Servicing

Prepayment rates for 30-year Fannie Mae and Freddie Mac mortgage-backed securities rose sharply in March, sending "a warning shot to mortgage investors," according to Bear Stearns & Co.Fannie Mae speeds rose from a constant prepayment rate of 18 CPR overall to 24 CPR in March in response to a rally in mortgage rates from 5.77% in February to 5.64%, as well as other factors such as a greater number of business days and a 14% increase in seasonal factors affecting turnover, said Bear Stearns analyst Dale Westhoff. Mr. Westhoff said the report is a warning shot to investors. "While relative coupon speeds are still well below levels observed in a typical refinance wave, the idea that somehow U.S. borrowers have become indifferent to new refinancing opportunities (a recent popular story) has been put to bed," he declared. "Borrowers viewed the rally and then sharp sell-off in mortgage rates in February as a last and best opportunity to lock in historically low rates." The Bear Stearns analyst said the "most striking" aspect of the report was "the uniformly strong prepayment response across coupons and vintages, particularly a reawakening of seasoned premium cohorts after several months of muted prepayments." Bear Stearns can be found online at http://www.bearstearns.com.

The Federal Home Loan Bank of Seattle, at year-end, had a $260 million "unrealized loss" on its balance sheet, according to company records.If the losses are realized at that amount, it would wipe out 13% of its $2 billion in capital, according to calculations by MortgageWire. A spokesman for the bank cautioned that the unrealized losses are just that, and could shrink or grow in size over time. The spokesman said the figure "is a snapshot at a point in time," reflecting a mismatch between the FHLBank's assets and liabilities. Meanwhile, the Seattle GSE reported a 42% drop in 2004 earnings, and has stopped purchasing mortgage loans under a restructuring plan that calls for a 25% reduction in staff. The Seattle bank warned that it "anticipates minimal to no dividends for its members" over the next few years and "may report net loss for some financial reporting periods." The troubled bank, which has been operating under a supervisory agreement since Dec. 10, filed a business/capital plan April 5 with its regulator, the Federal Housing Finance Board.

Residential Funding Corp., Minneapolis, has announced a redesign of its services website aimed at making it easier to find, analyze, and save data about the company's fixed-income securities.GMAC-RFC Vision offers various new features, including better navigation and search capabilities, access to expanded loan-level data downloads, and dynamic analytical capabilities that enable users to compare performance by shelf, vintage, deal, deal group, pool, and loan characteristic, the company said. "The analytics tool and data downloads in particular allow investors to either download collateral information or perform analysis online comparing many different attributes," said Julie Steinhagen, GMAC-RFC's managing director of capital markets investor relations. The enhanced website can be found online at http://www.gmacrfc.com/investors.

New foreclosed residential properties surged by 50% in March, according to Foreclosure.com, an online foreclosure listing service based in Boca Raton, Fla.Such foreclosures totaled 28,190 in the United States in March, and the nationwide inventory of foreclosed residential properties totaled 80,757, up 10% from that of February, the company reported. "Foreclosures are most prevalent in areas of the country where home values are not rising, such as Ohio, Texas, South Carolina, and Michigan," said Brad Geisen, president and chief executive officer of Foreclosure.com. "However, if the combination of rising interest rates and dropping home values continues, foreclosure inventory will likely continue to rise across the country." The company can be found online at http://www.foreclosure.com.

The stock prices of Fannie Mae and Freddie Mac are undervalued, even if reform legislation limits the size of their retained mortgage portfolios, according to Jonathan Gray of Sanford C. Bernstein & Co.Mr. Gray, in a report issued last week, noted that Rep. Richard Baker's proposed legislation does not place a cap on the GSEs, though some critics, including Federal Reserve Chairman Alan Greenspan, have called for a cap on the GSE portfolios. Without a cap, Mr. Gray estimated that the GSEs each have a fair share price expectation of between $70 and $75 based on 2006 earnings estimates. With a $200 billion portfolio cap, the share price range would drop to $60 to $65 per share.

The rating on class B-1 of Manufactured Housing Contract Sr/Sub Pass-thru Trust 1999-2 has been lowered from CC to D by Standard & Poor's Ratings Services.The rating agency attributed the action to "the reduced likelihood that investors will receive timely interest and the ultimate repayment of their original principal investment." S&P cited a recent interest shortfall and said it believes such shortfalls will continue "given the adverse performance trends displayed by the underlying pool of collateral." S&P can be found online at http://www.standardandpoors.com.

Irwin Financial Corp., Columbus, Ind., has announced that it expects to report a "small loss" for the first quarter due chiefly to losses in its mortgage business.Irwin said the mortgage losses resulted largely from the interest rate environment and the cap on the valuation of mortgage servicing rights imposed under generally accepted accounting principles. The company said it expects earnings per share to return to original projections for the rest of the year, but that profitability in the next three quarters is not expected to offset the first-quarter loss enough to produce full-year earnings greater than those of 2004. "We have noted for years that the mark-to-market and lower-of-cost-or-market cap on the carrying value of mortgage servicing rights required under GAAP would likely create this outcome at some point," said Irwin chairman Will Miller.

Fidelity National Financial, Jacksonville, Fla., has launched an enhanced version of its BuyBankHomes.com website portal for selling bank-owned homes.The online portal is dedicated to marketing properties that have completed the foreclosure process. Fidelity said the redesigned user interface offers a clean, intuitive environment for both experienced bank-owned property investors and consumers new to the market. Fidelity said the new site incorporates Intelligent Map Searching, so that users are no longer required to be familiar with specific property location data such as city or ZIP code. The layered map feature allows users to start with a broader area, like a state, and zoom in on local markets. The site also features new bidding capabilities for live, online auctions.

ACE USA, Philadelphia, has announced expanded distribution of its ACE Disaster Mortgage Protection policy outside its traditional mortgage service provider channel.The move will allow general agents and their producers to have direct access to real-time quoting and buying of DMP coverage through a dedicated website. ACE DMP insurance pays a homeowner's monthly mortgage payment and makes available emergency cash if the home becomes uninhabitable for 48 hours due damage from a covered disaster. "The recent windstorm losses in Florida, along with the storms and mudslide losses in California, made us aware that we must make our ACE Disaster Mortgage Protection product available to a broader group of American homeowners," said Patricia Goudarzi, executive vice president of ACE Select Markets, a division of ACE USA. "Homeowners may not be aware that while the typical property policy pays for the repairs to their home, it does not make their mortgage payments or provide emergency cash if the home becomes uninhabitable." The dedicated website for DMP coverage can be found at http://www.marketplacemakers.com.

Hanover Capital Mortgage Holdings earned $8.1 million, or $0.97 per share, versus $8.0 million, or $1.35 per diluted share, in 2003.President and CEO John Burchett said HCM’s investments in subordinate MBS continue to perform well. HCM held subordinate MBS investments related to $13.7 billion of prime mortgages at the end of last year. He said the company’s primary goal this year will be to continue its investment strategy and to grow its capital base. The company issued $20 million of trust-preferred securities in March to raise capital for additional investment through its core REIT portfolio. The company is located on the Internet at http://www.hanovercapitalholdings.com.