Servicing

Cerberus Capital Management, New York, and two partners have inked a deal to buy 51% of General Motors Acceptance Corp., the parent of Residential Capital Corp., the nation's fifth-largest mortgage banker.Cerberus, Citigroup Inc., and Aozora Bank will pay $14 billion for the stake. The sale places GMAC's residential empire -- GMAC Residential, GMAC-RFC, and Homecomings -- in the odd position of being owned by competitors. Citigroup owns Citigroup Mortgage and subprime lender CitiFinancial, and Cerberus owns a controlling interest in Aegis Mortgage, a top-20-ranked nonconforming lender. Besides mortgages, GMAC controls other financial services assets, including auto finance, credit cards, and insurance. A few weeks ago, General Motors sold a controlling stake in its commercial mortgage banking affiliate to Kohlberg, Kravis & Roberts and two partners. GM, which is facing possible bankruptcy, is trying to raise cash and restore its debt ratings and that of GMAC. Rick Wagoner, GM's chairman and chief executive officer, said the sale will preserve "the mutually beneficial relationship between GM and GMAC."

A unit of Fortress Investment Group has agreed to purchase Centex Home Equity Co., Dallas, in a deal valued at about $575 million.Late in the day on March 30, Centex Homes, the homebuilder parent of CHEC, disclosed it had signed a definitive agreement to sell the nation's 28th largest subprime lender to Fortress, which bills itself as a "global alternative investment and asset management firm." Fortress was one of the investment companies that purchased Green Tree from Conseco when the latter was in bankruptcy. The sale is subject to certain conditions, including regulatory approvals, and is expected to close within three to four months. Among subprime servicers, CHEC ranks 22nd, according to National Mortgage News and the Quarterly Data Report.

Irwin Financial Corp., Columbus, Ohio, is toying with the idea of selling $14 billion in servicing rights housed at its mortgage affiliate, sources told MortgageWire.A spokeswoman for IFC declined to comment. In January IFC announced that it was exiting the conventional market by selling subsidiary Irwin Mortgage Corp., which is based in Fishers, Ind. IMC ranks 31st among residential servicers. The bank parent has been fielding offers for the unit and in February rumors began to surface that subprime giant New Century Financial Corp., might be the winning bidder. However, the IFC spokeswoman clarified that no sale announcement is pending and the company is not commenting on any market rumors.

Freddie Mac, which is still not current on its financial reporting, unveiled preliminary earnings of $2.5 billion for 2005 while revealing a $500 million write down in the fourth quarter tied to its holdings of interest-only assets.During a Friday morning conference call, company EVP of investments Patty Cook described the hit as a "mark to market" accounting adjustment designed to make its financial reporting more transparent. She said that in the IO market "spreads widened" which contributed to the write down. Compared to 2004, Freddie's earnings fell 13%. GSE chairman and CEO Richard Syron called it a "solid year," while president Eugene McQuade noted that the company increased its GSE market share to 45% from 41%. The company will release final 2005 results in late May. Mr. McQuade noted that 5% of Freddie's retained portfolio includes "non-traditional" mortgages, including interest-only loans.

Fitch Ratings has raised the primary and master servicer ratings for GMAC Commercial Mortgage to 'CPS1-minus' while affirming the special servicer rating at 'CSS1.'The new ratings reflect a one notch upgrade in the primary and master servicer ratings, while the special servicer rating is already at the highest level. Fitch said the change comes in the wake of GM's partial sale of General Motors Acceptance Corporation to an entity controlled by affiliates of Kohlberg, Kravis Roberts & Co; Five Mile Capital Partners and The Goldman Sachs Group. At the end of last year, GMACCM's primary servicing portfolio consisted of about $100 billion of commercial mortgage loans. GMACCM was also the master servicer on 164 commercial mortgage-backed securities transactions totaling $107.2 billion.

Mortgage servicers and their auditors are still grappling with the testing and reporting requirements of the Securities and Exchange Commission's new asset-backed securities (AB) regulation and the Mortgage Bankers Association is urging SEC to delay the initial reporting period.There is confusion about the role and responsibilities of ABS issuers, auditors, servicers and vendors in filing "Compliance with Applicable Servicing Criteria" reports (Item 1122) under the ABS regulation, according to the MBA, and more time is needed to resolve outstanding issues. "MBA believes that planning and performance of Item 1122 engagements under Regulation AB has been delayed for legitimate reasons that call for leniency in this initial reporting year," MBA says in a March 13 letter to SEC. While compliance testing should be conducted throughout 2006, MBA is recommending that non-compliance be reportable only if it is identified in the fourth quarter. SEC officials will be speaking at a Reg AB conference MBA is sponsoring April 10-11 in Washington.

Late payments on home equity loans fell in the fourth quarter of 2005, according to the American Bankers Association.However, banks reported a five basis point increase in delinquencies on home equity lines of credit, with the year-end overdue rate reaching 0.51%. Still, HELOCs had the lowest past due rate of any consumer credit category. On closed-end home equity loans, the overdue rate fell 26 basis points from the third quarter to 2.07% at the end of the fourth quarter. Mobile home loan delinquencies increased to 3.91% at the end of the fourth quarter, 60 basis points higher than in the third. The ABA also reported a marked decline in credit card delinquencies that helped push the overall consumer credit delinquency rate lower. "With job growth strong over the last year and gas prices easing by year-end, the delinquency picture has brightened considerably," ABA chief economist James Chessen said.

EMC Mortgage Corporation, a subsidiary of The Bear Stearns Companies, has hired John Vella as president and chief operating officer.Mr. Vella most recently served as president and COO for Aames Investment Corporation. Prior to that he was chief sales officer and chief administrative officer for Option One mortgage corporation. He has also held senior positions at Household International, GMAC/RFC, Freddie Mac, Fleet National Bank and the FDIC/FSLIC. EMC also added two new members to its executive management team. They are Robert N. Pruett and William Glasgow, both of whom have more than 30 years experience in the industry. EMC's mortgage servicing portfolio has grown from $4.2 billion in 2000 to $63.8 billion today. Also, Clayton Baker has joined Bear Stearns as senior managing director. He is leading several strategic initiatives designed to facilitate EMC's growth, the company said.

Flattening home price appreciation, slowing home sales and rising interest rates could lead home prices in the Western U.S. to slip, causing a rise in foreclosure activity, according to ForeclosureS.com.The distressed property investment advisory firm and publisher of foreclosure information said that home prices in Phoenix, Ariz., have declined 6.7% over the last six months after several years of rapid increases. The company also said prices have dropped for two consecutive months in the Las Vegas market. California markets, including the San Francisco Bay and San Diego areas, are seeing price appreciation cool down as well, according to Alexis McGee, president of ForeclosureS.com. She noted that in San Diego, 50% of mortgage loans issued between 2003 and 2005 were either interest only or pay-option adjustable-rate loans, which pose a major risk of increasing default rates.

Two classes of Solstice ABS CDO Ltd., a collateralized debt obligation that includes residential and commercial mortgage-backed securities, have been downgraded by Fitch Ratings.The class B notes were downgraded from BB-plus to B, and the class C notes were downgraded from CC to C. Fitch said the downgrades stemmed from reduced collateral coverage levels. Solstice consists of 42% residential mortgage-backed securities, 37.6% CDOs, 10.1% asset-backed securities, 5.2% corporate debt securities, 3.5% CMBS, and 1.6% real estate investment trust securities.