Servicing

Two classes of Fremont Home Loan Trust's residential mortgage-backed certificates, series 2002-1, have been downgraded by Fitch Ratings.Class M-3 was downgraded from BBB to BB, and class M-4 was downgraded from BBB-minus to BB-minus. Fitch also affirmed the ratings on two classes in the transaction. The downgrades were attributed to concerns about the adequacy of credit enhancement in view of loss expectations. "In May 2005, the transaction passed stepdown tests and allowed the credit enhancement to be lowered to new target amounts," the rating agency said. "The stepdown has allowed for a significant amount of principal allocation to the subordinate classes. However, in recent months, losses have increased relative to the available excess spread and have caused the overcollateralization amount to decline below the target amount."

Flagstar Bancorp Inc., Troy, Mich., has announced that it will restate earnings for 2002, 2003, and 2004, resulting in an overall $5.9 million reduction in net earnings.The company said the restatement was necessitated by the discovery of errors in the computation of state tax liabilities that understated the liabilities by $9.5 million. The restatement will reduce net earnings by approximately $2.5 million for 2002, approximately $2.4 million for 2003, and approximately $1.0 million for 2004, Flagstar said. The mortgage lender reported net earnings of $79.9 million ($1.25 per share) for 2005, compared with $142.7 million ($2.22 per share) for 2004. (The 2004 figures reflect the aforementioned restatement, the company said.) Flagstar can be found online at http://www.flagstar.com.

National City Corp., Cleveland, has announced the formation of a Structured Products Group in its Capital Markets Division that will include a Mortgage Capital Markets Group.Peter J. McCarthy will be senior managing director and head of the Mortgage Capital Markets Group within the larger Structured Products Group, which will be headed by senior managing director Timothy J. Yanoti. "As our mortgage origination efforts have grown over the last few years, we identified a need to have a strong in-house securitization team," said John D. Gellhausen, executive vice president and head of National City's National Consumer Finance Division. "Many of our origination competitors have this capability, and it makes sense for National City to operate one as well." Mr. McCarthy was most recently head of mortgage trading and sales at GMAC Residential Funding Corp., and Mr. Yanoti was in charge of global securitization at General Electric Capital. National City can be found online at http://www.nationalcity.com.

Irwin Financial Corp., Columbus, Ind., is fielding offers for its conventional mortgage banking affiliate, which ranks 35th among residential funders.However, the bank holding company is keeping its home equity division. IFC chairman Will Miller cited declining profit margins in the conventional sector as a reason for the sale, adding that "our servicing activities have grown to a size where we believe they can be managed and grown more effectively within another organization." Among residential servicers, Irwin Mortgage Corp. ranks 31st nationwide, with a receivables portfolio of $23.7 billion. According to the Quarterly Data Report (a MortgageWire affiliate), 90% of IMC's production is sourced through loan brokers or correspondents. The mortgage division has 47 offices in 26 states. (See the Jan. 30 issue of National Mortgage News for more details.)

Freddie Mac's business model does not require rapid portfolio growth, and its $710 billion portfolio should not be singled out by critics as a "special source of systemic risk," according to the company's president and chief executive, Richard Syron.Freddie Mac can expand its portfolio in line with the annual growth rate of mortgage debt outstanding (which is projected to be 8% over the next few years) and still be profitable, Mr. Syron told the Money Marketeers of New York University. "We are thus able to both serve our mission and generate shareholder value by growing along with a very healthy mortgage market," he said. He also stressed that Freddie has more ways to hedge its risks and that its portfolio is "less risky" than the large portfolios maintained by a handful of banks and thrifts. "I don't believe it makes sense to single us out as a special source of systemic risk," the Freddie Mac chief executive said.

Class B2 of DLJ Mortgage Acceptance Corp. residential mortgage pass-through certificate series 1996-QJ has been downgraded from BBB-plus to BB-plus by Fitch Ratings.Fitch also upgraded one class in each of two other DLJ deals and affirmed the ratings on 12 classes in eight DLJ deals. The rating agency attributed the downgrade to a deterioration of credit enhancement relative to consistent or rising monthly losses.

Class M-2 of Soundview Home Equity Loan Trust, series 2001-1, has been downgraded from B to CC by Fitch Ratings.Fitch also affirmed the ratings on two classes in the transaction. The downgrade was attributed to deterioration in the relationship between credit enhancement and loss expectations. "Overcollateralization has been entirely depleted, and the B class bond contains less than $300,000, while monthly realized losses have averaged approximately $90,000," the rating agency said. The mortgage pool consists of 15-, 20-, and 30-year fixed- and adjustable-rate mortgage loans, all of which were originated or acquired by Delta Funding Corp. Fitch can be found online at http://www.fitchratings.com.

The Federal Agricultural Mortgage Corp., Washington, has announced the issuance of a guarantee on $500 million of Guaranteed Notes.Farmer Mac said the notes are secured by an obligation of Metropolitan Life Insurance Co. that is, in turn, secured by Farmer-Mac-eligible agricultural real estate mortgage loans. Farmer Mac, a congressionally chartered corporation that provides a secondary market for rural housing and agriculture-related mortgage debt, said the guarantee stems from a diversification of marketing focus to include transactions that emphasize high asset quality and greater protection against adverse credit performance. The transaction brings the total outstanding volume of its guarantee program to $5.8 billion. The government-sponsored enterprise can be found on the Web at http://www.farmermac.com.

Thornburg Mortgage Inc., Santa Fe, N.M., has doubled the size of its asset-backed commercial paper facility to $10 billion, according to the company.Thornburg said the facility, established in June 2004, gives it an alternative way to finance its adjustable-rate mortgage-backed securities portfolio. Lehman Brothers Inc. is the structuring agent and lead dealer for the transaction. Thornburg can be found online at http://www.thornburgmortgage.com.

A "flood" of mortgage defaults can be expected in the storm-ravaged Gulf Coast region now that 90-day grace periods extended by many lenders have expired, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm.Alexis McGee, president of ForeclosureS.com, said work-out solutions to avoid defaults were available on a case-by-case basis, but that they had to be negotiated before Dec. 1. She warned that scam artists are a threat to homeowners in the region. "Crooked adjusters are urging people to file bogus insurance claims for a share of the proceeds," Ms. McGee said. "Inexperienced and unlicensed contractors are preying on people with damaged homes, demanding money up front and then disappearing without doing the work." The company can be found online at http://www.foreclosures.com.