Servicing

Freddie Mac is increasing the financial incentives it offers to servicers for using technology, completing workouts with borrowers to avoid foreclosure, and sustaining superior performance under its system of rating servicers by tiers.The incentive program continues to reward servicers in three areas: investor reporting, default management, and superior overall performance. Freddie Mac announced that it is increasing the amounts awarded to servicers for loss mitigation activities that help keep borrowers in their homes. The most significant increases are for certain loan modification and repayment plans, Freddie Mac said. Freddie Mac also said it has developed a new category to reward servicers that use technology to send documentation and information to foreclosure attorneys when foreclosure cannot be avoided. Since 1996, when Freddie Mac introduced its Servicer Performance Profiles, the company has paid out over $15.6 million in incentives to servicers for their loss mitigation efforts. Freddie Mac can be found online at http://www.freddiemac.com.

PHH Corp., a subsidiary of Cendant Corp. based in Parsippany, N.J., has announced a $1 billion public offering of senior unsecured notes, of which $600 million will be issued as 10-year notes and the remainder as five-year notes.PHH said the proceeds will be used to repay short-term debt. Banc of America Securities LLC and Barclays Capital are the joint book-running managers for the offering, which was assigned a BBB-plus rating and a negative rating outlook by Fitch Ratings. Fitch said it views the offering positively because it extends the maturities of PHH's outstanding debt, but pointed to two offsetting factors: the cyclicality of the mortgage business and the "potential impact of the interest rate environment on mortgage servicing rights."

Fannie Mae started the new year right by purchasing a near-record $163.9 billion of loans in January.The secondary giant bought $57.28 billion in mortgages for its portfolio and issued $106.65 billion in "lender-originated" mortgage-backed securities. (National Mortgage News adds these two figures together to arrive at Fannie's monthly purchases.) Fannie measures its purchases by a data point called "business volume." Fannie's business volume in January totaled $121 billion, a record. Its January portfolio purchases were the second-highest on record. Its retained commitments -- a barometer of future purchase activity -- fell to $25.1 billion in January, compared with $29.2 billion in December and $52.7 billion in November. In 2002 Fannie acquired $1.093 trillion in home mortgages, a 60% increase from 2001, and yet another record. Fannie Mae can be found online at http://www.fanniemae.com.

Freddie Mac has provided new details and formats for six new items it will disclose to investors in its mortgage participation certificates, and says the inclusion of borrower credit scores should not raise concern about privacy rights.A spokeswoman said the credit score disclosure will be made at the pool level. "The individual borrowers will not be identified," she said. Earlier, Ginnie Mae executives expressed concern that disclosing borrower credit scores could run afoul of recently enacted federal privacy laws. The other new disclosure items, all recommended by a federal task force, include original loan-to-value ratio, loan purpose, servicer identity, property type, and occupancy status. Freddie Mac can be found on the Web at http://www.freddiemac.com.

A for-profit subsidiary of the American Bankers Association is going to provide a form of pool insurance for Mortgage Partnership Finance loans so that small community banks selling loans to the Federal Home Loans Banks can earn more fee income."It is cross-pool insurance for individual loans and small pools," said ABA senior counsel Joseph Pigg. The FHLBanks will pay ABA's Corporation for American Banking for insuring a portion of the credit risk associated with small, geographically concentrated pools of residential mortgage loans. This credit enhancement will enable FHLBanks to pay participating community banks up to 14% more fee income over the life of the loan. But the actual pricing of the loans will remain the same, a Chicago FHLBank official said. In addition to servicing fees, banks and thrifts receive fee income for retaining a portion of the credit risk on MPF loans. To participate in the ABA/MPF alliance, a community bank has to be a member of an FHLBank that offers the MPF program. "You do not have to be an ABA member to participate," Mr. Pigg said. The ABA can be found online at http://www.aba.com.

The board of the Federal Agricultural Mortgage Corp., Washington, has declared a dividend of $0.80 per share on the corporation's 6.40% cumulative preferred stock, series A.The dividend, for the period Jan. 1, 2003 to March 31, 2003, will be payable March 31 to stockholders of record as of March 20, Farmer Mac said. The government-sponsored enterprise can be found on the Web at http://www.farmermac.com.

Radian Group Inc., Philadelphia, has announced that it plans to sell $250 million of senior unsecured notes.The company said it plans to use approximately $75 million of the net proceeds of the sale to repay debt and the remainder for general corporate purposes. Radian, the parent company of mortgage insurer Radian Guaranty Inc., can be found online at http://www.radianmi.com.

First National Financial Corp., Toronto, has been added to the Standard & Poor's Select Servicer List as a master, special, and primary servicer of commercial mortgages.S&P said the company is the first Canadian commercial mortgage servicer to be added to its Select Servicer List. The rating agency cited the company's "extensive history of originating, securitizing, and servicing assets, combined with an experienced management team and suitable computer systems." S&P said it admits servicers to the list based on "a comprehensive assessment of firms' operational capabilities for servicing commercial mortgage, residential mortgage, or asset-backed portfolios." S&P can be found online at http://www.standardandpoors.com/ratings.

A nonconforming mortgage specialist and investment manager has launched what it says is the first real estate-backed synthetic guaranteed investment contract in the market.Larry H. Mylnechuk, a principal at Residential Capital Management LLC, told attendees at a State Street Global Alliances roundtable in New York that the company has signed one account for the new investment product it created and is working to sign a second by the end of the first quarter. Residential Capital is one of the asset managers SSGA supports by providing strategic operating capital, managerial support, and distribution as part of its goal to increase the value of its portfolio companies and offer a wider array of investment products to its institutional client base. SSGA can be found online at http://www.ssga.com.

Ocwen Financial Corp., West Palm Beach, Fla., has reported a net loss of $66.5 million ($0.99 per share) for 2002, compared with a loss of $124.8 million ($1.86 per share) in 2001.For the fourth quarter, the company reported a net loss of $7.8 million ($0.12 per share), compared with a loss of $6.9 million ($0.10 per share) a year earlier. William C. Erbey, Ocwen's chairman and chief executive officer, said the fourth-quarter loss included nonrecurring and severance charges totaling $6.5 million that will lower the company's expense structure. "We continue to make progress in our strategy of transitioning Ocwen to a fee-based business and reducing our noncore assets," Mr. Erbey said. He cited the company's core business earnings as "especially noteworthy" because its residential loan servicing business had record pretax earnings of $9.2 million in the fourth quarter despite very low interest rates. As of Dec. 31, Ocwen serviced approximately $30.7 billion of loans, up 40% from $21.9 billion at year-end 2001, Ocwen said. The company can be found online at http://www.ocwen.com.