Servicing

Bank of America Corp., Charlotte, N.C., has reported net income of $3.76 billion ($0.91 per share) for the third quarter, up from $2.92 billion ($0.96 per share) a year earlier, but said it had taken a $250 million loss in its mortgage banking operations.The loss in mortgage banking income resulted from lower origination volume and a writedown of mortgage servicing rights, BoA said. The company also reported that it realized $732 million in securities-related gains "as it repositioned its mortgage-backed securities to reduce mortgage prepayment risk." BoA touted its commercial MBS underwriting operations, saying it had become the top U.S. deal manager in CMBS in the first nine months of 2004. The company can be found online at http://www.bankofamerica.com.

The Pennsylvania Supreme Court needs to reconsider its decision involving bailee letters (used to facilitate sales of residential loans) in order to avoid disruption in the state's mortgage market, according to warehouse lender JPMorgan Chase Bank.Over 50% of all U.S. residential loans are shipped under a bailee letter, the New York bank says in an amicus brief on behalf of a defunct Los Angeles-based warehouse lender, Pioneer Commercial Lending Corp. Bailee letters protect a lender's ownership in loans that are being shopped to potential investors. In the Pioneer case, the purchaser erred by wiring the funds to an account of the wrong lender, which CoreStates Bank used to cover overdrafts by that lender. "The decision has effectively elevated the behavior of one party over the plain terms of the contract ... and creates the danger that lenders cannot protect themselves against potential purchasers that take liberties with the documents," the amicus brief says. The brief discloses that Pioneer has a $5 million loan from JPMorgan Chase Bank that is secured by the litigation.

The senior unsecured debt of GMAC Commercial Mortgage Bank PLC and GMAC Commercial Mortgage Japan KK has been downgraded from BBB-plus to BBB by Fitch Ratings as part of a broader downgrade of debt issued by General Motors Corp., General Motors Acceptance Corp., and related entities.Fitch also affirmed the corresponding commercial paper ratings at F2, and left the Rating Outlook at Negative. The rating agency attributed the downgrades and outlook to GM's "margin compression," weakness in its truck and car portfolios, and "significant post-employment benefit obligations." But it said GMAC's automotive and mortgage finance operations "have exceeded expectations and are projected to continue to perform well." The rating agency can be found online at http://www.fitchratings.com.

The board of directors of the Federal Agricultural Mortgage Corp., Washington, has for the first time declared a quarterly dividend on its three classes of common stock.The Farmer Mac board declared a dividend of $0.10 per share of class A and class B voting common stock and class C nonvoting common stock. The dividend will be payable on Dec. 31 to stockholders of record as of Dec. 15. The board also declared a regular quarterly dividend of $0.80 per share on the corporation's 6.40% cumulative preferred stock, series A.

The American Securitization Forum has appointed Thomas Deutsch to succeed Laura Stothmann as its associate director.Mr. Deutsch was previously an associate in the capital markets department of Cadwalader, Wickersham & Taft LLP, where he represented issuers and underwriters in residential mortgage-backed securitizations and other structured finance offerings. The forum can be found online at http://www.americansecuritization.com.

Four classes of Ocwen Residential MBS Corp. mortgage-backed securities have been downgraded by Fitch Ratings.The downgrades were as follows: Ocwen 1998-R1, class B-3, from BBB to BBB-minus; Ocwen 1998-OFS1, class B, from BBB to BBB-minus (and removed from Rating Watch Negative); and Ocwen 1999-R2, class B-2, from A to BBB, and class B-3, from B to CCC. Fitch also affirmed the ratings on 10 classes from the aforementioned Ocwen deals plus two others. The downgrades were attributed to "poor collateral performance and the deterioration of asset quality beyond original expectations."

Fitch Ratings is warning that disparities in the alternative-A sector of the residential mortgage-backed securities market have rendered the term Alt-A nearly meaningless for investors.The rating agency said bonds issued by many sellers in the alt-A market "bear unprotected credit risks because of the implications from borrower credit, risk layering, and intangibles." Fitch maintains that the alt-A sector should be segmented into three subsectors: Prime Alt-A, Alt-A-minus, and Alt-B. "As lenders have embraced a wider credit spectrum under the alt-A banner, there is such a blurring of the original definition of alt-A that the term should hold little meaning to investors," said Cheryl Glory, co-author of a new Fitch report titled "Who Put the Alt in Alt-A?" The report is based on a study of over 71,000 alt-A loans issued by GMAC-RFC and Indy Mac Mortgage Corp. in 1999 and 2000. "The analysis of intangibles is vital to understanding the credit risk in alt-A," said the other report co-author, Sarbashis Ghosh. "An issuer's underwriting and credit standards have a great impact on pool performance." Examples of such intangibles are FICO sourcing, valuation procedures, and multiple risk layering, Fitch said. The rating agency can be found online at http://www.fitchratings.com.

Fannie Mae has announced that it will not issue Callable Benchmark Notes in October.The company had previously announced that it might not issue Callable Benchmark Notes in a minimum of eight months, as originally planned. Fannie Mae said it will notify the market of its issuance intentions on the scheduled monthly announcement date. The government-sponsored enterprise can be found on the Web at http://www.fanniemae.com.

Freddie Mac has announced its 2005 funding calendar for Reference Notes and Reference Bills and issued its Quarterly Funding Announcement & Summary for the fourth quarter.The government-sponsored enterprise also announced that it will henceforth release the quarterly funding announcements before the pertinent quarter begins. Under Freddie Mac's 2005 funding program, two- or three-year Reference Notes may be issued every month except August; five-year Reference Notes may be issued in March, June, September, and December; and 10-year Reference Notes may be issued in January, April, July, and October. The report indicates that the company issued $287.6 billion of debt instruments in the third quarter, consisting of $259 billion of Reference Bills and discount notes, $24.5 billion of callable debt (including syndicated callable notes, euro-denominated callable notes, callable medium-term notes, and FreddieNotes), and $4 billion of Reference Notes. The report said Freddie Mac plans to offer $8 billion to $13 billion in Reference Notes in the fourth quarter, and $2 billion to $6 billion of syndicated callable notes. The funding announcement for the first quarter of 2005 is scheduled to be issued Dec. 10.

New York-based C-BASS has announced a definitive agreement to acquire a portfolio of assets from PCFS Mortgage Resources for an undisclosed amount.The company said the transaction includes: a portfolio of residual interests from securitizations backed by loans with a total principal balance of approximately $900 million; third-party mortgage servicing rights on a portfolio of loans with a total principal balance of approximately $8 billion; and the PCFS servicing operation. PCFS is a division of Provident Bank, which was acquired by National City Corp. in July 2004. C-BASS specializes in acquiring, servicing, and securitizing "credit-sensitive" residential mortgages. The company can be found online at http://www.c-bass.com.