Servicing

Rising foreclosures in the Phoenix metropolitan area represent a "disturbing" trend that may largely be a result of predatory lending, according to Foreclosures.com, a Sacramento, Calif.-based investment advisory firm specializing in distressed property.Alexis McGee, president of Foreclosures.com, said there were 1,165 new notices of trustee sales in Arizona's Maricopa County in October, and 1,254 in November. "This rise in foreclosure activity is a disturbing trend, because the Phoenix area economy is in full recovery and housing sales are still strong," Ms. McGee said. "Twenty percent of home sales are to incoming retirees who often bring cash and stable incomes with them." Ms. McGee said she suspects predatory lending as a "major" contributing factor, noting that Arizona has not enacted legislation aimed at curbing abusive lending practices. "These lenders put people into loans with outrageous fees and terms the borrowers cannot possibly meet," Ms. McGee said. "Then they just wait for the inevitable default and foreclose." The company can be found online at http://www.foreclosures.com.

American Home Mortgage Investment Corp., a real estate investment trust based in Melville, N.Y., has priced a public offering of 3 million shares of 9.25% series B cumulative redeemable preferred stock at $25 per share.The stock will be noncallable for five years and is expected to trade on the New York Stock Exchange under the symbol "AHM PrB," the mortgage REIT said. The underwriters have been granted an option to buy up to 450,000 additional shares to cover any overallotments. The lead manager and sole bookrunner of the offering is Friedman, Billings, Ramsey & Co. American Home can be found on the Web at http://www.americanhm.com.

Freddie Mac plans to issue $7-11 billion of Reference Notes in the first quarter, as well as $2-6 billion of syndicated callable notes, according to the government-sponsored enterprise's latest Quarterly Funding Announcement.The planned issuance would result in a net reduction (excluding repurchases) of $4.5-8.5 billion of outstanding Reference Notes, as $15.5 billion of the securities will mature during the quarter, Freddie Mac said. The GSE said it does not plan to issue any EuroReference Notes in the first quarter. Freddie Mac can be found online at http://www.freddiemac.com.

Class B of Impac Secured Asset Corp.'s mortgage pass-through certificates, series 2001-6, has been downgraded from Baa2 to Ba3 by Moody's Investors Service.In addition, Moody's upgraded 11 classes and confirmed the rating of one class. The downgrade was attributed to low credit enhancement levels relative to projected losses on the underlying pools. The transactions consist of first-lien, fixed-rate alternative-A mortgage loans that were originated by Impac Funding Corp. and serviced by GMAC Mortgage Corp.

Citing the risks of using home equity to make investments, the National Association of Securities Dealers has reminded regulated firms of "their obligation to perform a careful suitability analysis" before recommending such a strategy.The NASD's Notice to Members 04-89: Liquefied Home Equity follows an Investor Alert on the subject in March and a related alert in May on the risks of pledging securities in lieu of a mortgage downpayment. Noting that a growing number of homeowners are tapping their home equity to buy securities, NASD vice chairman Mary L. Schapiro warned that the practice isn't appropriate for many investors. "That strategy poses significant and unique risks, and failure to understand those risks could cost them their biggest asset -- their home," she said. In addition, the NASD told member firms that investors may not recognize potential conflicts of interest, such as a securities broker's interest in generating commissions or fees on investments from cash derived from home equity. The NASD can be found on the Web at http://www.nasd.com.

Fannie Mae and Freddie Mac have "sophisticated" risk management operations that are supported by sound structures and technical expertise, according to a report by Moody's Investors Service.The Risk Management Assessment report on the government-sponsored enterprises is the first of a series to be published by the rating agency to increase the "transparency of its rating process," Moody's said. Brian Harris, the lead analyst for the GSEs at Moody's, said the rating agency believes they "maintain well-run risk management operations, with sound support systems and technical capabilities. While there are areas for improvement at both GSEs, on the whole Moody's holds a positive view of these GSEs' risk management approaches." Moody's said it will publish more risk management assessments of companies in various financial sectors beginning in 2005. Moody's can be found on the Web at http://www.moodys.com.

Residential mortgage delinquency and foreclosure rates declined in the third quarter, according to the Mortgage Bankers Association's quarterly delinquency survey.The overall percentage of home loans that were 30 or more days past due declined to 4.41%, down from 4.43% in the second quarter. The third-quarter rate was down 24 basis points from the same period in 2003. While the rate of foreclosure starts remained unchanged from that of the second quarter, the inventory of home loans in the foreclosure process declined 2 bps to 1.14%, the lowest rate since the third quarter of 2000, according to the MBA. MBA chief economist Doug Duncan said the improvement in delinquencies and foreclosures was expected. "The continued modest declines in both delinquencies and foreclosures reflect the strong pace of economic growth and its steady, modest job creation," Mr. Duncan said. "These improvements override the effects of the increased subprime and ARM shares and the aging of the young mortgage portfolio."

Fidelity National Financial, Jacksonville, Fla., has agreed to sell a 25% stake in its mortgage and banking technology business, Fidelity National Information Services, to Thomas H. Lee Partners LP and Texas Pacific Group for $500 million.Fidelity National Information Services (known internally as FIS), a subsidiary of the title insurance giant, owns the former Alltel Information Services, the largest residential servicing bureau in the nation. The sale to THLP/TPG was announced in tandem with a $2.8 billion recapitalization plan for FIS. Under that plan, FIS will obtain $2.8 billion in senior secured credit facilities from a consortium of lenders. FIS will repay all its outstanding debt using the credit line and distribute $2.7 billion to Fidelity National. Once the deal is closed, Fidelity will pay a $10-per-share dividend to its shareholders. Of the $500 million that THLP and TPG are paying, Fidelity will book a gain of $375 million. The company said the dividend payment is not contingent on the FIS sale to THLP/TPG. In early September, Fidelity announced that it was delaying a spinoff of FIS. Fidelity can be found online at http://www.fnf.com.

Fannie Mae has agreed to forfeit $7.5 million to the government after investigators accused the company of not blowing the whistle on a fraudulent North Carolina mortgage lender that took Ginnie Mae for at least $23 million.Fannie Mae was also defrauded by the lender, First Beneficial Mortgage, but forced the company to repurchase loans it had sold to the government-sponsored enterprise. The government said Fannie knew the money it received from First Beneficial was fraudulently obtained from Ginnie Mae. The Department of Justice said that in settling the matter, Fannie waived its right to a hearing that would have determined whether the GSE received $6.5 million from First Beneficial "without knowledge of their fraudulent origin." The $7.5 million that Fannie forfeited includes $6.5 million in principal and another almost $1 million in interest. In a statement, Fannie senior vice president of communications Chuck Greener said, "Fannie does not wish to retain the funds or benefit from First Beneficial's illegal activities." Mr. Greener said the GSE now considers the matter closed, adding that the congressionally chartered company "will continue to work to defeat fraud in the mortgage industry."

Ten classes of Saxon Asset Securities Trust issues have been downgraded by Fitch Ratings.The downgrades were as follows: series 2000-1 group 1, class BF-1, from BB to C; series 2000-2 group 1, class BF-1, from BB to CCC, and class BF-2, from CCC to C; series 2000-3 group 1, class MF-2, from A to BBB, and class BF-1, from CCC to C; series 2000-4 group 1, class MF-2, from A to BBB, and class BF-1, from BB to C; series 20001-1 group 1, class MF-2, from A to BBB, and class BF-1, from CCC to C; and series 2001-1 group 2, class BV-1, from BBB to BBB-minus. In addition, Fitch upgraded 16 classes from seven Saxon transactions and affirmed the ratings on 47 classes from nine deals. The downgrades were attributed to worse-than-expected performance of the underlying collateral and diminishing credit enhancement. Fitch can be found online at http://www.fitchratings.com.