Servicing

Three classes of GE Capital home equity loan pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: series 1997-HE4, class B1, from BB to B; series 1999-HE1, class B2, from BB to CCC and removed from Rating Watch Negative; and series 1999-HE3, class B3, from B to CCC and removed from Rating Watch Negative. In addition, Fitch affirmed the ratings on 22 certificates from eight GE Capital HEL transactions. The downgrades were attributed to loss levels and high delinquencies in relation to the applicable credit support. Fitch can be found online at http://www.fitchratings.com.

Moody's Investors Service has named Warren Kornfeld, a senior credit officer in the rating agency's residential mortgage-backed securities group, to be the new head of its mortgage servicer ratings.Mr. Kornfeld replaces Linda Stesney, who has been promoted to a position as co-head of the Moody's term asset-backed securities group. She is moving up because Michael Kanef, formerly co-head of term ABS, has been named group managing director for asset finance. Moody's can be found online at http://www.moodys.com.

Industry veteran Dale Kurland, a former managing director at Bear Stearns, has formed a new advisory firm, hoping to tap what could be a hot merger market for mortgage companies in the next few years."We anticipate a robust market for mergers, acquisitions, and overall consolidation in the mortgage business for the foreseeable future," said Ms. Kurland, who will serve as chief executive of her new firm, Classic Strategies Group LLC. The new company is based in New York. Prior to launching CSG, Ms. Kurland was a principal in DK Advisory Services. DKAS advised on several franchise-related deals, including the sale of First Town Mortgage, James Madison Mortgage, Knutson Mortgage, and others. In the early 1990s, Ms. Kurland was the head of mortgage banking M&A for Bear Stearns. CSG can be found online at http://www.classicsg.com.

The pricing of Freddie Mac participation certificates has "strengthened" and the company is optimistic that it can recapture most of its traditional share of the mortgage-backed securities market this year."Market share has improved significantly since 2003," chief operating officer Paul Peterson told investors during a conference call on the release of Freddie's 2003 earnings. "The current full-year outlook is expected to be just short of historical levels." In early 2003, Bank of America announced that it would no longer sell a majority of its loan production to Freddie Mac, which reduced its issuance of PCs. In addition, rapid prepayments on its PCs forced the secondary-market agency to step into the market and prop up the pricing of its newly issued PCs or mortgage-backed securities. As a result, Freddie's PC issuance declined relative to Fannie Mae's MBS issuance. This year, Mr. Peterson says he expects the PC portfolio to grow 7%-9%. "While continued progress will be challenging, we remain committed to returning market share to historical levels," the COO said. "We also remain focused on maintaining the performance of our MBS."

Freddie Mac has announced that its earnings dropped 52% to $4.9 billion in 2003, as the company continues to play catch-up in its financial reporting due to a $5 billion accounting scandal.In 2002, Freddie Mac posted $10.1 billion in profits, which included a $5.3 billion gain in the value of its derivatives. Overall, Freddie had a $39 million gain in the value of its derivative portfolio in 2003. But in the third quarter of 2003, Freddie Mac actually posted a $288 million quarterly loss primarily due to derivatives, which fell in value by $3.1 billion as interest rates rose. The giant mortgage company also revealed that it will not disclose audited 2004 financial results until March 31, 2005. Freddie Mac chairman and chief executive Richard Syron told investors that the company still relies on an army of consultants and manual systems to produce its financial reports. As a result, the government-sponsored enterprise will not provide quarterly reports this year while construction of the accounting systems and internal controls continues. However, Freddie Mac officials will conduct quarterly briefings for investors to provide progress reports and answer questions.

The ratings on 11 classes from five Amresco Residential Securities Corp. Mortgage Loan Trust deals have been placed under review for possible downgrade by Moody's Investors Service.The affected classes are as follows: series 1997-2, class M-2F; series 1997-3, classes M-2F, B-1F, and B-2F; series 1998-1, classes M-2A, M-2F, and B-1F; series 1998-2, class B-1F; and series 1998-3, classes M-2A, B-1A, and B-1F. Moody's also placed 11 classes from three transactions under review for possible upgrade. The rating agency attributed the reviews for possible downgrade to the fact that credit enhancement levels are not sufficient to support the current ratings. Moody's can be found online at http://www.moodys.com.

Washington Mutual, citing the impact of rising interest rates on its mortgage banking unit, has officially lowered its earnings guidance for 2004.Higher interest rates have lowered mortgage production volume at a time when cost reduction plans have not yet fully taken effect, the company said. WaMu chief executive officer Kerry Killinger said shrinking mortgage volume is "likely to outpace the timing of ongoing cost reduction plans in our mortgage banking business." WaMu now estimates that its 2004 earnings will range from $3.00 to $3.60 per share. According to Thomson Financial's First Call, analysts had been expecting the company to earn $4.24 this year.

The delinquency rate on home equity loans held by banks declined sharply in the first quarter, according to the American Bankers Association.Home equity loan delinquencies declined to 2.37% from 2.50% in the last quarter of 2003, according to the ABA's consumer credit delinquency bulletin. Past-due payments on home equity lines of credit also fell to 0.29% from 0.43%, remaining the lowest delinquency rate among the consumer credit categories tracked by the ABA. One weak spot was manufactured housing loans, where the delinquency rate increased to 5.93% from 5.56%. The ABA also reported that credit card late payments declined.

USFN, a network of mortgage banking attorneys, honored Department of Housing and Urban Development executive Leslie Bromer with its inaugural 2004 Mortgage Servicing Leadership Award during the group’s recent conference in San Antonio, Texas.The Mortgage Servicing Leadership Award was given to Ms. Bromer in recognition of her outstanding contributions to the mortgage servicing industry during a career that has spanned more than 28 years at HUD. The USFN said Ms. Bromer has been instrumental in opening and expanding lines of communication between her agency and the mortgage servicing industry. The honor will be awarded annually to one outstanding individual who best exemplifies the highest standards of service and dedication to the mortgage servicing industry.

A House committee-approved bill to create a federally insured zero-downpayment mortgage program would need $125 million appropriations each year to cover losses from defaults and foreclosures, according to an estimate by the Congressional Budget Office.The bill (H.R. 3755) approved by the House Financial Services Committee would eliminate the traditional 3% downpayment on Federal Housing Administration-insured loans and even allow first-time homebuyers to roll closing costs into the loan amount. However, the CBO found that the higher costs of offering these risky "zero-down" loans would not be offset by higher insurance premiums. "CBO estimates that implementing this legislation would have a net cost of about $500 million over the 2006-2009 period, assuming future appropriation actions consistent with the bill," the CBO says.