Servicing

Standard & Poor's has placed its ratings on the Southern Pacific CMN Trust Series 1998-H1 home loan asset-backed notes on CreditWatch with negative implications.S&P said the action was based on the financial difficulties of Southern Pacific Funding Corp., which recently announced that it will take a one-time charge of $60-70 million in the third quarter as a result of changes in residual asset valuations and increased credit loss expectations. Following that announcement, S&P lowered SPFC's long- and short-term counterparty credit and senior unsecured debt ratings. SPFC, the servicer for the Southern Pacific CMN Trust transaction, has been removed from S&P's list of approved servicers. S&P's website address is http://www.ratings.standardpoor.com.

Freddie Mac has agreed to acquire Cendant Asset Services, a subsidiary of Cendant Mobility Services that specializes in management and sale of real estate owned.The Dallas-based Cendant provides REO services to lenders and servicers nationwide. It will become part of Freddie Mac's HomeSteps real estate sales unit, also based in Dallas. The combined unit will be called HomeSteps Asset Services and will market and sell an estimated 25,000 REO properties a year. Freddie Mac said the company will benefit from improved economies of scale, reducing the cost of marketing and selling REO. Freddie Mac's website address is http://www.freddiemac.com.

Senior unsecured notes of Southern Pacific Funding Corp., Lake Oswego, Ore., have been downgraded by Fitch IBCA Inc. The rating on $100 million of 11.5% senior unsecured notes due 2004 was lowered from B-plus to B-minus, the rating agency said.The action followed SPFC's announcement that it will take a one-time charge of $60-70 million in the third quarter as a result of changes in the valuation of its residual assets, increased credit loss expectations, and current conditions in the asset-backed, debt, and equity markets. "The rating action reflects SPFC's constrained liquidity over the long term, the ability to execute a committed whole loan sale strategy to improve cash flow, and an overall decline in capitalization, which will be exacerbated by the expected revaluation of the company's interest-only strip for the quarter ended Sept. 30, 1998," Fitch IBCA said. As previously reported, Standard and Poor's has lowered SPFC's long-term and short-term counterparty credit ratings and its senior unsecured debt rating. Fitch IBCA's website address is http://www.fitchibca.com.

Alltel Information Corp., Jacksonville, Fla., may be talking to Dovenmuehle Mortgage, Schaumburg, Ill., the nation's largest subservicer, about a possible purchase of the company, sources have told MortgageWire.Alltel operates the largest service bureau for residential servicers. A Dovenmuehle spokesman would not comment on the matter, and Alltel officials did not return telephone calls. At the end of June Dovenmuehle subserviced $26.41 billion in loans, according to the Database Products Group, a MortgageWire affiliate. (Dovenmuehle has owned servicing of just $338 million.) Last year EDS, a technology firm, bought Wendover Funding, Greensboro, N.C., another large subservicer.

Duff & Phelps Credit Rating Co., Chicago, has initiated debt ratings for FirstPlus Financial Group Inc. with a senior debt rating of BB and a subordinated debt rating of BB-minus.The Dallas-based FirstPlus, the nation's largest originator and servicer of high-LTV loans, recently put itself on the auction block. Duff & Phelps said its ratings reflect the company's "improving cash-oriented earnings," its securitization management, and its "dominant" market share in the high-LTV sector. Offsetting factors include the "still unseasoned performance record" for high-LTV loans, exposure to short-term interest rate volatility, and "a high reliance on securitization, including the continued, though more conservative, use of gain-on-sale accounting and the de facto subordination of cash flows relative to securitization lenders." The rating agency cited favorably FirstPlus's use of "significantly more efficient securitization structures over the past year which provide for an up to 2% upfront cash gain from a combination of initial undercollateralization and the sale of senior interest-only securities." Duff & Phelps's website address is http://www.dcrco.com.

Southern Pacific Funding Corp., Lake Oswego, Ore., has announced that it will take a one-time charge of $60-70 million in the third quarter as a result of changes in the valuation of its residual assets, increased credit loss expectations, and current conditions in the asset-backed, debt, and equity markets.Standard and Poor's responded to the announcement by lowering the company's long-term counterparty credit rating and senior unsecured debt rating from B-minus to CCC-plus and its short-term counterparty credit rating from B to C. Southern Pacific is the latest subprime mortgage lender to take a writedown in response to a prepayment-related decline in the value of its servicing portfolio, but the company said it was increasing credit loss assumptions as well. The company said it believes its adjustments for future period credit losses and prepayments will improve the company's performance if higher prepayment levels persist. In addition, the company said it will sell whole loans rather than securitize its product "for the foreseeable future" due to limited access to capital in today's market. "Although the company continues to pursue strategic alternatives with capital partners, the initiatives announced today will position Southern Pacific to be cash neutral and eliminate its reliance on the volatile capital markets," said Robert W. Howard, Southern Pacific's CEO and vice chairman.

Source One Mortgage Services Corp., Farmington Hills, Mich., hopes to generate $15 million to $20 million a month in home equity and high-LTV lending for the rest of this year and next year, according to Steve Manasco, vice president for home equity at Source One.The company has placed a new emphasis on servicing niche markets such as home equity loans, home equity lines of credit, and loans with high loan-to-value ratios over the past year, he said. Mr. Manasco said home equity lending at Source One dates back to about 1994, but that there was not a heavy focus on it until more recently, when Source One created a division devoted to home equity lending.

Freddie Mac has made a $100,000 commitment to the Mortgage Bankers Association's Year 2000 testing plan, the MBA has announced.The MBA Year 2000 Inter-System Readiness Test Plan is a multimillion-dollar voluntary program under which firms will test their systems with those of trading partners in a Year 2000 business environment. "At Freddie Mac, we've made Year 2000 readiness our top corporate priority," said James Cotton, Freddie Mac's vice president of Year 2000 Primary Markets. "We believe that the MBA Inter-System Readiness Test is an important and necessary step toward ensuring readiness for us and the mortgage finance industry." The plan, developed by the MBA Year 2000 Inter-Industry Test Subgroup, has also received $100,000 commitments from Alltel, Fannie Mae, and First American Real Estate Services. It will include test transactions relating to 15 critical business functions in origination, secondary marketing, and servicing, the MBA said. The test is scheduled to begin early next year.

The American Bankers Association has reported that late payments (30 days or more past due) on home equity lines of credit fell 4 basis points in the second quarter to 0.72%.Closed-end home equity loans delinquencies decreased by 8 bp to 1.22% in the second quarter.

G.E. Capital Corp., Stamford, Conn., and BancOne, Indianapolis, are talking to Dallas-based FirstPlus Financial Corp. about a deal, MortgageWire has learned.Sources say that GECC is conducting due diligence on the company and BancOne is scheduled to make a presentation either Thursday or Friday. At deadline time, FirstPlus's shares were trading up $2 or so at $18. FirstPlus, the nation's largest originator and servicer of high-LTV loans, hopes to get $22 a share for the company, said one source familiar with the situation. FirstPlus could not be reached for comment. BancOne is a warehouse lender to FirstPlus. Another large warehouse lender to FirstPlus, Residential Funding Corp., Bloomington, Minn., also has expressed interest in the company. In the first half of 1998, FirstPlus was the high-LTV volume leader with $2.46 billion in production. FirstPlus is being represented by Bear Stearns & Co. Its 52-week trading high was $61 a share.