Servicing

Eleven classes of securities in United Companies Financial Corp.'s manufactured housing deals have been downgraded by Fitch, and eight classes have been moved to Rating Watch Negative from Rating Watch Evolving. The rating agency noted that UCFC, which filed for Chapter 11 bankruptcy protection in March 1999, recently announced that it would sell its home equity whole loan portfolio, residual interests, and servicing rights to EMC Mortgage Corp. But Fitch said it is unaware of any plan to transfer the servicing of the eight securitized MH pools, which "have displayed a relatively high level of delinquencies and repossessions." The MH downgrades were: Class B-1 of Series 1996-1, from BBB to BB-minus, and Class B-2, from B to CCC; Class A of Series 1997-RS1, from BB-minus to B; Class B-1 of Series 1997-1, from BB to B, and Class B-2, from CCC to D; Class B-1 of Series 1997-2, from BBB to BB, and Class B-2, from CCC to D; Class B-1 of Series 1997-3, from BBB to BB, and Class B-2 from CCC to D; Class B-1 of Series 1997-4, from BBB to BB; Class B-1 of Series 1998-1, from BBB to BB; and Class B-2 of Series 1998-2, from BB to B. Except for Class B-1 of Series 1996-1 and the B-2 classes of Series 1997-1, 1997-2, and 1997-3, the above securities remain on Rating Watch Negative.

Southern Pacific Funding Corp., Lake Oswego, Ore., has obtained a temporary restraining order in a lawsuit filed Wednesday against Wilshire Real Estate Partnership, SPFC has announced.SPFC also said it is engaged in discussions with its warehouse lenders with regard to notices of default involving certain loan covenants. The warehouse lines of credit, which total $1.3 billion, are used by SPFC to fund loan originations and purchases. The litigation results from claims that SPFC is in default with respect to a $40 million loan recently made by Wilshire that is secured by assets with a market value substantially in excess of the loan amount, SPFC said. The temporary restraining order enjoins Wilshire from selling the loan collateral without complying with requirements of the Uniform Commercial Code.

FirstPlus Financial Group Inc., Dallas, has announced that it "remains strongly engaged in finding a suitable strategic partner" and that discussions with more than one party are under way.The announcement came after a selloff of FirstPlus shares Monday and Tuesday morning in the wake of a report in National Mortgage News that General Electric Capital Corp., Stamford, Conn., had considered but decided against buying FirstPlus, the nation's largest high-LTV originator/servicer. "There has been much speculation about our efforts, but we have made significant progress and we hope to resolve the matter in the next few weeks," said Daniel T. Phillips, chairman and chief executive officer of FirstPlus. Mr. Phillips said the company is attractive to prospective buyers because of its retail capability. "In the consolidating financial services industry, companies are looking for this platform as a way to sell products and cross-sell their own," he said.

Western Financial Bank, Irvine, Calif., has signed a letter of intent to sell substantially all its mortgage servicing rights, which will result in an after-tax writedown of approximately $2.3 million and contribute to a previously announced third-quarter loss, according to Westcorp, the bank's parent.The sale is pending the negotiation of a definitive agreement and related approvals. Western Financial will continue to originate prime and subprime mortgages for sale through established secondary market sources, Westcorp said. Westcorp's website address is http://www.westernfinancial.com.

Southern Pacific Funding Corp., Lake Oswego, Ore., which last month announced it was taking a charge of over $60 million due to higher-than-anticipated prepayments and credit losses in its subprime mortgage servicing portfolio, has announced a shake-up in its senior management.The board of the company appointed E. James Hedemark as CEO, replacing Robert Howard. Timothy Breedlove has been appointed executive vice president and chief financial officer, and Kevin Patrick has joined the company as executive vice president, capital financing. H. Wayne Snavely, chairman of the board, said the board thought the changes were necessary as the company attempts to restructure its capital base, funding sources, and origination strategy. Both Mr. Howard and Peter Makowiecki, formerly executive vice president and chief financial officer, have resigned. But the company said that Messrs. Howard and Makowiecki will continue as consultants to assist the company "in exploration of strategic alternatives."

The share price of FirstPlus Financial, Dallas, fell almost 15% Tuesday morning after a 34% decline on Monday.The Monday selloff was sparked, in part, by a report in National Mortgage News that General Electric Capital Corp., Stamford, Conn., had looked at and passed on buying FirstPlus, the nation's largest high-LTV originator/servicer. At noon Tuesday FirstPlus (symbol: FP) was trading at $12.89, down $2.18, and down 79% from its 52-week high. A FirstPlus spokesman declined to comment about its share price or potential bidders. After it became known that GECC was no longer interested in FP, Merrill Lynch downgraded FirstPlus to "neutral." It is well known that GECC looks at many potential acquisitions and often passes. Most recently it looked at United Companies, Baton Rogue, another publicly traded subprime lender, and passed on that acquisition as well, sources said. The steep decline in FirstPlus's share price has decimated investors in the company.

Amresco has issued a $1 billion home equity securitization with a Freddie Mac guaranty on the $275 million fixed-rate portion of the offering.The fixed-rate classes of the series 1998-3 security, A-1 through A-6, are backed by mortgage loans that conform to Freddie Mac's subprime standards, Amresco said. "As ABS spreads have widened significantly in the last couple of weeks, this unique Amresco transaction has received significant economic benefits from the Freddie Mac wrap, in addition to deepening the investor base," said Scott J. Reading, president of Amresco Home Equity Lending, Ontario, Calif. Credit enhancement for the approximately $725 million floating-rate portion of the deal was provided through a senior/subordinate structure. The collateral consists mainly of first lien home equity loans originated or acquired by Amresco. The company said it was the first Amresco transaction to include a special servicer role that is controlled by the residual holder. Amresco Residential Mortgage Corp. will be the servicer and contractual special servicer for the deal. Amresco's website address is http://www.amresco.com.

House and Senate appropriation staffers are working on language that would permit the Department of Housing and Urban Development once again to sell single-family loans that have gone into default.HUD officials are admitting that the Federal Housing Administration loss mitigation program has not worked very well and that it would save more money if lenders assigned defaulted FHA loans to HUD so that the loans could be sold in bulk. Provisions to protect designated revitalization neighborhoods are expected to be included in the VA-HUD appropriations bill that would require loan pool buyers to meet certain performance standards, such as sales to owner-occupants and house repairs. House and Senate appropriation committee members plan to meet the week of Sept. 28 to complete work on the final bill, which includes the FHA loan-limit increase.

Countrywide Credit Industries Inc., Calabasas, Calif., has reported record unaudited earnings of $95.1 million for the fiscal second quarter ended Aug. 31, up 27% from $74.7 million (from ongoing operations) a year earlier.Earnings per share were $0.81, up from $0.67 (from ongoing operations) a year before, Countrywide said. Angelo M. Mozilo, Countrywide's CEO, said the highlight among many production records set during the quarter was record fundings of $22.9 billion, up 117% from a year before. "While this is predominantly a refinance market, purchase mortgage fundings also reached an all-time high of $11.5 billion during the quarter," Mr. Mozilo said. "This is especially significant since demand for purchase mortgages is less sensitive than refinance volume to interest rates." Subprime and home equity loans accounted for 14% of the production sector's pretax profits, he said. Countrywide's servicing portfolio was $195 billion at the end of the quarter with a weighted average coupon of 7.7%, and prepayments and servicing hedge performance "were in line with expectations based on the current rate environment," Mr. Mozilo said. Countrywide's website address is http://www.countrywide.com.

The triple-A rating on Frederick City, Md.'s FHA-insured mortgage lien bonds, Series 1993A has been placed on CreditWatch with negative implications by Standard & Poor's.The action stemmed from a payment default on the mortgage note under the trust estate. The rating agency said it has been notified that "certain funds that were held by the servicer for the payment of mortgage insurance and taxes are no longer available to the trustee, as the servicer has filed for bankruptcy." After the bankruptcy filing the borrower had been making mortgage payments directly to the trustee, but "there are approximately $57,000 in funds that were misallocated by the servicer" prior to the filing, S&P said. In a typical default, the trustee may file for insurance if the mortgage payment is not received, but "in this case, HUD has claimed that since the payment was made by the borrower (although not received by the trustee) this is not an insurable event," the rating agency said. The trustee, which is pursuing legal remedies under the trust estate, says there are sufficient funds to pay debt service for the next two payment dates, S&P said. S&P's website address is http://www.ratings.standardpoor.com.