Servicing

Three classes of notes issued by SFA Collateralized Asset-Backed Securities I Trust have been downgraded by Fitch Ratings.The downgrades were as follows: class A, from AA-plus to BB; class B-1, from B-minus to CC; and class B-2, from B-minus to CC. The C rating on class C of the deal was affirmed. The transaction, a collateralized debt obligation managed by Structured Finance Advisors Inc., is supported by a diversified portfolio of asset-backed securities, residential mortgage-backed securities, and commercial MBS. Fitch attributed the downgrades to the continued deterioration of the collateral since the last rating action in July 2003. As of March 15, defaulted assets represented 7.98% of the approximately $183.8 million of collateral and eligible investments, the rating agency said. Fitch can be found online at http://www.fitchratings.com.

MERS, the electronic registry for tracking ownership of mortgage servicing rights, is now registering about 50% of new loans that are being originated, MERS president and chief executive officer R. K. Arnold has told MortgageWire.Since its inception, MERS has registered 22 million loans, and today 29 of the 30 largest loan originators are using the system. Mr. Arnold said MERS saves lenders money by eliminating the need to create assignments when loans or servicing rights are sold, and that is having an impact in the market for mortgage assets. "We are seeing, more and more out in the secondary market, a pricing differential between registered and nonregistered loans," Mr. Arnold said.

Five classes of ContiMortgage Corp. home equity loan transactions have been downgraded by Fitch Ratings.The downgrades were as follows: series 1998-2, class B, from BB to B; series 1998-3 group I, class B-I, from B to CCC; series 1998-3 group II, class B-II, from B to CCC; series 1998-4, class B, from B to CCC; and series 1999-3, class B, from B to CCC. In addition, class M-1F of series 1997-2 group I has been placed on Rating Watch Negative, and Fitch affirmed the ratings on 17 other classes from five ContiMortgage deals. The negative rating actions were attributed to the poor performance of the underlying collateral. The rating agency said greater-than-expected losses have "consistently exceeded the amount of available excess interest, resulting in a depletion of overcollateralization." Fitch can be found online at http://www.fitchratings.com.

Prepayment rates for Fannie Mae mortgage-backed securities rose sharply in March as the speed of the massive 5.5% 2003 coupon surged 48%, according to the Bear Stearns Prepayment Commentary.Bear Stearns analysts Dale Westhoff and Bruce Kramer said the speeds of most coupons jumped 25%-30%. The report reflects "two important realities in the current prepayment landscape," they said, namely "ample capacity in the mortgage pipeline" and the "significant drop" in mortgage rates after the March 5 employment report. However, they went on to note the more recent back-up in interest rates. "The sell-off has pushed the mortgage rate back to where it was at the beginning of the year (5.90%), reducing MBS market refinancing exposure from a high of 70% in March to just 37% today," the analysts said. "Similarly, the average borrower refinancing incentive has dropped from a high of 80 basis points the week ending March 12 to just 30 basis points today." Bear Stearns can be found online at http://www.bearstearns.com.

Twelve classes from four series of securities issued by Ocwen Residential MBS Corp. and backed by seasoned, re-performing mortgage loans have been placed under review for possible downgrade by Moody's Investors Service.The affected classes are as follows: series 1998-R1, classes B-2 and B-3; series 1998-R2, classes B-4F and B-5F; series 1998-R3, classes A-1, A-WAC, B-1, B-2, and B-3; and series 1999-R1, classes B-5A, B-4F, and B-5F. Moody's cited higher-than-expected cumulative losses, which it said have caused credit enhancement (relative to expected future losses) to fall below the levels apparently needed to maintain current credit ratings. The rating agency also placed classes B1-A and B2-A of series 1999-R1 on review for possible upgrade.

Falling interest rates forced the nation's mortgage bankers and brokers to add more workers in February, according to new employment numbers released Friday by the Bureau of Labor Statistics.Mortgage-related firms added 4,200 full-time workers during the month, bringing total industry employment to 436,700. Industry employment had been falling steadily since last July, when mortgage rates hit a 40-year low. Rates have risen steadily -- with a few hiccups -- since last summer, but over the past six weeks they have fallen again. However, the yield on the 10-year Treasury spiked Friday when new BLS figures showed the nation's overall employment rate rising. If the yield on the 10-year stays where it is (around 4.1%) or moves higher, mortgage firms may begin cutting workers once again. The yield on the 10-year recently stood at 3.71%. The BLS can be found online at http://stats.bls.gov.

The ratings on four classes of the Merit Securities Corp. series 12-1 manufactured housing securitization are being reviewed for possible downgrade by Moody's Investors Service.The affected classes of the collateralized bond obligation are: 6.45% class 1-A-3, 6.88% class 1-M-1, 7.35% class 1-M-2, and 7.88% class 1-B. Moody's said the review was prompted by the weaker-than-anticipated performance of the MH loans that make up the collateral pool. As of February, cumulative losses exceeded 9%. "Moreover, the high cumulative losses and insufficient excess spread have caused overcollateralization to erode," the rating agency said. "Based on the weak performance, the rating changes could be significant." Merit is a wholly owned subsidiary of Dynex Capital Inc., Glen Allen, Va. The loans that make up the collateral pool are being serviced by Origen Financial.

First State Bancorp., Albuquerque, N.M., has announced the sale of 194 residential mortgage loans that were obtained in the acquisition of First Community Industrial Bank in 2002.The loans, which were sold at 97.75 to unrelated third parties, had a carrying value of approximately $38.5 million, the company said. Michael R. Stanford, president and chief executive officer of First State, said the sale was part of the company's strategy of "repositioning our loan portfolio in Colorado and Utah with a greater focus on commercial lending." The company can be found online at http://www.fsbnm.com.

At a company investors conference March 30, Countrywide said the company hopes to more than double annual pretax earnings to $7.5 billion by 2008.This year, Countrywide estimates that it will earn $3.5 billion on a pretax basis. The company also hopes to have $250 billion in assets by 2008, up from $98 billion in 2003. And Countrywide said it is aiming for an origination market share of 30%, compared with 11.7% today, and a servicing portfolio of $1.9 trillion in home loans, up from $645 billion at the end of last year.

The board of directors of the Federal Home Loan Bank of Seattle has declared a class B(1) annualized stock dividend of 4% for the first quarter, but cautioned that market trends may result in lower dividends later this year."Earnings thus far in the first quarter have continued to be under significant pressure for the Seattle bank," said Norman B. Rice, president and chief executive officer of the Seattle FHLBank. "Interest rates have fallen, which has resulted in faster recognition of premium expense on mortgage loans and securities, as well as generally lower yields on assets. In addition, new volume in our Mortgage Purchase Program has been lower than anticipated in the first quarter." The bank can be found online at http://www.fhlbsea.com.