Servicing

Freddie Mac has reported that its total mortgage portfolio, which includes guaranteed mortgage-backed securities as well as its retained loans, contracted by 2% in April after eight straight months of growth.Freddie Mac said its retained portfolio fell at an annualized rate of 7.8% in April, while issuance of participation certificates decreased at a 4.9% rate. Structured securitizations increased, however. Freddie Mac's duration gap, an interest-rate risk management measure, remained at zero in April, unchanged from March. The single-family delinquency rate declined slightly to 25 basis points. Freddie Mac can be found on the Web at http://www.freddiemac.com.

Meanwhile, Foreclosures.com also forecast that rising interest rates will "spark a surge in Las Vegas foreclosure activity later this year."The company said the rising rates will "cool the very hot Clark County" rate of home price appreciation. "Foreclosures are a lagging indicator," said Alexis McGee, president of Foreclosures.com. "Although rates have been rising for seven consecutive weeks, we won't see the impact on homeowners for another four to six months."

The widespread use of adjustable-rate mortgages by California homebuyers in 2003 could lead to a rise in defaults later this year as interest rates rise, according to Foreclosures.com, a Fair Oaks, Calif.-based investment advisory firm specializing in distressed property.Company president Alexis McGee said the San Francisco Bay area and Orange County are the most vulnerable, as 65% of buyers in the Bay area and 67% in Orange County used ARMs last year to qualify for more expensive homes. Over 15,000 homes in California entered the foreclosure process in both the fourth and the first quarters, she said. "With two consecutive quarters of flat foreclosure activity, we can say that defaults returned to their baseline after victims of the 2001 recession were washed out of the system," Ms. McGee said. "Now, we expect defaults to start rising again as steady rate increases put adjustable-rate mortgage borrowers at risk." The investment advisory firm can be found on the Web at http://www.foreclosures.com.

Class BF of Long Beach Mortgage Loan Trust series 2000-LB1, group 1, has been downgraded from BBB to BB-minus and removed from Rating Watch Negative by Fitch Ratings.In addition, Fitch affirmed the ratings on 13 classes in two Long Beach residential mortgage-backed securities deals. The downgrade was attributed to high loss levels and depletion of overcollateralization. Fitch can be found on the Web at http://www.fitchratings.com.

Two certificates from a series of Bear Stearns asset-backed securities issued in 2001 have been placed under review for possible downgrade by Moody's Investors Service.The deal, Bear Stearns Home Loan Owner Trust 2001-A Home Loan-Backed Notes, Series 2001-A, is backed by high-loan-to-value junior-lien home equity and home improvement loans originated by Conseco Finance Corp. Classes M-2 and B, the two most subordinate fixed-rate certificates, were placed on review for possible downgrade "because existing credit enhancement levels may be low given the current projected losses on the underlying pools," Moody's said. The transaction has taken "significant losses," and the most subordinate tranche has begun taking writedowns, the rating agency said. Moody's can be found online at http://www.moodys.com.

The board of directors of The First American Corp., Santa Ana, Calif., has authorized the repurchase of up to 100 million shares of the company's common stock. The purchase of shares will be made in open-market transactions from time to time, the company said. "The current market price of our stock does not begin to reflect out success in transforming First American into a diversified provider of data and data-related products and services," said Parker S. Kennedy, chairman and chief executive officer of First American. "Given our current stock price and growth prospects, we believe a repurchase of our shares represents an excellent investment opportunity." Title insurance, mortgage information, and property information are among the company's primary businesses. First American can be found online at http://www.firstam.com.

Class B of First Union Home Equity Loan Series 1997-2 has been downgraded from BB-minus to CCC by Fitch Ratings.The rating action was attributed to the poor performance of the underlying collateral in the deal. Losses have been higher than expected and have resulted in the depletion of overcollateralization, Fitch said. The rating agency can be found online at http://www.fitchratings.com.

Four classes of certificates in the Merit Securities Corp. series 12 manufactured housing deal have been downgraded by Moody's Investors Service.The downgrades were as follows: class 1-A-3, from Aaa to Baa2; class 1-M-1, from Aa2 to Ca; class 1-M-2, from A2 to C; and class 1-B, from Baa2 to C. Moody's said the rating actions were based on weaker-than-expected performance by the manufactured housing loans that make up the collateral pool. As of March, cumulative losses equaled 10.33%. "Because of the high cumulative losses and insufficient excess spread, overcollateralization in the transaction continues to erode," the rating agency said. Merit is a wholly owned subsidiary of Dynex Capital Inc., Glen Allen, Va. Moody's can be found online at http://www.moodys.com.

AmNet Mortgage Inc. (formerly American Residential Investment Trust), San Diego, has reported a net loss of $5.7 million ($0.72 per share) for the first quarter, compared with net income of $12.2 million ($1.53 per share) a year earlier.The loss included a $2.6 million after-tax charge relating to a pending asset sale. "As a result of our decision to sell the majority of the remaining mortgage asset portfolio and focus entirely on our mortgage banking business, we reclassified certain portfolio assets from 'held for investment' to 'held for sale'," said AmNet chief executive officer John M. Robbins. "When we made that reclassification, we were obligated to mark those assets to market, and we took a pretax valuation adjustment of $4.4 million.... The sale will simplify our balance sheet, virtually double our cash reserves, eliminate nearly all future prepayment or credit risk represented by the portfolio, and unlock the cash equity previously invested in these assets." The company can be found online at http://www.amnetmortgage.com.

American Business Financial Services, Philadelphia, has reported a loss of $33.2 million ($10.53 per share) for the fiscal third quarter ended March 31, compared with net income of $221,000 ($0.06 per share) a year earlier.Albert W. Mandia, executive vice president and chief financial officer of ABFS, attributed the quarterly loss to adjustments stemming from the adoption of a new business model focused more on whole loan sales and less on securitization. "Since January 2004, we have added approximately 129 professionals to our broker origination channel, bringing the total broker loan origination network to a team of 150 professionals nationwide," Mr. Mandia said. "These efforts are generating traction, and we are on pace to originate close to $500 million of new loans during our fourth quarter ending June 30, 2004, which would be a company record."