Servicing

Proposed guidelines for quotation and trading of U.S. government agency debt securities that contain a "European-style" call option have been released by The Bond Market Association.The association said the draft guidelines were designed to allow market participants to more quickly quote and trade the securities and "compare securities offered on different trading platforms using a single yardstick." The European-style call option, which is used globally, is generally a one-time option to call in and retire a security on a specific date.

The issuance of mortgage-related securities appears poised to surpass the annual record of $1.67 trillion set in 2001, according to The Bond Market Association.Real estate finance securities -- including agency and private-label pass-throughs and collateralized mortgage obligations -- were up 39.4% between Jan. 1 and Sept. 30. A total of $1.54 trillion worth of such securities were issued in the first three quarters of 2002, compared with $1.10 trillion in the same period of last year. The association's website address is http://www.bondmarkets.com.

Ginnie Mae's mortgage-backed securities program has hit the $2 trillion threshold, according to the Department of Housing and Urban Development.That means that more than 27 million families have accessed lower-cost mortgage financing since Ginnie Mae was launched in 1968, said Ginnie Mae president Ronald Rosenfeld. GMAC Commercial Mortgage originated the milestone security that pushed Ginnie Mae past the $2 trillion mark. The government-owned corporation can be found online at http://www.ginniemae.gov.

All classes of 18 Oakwood manufactured housing securitizations have been placed on Rating Watch Negative by Fitch Ratings in the wake of a Nov. 15 Chapter 11 bankruptcy filing by Oakwood Homes.The filing came just days after Fitch downgraded 13 classes of Oakwood's manufactured housing deals. At the time, the rating agency cited Oakwood's recent discontinuation of its Loan Assumption Program and said its defaults and its repossession inventory had increased significantly. Fitch now says it is "unclear" what the effect would be on pool performance of a disruption or potential transfer of servicing due to the bankruptcy filing. "The limited number of manufactured housing servicers, as well as the limited interest from mortgage servicers in acquiring the servicing rights to this unique asset, make these securitizations particularly vulnerable," Fitch said. The following series were placed on Rating Watch Negative: 1994-A; 1995-A and B; 1996-A, B, and C; 1997-A, B, C, and D; 1998-B and C; 1999-A, B, C, and E; and 2000-A and B. The rating agency can be found on the Web at http://www.fitchratings.com.

Fannie Mae has announced the appointment of seven executives, including three that required a vote of its board of directors.The trio elected by the board are: Peter Niculescu, executive vice president for mortgage portfolio business; Donald Remy, senior vice president and deputy general counsel; and David Flaxman, chief e-solutions technology officer for Fannie Mae's e-business. The other new appointments were: Randall Bendine, vice president and chief credit officer for multifamily; David Magidson, vice president for finance and portfolio systems; Bradford Martin, vice president for risk-based capital; and Christine Wolf, vice president for compensation and benefit. Mr. Niculescu was previously Fannie Mae's senior vice president of portfolio strategy, and he formerly worked for Goldman Sachs. Mr. Remy was vice president and deputy general counsel, and previously worked for the U.S. Department of Justice. Mr. Flaxman joins Fannie Mae from Answerthink, a systems integration and management consulting firm he co-founded. Fannie Mae can be found on the Web at http://www.fanniemae.com.

Option One Mortgage Corp., Irvine, Calif., has completed a sale of mortgage residual assets that netted the company $142.5 million, according to its parent company, H&R Block Inc., Kansas City, Mo.The net interest margin sale, which securitized future cash flows from past mortgage securitizations that have outperformed original expectations, will enable Option One to realize a $122.4 million pretax gain, Block said. The company said the gain is expected to contribute 32-34 cents per share in additional income in the quarter ending Jan. 31. "This transaction is consistent with our strategy to operate the mortgage business conservatively, with a goal to maximize cash flow," said Mark A. Ernst, Block's chairman and chief executive officer. ".... I know of very few companies that have been in the enviable position to write up mortgage residuals in the past few years. Our business model is conservative and risk-averse, which is why the bond market values our securities so highly." Block can be found on the Web at http://www.hrblock.com.

The American Bankers Association wants to provide credit enhancements for pools of Mortgage Partnership Finance loans so that community banks will find it more cost-effective to sell their loans into the Federal Home Loan Bank's secondary market program.Under the alliance, the ABA would help the FHLBanks market the MPF program to increase community bank participation, and an ABA subsidiary, the Corporation for American Banking, would provide credit support for MPF loan pools. "Because this will result in larger volume and wider geographic representation, participating banks will receive additional fee income and added value -- at no cost -- for their MPF mortgages," a joint press release by the ABA and the FHLBank of Chicago said. ABA senior counsel Joseph Pigg said "nothing is finalized yet," but he noted that the alliance is more than a joint marketing agreement. The two partners said they will be ready to announce the full details of the alliance in the first quarter.

Freddie Mac purchased a record $73.6 billion in mortgages in October, doubling its volume from the same month a year ago.On a year-to-date basis, the secondary giant has acquired $476.8 billion in mortgages and is well on its way to cracking the $600 billion mark in purchases this year. Unlike its chief competitor, Fannie Mae, Freddie Mac managed to expand its portfolio in October. (Fannie's portfolio shrank by a meager 0.1% during the month. Fannie Mae is the larger of the two secondary giants.) At the end of October, Freddie's portfolio totaled $536.4 billion, a 12.9% increase from the same period a year ago. However, earlier this year Freddie did suffer from two consecutive months of portfolio contraction -- back in April and May. Thanks to the lowest mortgage rates in 40 years, both secondary agencies are due to have record years but have also been plagued by tremendous portfolio run-off. Freddie's purchase commitments slipped to $27.5 billion in October from $34.8 billion in September.

Crescent Banking Co., Jasper, Ga., has reported adjustments totaling $10.6 million in its mortgage banking operations as a result of overstatements of its gains on the sale of mortgage servicing rights and the value of mortgage loans held for sale.Crescent said the adjustments resulted from a review of its internal controls. As a result of inconsistencies between its mortgage banking software system and its MSR valuations, the gains on sale of MSRs had been overstated by approximately $3.9 million, the company said. In addition, it found a "potential overstatement" of mortgage loans held for sale totaling about $6.7 million. On an after-tax basis, the adjustments are expected to reduce the company's shareholders' equity by about $5.2 million as of Sept. 30, Crescent said. The company added that it expects to restate its previous financial statements to reflect the changes. Crescent can be found online at http://www.crescentbank.com.

Fannie Mae acquired a record-breaking $114.1 billion in mortgages during October, its best purchase month ever, although its portfolio shrank once again.(National Mortgage News/MortgageWire measures Fannie's purchases by adding its portfolio purchases and its "total lender originated MBS.") Fannie measures its monthly purchases through a data point called "business volume." The company's business volume in October also set a new record -- $95.1 billion, a $16 billion improvement from that of September, which was also a great month. Retained commitments at the secondary giant increased to a record $67.3 billion, which means November's purchase figures will be stellar as well. However, October's data set reveals that the company's mortgage portfolio actually shrank in October (by 0.1%) from September's level, and that its portfolio also shrank back in June (compared with May) by 0.5%. Fannie Mae reduced its duration gap to negative-six months in October, compared with negative-10 the previous month.