Servicing

The 24 classes of PNC Mortgage Securities Corp. mortgage pass-through certificates that were recently downgraded by Fitch Ratings are not affiliated with PNC Financial Services Group, Fitch has reportedPNC's residential mortgage banking platform was acquired by Washington Mutual on Feb. 1, 2001, the rating agency said. The downgraded classes are from 20 securitizations issued in 1998, 1999, and 2000.

Mortgage-backed securities issuance continued to climb in the first quarter, increasing 44% to $786.7 billion from $547.0 billion a year earlier, according to The Bond Market Association."The surge reflects the continuing appeal of historically low interest rates; however, the increase in activity is much more modest when compared to [that of] the previous quarter," the association reported. MBS issuance was up only 4.6% from the fourth quarter, when volumes totaled $773.8 billion. TBMA can be found online at http://www.bondmarkets.com.

Commenting on an observation that Fannie Mae's mortgage-related growth has been slow relative to that of banks, Fannie Mae chairman Franklin Raines said he considers the company's growth strong enough and thinks banks are exposing themselves to some risk by investing so heavily in mortgage products.Mr. Raines told listeners to the Morgan Stanley Financial Services' webcast CEOs Unplugged Conference 2003 that he believes when interest rates rise and the yield curve flattens, banks will exit the mortgage investment market simultaneously in a way that will be disadvantageous to the financial institutions but advantageous to Fannie Mae. Wall Street observers, whose firms sell mortgage investments to banks, have acknowledged that sudden and sharp changes in interest rate and yield-curve conditions could hurt the investments that banks favor, but said they consider such changes unlikely.

Countrywide Financial Corp., Calabasas, Calif., has announced the sale of approximately 2.2 million newly issued shares of its common stock.The lead underwriter of the offering is J.P. Morgan Securities Inc. Countrywide said the net proceeds will be used for general corporate purposes. The company can be found on the Web at http://www.countrywide.com.

Abington Bancorp, Abington, Mass., has announced a revision of its 2002 financial results and a restatement of its 2001 results to correct certain accounting errors related to prepayments on mortgage-backed securities, among other things.Abington, the holding company for Abington Savings Bank, reported revised net income of $6.17 million ($1.76 per share) for 2002, compared with the previously reported $7.26 million ($2.07 per share). The restated income for 2001 totaled $2.03 million ($0.63 per share), compared with the previously reported $3.08 million ($0.95 per share). The company said the accounting errors related to the acceleration of prepayments on MBS and the recording of prepayments on certain investment securities. In addition, adjustments were made to accruals for income and expense. The bank can be found online at http://www.abingtonsavings.com.

States would be permitted to tax the enormous profits earned by Fannie Mae and Freddie Mac under legislation introduced May 15 by Rep. Pete Stark, D-Calif.The two government-sponsored enterprises are "profitable enough to provide a steady stream of home loans without the state tax-exempt status that was once needed to draw investors," the lawmaker said. The two companies earned some $10 billion in combined profits in 2001 and are ranked on Fortune magazine's list of most profitable companies. Though they pay federal taxes, they do not pay state or local corporate income taxes. States would not be required to assess Fannie and Freddie under Rep. Stark's Secondary Mortgage Market Fair Competition Act, but they would be allowed to if they so desire. And the California Democrat left little doubt that, given a choice between cutting basic services or taxing two companies that are "amassing billions in profits each year," they would choose the latter. He said the two GSEs are successful enough that they no longer need to be sheltered by Congress. The 16-term lawmaker from Freemont, Calif., is the second-highest-ranking minority member of the House Ways and Means Committee.

Fitch Ratings has joined other rating agencies in downgrading the servicer ratings of Fairbanks Capital Corp., Salt Lake City, in the aftermath of a controversy regarding the company's loan administration practices.Fitch downgraded Fairbanks' residential subprime servicer rating to RPS2-minus from RPS1, the highest rating Fitch bestows. Fitch also lowered Fairbanks' alternative-A, home equity, and special servicer ratings to the same '2-minus' level. All the ratings remain on Rating Watch Negative. Fitch said the downgrades reflect uncertainty regarding Fairbanks' financial viability, management stability, and operational strength. Fitch can be found online at http://www.fitchratings.com.

Twenty-four classes of PNC Mortgage Securities Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings, and 15 of them have been removed from Rating Watch Negative.The affected classes come from 20 separate PNC securitizations issued in 1998, 1999, and 2000. Fitch also placed five classes on Rating Watch Negative. The rating agency attributed the actions to high delinquencies relative to applicable credit support. Fitch can be found online at http://www.fitchratings.com.

Fairbanks Capital Holding Corp., a subprime servicer based in Salt Lake City, has announced that Brad Shuster has been named chairman of the company and James Ozanne will take over as chief executive officer.Mr. Shuster and Mr. Ozanne are currently directors of the company and its subsidiaries. Mr. Ozanne will step down from the board and be replaced by Alex Makowski, a managing director of Financial Security Assurance. Tom Basmajian, former Fairbanks chairman and CEO, will "assist with its constituent relations," working with Mr. Ozanne, the company said. William Garland will remain as president, with duties now to include systems, investor reporting, and alternative-A servicing. Fairbanks is under investigation by the Department of Housing and Urban Development and the Federal Trade Commission in connection with its servicing practices.

Three classes of Merrill Lynch Mortgage Investors Inc.'s mortgage pass-through certificates, series 1999-C1, have been downgraded by Fitch Ratings.The downgrades were as follows: class F, from BBB-minus to BB-plus; class G, from B-plus to B; and class H, from CCC to CC. The rating agency also removed class F from Rating Watch Negative and affirmed the ratings on eight other Fitch-rated classes in the deal. Fitch attributed the downgrades to its re-evaluation of specially serviced loans, which resulted in higher expected losses of approximately $25 million since its previous annual review. "In addition, Fitch is concerned with the increasing amount of specially serviced loans and the interest shortfalls," the rating agency said.