Servicing

Washington Mutual, Seattle, earned $1.03 billion in the third quarter, despite losing $126 million during the period in connection with mortgage loan sales.But WaMu, which had warned the market in early September about its loan loss problem, did well in the quarter in part because it offset losses by reducing its servicing amortization rate -- at least that's the opinion of stock analysts who cover the mortgage banker. Smith Barney analyst Matt Vetto wrote in a research note that WaMu "used its toolkit to offset a loss from a widely-advertised hedging glitch." Mr. Vetto added that WaMu suffered a sequential decline in its servicing portfolio and is losing market share. In the second quarter WaMu reported a $475 million gain in regard to mortgage sales. Morgan Stanley analyst Ken Posner noted in his analysis that WaMu "missed consensus estimates [on earnings] by a sizeable amount." He added that "operational issues" at the mega-thrift, the nation's largest servicer of home mortgages, are "detracting significantly from current economic results." However, he said the risks facing WaMu "are not catastrophic in our view."

America's Community Bankers member banks and thrifts sold $33 billion in one- to four-family mortgages during the first nine months of this year through strategic alliances set up by the trade group with Fannie Mae, Freddie Mac, and private wholesalers.Since the first alliance with Fannie Mae was launched in May 2001, the ACB mortgage program has been a conduit for $55 billion in loans, according to ACB. "The mortgage programs couldn't have come along at a better time," said William Zuppe, a savings bank executive from Spokane, Wash. It has allowed ACB members -- especially the smaller members -- to participate in this "terrific boom in refis over the last couple of years," he said. Mr. Zuppe becomes the ACB chairman Oct. 22 when the current chairman, Russell Taylor, hands him the gavel at ACB's annual convention in Las Vegas.

To get a true understanding of Freddie Mac's financials one would have to "triangulate," Freddie executive vice president and chief operating officer Paul Peterson told a press luncheon Oct. 20 at the Mortgage Bankers Association of America's annual convention in San Diego.He compared it to using a global positioning system, which uses three reference points to get an accurate location. A single summary statistic does not give an accurate measure of Freddie Mac, according to Mr. Peterson. Part of the problem is that a large portion of assets are being marked to market but liabilities are not, which he said will result in volatility in Freddie Mac's financial statement. The fair-value balance sheet is more important because it marks to market all assets and all liabilities. Separately, Mr. Peterson said that unlike Fannie Mae, Freddie Mac expects to meet all three of its affordable housing goals. During a refinance boom it becomes a challenge to meet these goals, but earlier this year Freddie Mac was very active in seeking out portfolios of loans to meet the affordable housing criteria, he said.

Karl Meyer has been named director of national operations at LOGS Financial Services Inc., a provider of default management systems based in Northbrook, Ill.LOGS said Meyer will focus on improving communications between the company's outsourcing division and the law firms around the country that LOGS works with on behalf of mortgage servicers. Mr. Meyer has six years of experience in default servicing and private legal practice in the areas of construction, land use, real estate, mortgage banking, and lender liability. LOGS can be found online at http://www.logs.com.

RBMG Inc., a subservicer based in Columbia, S.C., has joined an alliance between Freddie Mac and the Independent Community Bankers of America.The alliance's new RBMG private-label subservicing option will help lenders retain mortgage customers, enhance cross-selling opportunities, and keep costs low, Freddie Mac and the ICBA said. They said the arrangement offers a "state-of-the-art call center" and around-the-clock access to mortgage information. Payments are permitted from all ICBA member bank locations that allow borrowers to make in-person payments, and a non-competition agreement prevents RBMG from competing for loan origination business or any other financial service the lender offers, according to Freddie Mac and the ICBA. The alliance can be found online at http://www.freddiemac.com/singlefamily/icba.html.

Banks and thrifts that are members of America's Community Bankers sold $33 billion in one- to four-family mortgages during the first nine months of this year through strategic alliances the trade group has set up with Fannie Mae, Freddie Mac, and private wholesalers.Since the first alliance with Fannie Mae was launched in May 2001, the ACB mortgage program has been a conduit for $55 billion in loans, according to ACB. "The mortgage programs couldn't have come along at a better time," said William Zuppe, a savings bank executive from Spokane, Wash. It has allowed ACB members -- especially the smaller members -- to participate in this "terrific boom in refis over the last couple of years," he said. Mr. Zuppe will become the ACB chairman Oct. 22 when the current chairman, Russell Taylor, hands him the gavel at ACB's annual convention in Las Vegas.

GMAC Mortgage Corp. has received an RPS1 rating from Fitch Ratings for servicing alternative-A, prime, subprime, high loan-to-value, and home equity loans and lines of credit.The rating is Fitch's highest for a servicer. In addition, Fitch upgraded GMAC Mortgage's special servicer rating to RPSS2-plus. Tony Renzi, executive vice president and head of national loan administration for GMAC, said the high ratings reflect the company's investment in its people, processes, and technology. GMAC Mortgage serviced $198 billion of loans at the end of last year.

Fannie Mae acquired a record $145.6 billion in mortgages during September, a reflection of the strong refinancing and home purchase market of the past summer.However, its retained purchase volume -- a barometer of future activity -- fell to $27.9 billion during the month, the second-lowest reading over the past 12 months. Compared with those of the same month a year ago, Fannie's loan acquisitions rose by 86%. The mortgage giant also reached another milestone during the month: its on-balance-sheet holdings of mortgages cracked the $900 billion mark. Fannie Mae can be found online at http://www.fanniemae.com.

Fannie Mae reported net income of nearly $2.7 billion in the third quarter, up 168% from that of the same period last year.Diluted earnings per share were up 175% to $2.69. However, Fannie Mae prefers to measure its "core operating earnings," which differ from the net income measure prescribed under generally accepted accounting principles. Core earnings were up 12% to $1.8 billion, or $1.83 per share. Net interest income totaled $3.5 billion, up 34.7%, and guaranty fee income totaled $613 million, up 32.6%, Fannie Mae reported. By contrast, credit-related expenses more than doubled to $28.6 million, and the government-sponsored enterprise reported losses of $902 million from the call and repurchase of debt, compared with $138 million in the third quarter of 2002. Chairman and chief executive officer Franklin Raines touted the results. "In a quarter marked by historic levels of volatility in the fixed-income markets, our company continued to benefit from the disciplined strategies for growth that have resulted in consistently strong financial performance through a wide range of economic and financial environments," he said. Fannie Mae can be found online at http://www.fanniemae.com.

The Federal Home Loan Banks purchased nearly $23.8 billion in single-family loans under the Mortgage Partnership Finance program in the third quarter, up slightly from the total recorded in the second quarter.The Chicago FHLBank reported that single-family MPF loan purchases rose by 7.7% in the third quarter, up from $22.1 billion in the second quarter. MPF loans funded in the third quarter of 2002 totaled only $6.1 billion. Over 90% of the loans funded in the third quarter were conventional loans, as opposed to government-guaranteed loans. And MPF loans outstanding totaled $81.5 billion as of Sept. 30, up 136% from a year ago. The MPF gives FHLBank members a "better deal" than selling their loans to Fannie Mae and Freddie Mac, according to Chicago FHLBank president Alex Pollock. "The MPF program also benefits the mortgage finance system more broadly," Mr. Pollock said. "As it grows, the mortgage credit risk is spread among hundreds of lending institutions, which is a sounder strategy than concentrating it in two giant companies."