Originations

The Department of Veterans Affairs has issued a proposed rule that would prohibit lenders from charging more than two discount points in refinancing a VA loan.The proposed rule also requires that borrowers be current to refinance. The comment period ends Aug. 3. The proposal grew out of VA investigations in early 1997 that found some lenders were charging borrowers 4-6 discount points to refinance. The VA also wants to stop lenders from encouraging borrowers to skip two or three monthly payments before refinancing. These lenders promise to refinance VA loans and roll the overdue payments into the principal amount of the loan.

MDC Holdings Inc., a Denver-based home builder and mortgage lender, has had its unsecured credit facility increased by $125 million to $300 million.In addition, the term on the facility was extended by two years and now will expire on June 30, 2003. Paris G. Reece III, MDC's senior vice president and chief financial officer, said the modifications "reflect the strength of our balance sheet, as well as our lending banks' recognition of continued improvement in the operating results of our home building and mortgage lending operations."

Mortgage applications fell 14.6% for the holiday-shortened week ended May 29, but both the Purchase Index and the Refinancing Index were up on a seasonally adjusted basis, according to the Mortgage Bankers Association of America's weekly Mortgage Application Survey.The Purchase Index dropped 17.2%, the Refinancing Index fell 10.4%, the Conventional Index was down 15.4%, and the Government Index declined 11.5%, the survey indicated. On a seasonally adjusted basis, the Market Index rose from 365.6 the previous week to 393.9; the Purchase Index increased from 248.1 to 259.8; the Refinancing Index jumped from 1049.0 to 1174.3; the Conventional Index climbed from 463.3 to 494.8; and the Government Index rose from 202.5 to 225.6. Refinancings represented 41.4% of total applications, up from 39.5% the previous week, while adjustable-rate mortgages accounted for 8.0%, down from 9.6% the week before. Overall, applications were up 90.5% compared with those for the same week last year.

Thrift originations of home mortgages skyrocketed in the first quarter to a near-record $59.1 billion, according to the Office of Thrift Supervision.In the fourth quarter of last year, thrifts produced $44.6 billion in residential product. The OTS also reported that thrifts are continuing to sell large amounts of one- to four-family product into the secondary market. Meanwhile, S&Ls earned $1.87 billion in the first quarter, the industry's best first quarter on record and its second best quarter ever.

Cityscape Financial Corp., Elmsford, N.Y., has announced that it intends to file a Chapter 11 bankruptcy petition within 60 days.In response, Standard & Poor's lowered its senior note rating on Cityscape from CCC to D (default) and removed the rating from CreditWatch. S&P said Cityscape has deferred the June 1 interest payment on its senior notes and continued to defer the May 1 payment on its convertible debentures. "The continued deferral of the convertible interest payment constitutes an event of default pursuant to the indenture under which such securities were issued," S&P said. Cityscape said it has entered into a nonbinding letter of intent with representatives of holders of a majority of the company's 12 3/4% senior notes due 2004 to support a proposed restructuring. The letter of intent has been filed with the Securities and Exchange Commission.

The Atlanta Urban League has announced that it will join forces with Norwest Mortgage Inc. in an effort to convert more than 400,000 apartment renters in metropolitan Atlanta into homeowners."Until now, no major lender in metro Atlanta has made it a priority to provide affordable loan products, then ensure the stability of those homeowners well into the life of the loan," said Mandala Jones, housing director of the Atlanta Urban League. Under the arrangement, Norwest Mortgage will provide direct financial support to qualifying participants who suffer a temporary setback, such as a loss of income, in the first three years of homeownership. Five free homebuyer workshops will be held in the remaining months of 1998 to provide guidance on shopping for a home, loan qualifying and credit requirements, downpayment assistance, home inspections, and the closing process.

The AFS Title Search Index remained nearly unchanged for the week ended May 29, rising 0.4% to a holiday-adjusted 200.0 from 199.2 for the week ended May 22, according to Advance Factor Service.The index averaged 206.9 over the previous four weeks, down 0.9 points from the prior week's four-week moving average. A year ago, the index stood at 142.0, 71.0% of the current level. "Recent erosion in title activity may have come to a halt according to last week's holiday-adjusted AFSTSX," said AFS manager Paul Descloux. "With further marginal increases in mortgage affordability over the past few days, the AFSTSX could be poised to retest its most recent high of 219.3 from April 8. If 30-year mortgage rates are able to reach the psychologically important 7.0% mark, an acceleration in title activity concurrent with mortgage applications should not be unexpected."

G.E. Capital has rejected two bids for its mortgage division, and the chances of getting a deal done any time soon look remote, sources have told MortgageWire.The spurned offers - each made separately - were placed by Chase Manhattan Bank, New York, and a partnership consisting of Kohlberg, Kravis & Roberts, former Citicorp Mortgage chief Rick Thornberry, and former Prudential Home chief Marvin Moskowitz. G.E. rejected the bids because they were too low and the company did not like the "reps and warranties" that were being requested, sources said. Sources also said the bids submitted were for most of G.E. Capital Mortgages Services, Cherry Hill, N.J. "They [G.E.] are not yet thinking about splitting this thing up," said one investment banker. A source familiar with the situation said G.E. will remain open to other offers, but is done talking to Chase and KKR. "They [G.E.] want their price and they're not budging," said one advisor. GECMS services roughly $95 billion in residential loans. In the first quarter it originated (mostly through third-party channels) $4.5 billion in residential product, ranking 13th overall, according to the Database Products Group, a MortgageWire affiliate.

New home sales soared to a record seasonally adjusted annual rate of 888,000 in April, according to the Commerce Department, as the housing market continues to exhibit extraordinary strength.The April sales number represents a 5% rebound over the March sales figure (844,000) and it surprised economists at the National Association of Home Builders, who have been expecting home sales to slow. An NAHB survey of builders found strong sales in April, but builders are "less optimistic about sales in the next six months," NAHB economist Michael Carliner said. (See related chart in Mortgage Data Charts section.)

Standard & Poor's has lowered its long-term debt and counterparty ratings on Transamerica Finance Corp., while affirming its rating on the company's commercial paper.The outlook was revised from negative to stable. The rating agency said the downgrades reflect declining trends in the profitability of Transamerica's equipment leasing business and in the business credit component of commercial finance. S&P said it will closely monitor Transamerica's remaining mortgage operations, consisting of Transamerica Mortgage Co. and Metropolitan Mortgage, which focus on secured B&C home equity loans.

The Eleventh District Cost of Funds Index for April is 4.903%, a decline of over 1 basis point from March's 4.917%.The drop continues the downward trend of this index during 1998. Since COFI hit a 12-month high of 4.987% in January, it has fallen by over 8 bp in four months. In comparison, according to Freddie Mac's Primary Mortgage Market Survey, the monthly average commitment rate for the one-year adjustable-rate mortgage increased from 5.54% in January to 5.69% in March, before falling 2 bp in April to 5.67%, for a total gain of 13 bp since the start of the year. The PMMS shows that the 30-year fixed mortgage rate increased each month of 1998, from 6.99% in January to 7.14% in April.

Master Financial Inc., Orange, Calif., has issued $210.6 million in securities backed by high loan-to-value second mortgages.The securitization consisted of seven classes, with a yield spread of 8 basis points above the one-month London Interbank Offered Rate for the A-1 notes and spreads ranging from 0.71% to 3.10% over the related U.S. Treasury bonds for the other classes. The offering, which used a senior/subordinated structure, was underwritten by a syndicate led by PaineWebber Inc. and co-managed by Deutsche Morgan Grenfell and Residential Funding Securities Corp.