Servicing

Thornburg Mortgage Inc., Santa Fe, N.M., has priced an offering of 4.0 million shares of common stock at $27.60 per share.Net proceeds from the transaction, which are estimated at $104.6 million, will be used mainly to fund adjustable-rate mortgage loans originated by the company and to buy additional ARM securities, Thornburg said. UBS Investment Bank acted as the book-running lead manager for the transaction. A.G. Edwards & Sons was the co-lead manager, and RBC Capital Markets acted as co-manager. The underwriters have been granted a 30-day option to buy up to an additional 600,000 shares of common stock to cover any overallotments. Thornburg can be found online at http://www.thornburg.com.

IndyMac Bancorp Inc., Pasadena, Calif., the holding company for IndyMac Bank, has reported record net earnings of $41.4 million ($0.73 per share) for the second quarter, up 20% from $34.6 million ($0.56 per share) a year earlier.The Mortgage Banking Group produced a record $8.0 billion of loans in the second quarter, up 73% from the volume recorded a year earlier, IndyMac said. "In light of the recent significant increase in long-term Treasury and mortgage rates, the industry appears to be in for an abrupt return to a more normal purchase-dominated mortgage market," said Michael W. Perry, IndyMac's vice chairman and chief executive officer. "Given that the majority of our capital is devoted to investment portfolio activities as opposed to mortgage origination activities and we currently have $259 million of excess capital, we believe we are reasonably well positioned for this likely challenging transition." IndyMac declared a cash dividend of $0.15 per share, up from $0.10 per share in the previous quarter, and pointed to recent changes in the tax laws regarding dividends as the reason for the hike. The company also announced that Terrance G. Hodel, the former president and chief operating officer of North American Mortgage Co., has been appointed to IndyMac's board. IndyMac can be found online at http://www.indymacbank.com.

The Default Risk Index issued by the Nonprime Mortgage Report rose slightly to 103 this quarter from a revised level of 102 in the last quarter, according to University Financial Associates of Ann Arbor, Mich.The index measures the risk of default on newly originated nonprime mortgage loans, UFA said. "The index has been flat for over a year because falling interest rates, which reduce payment burdens for borrowers, are offsetting the eroding prospects for the underlying housing collateral," said Dennis Capozza, professor of finance at the University of Michigan and a principal in UFA. A reading of 103 means that the risk of default on new loans is only 3% higher than the average risk on nonprime loans originated during the 1990s. The analysis is based on a "constant quality" loan, defined as a loan with the same borrower, loan, and collateral characteristics, the company said. UFA can be found online at http://www.ufanet.com.

A new outsource service firm specializing in helping mortgage brokers and mortgage bankers streamline their back-office functions has been established in Houston by Doug Thorpe.The company, Post-Close America, will offer compatibility with all major loan origination systems and document preparation services, said Mr. Thorpe, who will serve as president and manager of the operation. "Coming out of the past three-year run of historically low mortgage interest rates, lenders of all sizes are reeling from record-setting volumes," Mr. Thorpe said. "The investor firms that have purchased these loans are likewise swelled with increased activity. Our firm will help bridge the gap for successful loan sales into the secondary market." The company can be found online at http://www.postcloseamerica.com.

Mortgage lenders added 4,800 employees to their payrolls in June, when it looked like the refinancing boom would never end and the average interest rate on the 30-year fixed-rate mortgage fell to around 5.2%.According to data released Aug. 1 by the U.S. Bureau of Labor Statistics, employment in the mortgage banker/broker sector jumped from 409,600 in May to 414,400 in June. (There is a one-month lag in getting mortgage industry data due to recent changes in the BLS employment report.) Over the past 12 months, employment in the mortgage industry has increased by 19%, or 66,900 new hires. But the employment situation in many other sectors of the economy remains bleak, particularly in manufacturing. While the unemployment rate declined from 6.4% in June to 6.2% in July, the economy lost another 44,000 jobs last month. Since January, the number of jobs has declined by 486,000, the BLS said.

Eleven classes of IndyMac ABS Inc. Home Equity deals have been downgraded by Fitch Ratings.The downgrades were as follows: series SPMD 2000-B Group 1, class MF-2, from A to BBB-minus, and class BF, from BBB to B-minus; series SPMD 2000-C Group 1, class MF-2, from A to BBB; series SPMD 2000-C Group 2, class MV-2, from A to A-minus, and class BV, from BBB to BBB-minus; series SPMD 2001-A Group 1, class MF-1, from AA to A-minus, class MF-2, from A-minus to BB, and class BF, from CCC to CC; series SPMD 2001-A Group 2, class MV-1, from AA to A-minus, class MV-2, from A to BBB-minus, and class BV, from BBB to BB. All the downgraded classes but class BF of series SPMD 2001-A Group 1 and class MV-1 of SPMD 2001-A Group 2 were removed from Rating Watch Negative. In addition, class MF-1 of series SPMD 2000-B Group 1 was placed on Rating Watch Negative, and the ratings on 19 other classes in six deals were affirmed. Fitch attributed the downgrades to adverse collateral performance and the deterioration of asset quality. "To date, MH loans have exhibited very high historical loss severities, causing Fitch to have concerns over the available enhancement in these deals," the rating agency said. Fitch can be found on the Web at http://www.fitchratings.com.

Only 32% of the homeowners who refinanced their homes in the second quarter got a mortgage at least 5% larger than the original loan, the lowest percentage since Freddie Mac began tracking the statistic.The figure was down from 41% in the first quarter and down dramatically from 63% in the second quarter of 2002, the government-sponsored enterprise said in its quarterly refinance review. "It comes as no surprise that this figure of 32% represents the smallest [percentage] of refinancing homeowners to take cash out of their homes that we have seen since we began doing this report in 1985," said Amy Crews Cutts, Freddie Mac's deputy chief economist. "Mortgage rates have fallen to such incredibly low levels that homeowners are refinancing now primarily for the low rates, rather than to take out equity." Freddie Mac can be found online at http://www.freddiemac.com.

Fitch Ratings has announced that it will continue to rate residential mortgage-backed securities containing loans covered by the predatory lending laws in Washington, D.C. and Florida.The effective dates for those laws were May 6, 2002, and Oct. 1, 2002, respectively, and Fitch's decision will allow loans made after those dates to be included in RMBS transactions that it rates. This includes so-called high-cost home loans.

Moody's Investors Service has identified unanticipated interest shortfalls as an emerging problem for the commercial mortgage-backed securities industry.Such shortfalls have led to some downgrades and watchlist placements, and more are expected, according to the rating agency. In CMBS transactions, servicer advances for principal and interest, property protection, and trust expenses help provide liquidity to the securities. Servicers that facilitate this liquidity are reimbursed for the amounts advanced plus interest on a priority basis "at the top of the distribution waterfall." Nicholas Levidy, a Moody's analyst, pointed to a problem posed by this arrangement. "Unfortunately, in some cases where the servicer seeks reimbursement for large advance amounts, the senior certificates have been adversely affected by the advancing mechanism currently found in most CMBS documents," Mr. Levidy said. "By taking the money owed from advances in one payment rather than spreading the payments over a period of time, the shortfall problem is created." A tentative solution proposed by Moody's is to spread the servicer recoveries out, perhaps in combination with "reimbursement of nonrecoverable advances out of general collections of principal." Moody's can be found online at http://www.moodys.com.

The Bond Market Association and the American Securitization Forum are recommending changes to an accounting proposal they say would, among other things, "unnecessarily harm mortgage securitization programs."The concerns of the two related trade groups center on their belief that proposed amendments to Financial Accounting Standards Board Statement 140 would prevent transferors or decision-makers from meeting the qualifying standards for special-purpose entities that allow them to "derecognize" securitized assets for accounting purposes "no matter how immaterial" their continuing connection is to a financial asset transferred to an SPE. FASB proposed the changes to provide more "specific guidance" on the requirements an entity must meet to be considered a QSPE. It is accepting comments on the proposal through July 31. The organizations can be found online at http://www.bondmarkets.com, http://www.americansecuritization.com., and http://www.fasb.org.