Servicing

Guild Mortgage Co., San Diego, has announced the recent acquisition of Liberty Financial Group, a residential mortgage bank based in Bellevue, Wash. The terms of the transaction were not disclosed. Guild Mortgage was acquired in 2007 through a partnership between its senior management and that of McCarthy Capital, the company said. "McCarthy Capital's approach combines the stability we were looking for in a partner with the resources we needed for continued growth," said Mary Ann McGarry, Guild's president and chief executive officer. Liberty Financial originates nearly $1 billion of prime home loans annually via branches located mainly in Washington and Colorado, Guild reported. Guild Mortgage can be found on the Web at http://www.guildmortgage.com.

Classes B-3 and B-4 of Countrywide mortgage pass-through certificates series 2003-44 have been placed on Rating Watch Negative by Fitch Ratings. Fitch also removed class A-3 of the deal and class 1-A-2 of series 2003-1 from Rating Watch Negative and affirmed the ratings on 32 classes in the two transactions. The collateral consists of mixed-term fixed-rate prime mortgages.

Fannie Mae has priced $2.25 billion (82 million shares) of its common stock (CUSIP 313586109) at $27.50 per share, and $2.25 billion (45 million shares) of 8.75% noncumulative mandatory convertible preferred stock, series 2008-1, at a liquidation preference of $50 per share.Each share of the preferred stock (CUSIP 313586745) will automatically convert on May 13, 2011, into 1.5408 to 1.8182 shares of Fannie's common stock, the company said. At the election of the holder, each share of the preferred stock may be converted at any time into 1.5408 shares of Fannie's common stock. Fannie Mae has granted the underwriters an option to buy up to 12.3 million additional shares of common stock and up to 6.75 million additional shares of the preferred stock. Lehman Brothers Inc., J.P. Morgan Securities Inc., and Citigroup Global Markets Inc. are the joint book-running managers for the common stock offering, and J.P. Morgan, Lehman, and Banc of America Securities LLC are joint book-running managers for the preferred stock offering.

Fremont General Corp., Brea, Calif., has announced an agreement under which its bank subsidiary will sell the remaining mortgage servicing rights on its $12.2 billion servicing portfolio to Litton Loan Servicing LP. The terms of the transaction were not disclosed. Under the agreement, Litton will pay Fremont Investment & Loan (the bank subsidiary) for the MSRs and reimburse FIL for accrued and unpaid servicing fees and the unreimbursed delinquency and servicing advances made by FIL. The agreement does not include the sale of FIL's servicing platform, and Fremont said it plans to wind down its remaining loan servicing operation in Ontario, Calif. The company can be found on the Web at http://www.fremontgeneral.com.

American International Group Inc., New York, has reported a net loss of $7.81 billion in the first quarter, and its United Guaranty mortgage insurance subsidiary took an operating loss of $352 million due to housing and capital market disruptions. Analysts at Fitch Ratings, which downgraded AIG's issuer default and senior debt ratings from AA to AA-minus in response to the earnings results, said they believe AIG was primarily exposed to housing finance-related risks through $61 billion of structured finance collateralized debt obligations backed mainly by subprime U.S. residential mortgage-backed securities in its $469 billion portfolio of notional credit derivatives. AIG said the operating loss in its MI unit reflected "increased losses incurred in both the domestic first- and second-lien businesses" and occurred despite a 14.3% jump (from the level recorded a year earlier) in domestic first-lien net premiums written during the quarter. AIG also announced the commencement of offerings of common stock and equity units totaling $7.5 billion. If the company completes the capital raise successfully, Fitch said it plans to remove AIG's ratings from Rating Watch Negative and affirm them with a negative outlook. Fitch plans to lower AIG's ratings by one notch if the capital raise is not successful.

Six weeks after announcing its intention to pare $45 billion in mortgage assets, Citigroup said Friday that it will shed $500 billion in assets overall. No details were given at deadline time. The sales were expected to occur in "nonlegacy" businesses outside Citi's core consumer franchise, but also might entail more mortgage-related cuts. Meanwhile, Citigroup said May 7 that it would close mortgage offices in Orange and Irvine, Calif., eliminating 419 jobs, as part of a previously announced consolidation of its home lending businesses amid the housing and credit crisis. According to The Orange County Register, Citigroup is shutting down most of Argent Mortgage, which it bought from billionaire Roland Arnall last year. (Mr. Arnall died this spring.) Overall, Citi is cutting 1,860 jobs nationwide and keeping just 70 sales positions.

The House of Representatives has passed a Federal Housing Administration refinancing bill by a 266-154 vote, and attention now turns to the Senate Banking Committee, which is expected to mark up a similar foreclosure prevention measure soon. It is estimated that the House-passed bill (H.R. 3221) could refinance up to 500,000 borrowers with "underwater" mortgages into FHA-insured loans. But the bill provides little incentive for investors/servicers to participate, because the principal amount of the loan must be written down to 85% of the current appraised value and the noteholder does not share in any upside if property values increase. H.R. 3221 is a legislative package that also includes two other bills the House passed last year -- an FHA modernization bill and a government-sponsored enterprise bill to strengthen supervision of Fannie Mae and Freddie Mac. The House also passed and sent to the Senate a housing tax bill that contains a $7,500 tax credit for first-time homebuyers and $10 billion in revenue bonds that can be used to refinance subprime borrowers. Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., is planning to mark up an FHA refinancing bill and a GSE reform bill before the Memorial Day recess.

Class B-2 of Morgan Stanley mortgage pass-through certificates series 2002-AM3 has been downgraded from CC/DR2 to C/DR4 by Fitch Ratings. Fitch also affirmed the ratings on five other classes in the transaction and removed class A-2 from Rating Watch Negative. The collateral consists of fixed- and adjustable-rate subprime mortgages.

Thirteen classes in four scratch-and-dent mortgage-backed securities transactions issued by Credit Suisse Mortgage Corp. Trust have been downgraded by Fitch Ratings. Fitch also affirmed the ratings on 29 classes from seven CSMC and CSFB scratch-and-dent issues.

Fitch Ratings has downgraded 30 classes of notes from eight collateralized debt obligations backed primarily or partly by subprime residential mortgage-backed securities. The affected securities are: seven classes issued by Jupiter High-Grade CDO III Ltd.; five classes issued by Davis Square Funding III Ltd.; four classes issued by Pacific Bay CDO Ltd.; four classes issued by South Coast Funding II Ltd.; three classes issued by South Coast Funding VI Ltd.; three classes issued by Grenadier Funding Ltd.; three classes issued by Davis Square Funding II Inc.; and one class issued by Millstone Funding Ltd. Fitch attributed the downgrades to "significant collateral deterioration" in the portfolios' subprime RMBS and, in some cases, alternative-A RMBS, commercial MBS, prime MBS, and structured finance CDOs with underlying exposure to subprime RMBS.