Servicing

Countrywide Financial Corp., Fannie Mae, Freddie Mac, American Home Mortgage Holdings Inc., and New Century Financial Corp. have snagged the top stock recommendations in the mortgage and real estate industry from Zacks.com, Chicago.Zacks cited Countrywide's $2.2 billion in average daily applications in February, more than double its level of a year earlier, as well as a 121% rise in loan fundings. It pointed to Fannie Mae's rising earnings estimates and said the company "has met or surpassed Wall Street's expectations" in recent quarters. Zacks cited the 15% growth in Freddie Mac's mortgage portfolio last year and the 27% rise in its diluted earnings in the fourth quarter, compared with its earnings a year earlier. Regarding American Home, Zacks said the company's recent deal to acquire the retail lending branches of Principal Residential Mortgage will create the nation's 14th-largest retail mortgage lender. Finally, Zacks cited New Century's 73% increase in loan production in January and February. Further information on the stock recommendations can be found online at http://allstartoppicks.zacks.com.

Four classes of Structured Asset Securities Corp. mortgage pass-through certificates, series 1997-2, have been downgraded by Fitch Ratings.The downgrades were as follows: group 1, class 1B3, from BBB to C; class 1B4, from BB to D; and class 1B5, from B to D; and group 2, class 2B5, from B to C. In addition, class 2B4 of group 2 was placed on Rating Watch Negative. Fitch attributed the actions to loss levels and "future loss expectations on the current severely delinquent loans in the pipeline" relative to the applicable credit support. Fitch can be found online at http://www.fitchratings.com.

Standard & Poor's has announced that it will "closely monitor" S&P-rated securitizations that contain reverse mortgage loans as a result of the pending settlement of a class action lawsuit.The suit against Transamerica Corp. (the originator), Financial Freedom Senior Funding Corp. (the servicer), and Metropolitan Life Insurance Co. (the annuity provider) alleged that excessive fees and shared-appreciation costs were charged to borrowers or their heirs in connection with reverse mortgages, the rating agency said. Some reverse mortgages contain a shared-appreciation provision under which originators receive a share of any home value appreciation that occurs over the term of the mortgage, S&P noted. Moreover, the rating agency said, reverse mortgage originators "typically charge relatively high origination fees" because the period of expected repayment may be long and the origination process is usually "lengthy" compared with that for traditional mortgages. S&P said bond ratings are "not in jeopardy" because of the settlement, but that it will monitor further developments for "potential ratings implications." S&P can be found online at http://www.standardandpoors.com.

Morgan Stanley plans to launch a jumbo and alternative-A credit mortgage conduit in June that will expand the Wall Street firm's range of loan products in this area, sources have told MortgageWire.Morgan Stanley, which has previously been active in the subprime and subperforming loan areas, plans to utilize approximately 10 production offices covering its mortgage correspondents across the country in the new effort. Key personnel from Morgan Stanley said the conduit is part of the firm's efforts to provide a larger range of products to investors and to become one of the top three players in the whole-loan collateralized mortgage obligation business within two years.

A key U.S. senator has asked the Department of Housing and Urban Development to investigate the business practices of Fairbanks Capital Corp., Salt Lake City, the nation's largest servicer of subprime mortgages.In a letter to HUD Inspector General Kenneth Donohue, Sen. Barbara Mikulski, D-Md., the ranking member of the VA-HUD appropriations subcommittee, said, "There are hundreds of complaints about this company from homebuyers all over the country, alleging that Fairbanks is scamming them out of thousands of dollars." In a prepared statement given to MortgageWire, Fairbanks president Bill Garland said, "It is Fairbanks' policy and practice to treat all borrowers fairly and consistent with its legal obligations. Fairbanks will certainly seek to address directly with Senator Mikulski and her staff any concerns the Senator may have about Fairbanks' servicing practices." (See the March 17 issue of National Mortgage News for full details.)

Fannie Mae has priced an offering of $350 million of variable-rate, noncumulative preferred stock.The seven million shares of Series K stock have a stated value of $50 per share, with an initial dividend rate of 3.00%, the government-sponsored enterprise said. The dividend rate will reset every two years based on the two-year swap rate plus 133 basis points. Bear, Stearns & Co. served as lead manager for the issue, and the co-managers were FTN Financial Capital Markets, Vining-Sparks IBG LP, and Williams Capital Group LP, Fannie Mae said.

Standard & Poor's will accept Fair, Isaac and Co.'s Next Generation FICO credit risk score in its forthcoming mortgage analytics model, Fair Isaac has announced.As of April 1, S&P will use the NextGen FICO scores in version 5.6 of its LEVELS model to assess risk and predict losses associated with mortgage-backed securities, the San Rafael, Calif.-based Fair Isaac said. NextGen scores "offer lenders a more advanced alternative to Fair, Isaac's classic FICO credit bureau scores, the industry-standard decision solution used to make billions of credit decisions each year," the company said. The new scores offer an expanded score range, multidimensional characteristic analysis, and additional scorecards. The companies can be found online at http://www.fairisaac.com and http://www.standardandpoors.com.

Mortgage purchases by Fannie Mae fell in February to $106 billion, the secondary giant's weakest purchase month since November, but the decline will likely be short-lived.The company reported that retained commitments (an indicator of future activity) rose to $51 billion during the month, compared with just $25 billion in January. Fannie's "duration gap," which measures asset/liability repricing durations, increased to negative-five months in February. In trading at midday Thursday, Fannie's shares were up about 1%. "In all, February was another solid month" for the company, said Salomon Smith Barney analyst Matt Vetto. Fannie's best purchase month ever occurred in January, when it bought $121 billion in mostly home mortgages. Fannie Mae can be found online at http://www.fanniemae.com.

Fourteen corporate-guaranteed classes of Conseco Finance Corp.-related transactions have been downgraded from CCC-minus to D (default) by Standard & Poor's Ratings Services.In addition, the ratings on all classes above B-2 from the transactions originated between 1995 and 2002 remain on CreditWatch with negative implications. The downgraded classes are the B-2 classes in the following Green Tree Financial Corp. Manufactured Housing Trust series: 1995-2, 1995-3, 1995-4, 1995-5, 1995-6, 1995-7, 1995-8, 1995-9, 1995-10, 1996-1, 1996-2, 1996-7, 1996-10, and 1997-4. S&P said the subordinate B-2 certificateholders of the affected trusts experienced interest shortfalls in February for the second consecutive month. The interest shortfalls (about $3.26 million) represent rating defaults, and without the guarantee payments deposited by Conseco, S&P said it believes that B-2 interest shortfalls "will continue to be prevalent in the future for all of the guaranteed certificates, given the adverse performance trends displayed by the underlying pools of collateral that secure these classes, as well as the location of B-2 interest at the bottom of the transaction payment priorities (after distributions of senior principal)." S&P can be found on the Web at http://www.standardandpooors.com.

Thirteen classes of senior and subordinated mortgage-backed securities issued by Citicorp Mortgage Securities Inc. from 1989 through 1994 have been placed under review for possible downgrade by Moody's Investors Service.The affected securities are as follows: series 1989-05, class A-4; series 1990-05, classes A-4 and A-7; series 1990-08, class A-7; series 1990-09, classes A-3 and B; series 1990-12, class B; series 1990-14, class B; series 1993-08, class B-1; series 1993-10, class B-1; series 1993-14, class B-1; series 1994-02, class B-1; and series 1994-06, class B-1. The review is based on the poor performance of the underlying loans with respect to cumulative losses and available credit enhancement. Moody's has also placed under review for possible upgrade the ratings of 19 MBS classes issued by Citicorp from 1988 through 1994. Moody's can be found online at http://www.moodys.com.