Servicing

Residential Capital LLC, the Minneapolis-based holding company for GMAC's residential lending affiliates, has extended the early tender time for its previously announced cash tender offer for up to $750 million in aggregate principal amount of debt securities.ResCap said the new early tender time is 5 p.m. EST on Dec. 12 (unless further extended by ResCap). Holders must validly tender their notes prior to the early tender time in order to be eligible for the early tender premium of $30 per $1,000 principal amount of notes. The tender offer will expire at midnight Eastern time on Dec. 19. ResCap can be found on the Web at http://www.rescapholdings.com.

Fannie Mae has priced a $7 billion offering of 8.25% noncumulative, perpetual, fixed-to-floating-rate preferred stock.The 280 million shares of Series S stock (CUSIP 313586752) have a stated value of $25 per share, the government-sponsored enterprise said. The stock will have a fixed annual dividend rate of 8.25% from the issuance date to Dec. 31, 2010. Thereafter, the dividend rate will reset quarterly, with dividends accruing at 7.75% or the three-month London interbank offered rate plus 4.23%, whichever is greater. Fannie Mae will have the option to redeem all or part of the Series S preferred stock on Dec. 31, 2010, and on each fifth anniversary thereafter, at the redemption price of $25 per share plus accrued dividends. "We saw exceptional investor demand for this preferred offering," said David C. Benson, senior vice president and treasurer. The issuance "completes our previously announced capital raising program," he said. Lehman Brothers and Merrill Lynch & Co. are the joint lead underwriters of this issue. Fannie Mae can be found online at http://www.fanniemae.com.

Linda Remsberg, president and chief executive officer of NoteWorld LLC, Tacoma, Wash., has acquired the company from Credit-Based Asset Servicing and Securitization LLC, according to NoteWorld, a servicer of seller finance loans.The terms of the transaction were not disclosed. C-BASS acquired NoteWorld in 1998. "While we have been grateful for the years of ownership by C-BASS, the recent turmoil in the market and the opportunity for growth in seller finance has opened up the opportunity for an individual to own the organization," Ms. Remsberg said. Ms. Remsberg founded her own company in 1983, which developed and sold software to title and escrow companies. NoteWorld, which also services personal debt escrows and buys retail seller finance notes, can be found on the Web at http://www.noteworld.com.

Meanwhile, Fitch Ratings responded favorably to the securitization industry's loan modification plan backed by the Bush administration, declaring that it can help reduce the risk of principal loss on subprime residential mortgage-backed securities.Under the voluntary program, mortgage servicers can identify loans that are "good candidates for refinancing" as well as loans that "might be eligible for a 'streamlined' modification process" consisting of a five-year rate freeze, Fitch noted. "Fitch Ratings believes that on balance, by mitigating the impact of [adjustable-rate mortgage] resets on borrower default rates, the framework can help to reduce the risk of principal loss on senior subprime RMBS," the rating agency said. "Increased refinancing opportunities via [the Federal Housing Administration] and other programs are also important to stabilizing default rates. The implications for subordinated RMBS classes are unclear, as they may be exposed to a complex interaction of variables that can be difficult to analyze." Fitch can be found online at http://www.fitchratings.com.

Loan modification plans that would simply freeze interest rates on some U.S. subprime mortgage loans may impair the ratings of certain residential mortgage-backed securities, according to Standard & Poor's.In a report outlining its views on a rate freeze, S&P said it supports "appropriate loss mitigation strategies" to prevent foreclosures, but that some loan modification proposals may have negative effects. "By extending the initial interest rate that homeowners paid during the fixed-rate period of their hybrid ARM loan terms, the potential for payment shock may be mitigated, thereby potentially reducing the risk of default," S&P said. "However, there may be a corresponding reduction in excess spread that was initially incorporated into our ratings analysis.... [which] may offset the benefits of lower defaults, resulting in diminished investor protection." Loan modifications may also discourage investors from participating in the first-lien subprime securitization market by reducing the payments they receive, S&P said. "The consequences of declining investor participation include reduced capital and liquidity available for homeowners and lenders, which may negatively affect home ownership rates and borrowing opportunities to creditworthy borrowers," S&P said. The rating agency can be found online at http://www.standardandpoors.com.

To deal with a large volume of loan modifications, the Mortgage Bankers Association is asking the Financial Accounting Standards Board for relief from its rules for evaluating credit impairment on hundreds of thousands of subprime adjustable-rate mortgages.The MBA has endorsed President Bush's plan to freeze the resets on subprime ARMs. However, its members maintain that they don't have the systems capacity to evaluate loan impairment under Financial Accounting Standard No. 114 on a loan-by-loan basis and would like to use FAS 5 instead. "FAS 5 provides for a cost-effective approach to accurately measuring probable credit losses on large volumes of loans, which is consistent with the objective of a loan modification, which is to reduce the prospect of future credit losses," the MBA says in a letter to FASB. Separately, the Internal Revenue Service has issued a ruling that it will not challenge the tax status of real estate mortgage investment corporations if servicers follow the American Financial Services guidelines for freezing resets on subprime ARMs. The MBA can be found online at http://www.mortgagebankers.org.

Employment in the mortgage industry appeared to stabilize in October as lenders cut their work force by 1,600 positions after purging their payrolls of 25,600 full-time employees in September.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector declined from 403,100 in September to 401,500 in October. Since February (the high point in mortgage employment this year), the industry's work force has been reduced by 18%, and 88,300 employees have lost their jobs. There is a one-month lag in breaking out the mortgage banker/broker sector data. But Friday's jobs report points to more job losses when next month's report is released. BLS acting Commissioner Philip Rones said employment in credit intermediation declined by 13,000 in November, "reflecting weakness in housing and mortgage lending." The BLS can be found online at http://stats.bls.gov.

Two classes from Deutsche ALT-A Securities Mortgage Loan Trust 2006-AR1 have been downgraded by Fitch Ratings and removed from Rating Watch Negative.Class B-3 was downgraded from BB to B, and class B-4 was downgraded from B to C/DR4. Fitch also placed class B-2 on Rating Watch Negative and affirmed the ratings on three other classes in the deal. The downgrades resulted from a deterioration in the relationship between credit enhancement and expected losses, the rating agency said. The collateral consists of first-lien, adjustable-rate residential mortgage loans.

Three classes from two issues of Truman Capital mortgage-backed securities have been downgraded by Fitch Ratings.The downgrades were as follows: series 2002-1, class M-2, from BBB-plus to BB, and class B, from CC/DR4 to C/DR5; and series 2002-2, class M-2, from BBB-minus to BB-minus. Fitch also affirmed the ratings on three other classes in the two deals. The downgrades resulted from a deterioration in the relationship between credit enhancement and expected losses, the rating agency said. The collateral consists of first- and second-lien residential mortgage loans.

Redwood Trust Inc., Mill Valley, Calif., has announced the sale of approximately 4.1 million shares of common stock through a stock purchase and dividend reinvestment plan for net proceeds of $122.5 million."The recent dislocations in the residential mortgage market have strengthened our competitive position and brought about some welcome changes in asset pricing and the credit quality of newly issued mortgages," said Marty Hughes, Redwood's chief financial officer. "After several years of restrained growth, we are now finding attractive prime residential and other investment opportunities." He said the additional equity will allow the company to take advantage of such investment opportunities. Redwood can be found on the Web at http://www.redwoodtrust.com