Servicing

GSE regulator James Lockhart says he expects Fannie Mae's and Freddie Mac's capital-raising efforts to allow them to increase their investment portfolios dramatically and bolster the mortgage market. Fannie Mae recently announced that it is raising $6 billion in additional capital through issuances of common and preferred stock. Mr. Lockhart, director of the Office of Federal Housing Enterprise Oversight, said it looks as if Fannie will raise "significantly more than that. There is large demand." He also said he expects Freddie Mac to announce a capital-raising plan soon. (The government-sponsored enterprise is slated to release its first-quarter financial report May 14.) Raising the capital is "extremely important for the mortgage market," the regulator said, because it will allow the GSEs to purchase hundreds of billions of dollars of mortgages for their investment portfolios and securitize over $1 trillion in mortgages. "So they have the wherewithal to serve the market," Mr. Lockhart told a legislative conference sponsored by the National Association of Realtors.

Seven classes of notes from five collateralized debt obligations linked to AIG have been placed on Rating Watch Negative by Fitch Ratings. The affected securities are: class A1MM of G-Star 2002-1 Ltd./Corp.; classes A-1MM A and A-1MM B of G-star 2002-2 Ltd./Corp.; class A-1 of Lakeside CDO I Ltd./Inc.; classes A-1MM-a and A-1MM-b of Putnam Structured Products CDO 2001-1 Ltd.; and class A-1MM of TIAA Real Estate CDO 2003-1. Fitch said the short-term ratings on the CDO classes are supported by a put agreement from AIG Financial Products Corp., which in turn is guaranteed by AIG, the parent company. AIG's long-term Issuer Default Rating was downgraded from AA to AA-minus on May 8 and remains on Rating Watch Negative, while its short-term IDR was placed on Rating Watch Negative on May 8. Fitch can be found online at http://www.fitchratings.com.

Four tranches from Deutsche Alt-A Securities Mortgage Loan Trust 2007-RAMP1 has been downgraded by Moody's Investors Service. The downgrades were as follows: class M-6, from Baa1 to Baa3; class M-7, from Baa2 to B2; class M-8, from Baa3 to B2; and class M-9, from Ba1 to Ca. Class M-8 was placed under review for possible further downgrade. The ratings were downgraded, in general, based on higher-than-expected rates of delinquency, foreclosure, and real estate owned in the underlying collateral relative to credit enhancement levels, Moody's said. The collateral consists primarily of first-lien, alternative-A mortgage loans.

Twenty-nine tranches from 13 alternative-A transactions issued by Residential Asset Securitization Trust have been downgraded by Moody's Investors Service, and 132 tranches have been placed on review for possible downgrade. In addition, six of the downgraded tranches remain on review for possible further downgrade. The ratings were downgraded, in general, based on higher-than-expected rates of delinquency, foreclosure, and real estate owned in the underlying collateral relative to credit enhancement levels, Moody's said. The collateral consists primarily of first-lien, fixed -rate, alt-A mortgage loans. Moody's can be found online at http://www.moodys.com.

Guild Mortgage Co., San Diego, has announced the recent acquisition of Liberty Financial Group, a residential mortgage bank based in Bellevue, Wash. The terms of the transaction were not disclosed. Guild Mortgage was acquired in 2007 through a partnership between its senior management and that of McCarthy Capital, the company said. "McCarthy Capital's approach combines the stability we were looking for in a partner with the resources we needed for continued growth," said Mary Ann McGarry, Guild's president and chief executive officer. Liberty Financial originates nearly $1 billion of prime home loans annually via branches located mainly in Washington and Colorado, Guild reported. Guild Mortgage can be found on the Web at http://www.guildmortgage.com.

Classes B-3 and B-4 of Countrywide mortgage pass-through certificates series 2003-44 have been placed on Rating Watch Negative by Fitch Ratings. Fitch also removed class A-3 of the deal and class 1-A-2 of series 2003-1 from Rating Watch Negative and affirmed the ratings on 32 classes in the two transactions. The collateral consists of mixed-term fixed-rate prime mortgages.

Fannie Mae has priced $2.25 billion (82 million shares) of its common stock (CUSIP 313586109) at $27.50 per share, and $2.25 billion (45 million shares) of 8.75% noncumulative mandatory convertible preferred stock, series 2008-1, at a liquidation preference of $50 per share.Each share of the preferred stock (CUSIP 313586745) will automatically convert on May 13, 2011, into 1.5408 to 1.8182 shares of Fannie's common stock, the company said. At the election of the holder, each share of the preferred stock may be converted at any time into 1.5408 shares of Fannie's common stock. Fannie Mae has granted the underwriters an option to buy up to 12.3 million additional shares of common stock and up to 6.75 million additional shares of the preferred stock. Lehman Brothers Inc., J.P. Morgan Securities Inc., and Citigroup Global Markets Inc. are the joint book-running managers for the common stock offering, and J.P. Morgan, Lehman, and Banc of America Securities LLC are joint book-running managers for the preferred stock offering.

Fremont General Corp., Brea, Calif., has announced an agreement under which its bank subsidiary will sell the remaining mortgage servicing rights on its $12.2 billion servicing portfolio to Litton Loan Servicing LP. The terms of the transaction were not disclosed. Under the agreement, Litton will pay Fremont Investment & Loan (the bank subsidiary) for the MSRs and reimburse FIL for accrued and unpaid servicing fees and the unreimbursed delinquency and servicing advances made by FIL. The agreement does not include the sale of FIL's servicing platform, and Fremont said it plans to wind down its remaining loan servicing operation in Ontario, Calif. The company can be found on the Web at http://www.fremontgeneral.com.

American International Group Inc., New York, has reported a net loss of $7.81 billion in the first quarter, and its United Guaranty mortgage insurance subsidiary took an operating loss of $352 million due to housing and capital market disruptions. Analysts at Fitch Ratings, which downgraded AIG's issuer default and senior debt ratings from AA to AA-minus in response to the earnings results, said they believe AIG was primarily exposed to housing finance-related risks through $61 billion of structured finance collateralized debt obligations backed mainly by subprime U.S. residential mortgage-backed securities in its $469 billion portfolio of notional credit derivatives. AIG said the operating loss in its MI unit reflected "increased losses incurred in both the domestic first- and second-lien businesses" and occurred despite a 14.3% jump (from the level recorded a year earlier) in domestic first-lien net premiums written during the quarter. AIG also announced the commencement of offerings of common stock and equity units totaling $7.5 billion. If the company completes the capital raise successfully, Fitch said it plans to remove AIG's ratings from Rating Watch Negative and affirm them with a negative outlook. Fitch plans to lower AIG's ratings by one notch if the capital raise is not successful.

Six weeks after announcing its intention to pare $45 billion in mortgage assets, Citigroup said Friday that it will shed $500 billion in assets overall. No details were given at deadline time. The sales were expected to occur in "nonlegacy" businesses outside Citi's core consumer franchise, but also might entail more mortgage-related cuts. Meanwhile, Citigroup said May 7 that it would close mortgage offices in Orange and Irvine, Calif., eliminating 419 jobs, as part of a previously announced consolidation of its home lending businesses amid the housing and credit crisis. According to The Orange County Register, Citigroup is shutting down most of Argent Mortgage, which it bought from billionaire Roland Arnall last year. (Mr. Arnall died this spring.) Overall, Citi is cutting 1,860 jobs nationwide and keeping just 70 sales positions.