Servicing

Zacks.com, a Chicago-based stock rating firm, has given a "buy" rating to Washington Mutual.Noting that WaMu reported record earnings of $1 billion, or $1.07 per share in the first quarter, Zacks said that several analysts have been "slightly bumping up" earnings estimates for WaMu for this year and next. Even with the stock close to a 52-week high, Zacks said that if the market remains bullish, analysts believe WaMu has "plenty of room for appreciation." WaMu, with servicing rights on $728 billion of home loans as of March 31, is the nation's largest mortgage servicer. It also originated more home loans than any other lender in the first quarter.

Home prices continued to rise in the first quarter of this year, but the pace of appreciation is slowing down, according to the Office of Federal Housing Enterprise Oversight.Average U.S. home prices rose 6.48% between the first quarter of 2002 and the first quarter of 2003, according to OFHEO's quarterly home price index. However, appreciation slowed in the first quarter of this year to 3.77% on an annualized basis, according to OFHEO. That's the lowest reading in five years, continuing a trend toward gradual deceleration of home price gains. On the bright side, all states showed positive growth during the quarter. Also, OFHEO announced that it is adding a house price calculator to its website, at http://www.ofheo.gov.

The PMI Group Inc., Walnut Creek, Calif., has announced the approval of an amendment to the indenture for certain of its debt securities that excludes Fairbanks Capital Holding Corp. as a "designated subsidiary" of PMI.The company completed a consent solicitation involving the amendment, which changes the definition of a designated subsidiary in the indenture for its 2.50% senior convertible debentures due 2021 by excluding Fairbanks Capital Holding, its subsidiaries, and any of their successors. It also increases from 15% to 25% the percentage of consolidated assets a subsidiary must represent to constitute a designated subsidiary. "As a result of the amendment, any failure to pay indebtedness at maturity or default with respect to indebtedness for borrowed money by Fairbanks or any of its subsidiaries will not constitute events of default under the indenture," PMI said. PMI is a majority owner of the Salt Lake City-based Fairbanks Capital, which has been the target of lawsuits regarding its servicing practices and of reviews by the Department of Housing and Urban Development and the Federal Trade Commission.

Eighteen classes from eight UCFC manufactured housing transactions have been downgraded by Fitch Ratings, which cited uncertainty surrounding the servicing operation since UCFC's chapter 11 bankruptcy filing in 1999.The affected certificates were the M and B-1 classes of series 1996-1, 1997-1, 1997-2, 1997-3, 1997-4, and 1998-1 and the M-1, M-2, and B-1 classes of series 1998-2 and 1998-3. Fitch also affirmed the ratings on 15 other classes in the eight deals. The rating actions reflect the poor performance of the loans and the servicing-related uncertainty, Fitch said. The rating agency said EMC Mortgage Corp. acquired the servicing rights for UCFC's manufactured housing portfolio in 2000, but that "loss severities continue to be high" as a result of "the difficult environment in the manufactured housing industry." United Companies Financial Corp. exited the manufactured housing business in October 1998. Fitch can be found online at http://www.fitchratings.com.

Two consumer critics of Fairbanks Capital Corp. and its servicing practices have made peace with the nation's largest subprime servicer after getting commitments from the company and its major investors that they will work to resolve consumer disputes.Craig Kenney and Brian Barr said in a news release that they have settled all outstanding litigation and other issues with Fairbanks. "Because we believe that Fairbanks and its primary shareholders are fully committed to addressing and resolving issues raised by a number of borrowers, we will consult with the company in our role as independent consumer advocates to provide advice to the company on implementation of its comprehensive effort to revamp its practices," Mr. Kenney and Mr. Barr said. The Salt Lake City servicer said it is "pleased" to have reached a settlement with its two major critics, who waged a public relations campaign against the company for the past two years. "As part of the settlement, they will provide their views on the company's comprehensive plan to change and improve its loan servicing," Fairbanks said.

Eaton Vance Corp., Boston, has announced a $2 billion initial public offering of common shares of a closed-end fund that will invest in mortgage-backed securities, among others.Eaton Vance Limited Duration Fund issued 101 million shares at an initial price of $20 per share and will trade on the American Stock Exchange under the symbol EVV, the company said. Eaton Vance said the fund plans to use financial leverage initially equal to about 34% of gross assets, which would bring the fund's total assets to approximately $3 billion. "With interest rates on U.S. Treasuries recently at 40-year lows, many investors are increasingly concerned about the possibility of rising rates associated with economic recovery," said James B. Hawkes, chairman and chief executive officer of Eaton Vance. "In the current environment, it may be prudent for investors to shorten the duration of their portfolios to reduce exposure to future changes in interest rates." The company said the fund expects to maintain a duration of two to four years under normal conditions. In addition to MBS, it will invest in senior, secured floating-rate loans and corporate bonds that are below investment-grade quality.

Fairbanks Capital Corp., Salt Lake City, has announced an agreement in principle under which its committed financing for servicing advances and working capital would be extended through Sept. 30, 2004.The agreement in principle was executed May 24 between Fairbanks and a majority of its lenders and shareholders, the company said. Beyond the financing extension, Fairbanks said its primary shareholders have agreed to provide an additional $35 million of financing. "This agreement will provide financial stability for Fairbanks as it moves forward with its multipoint plan and work already initiated to address the concerns recently raised by the rating agencies and other parties," said Jim Ozanne, chief executive officer of Fairbanks. "The company will continue to cooperate fully with the Federal Trade Commission, the Department of Housing and Urban Development, and state regulators on their reviews of the company, and is taking a positive, proactive approach to making borrower-sensitive loan servicing improvements."

Class B-3 of Salomon Brothers Mortgage Securities VII Inc.'s series 1998-AQ1 mortgage pass-through certificates has been downgraded from BB to B by Standard & Poor's.The rating agency also raised its ratings on 12 classes from five Salomon Brothers deals and affirmed its ratings on 158 classes from 48 deals. S&P said the downgrade resulted from the erosion of the class's credit support. "This transaction has been realizing net losses, averaging approximately $334,000 per month during the most recent 12 months, while total delinquencies averaged approximately 14.20% per month during the same period," S&P said.

Five classes in three CWMBS (Countrywide Home Loans) Inc. mortgage pass-through deals have been downgraded by Fitch Ratings and five classes in three other deals have been placed on Rating Watch Negative.The downgrades were as follows: series 2000-1, class B-3, from BB to B, and class B-4, from B to C; series 2000-2, class B-3, from BB to B, and class B-4, from CCC to C; and series 2000-4 ALT 2000-1, class B-3, from B to B-minus and removed from Rating Watch Negative. Classes placed on Rating Watch Negative were as follows: series 2001-3 ALT 2001-2, classes B-3 and B-4; series 2001-10 ALT 2001-6, classes B-3 and B-4; and series 2001-14 ALT 2001-7, class B-2. In addition, five classes out of the six deals were upgraded and the ratings on 12 other classes were affirmed. The actions were based on the number of delinquencies in relation to the applicable credit support, the rating agency said.

Eight classes in three CWMBS (IndyMac) Inc. mortgage pass-through deals have been downgraded by Fitch Ratings.The downgrades were as follows: series 2000-F, class B3, from BB to CCC and removed from Rating Watch Negative, and class B4, from C to D; series 2000-G, class B-3, from BBB to BB, class B-4, from B to CC and removed from Rating Watch Negative, and class B-5, from C to D; and series 2000-H, class B-3, from BBB to BB, class B4, from B to CC and removed from Rating Watch Negative, and class B5, from C to D. In addition, Fitch placed class B-2 of series 2000-F on Rating Watch Negative and affirmed its ratings on five other classes from the three deals. The rating agency said the downgrades stemmed from loss levels and high delinquencies relative to the applicable credit support. Fitch can be found online at http://www.fitchratings.com.