Servicing

Employment in the mortgage industry rose 1.7% in December to a new record as lenders continue struggling to process refinancing and home purchase applications.While employment in the U.S. dropped by 101,000 last month, the U.S. Bureau of Labor Statistics reported that jobs in the mortgage banker/broker sector increased from 401,600 in November to 408,400 in December. Mortgage lenders added 56,300 new hires to their payrolls in 2002 -- a 16% increase. Meanwhile, the BLS reported that the U.S. unemployment rate remained stuck at 6% and that the loss of jobs in November was 88,000 -- more than double the preliminary estimate made last month. Despite this dismal jobs report, James Smith, chief economist for the Society of Industrial and Office Realtors, said he expects strong economic growth in 2003 and continued demand for refinancings. "If productivity growth stays strong … interest rates will stay low," he said at a news briefing. The BLS can be found online at http://stats.bls.gov.

Doral Financial Corp., San Juan, Puerto Rico, has announced that its common stock has begun trading on the New York Stock Exchange under the ticker symbol DRL.Doral is the largest residential mortgage lender in Puerto Rico and has banking operations in the United States as well.

Four classes of ContiMortgage Corp. home equity loan pass-through certificates have been downgraded by Fitch Ratings and two other classes were placed on Rating Watch Negative.In addition, the ratings on more than 50 classes were affirmed. The downgrades were as follows: class B of Conti 1997-5 and class B-1 of Conti 1998-3, pool 1, from BBB to BBB-minus; and the B classes of Conti 1999-1 and Conti 1999-3, from BBB to BB. Class B-1A of Conti 1997-2, group 2, was placed on Rating Watch Negative, and the B classes of both pools of Conti 1998-1 were removed from Rating Watch Negative. The actions were attributed to loss levels and high delinquencies relative to applicable credit support. Fitch noted that ContiMortgage's loan servicing platform was acquired by Fairbanks Capital Corp. in 2001. The rating agency can be found online at http://www.fitchratings.com.

Mortgage-backed securities issuance in 2003 is likely to fall short of 2002's record-breaking highs but remain relatively strong as subprime and second-lien volumes partially offset moderating refinancing, according to Standard & Poor's.The rating agency said it expects that the "continuance of nationally stable home prices and low interest rates will influence the high volume" it forecasts for the coming year. S&P also said it believes that the originations underlying the securitizations will have their third-best year ever in 2003. S&P can be found online at http://www.standardandpoors.com.

The Farm Credit Administration, regulator of the Farm Credit System network of cooperatively owned agricultural lenders, said that more than 99% of FCS institutions are rated as financially "sound in every respect."The Farm Credit System, a government-sponsored enterprise, consists of 113 banks, associations, and service corporations that provide loans to agricultural producers and their cooperatives in rural areas. The system is a major source of agricultural real estate loans.

Prepayment rates rose in the December reporting period for Fannie Mae and Ginnie Mae mortgage-backed securities and were mixed for Freddie Mac MBS, according to the Bear Stearns Prepayment Commentary, contrary to the analysts' expectations that speeds had peaked in November.Speeds of 30-year Fannie Mae 6.0%, 6.5%, and 7.0% coupons in the 2001 vintage rose by constant prepayment rates of about 3 CPR, and most seasoned Fannie Mae vintages held steady or sped up modestly, said analysts Dale Westhoff and Bruce Kramer. For Freddie Mac MBS, speeds were "much more muted." The Bear Stearns analysts said they were surprised by the rise in Fannie Mae speeds, attributing it in part to the two additional business days in December (compared with November's total) and the rise and fall of interest rates in October and November. "We had expected the zigzag rate path to smooth out the prepayment profile, especially since it was occurring during the holiday season when transactions are typically slower to close," the analysts said. Bear Stearns can be found online at http://www.bearstearns.com.

Prestwick Mortgage Group, Alexandria, Va., is brokering the sale of mortgage servicing rights on an estimated $700 million to $1 billion of mortgage loans on a "flow" basis.The loans, predominantly from Texas, New Mexico, California, and Florida, will have an estimated average loan balance of $120,000 to $135,000. About 80% are expected to be 30-year, fixed-rate loans and the rest are expected to be 15-year loans. The loans are sold to Fannie Mae. The seller desires to start delivery of the newly originated loans in February. Bids are due Jan. 16.

The overall delinquency rate for home loans declined by 11 basis points to 4.66% in the third quarter, according to the Mortgage Bankers Association of America.The MBA's quarterly delinquency survey, which now tracks subprime loans in addition to prime conventional loans and loans backed by the government, showed improved loan performance in all categories. The MBA survey found that 3.06% of conventional loans were 30 days or more late on repayment in the third quarter, down from 3.20% in the second quarter. The delinquency rate for loans backed by the Federal Housing Administration fell 19 bps, to 11.62%, and the rate for loans backed by the Department of Veterans Affairs also fell 19 bps, to 7.81%. While warning that its subprime database is not yet representative of the entire sector, the MBA said 14.28% of the subprime loans in its conventional loan category were late in the third quarter, also down from the previous quarter. MBA chief economist Doug Duncan told reporters that the subprime delinquency rate will likely move "much lower" as additional subprime lenders are recruited to participate in the survey, because the current database includes several lenders that specialize in servicing particularly high-risk and high-delinquency loans. The MBA can be found online at http://www.mbaa.org.

Analysts included in Zacks.com's All Star Analyst Survey have recommended the stocks of Fannie Mae, Freddie Mac, American Home Mortgage Holdings Inc., Federated Investors Inc., and Washington Mutual Inc.The five stocks were the analysts' top recommendations in the finance sector. The Zacks all-star survey, created with Fortune magazine, can be found online at http://allstarpickshome.zacks.com.

Twenty classes of mezzanine and subordinate bonds in six securitizations issued by GE Capital Mortgage Services Inc. from 1996 through 1999 have been downgraded by Moody's Investors Service.The affected transactions -- series 1996-HE3, 1997-HE2, 1997-HE3, 1997-HE4, 1998-HE1, and 1999-HE2 -- are securitizations of seasoned fixed-rate, first- and second-lien, subprime residential mortgage loans. Moody's attributed the downgrades to low credit enhancement levels, stemming from poor performance by the deals, compared with projected future losses. "The pool performance was originally expected to be stronger than an average subprime mortgage pool," the rating agency said. "However, the performance to date has been below expectations. As of the October 2002 reporting date, cumulative losses to date range from 1.50% for the 1998-HE1 transaction to 2.60% for the 1997-HE2 transaction." GE Capital Mortgage Services was the original master servicer for the transactions, but the company is no longer in the servicing business, Moody's noted. Wells Fargo Mortgage Minnesota NA has taken over the servicing. The rating agency can be found online at http://www.moodys.com.