Originations

Total operating revenue for the nation's title insurers hit $1.6 billion in the first quarter, up 32% from revenue in the first quarter of 1997, according to the American Land Title Association, Washington, D.C. Pretax operating gain totaled $39 million in the first quarter, up from $6 million the year before.Richard W. McCarthy, ALTA's director of research, attributed the impressive gains to low interest rates, increased housing starts, and record sales of existing homes. Mr. McCarthy said improved loss-prevention work brought the industry's loss and loss-adjustment expenses down to 3.7% of operating revenue in the first quarter, down from 3.9% the year before.

Mortgage applications rose 25.2% for the week ended June 5 on the heels of a holiday-shortened week, but the Market Index was up only 0.7% on a seasonally adjusted basis, according to the Mortgage Bankers Association of America's weekly Mortgage Application Survey.The Purchase Index climbed 29.3%, the Refinancing Index increased 19.3%, the Conventional Index jumped 27.8%, and the Government Index rose 15.7%, the survey indicated. On a seasonally adjusted basis, the Market Index rose from 393.9 the previous week to 396.6; the Purchase Index increased from 259.8 to 272.1; the Refinancing Index fell from 1174.3 to 1120.7; the Conventional Index climbed from 494.8 to 508.3; and the Government Index declined from 225.6 to 210.0. Refinancings represented 39.4% of total applications, down from 41.4% the previous week, while adjustable-rate mortgages accounted for 9.3%, up from 8.0% the week before. Overall, applications were up 74.9% compared with those for the same week last year.

Bay View Capital Corp., San Mateo, Calif., has agreed to purchase Carlsbad, Calif.-based PSB Lending Corp., an indirect originator of home equity loans with high loan-to-value ratios, from Pacific Southwest Bank, Dallas.Bay View will pay $153 million for PSBL, of which $53 million will be cash and $100 million will be in common stock. In addition, Pacific Southwest could receive up to an additional $147 million under provisions of an earn-out agreement. Following completion of the deal, which is expected to be in the fourth quarter, PSBL will change its name to Bay View Consumer Finance Corp. and become a subsidiary of Bay View Bank. Bay View president and chief executive Edward H. Sondker said high-LTV home equity loans are "a natural extension of our consumer finance platform, with many characteristics similar to those products currently offered by Bay View Credit, one of our auto finance subsidiaries."

Senate Banking Committee chairman Alfonse D'Amato has endorsed an increase the Federal Housing Administration loan limit recently approved by a Senate Appropriations subcommittee.The subcommittee's action is a "great first step in expanding homeownership," Sen. D'Amato said, that will benefit homebuyers in urban and rural areas where current loan limits restrict FHA financing. The subcommittee approved a Department of Housing and Urban Development appropriations bill that would raise the FHA loan limit from $86,317 in low-cost areas to $108,960 and from $170,362 in high-cost areas to $197,490.

President Clinton has announced his intention to nominate William C. Apgar to be the next Federal Housing Administration commissioner.The announcement is kind of a switcheroo, since the president officially nominated Mr. Agar to be assistant secretary for policy and research at the Department of Housing and Urban Development back in February. The president's nominee has been working in that capacity since Oct. 1, when he first came to HUD from his previous job as the executive director of Harvard University's Joint Center for Housing Studies. Former FHA commissioner Nicolas Retsinas now occupies Mr. Apgar's academic seat at Harvard, and it is beginning to look like they simply switched jobs.

Municipal Mortgage and Equity LLC, Baltimore, has completed a $28.6 million tax-exempt bond transaction involving a bond secured by a 439-unit multi-tower property in Denver.The company, also known as MuniMae, acquired a controlling interest in a trust holding the mortgage revenue bond. The floating-rate security was issued by the City and County of Denver and is secured by The Seasons of Cherry Creek, Muni Mae said. The company specializes in originating, investing in, and servicing tax-exempt multifamily housing bonds.

The AFS Title Search Index rose 5.6% to 211.2 for the week ended June 5 from a holiday-adjusted 200.0 for the week ended May 29, according to Advance Factor Service.The index averaged 204.9 over the previous four weeks, down 2.0 points from the prior week's four-week moving average. A year ago, the index stood at 150.6, 71.3% of the current level. "The continued increase in fixed-rate mortgage affordability by some 15 [basis points] over the past three weeks is helping prop up sagging title search activity," said AFS manager Paul Descloux. "This latest bump up in activity points to a continuation of 1998's current refinance wave."

A Senate Appropriations panel has unanimously approved an increase in the Federal Housing Administration loan limit in high-cost areas to $197,000, or 87% of the $227,150 Fannie Mae/Freddie Mac conforming loan limit.President Clinton supports a single nationwide FHA loan limit of $227,150, but Sen. Christopher Bond, R, Mo., has advanced a compromise approach that would increase the FHA loan ceiling in high-cost areas from $170,000 to $197,000. The floor on FHA loans would be increased from $86,000 to $109,000, or 48% of the Fannie/Freddie limit. The increase proposed by Sen. Bond, along with a provision that simplifies the FHA downpayment calculation, is now part of the Department of Housing and Urban Development and Department of Veterans Affairs appropriations bill. Sen. Bond, who chairs the VA-HUD appropriations subcommittee, concedes that the FHA increase is controversial, while opponents say it will face "tough sledding" in full committee and the Senate floor. Nevertheless, Sen. Bond contends that the increase is necessary so that first-time homebuyers can get financing for newly constructed homes, especially in rural and non-urban areas.

Norwest Mortgage Corp., Des Moines, whose parent bank is merging with Wells Fargo Bank, San Francisco, will change its name to Wells Fargo Mortgage, NMC president Mark Oman has told MortgageWire.In an exclusive interview, Mr. Oman -- who manages the nation's largest lender/servicer -- called the merger a "win-win" situation for NMC even though Wells, historically, has frowned upon the residential business. Mr. Oman said even though NMC has mortgage origination branches in markets where Wells has bank branches, he does not see any danger of overlap or mortgage-related layoffs. He said that in some cases NMC mortgage employees would move into Wells branches and operate there. Some mortgage analysts expected that, although the combined banks would take the Wells name, the mortgage division would retain the NMC name because of the brand recognition it carries. But Mr. Oman said he likes the Wells name and its "stagecoach brand." Thanks to the merger, he also looks forward to cross-selling new products to "millions of new customers."

The delinquency rate on commercial mortgages owned by life insurance companies fell to 0.85% at the end of the first quarter of 1998, the seventh straight quarterly decline, according to data from the American Council of Life Insurance.Commercial mortgages make up approximately 92% of life companies' total mortgage investments. However, because delinquencies in the agricultural sector exploded from 0.97% at year-end 1997 to 2.04% for the first quarter, and single-family residential delinquencies increased 20 basis points to 1.99% during the same period, the overall delinquency rate for the first quarter was up 2 bp to 0.94%. This is the first increase in the overall rate since June 1996. The ACLI noted that life companies have been returning to mortgage investments after years of selling off such assets. The overall portfolio increased from $174.2 billion at the end of 1997 to $175.1 billion as of March 31, 1998. Commercial investments increased during the period from $159.6 billion to $161.0 billion.

Meanwhile, the issuance of asset-backed securities was 35.7% higher in the first quarter than a year ago, thanks mainly to growth in the home equity sector and a widening investor base, the bond group reported.Home equity loans accounted for nearly half of all ABS issuance in March and dominated issuance throughout the quarter, totaling $18.7 billion, a 52.7% increase from $12.2 billion a year earlier. "The increase stems from attractive interest rates that prompted homeowners to refinance or take out second mortgage loans, creating an increase in the supply of home equity loans available for securitization," the association said. "In addition, slower prepayment rates in the home equity ABS market attracted some investors from the mortgage-related debt market."

Agency issuances of pass-through mortgage-backed securities totaled $132.5 billion in the first quarter, up 68% from the same period a year ago, according to The Bond Market Association.Fannie Mae led the pack in total MBS issuances, but Freddie Mac posted the largest percentage gain from a year ago. Fannie Mae issued $58.3 billion in MBS pass-throughs, nearly double the $30.9 billion issued in the first quarter of 1997. Freddie Mac issued $44.3 billion in MBS pass-throughs in the first quarter, a jump of 68.7% from $26.3 billion a year ago. Ginnie Mae's MBS issuances rose 37.9% to $30 billion, up from $21.7 billion a year ago. The quarterly report was based on data from Securities Data Co., the group said.

The Office of the Comptroller of the Currency is concerned about national banks and their mortgage subsidies "steering" customers into subprime loans."We are looking at referrals going back and forth," Acting Comptroller Julie Williams told reporters recently. "It is a fair lending issue." Ms. Williams's comments came after she made the keynote speech at the annual meeting of the National Housing Conference. She noted that the OCC has seen an increase in subprime mortgage lending by national banks.

Wells Fargo, which exited the mortgage business in April, is merging with Norwest Corp., Minneapolis, which owns the nation's largest residential lender/servicer.Because Wells has no mortgage division, Norwest Mortgage Corp. chief Mark Oman likely will have no competition for the top spot once the two commercial banks combine. In April the San Francisco-based Wells sold its $34 billion servicing portfolio and platform to GMAC Mortgage. Although some banks have been gobbling up mortgage assets during the decade, others have been exiting the business entirely. When Wells sold its servicing it joined other large banks such as BancOne, Barnett, First Bank, and National City that have exited the business over the past two years. Ed Elanjian, managing director of Cohane Rafferty Securities, Harrison, N.Y., told MortgageWire that some commercial banks don't like the high expense ratios that are involved in running a mortgage operation. He noted that some banks sell their mortgage divisions to make their expense ratios look better in preparation for a merger. At the end of March Norwest Mortgage was the nation's largest mortgage banker, with $212 billion in servicing. In the quarter NMC produced $20.9 billion in residential loans.

The average 30-year fixed mortgage rate for the week ending June 5 fell to 7.05% from 7.07% for the week ended May 29, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate declined to 6.70% from 6.72%, while the average rate for one-year Treasury-indexed adjustable-rate mortgages slipped to 5.68% from 5.70%. Fees and points averaged 1.0 for each category. A year ago, the average 30-year and 15-year fixed rates were 7.85% and 7.40%, respectively, and the average one-year ARM rate was 5.78%. "With the economy strong and inflation low, mortgage interest rates remain stable, as we had predicted earlier in the year," said Robert Van Order, Freddie Mac's chief economist.

Amresco Residential Mortgage Banking Group, Dallas, has announced record pricing for a $1 billion home equity deal.Amresco Residential Securities Corp. Mortgage Loan Trust 1998-2 consisted of nine classes of fixed-rate certificates totaling $350 million and five classes of adjustable-rate certificates totaling $650 million. The triple-A rated floaters priced at 4 basis points above the London Interbank Offered Rate for the shorter bond and a record LIBOR plus 15.5 bp for the longer bond, Amresco said. The blended average spread was less than 13 bp above LIBOR. Scott J. Reading, president of Amresco Residential Mortgage, said the execution "shows investors have begun to differentiate between home equity issuers." Greg Richter, head of asset-backed security trading for Prudential Securities, the lead underwriter for the issue, said the spreads on the floating-rate tranches "were perhaps the tightest to date and the fixed rate was the tightest in quite some time." Mr. Richter said the Amresco name attracted diverse investors and cited the level of oversubscription on many tranches as evidence of investor confidence.

Title One home improvement loan production is down 37% through the first five months of 1998, according to data compiled by the Department of Housing and Urban Development.Between January and May, Title One lenders originated $486 million in home improvement loans (single-family and multifamily), compared with $643.1 million during the same period in 1997. A further breakdown of the data shows that single-family Title One production totaled $427 million -- a 27% drop from last year. "I would attribute the decline to the continued growth of the 125% [high-LTV loan] market," said Peter Bell, executive director of the Home Improvement Lenders Association. "Because of the favorable rate environment, more people are refinancing their existing mortgage, instead of taking out a Title One loan for home renovations." Multifamily production -- which constitutes a smaller percentage of the overall Title One market -- nonetheless has been especially hard hit this year. HUD has insured $38.8 million worth of Title One loans for multifamily projects -- a 125% decline compared with the level for the first five months of 1997.

Richard H. Cole has been appointed chief executive officer of Holliday Fenoglio Fowler LP, the Houston-based commercial mortgage banking subsidiary of Amresco Inc., Dallas.Mr. Cole, a 27-year veteran of the mortgage banking industry, succeeds John T. Fenoglio, a co-founder of the firm. Mr. Fenoglio is leaving to establish a nonprofit environmental organization, Amresco said.

American Business Financial Services Inc., Bala Cynwyd, Pa., has priced a $120 million securitization through its three main subsidiaries: American Business Credit Inc., New Jersey Mortgage and Investment Corp., and Upland Mortgage.ABFS Mortgage Loan Trust 1998-2, backed by business and home equity loans, is structured as a real estate mortgage investment conduit consisting of six Class A securities and a 1.5% overcollateralization account, the company said. The $38.7 million of Class A-1 certificates were priced at 5 basis points above the one-month London Interbank Offered Rate. The initial coupon will be set before the deal closes. (The expected settlement date is June 18.) The other five classes were priced at spreads ranging from 57 to 120 bp over related Treasury notes and yields ranging from 6.139% to 6.872%. All bore issue prices of 100. The transaction was underwritten by Prudential Securities Inc. and will be insured by Financial Security Assurance Inc., ABFS said.

Norwest Mortgage Inc., Des Moines, Iowa, has formed a joint venture with Edina Realty Inc., Minneapolis, that will originate mortgage loans for the real estate company's customers.This partnership will operate under the name Edina Realty Mortgage. As part of its retail production network, Norwest Mortgage operates more than 25 joint venture mortgage partnerships with real estate brokers and builders. Edina Realty Mortgage will serve home buyers in Minnesota and western Wisconsin. Edina Realty is the nation's fourth largest residential real estate brokerage, with sales volume of $4.1 billion in 1997. Edina Financial Services Inc., parent company of the real estate firm, also operates a title unit, Edina Realty Title.