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Under pressure from its regulator to raise capital, Fannie Mae saw its loan purchases fall to a four year-low in February as the company continued to shrink its portfolio.The government-sponsored enterprise acquired just $40.2 billion in loans during the month, its lowest acquisition volume since February of 2001. So far this year, Fannie has purchased $88 billion in loans, giving it an estimated market share of 22% (according to National Mortgage News), compared with a 27% market share for all of last year. Its portfolio shrank at an annualized rate of 19% during the month, to $875 billion. In an analyst note, Smith Barney attributed half the portfolio decline to asset sales. The investment banker said it expects negative portfolio growth to continue at Fannie "until it reaches its capital target level, though rising rates (which could boost its capital position) could temper that pace if sustained." The company is expected to restate prior years' earnings by $9 billion to $11 billion.

Four classes of securities issued by Independence II CDO Ltd., a collateralized debt obligation, have been downgraded by Fitch Ratings.The downgrades were as follows: class A notes, from AA-plus to AA-minus; class B notes, from BBB-plus to BB-minus; class C notes, from BB to CCC; and $16.7 million of preference shares, from CCC to C. Classes B and C were removed from Rating Watch Negative. Independence II is composed of approximately 40.4% residential mortgage-backed securities, 37.1% commercial MBS, 16.7% asset-backed securities, 5.4% CDOs, and 0.5% real estate investment trusts. Fitch attributed the downgrades to a deterioration of collateral quality, citing principal writedowns to various tranches from underperforming manufactured housing deals.

Three classes of notes issued by Independence I CDO Ltd., a collateralized debt obligation partly composed of residential and commercial mortgage-backed securities, have been downgraded by Fitch Ratings.The downgrades were as follows: class A, from AA-plus to AA; class B, from A-minus to BB; and class C, from BB to CC. Fitch attributed the downgrades to deteriorating collateral. "Mezzanine and subordinate tranches from underperforming manufactured housing securitizations have taken principal writedowns and, in Fitch's opinion, over $14 million in collateral that was considered performing from its previous review is now considered distressed," the rating agency said. The CDO consists of approximately 23.1% RMBS, 26.1% CMBS, 43.3% asset-backed securities, and 7.6% CDOs, the rating agency said. Fitch can be found online at http://www.fitchratings.com.

Fifteen classes from three issues of IndyMac Manufactured Housing contract pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: series 1997-1, classes A-2 to A-6, from AA to A, and class M, from CCC to C; series 1998-1, classes A-3 to A-5, from A to BBB-plus, and class M, from CCC to C; and series 1998-2, classes A-2 to A-4, from AA to A, class M-1, from B to CC, and class M-2, from CCC to C. The downgrades were due to continued poor performance of the underlying collateral, as well as diminishing credit enhancement, Fitch said. As of the February distribution date, the cumulative loss percentages on series 1997-1, 1998-1, and 1998-2 were 22.63%, 22.10%, and 20.01%, respectively, the rating agency said.

Six classes of Credit Suisse First Boston Mortgage Securities Corp. commercial mortgage pass-through certificates, series 2002-TFL1, have been downgraded by Fitch Ratings.The downgrades were as follows: class E, from A-minus to BBB-minus; class F-ABP, from BBB-plus to BBB-minus; class G-ABP, from BBB-minus to BB-plus; class H-ABP, from BBB-plus to B-plus; class F-WBC, from BB-plus to B-plus; and class G-WBC, from BB-minus to B-minus. Classes E, F-WBC, and G-WBC were removed from Rating Watch Negative. In addition, Fitch placed three classes on Rating Watch Evolving and affirmed the ratings on eight other classes in the transaction. The downgrades were attributed to the pool's declining performance since issuance.

The Enstar Group Inc., Montgomery, Ala., has reported a 15-day delay in the filing of its annual Form 10-K report, citing the timing of audited financial statements for Green Tree Investments, in which Enstar held an indirect interest until July 2004.Enstar said Green Tree -- the successor company to Conseco Finance Corp., which was the successor to manufactured housing lender Green Tree Financial Corp. -- changed accounting firms last year and the new auditors have not yet completed the audit of Green Tree's 2004 financial statements. Enstar said it will file its 2004 Form 10-K with the Securities and Exchange Commission "as soon as the predecessor Green Tree auditors are able to agree to the inclusion of their audit reports" for fiscal year 2003.

Troubled mortgage giant Fannie Mae said late Thursday that, once again, it could not report quarterly earnings in a timely manner, but also said its anticipated losses could be lower by about $1 billion.In a Form 12b-25 filing with the Securities and Exchange Commission, Fannie said its restatement in regard to hedge accounting (FAS 133) may be $8.4 billion, not $9 billion as previously thought. Its losses on certain "purchase and sell commitments" may be $2.4 billion, compared with an earlier estimate of $2.8 billion. Fannie, which has not reported earnings since the second quarter of 2004, is operating under a supervisory agreement with the Office of Federal Housing Enterprise Oversight. It is continuing an intense audit of its books and says it expects to restate earnings for the past three years. A new analyst report released by Smith Barney predicts that if interest rates rise, the company's anticipated losses "could shrink further in size."

Classes B and C of Structured Mortgage Trust 1997-1 have been placed under review for possible downgrade by Moody's Investors Service.The transaction is a resecuritization backed by other residential mortgage-backed securities. The rating actions were based on the weak performance of the underlying securities, whose losses have exceeded original expectations, Moody's said.

Three subordinate certificates from Amresco Residential Securities Corp. Mortgage Loan Trust series 1997-3 have been downgraded by Moody's Investors Service.The downgrades were as follows: class M-2F, from Baa1 to Ba1; class B-1F, from B2 to Caa3; and class B-2F, from Ca to C. The certificates are backed by 30-year fixed-rate and adjustable-rate home equity loans. The downgrades were due to credit enhancement levels that are insufficient to support the current ratings, Moody's said. "The B-2F certificates are almost completely written down, and future pipeline losses may cause the B-1F certificates to begin taking writedowns," the rating agency said.

The delinquency rate on single-family mortgages fell 18 basis points from the third quarter to 4.23% at the end of the fourth quarter, according to the Mortgage Bankers Association.The fourth-quarter delinquency rate was also down 26 bps from one year earlier. The MBA's National Delinquency Survey found improvement for all loan types. Foreclosure rates also declined in the fourth quarter. MBA chief economist Doug Duncan said strong economic growth and low interest rates allowed homeowners to improve their household finances in the last quarter of 2004. Continuing job growth and only modest increases in interest rates suggest that "moderate declines in delinquencies" will continue for the next few quarters, he said. The MBA can be found online at http://www.mortgagebankers.org.