Servicing

Ten subordinate certificates from five transactions issued by Saxon Asset Securities Trust in 2000 and 2001 have been downgraded by Moody's Investors Service.The downgrades were as follows: class MF-2, from A2 to Baa1; class BF-1, from Ba3 to B3; class MF-2, from Baa2 to Ba2; class BF-1, from B1 to Ca; class MF-2, from Baa2 to Ba2; class BF-1, from B2 to Ca; class M-2, from A2 to Baa1; class B-1, from Baa2 to Ba2; class M-2, from A2 to Baa1; and class B, from Baa2 to Ba1. In addition, Moody's upgraded three subordinate certificates from three transactions and confirmed the rating of one. The certificates are secured by fixed- and adjustable-rate home equity loans. The rating agency said the reason for the downgrades is that the underlying collateral was performing worse than Moody's original expectations. Moody's can be found online at http://www.moodys.com.

Washington Federal Inc., Seattle, has announced a review of its accounting for forward contracts to buy mortgage-backed securities in light of a Securities and Exchange Commission letter questioning the sufficiency of its documentation.The SEC is questioning whether Washington Federal's documentation for the derivatives meets the requirements of Statement of Financial Accounting Standards No. 133 and Emerging Issues Task Force Topic D-102, the company said. If its discussions with the SEC result in a requirement to restate its financial results for fiscal years 2001 through 2004, Washington Federal estimated that the cumulative effect would be to decrease net income by $3.81 million, or 0.62% of cumulative net income during that period.

The Federal Home Loan Bank of Seattle is weighing whether it should ask two member directors to resign from its board as it continues to investigate "inside information" allegations regarding FHLBank stock sales, industry officials have told MortgageWire.A spokesman for the Seattle FHLBank declined to comment. A source close to the situation said a Seattle FHLBank independent review committee consisting of five nonmember directors is "looking at its options" but "has yet to make a determination." As previously reported by National Mortgage News, the IRC is looking into charges that three of its member institutions had inside information about the condition of the government-sponsored enterprise when they requested stock redemptions from the bank last fall. About $337 million in stock was redeemed in October -- several months before the GSE said it would pay minimal or no dividends and report a $260 million unrealized loss. Washington Mutual of Seattle is one of the three firms, but a spokeswoman for the thrift said it redeemed B(2) FHLBank stock, also known as "excess" stock. The other two institutions -- whose identities are not known -- redeemed "activity" or B(1) stock, which is needed if a member wants to get advances from the FHLBank.

Five classes from three Structured Asset Mortgage Investments Inc. securitizations have been downgraded by Fitch Ratings.The downgrades were as follows: series 1999-1 group 2, class 2B-4, from BB to B, and class 2B-5, from CCC to CC; series 1999-2 group 3, class 3-B-3, from BBB to BB, and class 3-B-4, from B to CCC; and series 2000-1 group 2, class II-B-5, from BB-plus to B-plus. In addition, Fitch upgraded four classes from two of the deals and affirmed the ratings on eight other classes from the three deals. The downgrades reflect deteriorating credit enhancement relative to "consistent or rising monthly losses" and rising delinquencies, Fitch said. The rating agency can be found online at http://www.fitchratings.com.

Washington Mutual Inc., Seattle, has reported net income of $902 million ($1.01 per share) for the first quarter, down from $1.05 billion ($1.18 per share) a year earlier, although earnings from its mortgage business rose.WaMu attributed the overall decline to discontinued operations from the sale of Washington Mutual Finance Corp. Net income for WaMu's mortgage banking segment totaled $243 million in the first quarter, up from $228 million a year earlier, the company said. Originations of home loans totaled $38.50 billion for the quarter, down from $43.72 billion a year earlier. The company attributed the increase in the mortgage segment's net income to higher gain from mortgage loans (net of risk management activities) and lower noninterest expense. WaMu can be found online at http://www.wamu.com.

Doral Financial Corp., San Juan, Puerto Rico, has announced that it may restate its earnings for 2000 through 2004 to decrease the fair value of its portfolio of floating-rate interest-only strips by $400 million to $600 million.The IO strips are backed by fixed-rate nonconforming mortgage loans that are pooled and sold on a floating-rate basis, Doral said. The company estimated that the after-tax effect of the required adjustments as of Dec. 31, 2004, will range from $290 million to $435 million, but said it has not yet determined how the adjustments will be distributed among the affected periods. Doral said it is working with First Manhattan Consulting Group, a risk management specialist, to assess its risk measurement and risk management techniques, and that the restatement process will delay the release of its earnings for the first quarter of 2005. The company is the largest residential mortgage lender in Puerto Rico.

National City Corp., Cleveland, has reported earnings of $484 million for the first quarter ($0.74 per share), down from $710 million ($1.16 per share) for the first quarter of 2004.Chairman and chief executive officer David Daberko said earnings-per-share comparisons with those of a year ago were "distorted by large gains from mortgage hedging." He went on to say that "mortgage-related activities, as expected, are now earning at more normal rates following the 2003-2004 period when we took advantage of the largest mortgage volumes in U.S. history." National City said its mortgage banking revenue in the first quarter of this year was $283 million, compared with $579 million for the first quarter of 2004. Net hedging gains related to mortgage servicing rights were $70 million for the first quarter, compared with a gain of $295 million in the first quarter of last year.

Wells Fargo & Co., San Francisco, has reported record net income of $1.86 billion ($1.08 per share) for the first quarter, up 5% from $1.77 billion ($1.03 per share) a year earlier.Mortgage originations totaled $65 billion. "Home Mortgage saw a strong pick-up in application activity in the quarter, as applications of $91 billion increased 14% over fourth-quarter 2004, and the March 31, 2005 pipeline of $59 billion was up 18% from year-end," said Mark Oman, group executive vice president for home and consumer finance. "The rise in interest rates during the quarter and the growth in the servicing portfolio resulted in an increase in the mortgage servicing rights asset to $9.0 billion, or 1.24% of loans serviced for others, up from 7.9 billion, or 1.15%, at year-end. Reflecting the increase in fair value of the servicing asset, a $271 million reversal of the valuation allowance was realized in the quarter." The company can be found online at http://www.wellsfargo.com.

Three classes of notes issued by HarbourView CDO III Ltd., a collateralized debt obligation that includes mortgage-backed securities, have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are classes A, B, and C. The rating agency said the deal has triggered an event of default, in response to which a majority of the controlling class of noteholders may accelerate the maturity of the transaction, a majority of all the noteholders may choose to liquidate the portfolio, or some other remedy may be chosen. Fitch said HarbourView III is composed of 34.2% residential MBS, 27.9% asset-backed securities, 15.3% commercial MBS, 8% real estate investment trusts, 7.3% CDOs, and 7.3% corporate debt. The rating agency can be found online at http://www.fitchratings.com.

The national inventory of foreclosures decreased slightly in February despite widespread expectations that foreclosures will rise in 2005, according to RealtyTrac, an online marketplace for foreclosure properties based in Lake Forest, Calif.The company's Monthly U.S. Foreclosure Market Report indicates that the latest foreclosure inventory totaled 53,222. "On the other hand, certain regions appear to be experiencing higher foreclosure rates," said Jim Saccacio, RealtyTrac's chief executive officer. "Florida and Colorado had the largest number of foreclosures, more than three times the national average." In Texas, the company said, more than 50% of all foreclosures in February took place in three counties: Bexar (San Antonio), with 10.1%; Dallas, 16.4%; and Harris (Houston), 25.3%. RealtyTrac can be found online at http://www.realtytrac.com.