Servicing

Fannie Mae reported an increase in its effective guarantee fee rate in the first quarter, and chief financial officer Timothy Howard has suggested that lenders may continue to see upward pressure on guarantee fees.In the second quarter, Fannie Mae said its effective guarantee fee rate was 21.2 basis points, up from 20.3 in the first quarter and 18.3 in the second quarter of last year. In a conference call with analysts, Mr. Howard said Fannie Mae anticipates that the corporation's credit losses may trend upward. He said Fannie Mae's intent is to have the average guarantee fee "keep pace with changes in our average credit losses."

Thornburg Mortgage Inc., Santa Fe, N.M., has announced an exchange offer of $200 million of 8% senior notes due 2013 for the same amount of 8% senior notes issued in a private placement in May.As part of the earlier transaction, Thornburg had agreed to file a registration statement with the Securities and Exchange Commission to register and facilitate resales of the new notes. "We believe this transaction provided us with an opportunity to further diversify our long-term capital sources," said Larry Goldstone, Thornburg's president and chief operating officer. "We continue to see attractive mortgage asset acquisition opportunities in both our wholesale and origination channels, and believe adding capital at a cost of 8% should have a positive impact on earnings and earnings per share." Thornburg can be found online at http://www.thornburg.com.

Wells Fargo & Co., San Francisco, has reported that mortgage banking and other consumer lending drove a 10% increase in its earnings per share in the second quarter, which reached a record level.Wells Fargo reported net income of $1.525 billion in the second quarter, or $0.90 per share. The company said it funded $135 billion in home loans during the second quarter, up $32 billion from its first-quarter volume. "The impact of the lowest interest rates in 40 years and the flood of home financing activity were best reflected in the record $204 billion of applications taken by Home Mortgage during the second quarter," said Mark Oman, group executive vice president of Home and Consumer Finance. The company serviced $582 billion of home loans at the end of the second quarter, an increase of $96 billion from that of a year earlier. The portfolio has a weighted average note rate of 6.21%.

Four classes of notes issued by SFA Collateralized Asset-Backed Securities I Trust have been downgraded by Fitch Ratings.The transaction, a collateralized debt obligation managed by Structured Finance Advisors Inc., is supported by a diversified portfolio of asset-backed securities and commercial mortgage-backed securities. The downgrades were as follows: class A, floating-rate, from AAA to AA-plus; class B-1, floating-rate, from BBB to B-minus; class B-2, fixed-rate, from BBB to B-minus; and class C, fixed-rate, from B to C. Fitch attributed the downgrades to "the recent deterioration of the portfolio to the point where the risk is no longer consistent with the current ratings." Only two assets in the portfolio are classified as defaulted, but a number of them face "probable" default, the rating agency said.

Three classes of Ocwen Residential MBS Corp. mortgage-backed securities have been downgraded by have Fitch Ratings.The downgrades were as follows: Ocwen 1998-R3, class B-2, from BBB to BB; Ocwen 1999-R1 Group A, class B-5A, from B to CCC; and Ocwen 1999-R1 Group F, class B-4, from BB to B. Fitch also placed class B-1 of Ocwen 1998-R3 on Rating Watch Negative and affirmed the ratings on 26 classes from the aforementioned deals plus Ocwen 1998-R1 and Ocwen 1998-R2. The downgrades were attributed to loss levels and high delinquencies relative to applicable credit support as of the May 25 distribution date. Fitch can be found online at http://www.fitchratings.com.

Despite missing analysts' consensus earnings estimate by one penny in the second quarter, Fannie Mae has increased its dividend by six cents.Fannie Mae's net income, at $1.1 billion ($1.09 per share) was down 24.3% from that of a year earlier. However, Fannie Mae's "core earnings" painted a rosier picture. Fannie Mae reported second-quarter core earnings per share of $1.86, just shy of the consensus estimate but up 20% from that of a year earlier. Core earnings exclude unrealized losses on purchased options used for hedging. Those unrealized losses must be factored into net earnings under generally accepted accounting principles. Meanwhile, Fannie Mae has raised its dividend on common shares from $0.39 per share to $0.45 per share. Timothy Howard, vice chairman and chief financial officer of the government-sponsored enterprise, said the dividend increase "reflects management's confidence in the strength and sustainability of the cash flows of Fannie Mae's business," as well as increased investor focus on dividend payouts as a result of recent tax changes. Fannie Mae can be found online at http://www.fanniemae.com.

The insurer financial strength rating of Mortgage Guaranty Insurance Corp. has been affirmed at AA-plus by Fitch Ratings, but the outlook for the AA-minus debt ratings of MGIC Investment Corp. has been changed from Stable to Negative.Fitch said MGIC's "very strong" insurer financial strength rating reflects "its leadership position in the mortgage insurance marketplace, its consistent profitability and [consequent] capital generation capabilities, and its high-quality balance sheet." However, the negative rating outlook on its MGIC Investment subsidiary's debt ratings "reflects Fitch's concern with the parent company's more aggressive management of its financial leverage," the rating agency said. "At March 31, 2003, the ratio of debt to adjusted total capital was 19.0%, up from 13.7% at year-end 2001."

Eleven classes in various structured finance deals have been downgraded by Fitch Ratings following a review of 90 subprime and specialty transactions entirely or partially serviced by Fairbanks Capital Corp.The downgrades were as follows: DLJ 1994-Q7, class B-1, from B to CCC; DLJ 1994-Q8 P1, class IB-1, from BB to B; DLJ 1995-Q10, class B2, from CCC to C; DLJ 1996-Q2, classes B-1 and B-2, from CCC to D; DLJ 1996-Q4, class B-2, from BB-minus to D; IMC 1997-3, class M-2, from BBB-minus to BB; IMC 1997-5, class M-2, from BBB-minus to BB; IMC 1998-1, class B, from BBB-minus to BB; IMC 1998-5, class B, from BBB to BB-minus; and WMC 1997-2, class B, from BB to B. Fitch also affirmed 381 other classes, and 11 were placed or left on Rating Watch Negative. The review stemmed from recent downgrades of Fairbanks' servicer ratings as follows: residential primary servicer for subprime and home equity, from RPS2-minus to RPS3-minus; alternative-A primary servicer, from RPS2-minus to RPS3; and special servicer, from RSS2-minus to RSS3. "If Fitch's opinion were solely based upon the Fairbanks rating actions, many classes would have been downgraded," the rating agency said. "However, in the recent environment the consideration of seasoning, performance, and most notably LIBOR movements were significant mitigants."

Provident Financial Group Inc., Cincinnati, has announced the sale of $471 million of subprime residential mortgage loans as part of an effort to align its core businesses with its corporate strategy.Provident said it sold the mortgage loans at a $40 million net discount. "Removing these subprime mortgage loans from our balance sheet significantly improves our credit quality metrics, including lowering the level of nonperforming loans," said Robert L. Hoverson, Provident's president and chief executive officer. "These subprime mortgage loans represented approximately 5% of our total loan portfolio, and approximately $53 million, or 26%, of nonperforming assets." Provident also reported the sale of its Merchant Services payment systems business and an agreement to sell its 13 Florida branches to RBC Centura Bank. Provident can be found online at http://www.provident-bank.com.

Class B-5 of ICIFC (Impac) Secured Assets Corp. mortgage pass-through certificates, series 1997-2, has been downgraded from CCC to D by Fitch Ratings.The rating agency also affirmed the ratings on six other classes in the deal. Fitch attributed the downgrade to high delinquencies relative to applicable credit support as of the June 25 distribution.