Servicing

Steven Chiou has been named executive vice president and head of secondary marketing at Market Street Mortgage, a retail residential mortgage banking firm based in Clearwater, Fla.Before joining Market Street, Mr. Chiou served as executive vice president for capital markets at CTX Mortgage Co., Dallas, and worked for Fannie Mae in Dallas in several key management positions, Market Street said. “Given the likelihood that interest rates will go up in 2003, hedging is going to be the number one challenge [for the secondary market], as the volatility of rates will be much greater,” Mr. Chiou said. Market Street Mortgage is a subsidiary of NetBank, which can be found online at http://www.netbank.com.

Washington Mutual Inc., Seattle, has announced that it will begin expensing employee stock options.WaMu estimated that adopting the prospective method of accounting for the expensing of stock options will have no material effect on earnings per share this year, and will affect EPS by less than $0.05 per share in 2004. Kerry Killinger, WaMu's chairman, president, and chief executive officer, said stock options "will remain an important component of our incentive compensation...." The company can be found on the Web at http://www.wamu.com.

Fannie Mae chairman Franklin Raines has told investors that he wants to move away from the view that mortgages are a commodity and toward the notion that loan products can be custom-made.During a webcast from Salomon Smith Barney's financial services conference, Mr. Raines said the government-sponsored enterprise has about $1.4 billion in guarantee fees from upfront payments Fannie charges to offset the higher risk of newer products the company is offering in pursuit of that customization goal. He characterized these loans as part of the alternative-A credit risk market. Fannie Mae can be found online at http://www.fanniemae.com.

Bank of America, Charlotte, the fifth-largest seller of loans to Freddie Mac, has ended its strategic alliance with the government-sponsored enterprise.BofA's decision to sell some of its conforming production to Fannie Mae (as well as continuing to sell to Freddie) is just the latest example of a trend toward the fraying of such alliances. For instance, Countrywide Home Loans, Calabasas, Calif., which has an alliance agreement with Fannie Mae, is now actively selling some of its production to Freddie. Jeff Lebowitz, who runs the Mortech study, called the strategic alliances "meaningless." A former executive at Fannie Mae, Mr. Lebowitz said: "It's just a venture in price cutting." A spokeswoman for BofA said the company "will continue to work closely with Freddie Mac. But at this point we are going to return to a competitive open market." BofA originated $84 billion in mortgages last year, $64 billion of which were conforming. A Freddie Mac spokesman declined to comment on BofA's action. (See the Feb. 3 issue of National Mortgage News for full details.) The companies can be found online at http://www.bankofamerica.com and http://www.freddiemac.com.

Success Financial Services Group Inc., a mortgage banking company based in Round Rock, Texas, has announced a management change and a reverse stock split.James S. Renaldo has been named chief executive officer of the company, and Robert L. Leonetti will remain president of Success Investments Inc., the company said. Success Financial's board of directors approved a resolution Jan. 24 to reverse-split the company's outstanding stock on a 1-for-100 basis. The company can be found on the Web at http://www.successfinancialservices.com.

Class B-5 of Bear Stearns Mortgage Securities Inc. series 1997-6 has been downgraded from B to D by Fitch Ratings and removed from Rating Watch Negative.In addition, class B-4 of the transaction has been placed on Rating Watch Negative. The rating agency said the actions were based on a review of loss and delinquency levels in the deal. Fitch can be found online at http://www.fitchratings.com.

Hanover Capital Partners Ltd., a subsidiary of Hanover Capital Mortgage Holdings Inc. based in Edison, N.J., has announced an alliance with DMS Advisors Inc. under which DMS will market Hanover's consulting services.The products and services to be marketed include due diligence, agency securitization, document rectification, assignment processing, servicing audits, mortgage operations process reviews, and temporary staffing placements. Hanover said two DMS principals are "veteran mortgage industry experts." Dianne Johnson was formerly vice president of capital markets and correspondent lending at Wells Fargo Home Mortgage, and Beverly Sheehy was most recently vice president of national accounts at Triad Guaranty Insurance. Hanover Capital Mortgage Holdings is a mortgage real estate investment trust.

Freddie Mac acquired $91.22 billion in home mortgages during December, yet another record month for the secondary market giant.For the year, Freddie bought a record $642.3 billion in product, a 35% increase from the level recorded in 2001. Freddie's chief competitor, Fannie Mae, bought $1.09 trillion in mortgages in 2002, also a record. (Fannie's 2002 "business volume," a different way of measuring purchases, was $848 billion.) Freddie's purchase commitments were $26 billion in December, down from $29 billion in November, which means January's purchase volume will likely be weaker than in the previous month. Together, Fannie and Freddie bought about $1.7 trillion in product, which means the two gobbled up 65% of all loans originated in 2002. The market share number is based on an estimated $2.6 trillion in mortgage production. (The estimate comes from National Mortgage News.)

Freddie Mac has reported record unaudited net income of $5.76 billion ($7.95 per share) for 2002, up 39% from $4.15 billion ($5.64 per share) the year before, but the results are preliminary and will be restated.The results are expected to be revised upward after PricewaterhouseCoopers finishes auditing the government-sponsored enterprise's books for 2002 and re-auditing its financial statements for 2001 and possibly 2000, Freddie Mac said. Unaudited net income totaled $1.70 billion ($2.38 per share) for the fourth quarter, up 25% from $1.36 billion ($1.87 per share) a year earlier. "We fully support the re-audit, and we are confident it will have no adverse impact on the company's fundamental strength," said Leland C. Brendsel, chairman and chief executive officer of the GSE. "Last week, all three major rating agencies affirmed our high ratings." Financial highlights cited by the GSE include: total mortgage portfolio growth of $173 billion, or 15%; retained portfolio growth of $76 billion, or 15%; and credit losses representing only 0.7 basis points of its average total mortgage portfolio. Freddie Mac can be found online at http://www.freddiemac.com.

Two classes of GE Home Equity 1997-HE 1 mortgage pass-through certificates have been downgraded by Fitch Ratings.Class M was downgraded from AA to A and removed from Rating Watch Negative, and class B-1 was downgraded from CCC to D. (The ratings on classes A-4 and A-4 were affirmed.) The rating agency attributed the actions to loss levels and high delinquencies in relation to applicable credit support levels.