Servicing

Six classes from two Deutsche Financial Capital manufactured housing transactions have been downgraded by Fitch Ratings.The downgrades were as follows: series 1997-I, classes A-3 to A-6, from AAA to AA-plus, and class M, from BBB to B-minus; and series 1998-I, class M, from B-minus to CCC. In addition, Fitch affirmed the ratings on six classes in series 1998-I. Fitch said DFC was a joint venture of Deutsche Financial Services Corp. and Oakwood Acceptance Corp. OAC was a wholly owned subsidiary of Oakwood Homes Corp., which filed for Chapter 11 bankruptcy protection in November 2002.

General Electric Co., Stamford, Conn., will sell 60 million shares of class A common stock of Genworth Financial, Richmond, Va., in a secondary public offering.In addition, GE will sell 21 million shares to Citigroup Global Markets Inc., New York. In turn, an affiliate of Citigroup intends to publicly offer securities exchangeable for Genworth class A common stock. Overallotment options of 9 million shares and 3.15 million shares have been granted to the underwriters of the secondary offering and to Citigroup, respectively. The global coordinator and bookrunner for the offering is Morgan Stanley, with Bank of America Securities, JP Morgan, and Merrill Lynch as joint lead managers and bookrunners. In the Genworth IPO in May 2004, GE sold 30% of the company to the public. An offering announced in March cut its holdings to 51%, and if this deal is completed, GE will own just 32% of Genworth. The market did not react well to the announcement at first. As of shortly before 1 p.m. Sept. 14, Genworth was trading at $31.16 per share, down $0.62 on the day. But at one point after the deal was announced, Genworth was down to $30.91 per share. Among the lines of business GE spun off to Genworth was the mortgage insurance operation based in Raleigh, N.C.

Intellidyn Corp., Boston, has announced that the company is offering free list-suppression services to help direct marketers such as banks and mortgage companies comply with regulations on contacting disaster victims.Intellidyn also said it has donated an undisclosed amount to America's Second Harvest to aid the victims of Hurricane Katrina and has pledged to "adopt" one of more than 300 hurricane-displaced families now relocating to Florida. Peter Harvey, Intellidyn's chief executive officer and president, noted that the U.S. Postal Service is not accepting mail for delivery to certain Gulf Coast ZIP codes and that Louisiana's state of emergency has triggered the state's "do not call" legislation barring telephone solicitation. "Without list segmentation to remove these closed ZIP codes and prohibited calls, companies may waste expensive marketing resources and incur costly return and address correction charges -- or face fines for illegal telemarketing," Mr. Harvey said. Intellidyn can be found online at http://www.intellidyn.com.

Standard & Poor's has announced the commercial release of SPIRE, a proprietary cash flow modeling system for residential mortgage-backed securities.SPIRE (Standard & Poor's Interest Rate Evaluator) provides access to the same tools used by S&P analysts to obtain "rapid feedback" on possible RMBS securitization structures, S&P said. Used in conjunction with other S&P models, SPIRE analyzes the effect of variable interest rates on assets and liabilities associated with structuring RMBS. It incorporates S&P's collateral and cash flow modeling criteria for foreclosure frequency, loss severity, and loss coverage requirements, as well as vectors for voluntary prepayments and interest rate risk, the company said.

Reducing capital requirements under Basel II may spur more securitization of mortgage and credit card loans among banks, according to a new report from Fitch Ratings.The report, "Basel II: The 'Bottom-line' Impact on Securitization Markets," explores the quantitative effect of Basel II capital charges on various structured transactions. Fitch concluded that banks could face lower capital charges by investing in rated securitization deals rather than by directly holding a comparable pool of unsecuritized assets, especially for credit card asset-backed securities, commercial mortgage-backed securities, and residential MBS. The rating agency also said Basel II could influence the structure of securitizations. "Banks will face strong pressures under Basel II to minimize their exposure to sub-investment-grade tranches, given the significant amount of regulatory capital they will have to hold against these positions," said Krishnan Ramadurai, a Fitch senior director for financial institutions.

Despite the widespread destruction caused by Hurricane Katrina in several Gulf Coast states, the impact on U.S. residential mortgage-backed securities rated by Standard & Poor's is expected to be minimal, according to the rating agency.In addition, S&P said deals backed by manufactured housing loans are likely to see some decline in collateral performance, but that most servicers say the majority of damage will likely be covered by hazard and flood insurance. S&P said it expects effective RMBS loan servicing policies to assist with issues such as delinquency advances, property inspections, forbearance plans, and the filing and settling of insurance claims. "We also expect these measures to eliminate, or at least reduce, potential losses for a majority of the existing transactions," the agency said. Sellers of transactions rated by S&P are required to honor representations and warranties, including those that the home is in good repair, that flood insurance is in effect for properties in a flood zone, and that hazard insurance is in place. If any of the reps and warranties is breached, the issuer is required to repurchase the mortgage loan. If a loan becomes delinquent, the servicer must advance for it as long as the advance is deemed recoverable. S&P can be found online at http://www.standardandpoors.com.

Meanwhile, delinquencies for U.S. commercial mortgage-backed securities are likely to rise from their record low as a result of Hurricane Katrina, according to Fitch Ratings.CMBS delinquencies declined from 1.07% in July to a new low of 1.0% in August, Fitch reported. "Although there is not a large concentration of properties in the Gulf Coast relative to other markets in CMBS, the ongoing crisis will make it difficult for borrowers to make their payments," said Adam Fox, a Fitch director. "While we expect master servicers to advance on assets in the near term while determining the extent of damage and insurance coverage, delinquencies will rise and more loans will be transferred to the special servicer as details emerge." The rating agency said servicers are still unable to contact borrowers in the New Orleans area. Fitch can be found online at http://www.fitchratings.com.

Hurricane-related losses for mortgage banks and the housing government-sponsored enterprises are likely to be manageable and unlikely to result in any rating changes, according to Moody's Investors Service.In addition, the rating agency said losses for rated real estate investment trusts will probably be minor. In a report on Hurricane Katrina's probable rating impact on firms in the real estate sector, Moody's said losses for the Federal Home Loan Banks and the Farm Credit Banks are likely to be "modest." Losses for Fannie Mae and Freddie Mac are likely to be higher "but not severe," and spread out over several reporting periods. "The two firms' earnings and capital bases should be more than adequate to absorb likely losses," the rating agency said. Regarding rated REITs, Moody's said none have material exposure, if any, to southern Louisiana, Mississippi, or Alabama. Few REITs own "more than a handful" of properties in these states, it said. Moody's can be found online at http://www.moodys.com.

The financial impact of Hurricane Katrina on Countrywide Financial Corp., Calabasas, Calif., is likely to exceed its hurricane losses for 2004, which totaled approximately $70 million, according to the company.Countrywide said reliable loss estimates cannot be made yet, but it said the company is "well-positioned" to manage the consequences of the disaster. "Countrywide's principal sources of exposure are expected to relate to our insurance operations, residuals, and loans held for investment," said Stanford L. Kurland, Countrywide's president and chief operating officer. "The company has already established a sophisticated protocol for assessing the damage, but the availability and integrity of data regarding the condition of the affected properties remains problematic at this time." The announcement was made in conjunction with the release of the company's operational results for August, during which Countrywide's mortgage loan servicing portfolio surpassed $1 trillion, an industry milestone. Countrywide can be fund online at http://www.countrywide.com.

The National Association of Mortgage Brokers has committed $325,000 to the NAMB Hurricane Relief Fund created to assist NAMB mortgage brokers and other members affected by Hurricane Katrina.The board of directors approved the action to help members who lost homes and businesses in Alabama, Louisiana, Mississippi, and parts of Florida. "Because the vast majority of mortgage brokers are small-business people serving their local communities, Hurricane Katrina was catastrophic to them in many ways," said NAMB president Jim Nabors. "Many lost their homes, their offices, and their markets. The board saw immediately the impact this would have on our members, and we are determined to offer as much help as possible." Contributions are also pouring in from individual states. The California Association of Mortgage Brokers has contributed $25,000 to the fund and other NAMB state affiliates and industry partners are embracing the relief campaign, the organization said. The NAMB can be found online at http://www.namb.org.