Servicing

Freddie Mac has announced the pricing of 20 million shares of fixed-rate noncumulative perpetual preferred stock at $25 per share.The shares (CUSIP: 313400640) are being offered to investors with a dividend rate of 6.55%, the government-sponsored enterprise said. Freddie Mac said it will have the option to redeem all or part of the shares on or after Sept. 30, 2017, at $25 per share plus accrued dividends. Banc of America Securities LLC was the underwriter of the offering.

The long-term issuer default ratings of R&G Mortgage, San Juan, Puerto Rico, and its parent company, R&G Financial Corp., have been downgraded from CCC to BB-minus by Fitch Ratings and placed on Rating Watch Negative.In addition, the long-term IDR of R-G Premier Bank has been downgraded from BB-minus to B and placed on Rating Watch Negative. Fitch pointed to R&G's recent news release "detailing uncertainties regarding relationships with certain government agencies and [government-sponsored enterprises], along with uncertainties related to the near-term renewal of two credit facilities." Moreover, the company "indicated the need to take mortgage impairment charges and provisions for construction loans" in the third quarter, Fitch said. In addition, audited financial statements have still not been released, and "financial metrics" presented in regulatory filings for the first half "compare unfavorably" to those of other financial institutions in the BB rating range, Fitch said.

Limited access to capital has worsened the growth prospects for U.S. mortgage real estate investment trusts in recent weeks and boosted ratings pressure on such companies, according to Fitch Ratings.Steven Marks, a Fitch managing director, said declines in market values of unsecuritized assets have helped trigger margin calls and reduced liquidity for mortgage REITs. "Despite the use of longer-term. match-funded [collateralized debt obligation] financing by mortgage REITs and other finance companies, a majority of these companies continue to utilize short-term, floating-rate financing, creating a mismatch of longer-term, fixed-rate assets and shorter-term, floating-rate, subject to margin debt that is a concern for Fitch," Mr. Marks said. "While a mitigant to this mismatch is the use of interest rate hedging instruments, market value declines in assets due to increased perceived or actual credit risk of a REIT's collateral for this short-term borrowing can still lead to margin calls."

Freddie Mac added more than $12 billion in mortgage assets to its investment portfolio in August, while its issuance of guaranteed mortgage-backed securities fell slightly to the lowest level since December.At the end of August, Freddie's retained portfolio totaled $732.2 billion. Freddie's regulator recently raised its portfolio cap to $735.0 billion and $742.4 billion for the third and fourth quarters, respectively. The Office of Federal Housing Enterprise Oversight raised the cap, allowing Freddie greater flexibility in helping troubled subprime borrowers refinance their loans. Freddie's monthly activity report showed very little sales activity in its investment portfolio, which included $374.6 billion in Freddie-guaranteed MBS and $239.0 billion in private-label MBS. Portfolio liquidations are running at $12 billion to $15 billion a month. The secondary-market agency also reported the issuance of $35.3 billion in guaranteed MBS and structured securities in August, down slightly from $35.5 billion in July. Freddie Mac can be found online at http://www.freddiemac.com.

An affiliate of H&R Block, the publicly traded parent of subprime giant Option One Mortgage, has tapped a $250 million credit facility, citing deteriorating conditions in the commercial paper market.The loan is the responsibility of Block Financial Group, a subsidiary of H&R Block. The tax preparation giant is trying to sell the Irvine, Calif.-based Option One. In a new filing with the Securities and Exchange Commission, Block cites, as one of its risks, the uncertainty surrounding the sale. Hedge fund giant Cerberus Capital has agreed to buy Option One, but it recently threw its existing subprime unit, Aegis Mortgage, into bankruptcy. Option One can be found online at http://www.optiononemortgage.com.

Three classes of notes (and two classes of loan interests) issued by Westways Funding X Ltd., a mortgage market value collateralized debt obligation, have been downgraded by Fitch Ratings.The downgraded notes were as follows: class C, from A to CCC; class D, from BB-minus to C/DR5; and income notes, from CCC to C/DR6. In addition, the class LC loan interests have been downgraded from A to CCC, and the class LD loan interests have been downgraded from BB-minus to C/DR5. "Losses incurred during the liquidation process have increased the risk that the class C and LC notes may not be paid in full," Fitch said. "It is likely that class D and LD will incur a significant loss and class income notes will suffer a complete loss." Fitch can be found on the Web at http://www.fitchratings.com.

Forty-eight classes from 10 residential mortgage-backed securities deals have been downgraded by DBRS Ltd.The downgrades involve MBS transactions issued by Structured Asset Securities Corp., Credit Suisse First Boston Mortgage Securities Corp. Home Equity Mortgage Trust, Home Equity Mortgage Trust, Merrill Lynch Mortgage Investors Trust, Fremont Home Loan Trust, and CWABS Asset-Backed Certificates Trust. DBRS attributed the downgrades to an increase in the pipeline of delinquencies of more than 90 days relative to available levels of credit enhancement. The rating agency can be found on the Web at http://www.dbrs.com.

Opteum Inc., a real estate investment trust based in Vero Beach, Fla., has announced that the company will change its name to Bimini Capital Management Inc. on Sept. 28.The REIT, which invest mainly in residential mortgage-backed securities issued by Fannie Mae, Freddie Mac, and Ginnie Mae, said its class A common stock will begin trading that day under the symbol BMN on the New York Stock Exchange. Opteum also said its website will be moved to http://www.biminicapital.com.

Members of the House Financial Services and Judiciary committees have fashioned a narrowly tailored bill to allow bankruptcy judges to modify "predatory" mortgages, but congressional "experts" think it has virtually no chance of passing.Rep. Brad Miller, D-N.C., told a Mortgage Bankers Association conference that the bankruptcy bill (H.R. 3609) is drafted to help troubled subprime borrowers with adjustable-rate 2/28 loans. It would allow bankruptcy judges to waive prepayment penalties and spread the principal payments over 30 years. The interest rate could be set a "couple of points" above that of the prime mortgage to recognize that the borrower is riskier than a prime borrower. The congressman noted that Sen. Arlen Specter, R-Pa., might support a similar bill on the Senate side, as opposed to a broader bill that Sen. Richard Durbin, D-Ill., is drafting to repeal other parts of the 2005 bankruptcy bill, which took 10 years to pass. MBA senior vice president Steve O'Connor told the mortgage bankers that bankruptcy experts think the chances of congressional passage of H.R. 3609 are "close to zero."

The average subprime loan servicer has only recently begun to make material loan modifications related to interest rate resets, and the modification activity remains low, according to a recent survey of mortgage servicers by Moody's Investors Service.The survey reviewed 16 subprime servicers with total servicing volume of approximately $950 billion, roughly 80% of the subprime servicing market. Moody's said the survey showed that most servicers had only modified about 1% of loans that underwent a reset in January, April, and July of 2007. It also found that the majority of large servicers surveyed continue to rely on passive letter-based contact with borrowers instead of more active methods such as telephone calls. "These trends can be a cause for some concern," said Nicolas Weill, chief credit officer in the Moody's Structured Finance Group. "Based on these survey results, the number of future loan modifications by subprime servicers on loans facing reset may be lower than needed to mitigate losses meaningfully." The rating agency can be found online at http://www.moodys.com.