Servicing

Franklin Credit Management Corp., a New York-based company that buys, manages, and sells subprime residential mortgage assets, says it expects to report a second-quarter loss of $280-285 million, compared with a net loss of $3.6 million a year earlier. The company says the loss is due to deterioration in the subprime market and the performance of its portfolio of acquired and originated loans, especially acquired second-lien mortgage loans. The company has filed a five-day automatic extension for filing its second-quarter Form 10-Q with the Securities and Exchange Commission. The expected loss reflects a higher provision for credit losses. "Franklin's updated evaluation of its provision and reserves is more in line with the assumptions we used and reserves established as part of our 2007 fourth-quarter restructuring of this commercial lending relationship," said Thomas E. Hoaglin, chairman, president, and chief executive officer of Huntington Bancshares Inc., which has a $1.1 billion commercial lending relationship with Franklin. "The provision does not have any impact on our reported reserve level." Franklin is evaluating the legal structure of its servicing platform as a result of the expected second-quarter loss. Franklin can be found on the Web at http://www.franklincredit.com.

Production of Federal Housing Administration jumbo mortgages continues to ramp up, and Ginnie Mae officials say they expect to guarantee another $1.9 billion in FHA jumbo mortgage-backed securities in August, up from $1.5 billion in July. Since the beginning of April, Ginnie Mae issuers have securitized $4.9 billion in FHA jumbo MBS. Currently, Ginnie Mae segregates FHA jumbos into specially designated Ginnie Mae MBS, and the jumbos are not mixed with lower-balance FHA-insured mortgages. Fannie Mae and Freddie Mac generally purchase jumbos from lenders and hold them in portfolio. (The two government-sponsored enterprises began buying jumbos in April.) According to securities filings, Fannie purchased $947 million in jumbos in the second quarter and Freddie purchased $471 million. Ginnie Mae issuers securitized $1.4 billion in FHA jumbo MBS in the second quarter. Ginnie can be found on the Web at http://www.ginniemae.gov.

Zacks.com has announced the assignment of a Sell ranking to the stock of Fannie Mae, citing its "deteriorating financial profile." The Zacks Rank #4 (Sell) is assigned to stocks that the research firm says should "most likely be sold or avoided for the next one to three months." The company noted that Standard & Poor's recently cut its preferred stock rating on Fannie Mae from A to A-plus, saying it "presented significant risk to the government." Zacks said Fannie is also "pressured by continued home price declines in key markets, higher credit-related expenses, and capital challenges" and has cut its dividend to conserve capital in view of expectations of further losses from mortgage defaults and foreclosures. "In the last week, analysts have lowered their current-year estimate to project a loss of $6.01 per share," the research company said. Zacks can be found online at http://www.zacks.com.

Four classes of notes issued by C-Bass CBO XIII Ltd., a cash flow collateralized debt obligation linked to subprime residential mortgage-backed securities, have been downgraded by Fitch Ratings. The downgrades were as follows: class A, from AAA to BBB-plus; class B, from AA to BB-plus; class C, from A to BB-minus; and class D, from BBB to B-minus. Classes B, C, and D were removed from Rating Watch Negative. The downgrades were attributed to credit deterioration in the portfolio and underlying exposure to subprime RMBS. More than half, 51.6%, of the portfolio consists of subprime RMBS, while the remainder consists of alternative-A RMBS, 22.2%; prime RMBS, 7.1%; commercial MBS, 5.3%; commercial real estate CDOs, 4.8%; manufactured housing RMBS, 3.9%; commercial asset-backed securities, 2.4%; U.S. structured finance CDOs, 2.0%; and high-yield bond CDOs, 0.7%.

Five classes of notes issued by Acacia CDO 10 Ltd., a collateralized debt obligation linked to residential mortgage-backed securities, have been downgraded by Fitch Ratings. The downgrades in the cash flow structured finance CDO were as follows: class A-1, from AAA to B; class A-2, from AAA to CCC; class B, from AAA to CC; class C, from AA-minus to C; and class D, from BBB to C. All the downgraded classes were removed from Rating Watch Negative. The downgrades were attributed to "significant collateral deterioration" in RMBS. Nearly half, 48.3%, of the portfolio consists of prime RMBS, while the remainder consists of alternative-A RMBS, 29.4%; commercial MBS, 11.8%; subprime RMBS, 6.1%; and CDOs, 4.5%. The rating agency can be found online at http://www.fitchratings.com.

The Federal Agricultural Mortgage Corp., Washington, D.C., has announced a $475 million offering of guaranteed notes with a three-year maturity. The notes will be an obligation of M&I Marshall & Ilsley Bank collateralized by Farmer Mac-eligible agricultural real estate mortgage loans, Farmer Mac said. The government-sponsored enterprise can be found online at http://www.farmermac.com.

Mortgage servicing rights on $169 million of Freddie Mac, Fannie Mae, and Federal Home Loan Bank home loans are being sold by Mortgage Industry Advisory Corp., a New York City-based broker and provider of mortgage asset pricing services. MIAC said 99% of the loans are fixed-rate, with an average loan size of $98,274 and a weighted average interest rate of 5.97%. The delinquency ratio is 1.34% on the loans, which are backed by homes in Idaho. Written bids are requested by Aug. 25, and the seller would prefer a Sept. 30 sale date with a transfer of servicing completed by Nov. 1, MIAC said. MIAC can be found on the Web at http://www.servicing.com.

Hanover Capital Mortgage Holdings Inc., a New York-based real estate investment trust, has reported a net loss of $22.9 million ($2.66 per share) for the second quarter, compared with a loss of $11.4 million ($1.42 per share) a year earlier. The mortgage REIT attributed the loss partly to an increase in interest expenses connected to the conversion of the company's short-term revolving financing for its primary portfolio of subordinate mortgage-backed securities to a fixed-term financing. An increase in mark-to-market losses of mortgage assets (net of free-standing derivatives) also contributed to the loss, Hanover said. The company can be found online at http://www.hanovercapitalholdings.com.

Silver State Bancorp, Henderson, Nev., has announced a restatement of its second-quarter financial results that boosted its real-estate-related net loss from $62.7 million ($4.15 per share) to $73.2 million ($4.84 per share). The larger net loss stems from an increase in the company's provision for loan losses from $58.6 million to $69.1 million, which was attributed primarily to an updated appraisal on the collateral underlying one of Silver State's commercial land loans. In the second quarter of 2007, the company reported net income of $6.2 million ($0.44 per share). Silver State can be found online at http://www.silverstatebancorp.com.

Citing turmoil in the mortgage markets, Home Federal Bancorp Inc. of Louisiana, Shreveport, La., has announced the termination of a planned merger with First Louisiana Bancshares Inc., Shreveport. The mutual agreement to call off the planned merger stemmed from the termination of Home Federal's second-step conversion, under which the company was to convert from a mutual holding company to a stock holding company, Home Federal reported. "The ongoing problems in the residential mortgage lending market continue to depress the securities market for most financial institutions, which adversely affected our ability to complete the stock offering at the current pricing and valuation ratios," said Daniel R. Herndon, president and chief executive officer of Home Federal.