REIT Craze
HomeBanc Mortgage Corp. has decided to go public as a real estate investment trust.
On Tuesday the Atlanta lender announced its plan to raise $500 million through an initial public offering in late spring or early summer. It will take the name HomeBanc Corp.
In recent months Saxon Mortgage converted to a REIT and New Century Financial Corp. said it was considering it. Since New Century's announcement, investors have bid up its stock 10%. In exchange for favorable tax status, REITs must pay out at least 90% of their earnings to investors as dividends.
HomeBanc officials said Wednesday that Securities and Exchange Commission regula-tions prevented them from discussing their plans.
Keith Gumbinger, a vice president at HSH Associates, a financial publishing firm in Butler, N.J., said Wednesday that "if you're going to go public, now would be the time."
For a lender expecting lower originations, Mr. Gumbinger said, going public offers "a way to raise working capital, spread your risks over a bigger base of investors, and cash out some of your company" without selling it outright.
A mortgage bank could show investors "a good solid record over the last four or five years," because originations have grown briskly over that period, he said.
Michael McMahon, an analyst with Sandler O'Neill & Partners LP in San Francisco, identified several factors behind the REIT conversion trend.
For one thing, Mr. McMahon said, REITs are a more stable source of earnings than the typical mortgage bank. They hold some or all of their originated loans in portfolio, generating regular principal and interest income over the longer term.
That stability is why REIT stocks typically trade at a higher multiple - between six and eight times earnings - than mortgage banks, which trade at between four and five times earnings, Mr. McMahon said.
Another advantage, he noted, is that a REIT can choose to put a loan in its portfolio or sell it in the secondary market. This lets them offer borrowers more competitive pricing because a loan that would be difficult to sell can be put in the portfolio.
Nonetheless, because of their dividend obligations REITs tend to grow slowly and must often tap the equity market for capital, Mr. McMahon said.
Running a REIT also requires skills, such as managing a portfolio, that are different than those needed by a mortgage bank, he said.
Refi Redux
The Mortgage Bankers Association reported Wednesday that its index of refinancing applications jumped 5.1% last week, to a seven-month high.
"The news is finally getting out there that rates are within a stone's throw of the 41-year lows we saw last June," Mr. Gumbinger of HSH said.
Homeowners who procrastinated or whose refi hopes "crashed and burned" when rates spiked last summer are "getting another opportunity to have nearly bottom-of-the-market interest rates."
The average 30-year rate fell below 6% in January and "remained there for a number of weeks," Mr. Gumbinger said. That was "long enough for people to notice it and react to it; it takes time for people to notice in their busy lives what's going on with interest rates."
But the boom has not returned, Mr. Gumbinger said. It would take "continually declining interest rates to attract new borrowers at each interval."
Bundle Builder
Metrocities Mortgage LLC, a Sherman Oaks, Calif., lender and brokerage, has appointed Patrick F. Stone vice chairman.
In a press release issued Tuesday, Mr. Stone, who has been a Metrocities director for several years, said its partnerships with nonmortgage firms is a "competitive advantage.
"I look forward to contributing to those collaborative operations, as well as developing an effective bundled services offering," he said. "The ultimate goal" is "providing true one-stop shopping for clients and business partners alike."
Metrocities originated more than $4.5 billion of loans last year.
Mr. Stone comes from the vendor side of the business. From 2002 through last year he was the chief executive of Fidelity National Information Solutions Inc., a realty services and technology provider.
According to its parent Fidelity National Financial Inc., Mr. Stone signed a five-year noncompete agreement when he resigned from the title insurer's board in January.
Before that he was chief operating officer for eight years at Fidelity National Financial. In September the title insurer bought all the stock it did not already own in the tech outfit.
Phone messages left for Mr. Stone and Metrocities were not returned by press time. A spokesman for Fidelity National declined to comment.
Arbor Hires
Arbor Realty Trust Inc. has hired Scott Warshaw as director of asset management.
The real estate investment trust is run by Arbor Commercial Mortgage LLC of Uniondale, N.Y.
Mr. Warshaw was the assistant director of residential property at Macklowe Management Co. Inc., part of the New York investment firm Macklowe Properties Inc.
Quotable...
"All I can tell you is that over the years, when confronted with the issue of borrowing on real estate, I always took a long-term mortgage."
- Alan Greenspan at the Economics Club of New York on Tuesday, explaining that he did not mean to "disparage" 30-year fixed-rate mortgages in a speech last week.
"The bathtub's getting more water added, and there's less leaking out."
- Eric P. Sieracki, Countrywide Financial Corp.'s senior managing director of corporate finance, at a conference Tuesday in Orlando, explaining how higher originations and slower prepayments increased Countrywide's servicing market share by 1.8% last year.
By Erick Bergquist, Marc Hochstein, and Jody Shenn
