Servicing

Mortgage employment posted still another record in August as the industry added 4,800 full-time jobs to the previous month's total.According to figures compiled by the Bureau of Labor Statistics, the mortgage banking/brokerage sectors employed 297,000 full-timers in August compared with 292,200 in July. A year ago the industry employed 253,900. The BLS website address is http://stats.bls.gov.

A $235 million Multifamily Gold PC with a defeasance option that increases the borrower's flexibility has been issued by Freddie Mac.The Gold PC is backed by 25 mortgages -- secured by 38 multifamily properties -- originated by Reilly Mortgage Group Inc. for a major real estate developer in the Southeast. The 30-year mortgages were structured with various special features, including the defeasance option. Defeasance is a process whereby mortgages are replaced by non-callable securities issued by the U.S. Treasury or government-sponsored enterprises. Other features of the $235 million Gold PC include the rights to substitute and to sell mortgaged properties. "Without these features, the sale or refinance of a mortgaged property would require the borrower to prepay the mortgage and the associated yield maintenance premium, which could be substantial," said H.L. Van Varick, vice president of Freddie Mac's Multifamily Negotiated Transactions Department. "Also, the investor in the Multifamily Gold PC potentially benefits from these features to the extent that they reduce the prepayment speed of the mortgages by providing an alternative to prepayment." Freddie Mac's rival GSE, Fannie Mae, recently announced a "one-stop" defeasance option for fixed-rate multifamily mortgages with a term of 10 years or less.

The Huntington Mortgage Co., Columbus, Ohio, has promoted Thomas J. Finnegan III to president and chief executive, replacing R. Frederick Taylor, who has left the company.Mr. Finnegan joined the company in 1996 as senior vice president of residential loan production. Prior to that he was executive vice president of Integra Mortgage Co., Pittsburgh, where he was responsible for all retail, wholesale, and correspondent production functions. Huntington Mortgage, a unit of Huntington Bancshares Inc., has a servicing portfolio of over $8 billion and has closed more than $1.65 million in mortgages so far this year. In the second quarter, Huntington Mortgage ranked 49th in the nation in retail mortgage originations with $513 million, according to the Database Products Group, a MortgageWire affiliate.

Prepayment speeds for 30-year Freddie Mac mortgage-backed securities rose for all coupons below 9.0% in the August reporting period, but the percentage gains were highest among post-1993 vintages of the 7.0% coupon, according to the Bear Stearns Prepayment Commentary.Conditional prepayment rates for those coupons were up as much as 30% in some cases. "As important as the percentage gains, however, is the fact that post-1993 7.0s are already paying at or above the spreads they reached last March, at the initial stages of this year's extended Treasury rally," analysts Dale Westhoff and Bruce Kramer said. Furthermore, the analysts noted, the reporting period ended in mid-August and therefore the prepayment numbers do not reflect August's drop of 16 basis points in the monthly average 30-year effective mortgage rate. The effective mortgage rate underlying the reported speeds was about 7.20%, a level they said falls short of making all 7.0s refinanceable. "If the effective mortgage rate stays at 7.00% for two to three weeks, all borrowers backing the 7.0% coupon will be exposed to their best-ever opportunity, pushing speeds higher across the board," Messrs. Westhoff and Kramer said.

Thrift originations of one- to four-family loans hit a record $67.7 billion in the second quarter, according to the Office of Thrift Supervision, as thrifts took advantage of the summer refinancing activity and strong sales of new and existing homes."Thrift institutions fully participated in this vibrant housing market," OTS Director Ellen Seidman said Wednesday morning. The previous record of $57 billion in originations was set in the fourth quarter of the 1993 refinancing boom. In 1993, thrifts originated a total of $189 billion in single-family loans for the entire year. In the first half of this year, 1,181 thrifts have originated $127 billion in product. The OTS also noted that thrifts have essentially turned into mortgage banks because of the high demand for fixed-rate loans. And thrifts sold $66.3 billion of their production into the secondary market during the second quarter. Thrift servicing portfolios increased in the second quarter by $19.7 billion to $517 billion as a result of this mortgage banking activity.

WMF Capital Corp., Vienna, Va., has sold $691 million in commercial mortgage loans to Merrill Lynch Mortgage Capital Inc. and closed related hedges.The sale, which was on a servicing-retained basis, resulted in a pretax loss of approximately $30 million, according to WMF Capital's parent, WMF Group Ltd. WMF Group said it had intended to sell the loans in a September securitization led by Merrill Lynch, "but opted to sell the loans at this time due to continuing adverse securitization market conditions." The sale was made in conjunction with the WMF Group's decision to "adjust its business strategy to limit interest rate and spread risks that have developed as a result of global market instability," the company said. WMF Group also announced that it has received a $20 million subordinated loan commitment from Commercial Mortgage Investment Trust Inc., in which it has a minority interest. WMF Group's website address is http://www.wmfg.com.

The long-term counterparty credit rating and the senior unsecured debt rating of ContiFinancial Corp. have been lowered to BB from BB-plus by Standard & Poor's and removed from CreditWatch.S&P said the action followed Conti's announcement of a writedown in its excess-spread receivable. "The downgrade reflects an increasingly difficult operating environment in which a flood of mortgage refinancings have negatively impacted the value of ContiFinancial's and most other subprime mortgage securitizers' excess-spread assets," S&P said. The rating agency said ContiFinancial "remains a benchmark for the industry. Management's skill in maximizing cash out of its securitizations while minimizing associated cash expenses have contributed to a near neutral operating cashflow -- an achievement in an industry characterized by an inability to cover cash expenses out of operations." Noting the "substantial risk" involved in the industry's reliance on securitization and gain-on-sale accounting, S&P said "no management is capable of effectively controlling these risks without compromising the basic economics of the business model." The risk is now large enough that subprime mortgage lenders that follow the model "represent, on a stand-alone basis, a credit risk that is no longer consistent" with a BB-plus rating, S&P said. S&P's website address is http://www.ratings.standardpoor.com.

FirstPlus Financial Corp., Dallas, the nation's largest originator and servicer of high-LTV loans, has put itself up for sale.Investment bankers told MortgageWire Tuesday morning that the likely buyer could be a commercial bank or even a credit card company. Last fall National Mortgage News reported that Residential Funding Corp., which is ultimately owned by General Motors, was interested in the company. RFC is a major warehouse lender to FirstPlus. At deadline time, it could not be determined whether RFC still might be interested. (Sources say RFC owns warrants in Master Financial, another top high-LTV lender, and that it might also still own warrants in FirstPlus.) FirstPlus officials could not be reached for comment. At noon Tuesday its stock was trading at almost $26 a share, up 14%. However, FirstPlus (symbol: FP) is way down from its 52-week high of $61.87, making many a shareholder unhappy. The company has retained Bear Stearns as its advisor. FirstPlus's website address is http://www.firstplus.com.

Consolidation will continue in the mortgage banking industry, and low profit margins, high leverage, and growing subprime originations will weaken a "relatively stable" credit profile overall for conventional mortgage bankers, according to Moody's Investors Service.In a new industry outlook report, the rating agency said it does not expect near-term downgrades in the industry "primarily due to improved risk management techniques and strong efforts to sustain healthy liquidity." Moody's said the "overwhelming influence" of Fannie Mae and Freddie Mac is "likely to intensify" as their automated technologies become standard and they expand their presence in the alternative-A and subprime markets. The report noted that much of the consolidation in the past two years has been incidental to commercial banking mergers, but said Moody's believes it will continue "irrespective of what happens" in the commercial banking industry. "Greater competition among mortgage originators, the costs of new technologies, and scale economies in servicing and securitization, make it increasingly difficult for smaller mortgage banks to survive as independent entities," Moody's said. The Moody's website address is http://www.moodys.com.

CFI Mortgage Inc., West Palm Beach, Fla., has agreed to sell its conforming retail originations subsidiary, Bankers Direct Mortgage Corp., to Inverrary Trace Inc. for book value plus a premium of $1 million.Inverrary Trace will pay $1.5 million in cash and the rest in a note. It has already made a good faith cash deposit of $150,000. CFI will now focus strictly on the subprime business through its Direct Mortgage Partners subsidiary. DMP is developing a subprime servicing platform and an Internet loan application delivery system.