Servicing

Ginnie Mae has announced a new policy for repurchasing delinquent loans from Ginnie Mae mortgage pools, allowing buyouts only when no payments have been made for three consecutive months.The new policy will take effect with loans placed in pools with an issue date of Jan. 1, 2003, according to the Bear Stearns Prepayment Commentary. Previously, Ginnie Mae allowed rolling 30-day delinquent repurchases (loans with at least one delinquent payment over four consecutive months), which the publication said probably represent "the bulk of the buyout product." The Bear Stearns analysts termed the change "long overdue" and predicted that it will substantially reduce the amount of new Ginnie Mae securities that are susceptible to servicer buyouts. Ginnie Mae can be found online at http://www.ginniemae.gov.

Prepayment rates for virtually all agency mortgage-backed securities shot up in the October reporting period, "substantiat[ing] the magnitude and breadth of the current refinancing wave," according to the Bear Stearns Prepayment Commentary.Speeds of Fannie Mae and Freddie Mac 6.0%-7.0% coupons rose by constant prepayment rates of 9-15 CPR, said analysts Dale Westhoff and Bruce Kramer. "Overall, there was little evidence of burnout in the numbers in coupons below 8%, with seasoned 7.0s (pools seasoned at least 30 months) paying an average of 63 CPR and seasoned 7.5s paying 59 CPR," the analysts said. Among Ginnie Mae securities the speed-up was similar, as CPR gains at and above the 6.5% coupon level were "nearly identical" to those for conventional MBS, they said. Bear Stearns can be found online at http://www.bearstearns.com.

The Federal Reserve Board surprised the market late Wednesday, cutting short-term rates by 50 basis points -- instead of the anticipated 25.The yield on the 10-year Treasury (which mortgages are pegged to) fell to 4.035%, down 0.04%. The target federal funds rate now stands at 1.25%, a four-decade low. Douglas Duncan, senior economist for the Mortgage Bankers Association of America, had originally forecast a 50 bp cut, but recently trimmed it to 25 bp. Before the Fed made its decision, Mr. Duncan told MortgageWire that, "It's not like our members need a rate cut." In cutting rates, the Fed also shifted to a "neutral" stance on rates. The MBA says refinancings are running at about 70% of applications. The trade group is forecasting residential production of $2.4 trillion this year and $1.7 trillion next year.

Fitch Ratings has upgraded the residential primary servicer rating of Ameriquest Mortgage Co. from RPS2-minus to RPS2 for subprime loans.At the same time, Fitch assigned AMC a special servicer rating of RSS2-minus. As of July 31, AMC serviced nearly 120,000 subprime mortgage loans with a total balance of nearly $14 billion. About $50 million of the total were in special servicing.

Two classes of Deutsche Mortgage & Asset Receiving Corp.'s commercial mortgage pass-through certificates, series 1998-C1, have been downgraded by Fitch Ratings.Class L was downgraded from B to B-minus, and class L was downgraded from CCC to CC. The ratings on 11 other classes in the deal were affirmed. Fitch attributed the downgrades to continuing deterioration in the pool's collateral performance and expected losses for many loans. As of the October 2002 distribution date, 22 loans representing 7.8% of the pool were in special servicing, the rating agency said. Of those, three were more than 30 days delinquent, six were more than 90 days delinquent, and nine had reached the status of real estate owned, Fitch said.

Washington Mutual, Seattle, which has been on an intense "buy-and-build" spree the past three years, is now officially taking a respite from any major acquisitions.During a speech this week at the annual convention of America's Community Bankers, WaMu chief executive Kerry Killinger indicated that WaMu will build its base of branches de novo instead of through acquisitions. For the past nine months, WaMu watchers have been saying that the mega-thrift -- the nation's largest residential servicer -- has been on the sidelines when it comes to buying other firms. Then again, the mortgage-related mergers-and-acquisitions market has been slow the past half-year, with few exceptions. (In August, WaMu agreed to buy HomeSide's huge servicing portfolio, but that deal had been anticipated for a year.) In fact, the top 10 residential servicers combined saw their market share slip in the third quarter, the third consecutive decline for the group. (See the Nov. 11 issue of National Mortgage News for full details.)

Though the new chairman of America's Community Bankers, Russell Taylor of Rahway Savings Institution, heads a Fannie Mae seller/servicer that sells the lion's share of its fixed-rate loans to Fannie, he says ACB remains supportive of the Federal Home Loan Bank System's effort to provide an alternative to Fannie and Freddie.In his address to the ACB convention in San Francisco, outgoing chairman Curtis L. Hage stressed that ACB is a strong advocate of the FHLBank system and the possibility of securitizing the FHLBanks' Acquired Member Assets program to expand it beyond its modest $50 billion level. An FHLBank panel following Mr. Hage's address explored the possibility of the FHLBanks' employing securitization as a way to expand the Mortgage Partnership Finance Program and the Mortgage Purchase Program as alternatives to Fannie and Freddie dominance in the secondary market. No FHLBank securitization initiatives have been mounted to date.

Matrix Bancorp, Denver, reported an after-tax net loss for the third quarter of $5.2 million, or 81 cents per share, reflecting the impact of $9.6 million in charges against the value of the firm's mortgage servicing rights.Those charges included an $8.0 million non-cash impairment reserve against Matrix's investment in mortgage servicing rights and an increase of $900,000 in the amortization cost for the company's investment in mortgage servicing rights, reflecting high prepayment rates. Richard Schmitz, co-CEO and chairman of the board, said it was a difficult quarter for Matrix. "Due to the high level of amortization, which is in response to increased prepayments, our investment in mortgage servicing has been very unprofitable this year." The company said that it made a decision in the spring of 2001, in part because of the difficulty of accounting for hedging activities, not to hedge its servicing portfolio. Beginning in August of this year, Matrix decided to sell the majority of its newly servicing rights on newly originated mortgage loans, and the company intends to "significantly" decrease its investment in MSRs, Mr. Schmitz said.

Fitch Ratings has changed its criteria for recognizing prepayment penalty charges from home equity loans pledged to Net Interest Margin Securitizations.The adjustments reflect changes in the regulatory and statutory treatment of prepayment penalty charges and the impact those changes may have on the ability of servicers of subprime and home equity mortgages to enforce those prepayment penalties, Fitch said. The rating agency said its change "is likely to result in a reduction in the size of NIMS notes that are backed by transactions collateralized by mortgage loans with prepayment penalty charges lasting greater than 24 months. NIMS backed by loans with prepayment penalties that do not exceed 24-months will not be affected, Fitch said.

The Prestwick Mortgage Group, Alexandria, Va., is brokering the sale of servicing rights on $1.1 billion portfolio of conventional mortgage loans from the Midwest.The weighted average note rate is 6.996% and the average loan balance is $94,799, Prestwick said. The portfolio has weighted average seasoning of 41 months and includes properties in 34 states. The highest concentration of loans come from Ohio, Indiana, New Jersey, Pennsylvania and Illinois. Bids are due Nov. 13.