Servicing

Fannie Mae, which is working through a $10.8 billion earnings restatement scandal, has found yet more accounting errors and will have to repatriate $28.5 billion in assets to its balance sheet.A company spokeswoman told MortgageWire that the government-sponsored enterprise cannot, at this time, determine whether moving the off-balance-sheet assets (Fannie mortgage-backed securities) to its on-balance-sheet portfolio will result in an additional loss or gain. The GSE is in the process of restating its earnings for 2001 through 2004 and has yet to release any profits for 2005 and the first quarter of this year. Fannie says it expects to release the revised 2001 through 2004 earnings after June 30 of this year. The restatement is expected to result in a cumulative loss of $10.8 billion. The information about the $28.5 billion was contained in a new "12b-25" filing with the Securities and Exchange Commission. The filing also reveals that Fannie has dumped $126 billion of its own MBS on the market over the past year. From March 31, 2005 to March 31, 2006, its holdings of its own MBS have fallen by a stunning 27%. The filing also notes that the GSE is still in danger of being delisted by the New York Stock Exchange, though few in the industry believe it will actually happen. Fannie Mae can be found online at http://www.fanniemae.com.

Prestwick Mortgage Group, Alexandria, Va., is brokering the sale of servicing rights on a portfolio of $93 million of Freddie Mac home loans.The weighted average note rate is 5.994%, and the weighted average servicing fee is 25 basis points. The average loan balance is $180,237, with 25 months of average seasoning. Approximately 77% of the loans are backed by homes in Pennsylvania, and approximately 59% were retail originated. The bid deadline is May 16 at 5 p.m. EDT.

Freddie Mac is changing its underwriting requirements to allow for higher homeowners' insurance deductibles.Beginning in July, the company will increase the maximum allowable deductible from 2% to 5% for fire, water, and wind damage coverage for one- to four-unit properties, condominiums, and planned-unit developments, effectively realigning its rules to match current insurance industry practices. As a result of the last two years of severe hurricanes along the Gulf Coast and Florida, most insurers have raised their minimum deductible to 5%, an automatic "disqualifier" under Freddie Mac's current guidelines. Borrowers have always had the option of choosing a higher deductible to save money, but the mandatory increase instituted by some insurance carriers has set a new floor beyond what Freddie Mac currently finds acceptable. Either way, many borrowers are being forced into the private-label market, where mortgage rates tend to be higher than in the agency market, officials said at the Mortgage Bankers Association's National Secondary Market Conference in Chicago. By acknowledging the change in insurance company practices, they said, Freddie Mac is making sure borrowers have access to lower rates.

The "new Freddie Mac" says it will be expanding the list of loan products available through its Web-based selling system this summer by adding a number of 40-year fixed-rate mortgages, a score of adjustable loans, and federally insured rural housing loans."Our main goal is to make sure we provide liquidity across a broad spectrum of the marketplace," Paul Mullings, Freddie's senior vice president of single-family sourcing, said at the Mortgage Bankers Association's National Secondary Market Conference in Chicago. The Freddie Mac official said the company is "putting a lot of money into infrastructure" so it can move more quickly with market forces. "From time to time we will try to innovate ourselves," he said. "But most innovation is taking place in the primary market, and we want to be able to respond to it." When fully implemented, the changes will make it possible for lenders to access, price, and deliver on a flow basis virtually every mortgage product currently offered in Freddie Mac's seller/servicer guide. The company has no interest right now in buying interest-only and payment-option ARMs on a flow basis, but it is studying them, Mr. Mullings said. "As the products evolve, we will evolve with them," he told a news briefing. Freddie Mac can be found online at http://www.freddiemac.com.

Wachovia Corp. struck a deal over the weekend to buy Golden West Financial Corp. for about $26 billion in cash and stock, placing the combined institution squarely among the top 10 in residential servicing and production.The Charlotte, N.C.-based Wachovia, a bank, has shown a growing appetite for mortgages over the past few years, and its purchase of GWF -- the nation's second-largest thrift -- could serve as the first real sign of rapid consolidation in the mortgage finance industry. The Oakland, Calif.-based GWF, the parent of World Savings, is also one of the nation's largest adjustable-rate mortgage lenders. For decades the thrift has been managed by co-chief executive officers Herbert and Marion Sandler, who steered the company through the turbulent waters of the savings-and-loan crisis. According to the Quarterly Data Report, Wachovia ranked 12th in residential production last year, funding $58.1 billion. GWF ranked 15th, with $50.5 billion. Combined, they ranked sixth, with a market share of 3.27%. The companies can be found online at http://www.wachovia.com and http://www.worldsavings.com.

Moody's Investors Service has downgraded the rating of one class of Credit Suisse First Boston Mortgage Securities Corp., Commercial Pass-Through Certificates, Series 1999-C1 and upgraded or affirmed other ratings in the transaction.Due to the rating actions, class L's rating slipped to C from Ca and the ratings of classes C, D, E and F rose, respectively, to Aaa from Aa2, to Aa3 from A2, to A1 from A3, and to Baa1 from Baa2. In addition, Moody's affirmed the ratings of classes A-2, A-X, and F. Moody's can be found on the Web at http://www.moodys.com.

Prepayment rates on 30-year fixed-rate mortgages in Fannie Mae and Freddie Mac mortgage-backed securities declined by 16% and 15%, respectively, in April, according to the Bear Stearns Prepayment Commentary.Overall speeds on 30-year Fannie Mae collateral came in at a constant prepayment rate of 11.4 for the month, down 2.2 CPR from March, Bear Stearns senior managing directors V.S. Srinivasan and Dale Westhoff said in the report. Speeds for comparable Freddie Mac mortgages averaged 10.0 CPR, down 1.8 CPR. "Improving seasonal factors affecting turnover gave way to the drag imposed by a three day decline in the business calendar and a 9 [basis point] back up in rates," they said. The two analysts added, "the decline in speeds was 0.5 to 1.0 CPR more than expected." Overall prepayment speeds for 15-year Fannie and Freddie MBS collateral declined 10%, less than 30-year collateral. Prepayment speed declines on agency hybrids ranged from less than 8% for 3/1 hybrids and 10% for 5/1 hybrids to almost 13% for 7/1 and 10/1 hybrids. Bear Stearns can be found online at http://www.bearstearns.com.

The Senate Banking Committee has approved a regulatory relief bill by a voice vote that removes a "haircut" that banks and thrifts have to take on the value of purchased mortgage servicing rights for capital purposes.Currently, depository institutions carry purchased MSRs at 90% of fair value, and the bill would allow the banking agencies to jointly raise the limit up to 100% of fair market value. The regulatory relief bill, sponsored by Sen. Mike Crapo, R-Idaho, also eliminates a restriction on loans-to-one-borrower involving development loans for residential housing. Thrifts currently cannot make such loans if the purchase price of the units exceeds $500,000. The House passed a regulatory relief bill by a 415-2 vote in March.

Merit Financial, Kirkland, Wash., has reportedly laid off 300 workers and is considering filing for bankruptcy protection, according to a report in the Seattle Times. On Friday a receptionist at the company told MortgageWire that no one was available to talk about the situation and she herself declined to answer questions. She said company CEO and founder Scott Greenlaw a former college football star was not in. A voice mail message left for Mr. Greenlaw had not been returned at press time. Founded just five years ago, the company was funding about $2 billion a year in mortgages. This past fall it published a press release, saying it had been honored by the Puget Sound Business Journal as one of the fastest growing companies in the area. Over the past six months several mortgage firms have announced sizeable layoffs while others have either gone out of business or are for sale.

Employment in the mortgage industry edged down in March after lenders added 6,500 full-time employees to their payrolls in February.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector slipped by 400 jobs to 504,400 in March. During March, the 30-year mortgage rate inched up to 6.4%, but mortgage applications held fairly steady compared to the previous month. Friday's jobs report also shows that hiring in the construction trades has come to a halt after large gains in January and February. As previously reported, single-family housing starts fell 11.2% in March. Meanwhile, the U.S. economy created 138,000 new jobs in April compared to 200,000 in March. The unemployment rate remained unchanged at 4.7%.