate Majority Leader Trent Lott, R, Miss., pulled the VA-HUD appropriations bill off the floor of the Senate Tuesday evening just before the start of debate on Federal Housing Administration loan limits.The sudden move came amid partisan bickering over health care issues, but it appears opponents of the FHA loan limit increase did not have the votes to block it. The VA-HUD appropriations bill (S. 2168) is now in limbo, however, and a vote on blocking the hike in the FHA loan limit will be delayed for at least a week. As approved by the Senate Appropriations Committee, S. 2168 would increase the FHA loan limit in low-cost areas to $109,032 and in high-cost areas to $193,620. The current floor is $86,317 in low-cost areas and the ceiling is $170,362 in high-cost areas. An amendment by Sen. Don Nickles, R, Okla., and Sen. Herbert Kohl, D, Wis., would keep the FHA ceiling at $170,362 and increase the Ginnie Mae guaranty fee from 6 basis points to 12 bp, which penalizes FHA servicers. That amendment is now on hold until Senate leadership decides to take up the VA-HUD appropriation bill again.

First-time homebuyers accounted for 42% of the nation's housing market in the second half of 1997 and remain "a critical segment of the market," according to the National Association of Realtors.In "The Home Buying and Selling Process: 1997," the NAR reports that the typical homebuyer searched eight weeks and looked at 10 homes to find the home that was ultimately bought. The typical seller's home was on the market for seven weeks, and only 15% sold the home without using a real estate agent, the survey found. More nontraditional buyers are entering the market, but married couples still accounted for 64% of sales. Single women accounted for 18%, single men 11%, and unmarried couples and others 7%, the NAR said. The NAR's website address is http://www.nar.realtor.com.

ContiFinancial Corp.'s BB-plus senior debt rating has been placed on CreditWatch with negative implications by Standard & Poor's.S&P said the action stems from an announcement by ContiFinancial that it would take a special charge in its first fiscal quarter, ended June 30, to write down the value of its excess spread receivable and to meet its obligation under a yield maintenance agreement with investors in company interest-only securities sold from late 1995 through early 1996. "While the company will report a profit for the quarter, the writedown highlights the company's dependence on the subprime home equity market and the use of gain-on-sale accounting for reported earnings," S&P said. In addition, S&P said that ContiFinancial's reliance on brokers and other third parties to acquire its product "leaves it especially vulnerable both to refinancing risk and to the heated competitive environment that currently exists in the subprime mortgage sector." S&P's website address is http://www.ratings.standardpoor.com.

Stephen J. Rotella has been named to the newly created position of chief operating officer of Chase Home Finance, a unit of Chase Manhattan Corp. based in Edison, N.J., that deals with mortgages, home equity loans, and manufactured housing.Mr. Rotella, 45, will be responsible for post-production, servicing, technology, and underwriting and will report to Tom Jacob, the chairman and chief executive officer of Chase Home Finance. Mr. Rotella joined the company in 1987 and, over the past seven years, has directed its servicing business. Chase originated $40 billion in residential mortgages in 1997 and has a servicing portfolio of $178 billion.

The AFS Title Search Index fell 2.9% to a holiday-adjusted 199.6 for the week ended July 3 from 205.4 for the previous week, according to Advance Factor Service.Unadjusted, the index would have been 159.7. [Click here to see the chart.] The index averaged 208.2 over the previous four weeks, down 2.9 points from the prior week's four-week moving average. A year ago, the index stood at 143.6, 72.0% of the current level. "The lack of upward momentum in the AFSTSX suggests that an equilibrium has been reached between prevailing rates and mortgage activity," said AFS manager Paul Descloux. "However, title activity is still robust enough to maintain currently elevated prepayment speeds. An acceleration in title activity and therefore prepayments could occur if the present bond rally can take mortgage rates to new and significant 1998 lows."

Norwest Asset Securities Corp., Frederick, Md., has announced an approximately $475 million securitization backed by two separate pools of mortgage loans.About $250 million of the securities are backed by Pool 1, consisting of fixed 20- and 30-year non-relocation mortgage loans, NASCOR said. About $225 million are backed by Pool 2, consisting of fixed-rate 10- through 15-year relocation and non-relocation mortgage loans. Credit enhancement for the deal will be provided via a senior/subordinated structure. Pool 1 is being offered through Bear, Stearns & Co. Inc., and Pool 2 is being offered through Morgan Stanley Dean Witter. The transaction is scheduled to settle on July 29. Issuance and post-issuance data on the securities will be available after settlement from the SecuritiesLink Advanced Information Services website at http://www.securitieslink.net.

Mego Mortgage Corp., Atlanta, has completed its recapitalization, but will take a third-quarter loss of $55 million.The company generated $87.5 million of new equity from various sources. City National Bank, Charleston, W.Va., and Sovereign Bancorp Inc., Wyomissing, Pa., have acquired $10 million in convertible preferred stock. Both have options to acquire $10 million of Mego common stock at $1.50 per share. City Mortgage Services, an affiliate of City National, has acquired the right to service approximately $536 million of mortgages now serviced by Mego and the exclusive right to service up to $1 billion of mortgages originated or acquired by Mego in the future. Another unnamed strategic investor has acquired $5 million in preferred stock, while other private investors have purchased $15 million of Mego's common stock at $1.50 per share. In addition, Mego exchanged $79 million of senior subordinated notes for $37.5 million of preferred stock and $41.5 million in new senior subordinated notes. Mego also announced that Champ Meyercord, formerly a senior investment banker with Greenwich Capital Markets, is the company's new chairman and chief executive. Mr. Meyercord will be heading up a company that will lose at least $55 million for its fiscal third quarter, which ended on May 31. This loss comes from additional reserves against loans held for sale, writedowns of capitalized fees and expenses resulting from the recapitalization, and a writedown in the carrying value of mortgage-related securities.

United Guaranty Residential Insurance Co., Greensboro, N.C., is testing a new mortgage insurance product for "A-minus" and "B" loans.Two of the nation's largest lenders (which UG would not identify) are participating in the test program, which is designed to work with Fannie Mae's A-minus program. Several private mortgage insurance companies offer MI on A-minus loans, but UG claims it has a more comprehensive plan that will allow lenders to enter the subprime market, where loans are often priced 200-400 basis points higher than conventional product. "It is not just a one-dimensional program that has a small [premium] increase for loans that don't quite fit the 'A' paper market," said Mark Amacher, UG's senior vice president of strategic planning and marketing.

The House is set to vote on a private mortgage insurance reform bill July 14.Lawmakers have resolved several sticking points that had previously endangered the bill. Once voted on in the House it will move to the Senate, where mortgage industry lobbyists are predicting easy passage. "The bill provides a happy medium for both servicers and borrowers," said Karen Kapen, a lobbyist for the Mortgage Bankers Association of America, which supports the legislation. The bill, also backed by the Mortgage Insurance Companies of America, calls for automatic cancellation of private MI once a borrower's equity reaches 22%, although creditworthy borrowers can cancel at 20% equity. Servicers will notify borrowers once these equity levels have been attained. The proposed legislation provides a federal preemption, except for those states that already have private MI laws, including California, Connecticut, Maryland, Minnesota, Missouri, New York, and Texas. There is no federal regulator under the proposed MI reform bill, which means the courts will have to resolve any consumer or lender complaints.

The average 30-year fixed mortgage rate for the week ending July 3 rose to 6.98% from 6.96% the previous week, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate inched up to 6.65% from 6.64%, while the average rate for one-year Treasury-indexed adjustable-rate mortgages dipped to 5.66% from 5.68%. Fees and points averaged 1.0 for the fixed-rate mortgages and 1.1 for the ARMs. "New and existing home sales have been amazingly strong, thanks in large part to current low interest rates," said Robert Van Order, Freddie Mac's chief economist. "With signs that the economy may be cooling a little, there is nothing that would indicate interest rates will not stay low and affordable for some time to come." A year ago, the average 30-year and 15-year fixed rates were 7.62% and 7.15%, respectively, and the average one-year ARM rate was 5.67%. Freddie Mac's website address is http://www.freddiemac.com.

In a related development, American Residential Investment Trust has closed a $98.1 million securitization of adjustable-rate home equity loans.American Residential Home Equity Loan Trust 1998-1 consisted of four classes of adjustable-rate certificates using a senior/subordinated credit enhancement structure. The deal was closed through a company affiliate, American Residential Holdings Inc. Bear Stearns Asset Backed Securities Inc. acted as depositor for the trust, and Bear Stearns & Co. Inc. was the lead manager on the transaction.

In the first use of a financial asset securitization investment trust in a publicly offered residential mortgage deal, American Residential Eagle Inc., Del Mar, Calif., recently issued approximately $422 million of mortgage-backed securities via a FASIT.American Residential Investment Trust Inc., a real estate investment trust that is the parent company of American Residential Eagle, said the structure "allowed for the creation of subordinate bonds with different maturities without generating excess inclusion income" for the company. As a result, the securities were issued at a lower combined yield than would have been the case with traditional collateralized mortgage obligation structures, the company said. The transaction, American Residential Eagle Certificate Trust 1998-1, was underwritten by Lehman Brothers Inc. FASITs are tax vehicles designed to facilitate the securitization of revolving short-term assets, but they may be used for virtually any kind of debt. They permit the addition and substitution of loans, the issuance of new securities, and the inclusion of various hedging instruments. The REIT's website address is http://www.amerreit.com.

Lutheran Brotherhood, a financial services organization that serves members of the Lutheran faith worldwide, has agreed to acquire Metro Community Bank FSB, Minneapolis, for $3.5 million.The organization said acquiring the thrift will enable it to offer its members such services as mortgages and home equity loans, among other loan and deposit products. After the deal is completed, Metro Community will be renamed Lutheran Brotherhood Community Bank and Trust FSB. All of its products and services will be available to the general public, Lutheran Brotherhood added.