Servicing

Ginnie Mae's decision last year to reduce servicing fees on Ginnie II mortgage-backed securities has really paid off.Lenders are securitizing more 30-year fixed rate mortgages in GNMAs IIs and the average servicing fee has declined to 48 basis points from 78 bp, according to Ginnie Mae vice president for MBS Theodore Foster. In March, 47.2% of all 30-year fixed rate mortgages went into Ginnie II securities, as opposed to Ginnie I securities. Before Ginnie Mae lowered its minimum servicing fee requirement from 44 basis points to 19 bp last July, only 25% to 33% of fixed-rate product went into Ginnie IIs. Execution has improved and spreads between GNMA Is and GNMA IIs have narrowed, Mr. Foster stated at the Mortgage Bankers Association's secondary market conference. Meanwhile, Federal Housing Administration has given lenders the green light to originate hybrids adjustable rate mortgages, and Ginnie Mae is ready to handle the new product, Mr. Foster said. So far, Ginnie has guaranteed $3.2 billion in three-year hybrid adjustable-rate mortgages backed by the Department of Veterans Affairs. VA lenders started to originate hybrids in October. "We really look forward to next months' pooling, which will include the FHA product," Ginnie Mae vice president Michael Frenz said.

Freddie Mac chairman and chief executive Richard Syron is planning for both the passage of government-sponsored enterprise oversight reform legislation and the release of revised earnings, but indicated in talks at The Bond Market Association annual meeting in New York that it may take some time for both to come to fruition.When asked at a press briefing about a planned release of Freddie Mac's revised earnings slated for June 30, Mr. Syron stopped just short of promising the GSE would adhere to that schedule, noting that he would rather ensure that they would be completely accurate when they were released than keep to a timetable. "Things are coming along pretty well," he said. However, he added that the company was not making any "locked-in-concrete guarantees." He also indicated in a question and answer session following his speech that he expects that GSE oversight reform legislation will likely be an issue that carries over into next year, at which time Mr. Syron hopes the company will be in better shape to address it. While he declined to comment more broadly on negotiations involving regulatory reform for strategic reasons, he said - when asked about the receivership issue that has been a sticking point - that that would be an issue of concern to Freddie Mac mostly to the extent that it "would affect our rating." Standard & Poor's has indicated that original versions of proposed legislation that would have allowed receivership to occur without congressional review were a concern in terms of the GSEs' ratings. But the subsequent version changed via an amendment that included congressional review would not affect GSE ratings, S&P said.

Ken Hackel has joined RBS Greenwich Capital Markets as managing director and co-head of fixed-income strategy, and Alec Crawford has joined RBS Greenwich Capital as managing director in the mortgage pass-through trading group.Mr. Hackel, who previously was chief U.S. fixed-income strategist at Merrill Lynch, will be responsible for coordination and oversight of RBS Greenwich Capital's mortgage-backed securities strategy as well as asset allocation. Mr. Crawford previously was a managing director and head of the mortgage and cross-rates strategy group at Deutsche Bank Securities.

Fannie Mae has priced $5 billion of two-year Benchmark Notes with a 2.5% coupon at 99.929.The joint lead managers for the issue (CUSIP 31359MVA8) were Credit Suisse First Boston Corp., Lehman Brothers Inc. and Morgan Stanley & Co. There were 10 co-managers and a designated selling group comprised of 12 additional dealers. The issue is due June 15, 2006 and yields 2.535% at a spread of 34.5 basis points over the 1.5% U.S. Treasury due March 31, 2006. Settlement is scheduled for April 23, and coupon payments will be made each June 15 and Dec. 15, beginning in June of 2004. Fannie Mae can be found on the Web at http://www.fanniemae.com.

SL Green Realty, a New York-based office real estate investment trust, has formed Gramercy Capital, a specialty finance company that will focus on originating and acquiring loans and other fixed-income investments secured by commercial real estate.Gramercy is filing a registration statement with the Securities and Exchange Commission for an initial public offering of common shares, SL Green reported. The offering is expected to raise up to $200 million, which will give Gramercy access to capital, "a public company platform", and the infrastructure to grow SL Green's structured finance business within New York City, as well as into other markets and property types. SL Green is not contributing its existing fixed-income investment portfolio in connection with the IPO, the REIT said, but it will invest up to $50 million in the IPO and own about 25% of Gramercy's post-IPO stock base. An SL Green subsidiary will manage Gramercy, which is also opting for REIT status, for a fee.

Countrywide Financial Corp. reported consolidated net earnings of $691 million in the first quarter, up 112% over net earnings of $326 million in the first quarter of last year.Earnings per diluted share increased 82% to $2.22, Countrywide said. Adjusted to reflect April's three-for-two stock split, EPS would have been $3.33. Total loan production was $76 billion for the quarter, essentially unchanged from the fourth quarter of last year but lower than the $102 billion originated in the first quarter of last year. That $76 billion volume exceeded the originations of Wells Fargo Home Mortgage and Washington Mutual, making Countrywide the largest home loan producer in the quarter. Countrywide's mortgage servicing portfolio rose by $38 billion during the quarter, ending at $683 billion.

General Electric -- which four years ago dumped its 'A' paper mortgage unit and is in the process of getting out of mortgage insurance -- has agreed to buy WMC Mortgage, Woodland Hills, Calif., the nation's 12th largest subprime funder.GE's consumer finance division is acquiring the online wholesale lender for an undisclosed amount from Apollo Management LP, New York, a group headed by famed bargain hunger Leo Black. Mr. Black bought WMC back in 1997 when it was called Weyerhaeuser Mortgage and was funding mostly conventional loans. According to figures compiled by National Mortgage News WMC services $2.4 billion in loans, ranking 29th among all subprime servicers. As MortgageWire went to press on Wednesday, officials from both GE and WMC could not be reached for comment. One former GE Mortgage Insurance official said of his former employer: "I don't know what their motivation is."

At the MBA's National Secondary Market Conference in Washington, D.C., the issue of fair valuation of mortgage servicing rights to create a more balanced financial picture of mortgage banking businesses was debated.FASB has proposed an amendment to accounting rules that would make it possible for mortgage servicing rights to be quantified at fair value so that these rights can be a part of a company's financial statement. Supporters said that under current rules the only way to value servicing rights is to sell the asset, which is counterproductive because it eliminates the possibility for retaining the customer for cross-selling purposes. Detractors believe the rule doesn't go far enough and will drive small servicers out of business because of ambiguities in the rule as it is stated. FASB is evaluating all viewpoints and has not initiated a formal amendment at this time.

Concerns that homeowners tapped themselves out during the recent refinance binge are overblown, according to Washington area mortgage banker Robert Broeksmit.Far from being over-leveraged and becoming a drag on the economy, consumers have "rearranged their balance sheets" and are now "in an even better position" to keep the country humming for years to come, the president of B.F. Saul Mortgage Co. said at the Mortgage Bankers Association's National Secondary Market Conference and Expo. Even though an uptick in interest rates has "choked off" refinancing for the moment, homeowners "still have room to leverage up" because the typical borrower's loan-to-value ratio is below 60%, Mr. Broeksmit said during a panel session. Rather than spending their equity on frivolous items, consumers who have refinanced have exhibited financial prudence, he also said, pointing to a study by the New York Federal Reserve that found only 16% of the $450 billion in withdrawn equity has been laid out for travel and automobiles. The rest was put into home improvements, paying off high-cost debts and investments in stock and real estate, according to the study.

Wells Fargo & Co., the nation's largest mortgage servicer, reported record net income of $1.8 billion in the first quarter, or $1.03 per share, up 18% and 17% from the first quarter of last year, respectively.But Wells Fargo Home Mortgage saw its revenue fall amid lower mortgage lending volume. Revenue from Wells Fargo's mortgage unit was $800 million in the first quarter, one-third lower than during the first quarter of 2003. Wells originated $65 billion of home loans in the first quarter. The company expects to see stronger loan origination activity in the second quarter due to a drop in interest rates in March. Wells took $119 billion in home loan applications in the first quarter, up from $46 billion in the fourth quarter of last year. And the company owned a portfolio of mortgage servicing rights on $725 billion of home loans, up 19% from a year earlier. The company valued its MSR portfolio at $6.1 billion, down from $6.9 billion at the end of 2003.