Servicing

Three classes of FMAC Loan Receivables Trust, series 1998-C, have been downgraded by Fitch Ratings.The downgrades were as follows: class B, from BBB to BB; class C, from BB to B; and class F, from C to D. The downgrade to class F was based on a default and writedown of the notes to zero, Fitch said. The other two downgrades resulted from the erosion of credit enhancement from writedowns and losses passed through to the trust. Fitch can be found online at http://www.fitchratings.com.

Freddie Mac has established an across-the-board minimum servicing fee of 25 basis points on its adjustable-rate mortgage products.Previously, the servicing fee minimum on some ARM products -- including balloons and one- and three-year ARMs -- was 37.5 bps. The reduction of the minimum servicing fee to 25 bps will enable Freddie Mac seller/servicers to pass on more of the coupon yield to investors, reducing their need to capitalize servicing rights. "It adds flexibility," said a Freddie Mac spokeswoman. In an unrelated matter, Freddie Mac's loan purchases fell to $33.8 billion in February, compared with $36.9 billion the month before. The company's retained portfolio fell to $637.0 billion from $639.6 billion the previous month.

Freddie Mac has announced a change in its Multilender Swap program under which lenders will swap conventional 15- and 30-year fixed-rate mortgages for Giant PCs instead of a pro rata share of a Gold PC.The program change will take effect with multilender pools posted on or after April 1 for settlements on or after July 1, the government-sponsored enterprise said. It will enable Freddie Mac to create Giant PCs by combining Gold PCs backed by mortgages purchased under its cash program with Gold PCs backed by mortgages purchased under the Multilender Swap program. "This capability will expand and enhance our Multilender Swap program by providing large, liquid, and more predictable Giant PCs in exchange for conventional 15- and 30-year mortgages," Freddie Mac explained. Details of the program can be found online at http://www.freddiemac.com/singlefamily.

Despite a rise in credit card overdue rates, the percentage of home equity loans and lines of credit that were overdue at the end of last year declined, according to the American Bankers Association.Home equity loan delinquencies declined slightly to 2.50%, from 2.52% in the third quarter, while the past-due rate on home equity lines of credit dropped to 0.43% from 0.52%. That was the lowest delinquency rate among the eight types of consumer loans tracked by the ABA. Mobile home delinquencies decreased to 5.56% from 6.00% in the third quarter. The ABA can be found on the Web at http://www.aba.com.

Postings of new notices of foreclosure auctions in the Phoenix metropolitan area have reached nearly 1,500 per month, according to Foreclosures.com, a Fair Oaks, Calif.-based investment advisory firm specializing in distressed property.In the first nine weeks of 2004, 3,285 properties in the Phoenix area have gone into foreclosure, said company president Alexis McGee. Ms. McGee attributed the wave of foreclosures to several factors. "First of all, during the recent boom in home prices and sales volume, lenders relaxed their qualification standards to get more people into homes," she said. "Secondly, record low interest rates have led homeowners to overleverage their properties, pulling out cash for major purchases and to refinance high-interest credit card balances." Ms. McGee also cited predatory lending as a factor. "Until there is a law for the attorney general to enforce, it's still the Wild West in Arizona as far as abusive lending is concerned." The investment advisory firm can be found on the Web at http://www.foreclosures.com.

With mortgage rates falling to their lowest level in six months in mid-March, some lenders may face an unpleasant impairment timing scenario when they report first-quarter financial results.Mike McMahon of Sandler O'Neill & Partners said in a report that if rates remain low at the end of the month, lenders will likely have to report impairment to the value of their mortgage servicing rights. But lenders that rely upon loan production gains to offset servicing losses may be in a bind, because loan applications taken in March in most cases won't be funded until April or May, meaning that loan sale gains will be deferred until the second quarter. Mr. McMahon said lenders that have been laying off loan production employees aggressively in anticipation of higher interest rates may be particularly vulnerable to the impairment problem.

BB&T Corporation, Winston-Salem, N.C., has lowered its earnings estimate for this year to reflect the impact that "fluctuating interest rates" have had on its mortgage operation. Management now expects earnings per share for 2004 to be $2.75 to $2.90 excluding the impact of merger-related charges. Previous guidance was $2.85 to $2.95. John Allison, BB&T's chairman and CEO, said, "fluctuations in interest rates are producing unexpected pressure on mortgage banking operations." Specifically, he said originations have been slower than expected in the first quarter, while falling rates have impaired the value of BB&T's mortgage servicing rights.

The Federal Housing Finance Board does not have the legal authority to repeal the Federal Home Loan Banks' long-recognized exemption from Securities and Exchange Commission registration, according to a legal opinion obtained by America's Community Bankers. The opinion by the law firm, based in Washington, casts doubt on the legality of the Finance Board's proposal that would mandate the registration of FHLBank stock with the SEC. It also challenges a legal opinion by FHFB's general counsel, claiming it is "demonstrably erroneous." The Finance Board's opinion "ignores a long line of decisions by the Supreme Court and lower federal courts, which establish that the Finance Board cannot, without an explicit grant of authority, overturn Congress' decision that securities issued by the FHLBanks are exempt from SEC registration," the opinion noted. ACB sent copies of the opinion to the five members of the Finance Board.

A report from the Woodstock Institute, Chicago, identifies a "strong relationship between skyrocketing foreclosures and and increased levels of high-cost, subprime mortgage lending."According to the report, for every 100 additional subprime loans on owner-occupied properties made in a typical neighborhood from 1996 to 2001, there were an additional nine foreclosure starts in the community in the year 2002. Subprime home-improvement loans had the largest impact on foreclosures on a per-loan basis, according to the Institute. The Woodstock Institute can be found on the Internet at www.woodstockinst.org.

BillMatrix Corporation, Dallas, has launched a program to utilize the ATM electronic funds networks for mortgage payments taken over the telephone and Internet without a personal identification number.BillMatrix said it recently implemented the service with a major mortgage servicer, but did not name the lender. The client was looking to accelerate cash flow and provide customers with a convenient, secure means to make payments, the company said. Leveraging the rapidly increasing use of debit cards for utility, insurance and other bills was a natural extension of the mortgage servicer's automatic recurring ACH service, BillMatrix said. The servicer benefits because the ATM system virtually eliminates returned checks, according to the company.