Servicing

Former Housing and Urban Development Secretary Henry Cisneros, who recently resigned from the board of Countrywide Financial Corp., plans on selling his holdings in the troubled lender -- all 25,337 shares worth.According to a Form-4 filed with the Securities and Exchange Commission, Mr. Cisneros signaled his intention to sell his stake in the company beginning Nov. 6. (In trading Nov. 19, Countrywide's shares reached a new 52-week low of $10.25.) Meanwhile, according to an investment newsletter called tickerspy.com, investor George Soros now owns 1.8 million shares in Countrywide. On Monday it was also revealed that Countrywide is paying more to insure the debt of its home loan unit. That cost jumped 30%, or 787 basis points ($787,000 per year for five years to insure $10 million in debt), according to Markit Intraday.

Home values nationwide have declined 5.7% during the past 12 months, according to Zillow's Q3 2007 Home Value Report, leaving many recent homebuyers with negative equity.Zillows, an online real estate data provider, estimates that 16% of homeowners who bought in the last year and almost 18% who bought two years ago have current home values that are below the original mortgage amount. By comparison, fewer than 2% of owner who bought a home five years ago have seen their equity slide into negative territory, Zillows said. Markets with the greatest proportion of negative equity include California's Central Valley, parts of Florida and Las Vegas, Zillows said.

Thrift institutions originated 30% of all 1-4 family mortgages in the third quarter but their earnings tumbled to $704 million, down from $3.83 billion in second quarter, according to the Office of Thrift Supervision.OTS officials blamed the 82% drop in earnings mainly on secondary market conditions that forced 10 thrifts recognize on losses on their mortgage pipelines and reduced gains on sales. Portfolio lenders did not fairly well in the third quarter. Federally chartered thrifts also increased the loan provisions to 0.92% from 0.38% in the second quarter as charge-offs rose 8 basis points to 0 .43% Charge-offs on single-family loans jumped to $569.5 millions from $312.6 million the second quarter. OTS officials expect charge-offs to increase in coming quarters. Meanwhile, thrifts originated $165.1 billion in 1-4 family mortgages, down 5% from the second quarter, but up 10% from a year ago. Refinancings accounted for 44% of loan production.

The C-BASS-owned Fieldstone Mortgage of Maryland - which ceased funding loans in late July - has closed its doors and is no longer taking any applications, according to a posting on its website."We will continue to work with customers and brokers in providing them with information," Fieldstone said. A non-prime lender, Fieldstone ranked 26th among subprime funders last year, according to the Mortgage Industry Directory. The New York-based C-BASS, which is owned by two publicly traded mortgage insurers, has troubles of its own. In July it was hit by what its parent companies called an "unprecedented amount" of margin calls. In the wake of the margin calls MGIC and Radian wrote down their interest in C-BASS by $1 billion. The two MIs tried to sell some of C-BASS's assets, including its Litton Loan Servicing unit, but a deal with Goldman Sachs fell apart.

The Office of Thrift Supervision is refining a policy position on loan modifications that would compensate servicers and allow adjustable-rate subprime borrowers to stay at the initial interest rate for 36 months if they can't afford their payments once the mortgage resets.OTS director John Reich has discussed the proposal with Treasury Department officials and he believes a three-year modification period is consistent with current servicing contracts and could be used by all servicers - not just thrift institutions. Mr. Reich told reporters he is "not comfortable" with proposals that call for converting 2/28 ARMs to 30-year fixed rate mortgages. Under his proposal, borrowers that are current and borrowers that became delinquent because of a reset could be eligible for a loan modification. However, each eligible borrower would have to make their monthly payment for six months before the modification becomes permanent. Servicers would be paid $500 for each loan modification Mr. Reich plans to discuss the loan modification proposal at OTS' housing conference on Dec. 3 at the National Press Club in Washington.

Freddie Mac officials, noting that they are being "conservative" in their loss estimates, on Tuesday forecasted $16.4 billion in future "credit costs" to cover writedowns but believe the actual loss experience will be $10 billion to $12 billion.Discussing its poor third quarter performance, company officials predicted dismal fourth quarter results as well. It also was hinted that Freddie tried to obtain a regulatory waiver on maintaining a 30% excess capital ratio but was rejected by the Office of Federal Housing Enterprise Oversight. All the bad news was not what stock analysts wanted to hear. During the conference call, company CEO and chairman Richard Syron suggested that a preferred stock offering to bolster its capital position was imminent.

Stung by declining home values and subprime delinquencies, Congressionally chartered mortgage giant Freddie Mac posted a $2 billion loss in the third quarter, noting that it may raise additional capital in "the very near term" so it can meet a 30% minimum capital standard. Early Tuesday morning it was unclear how much of its 3Q loss is directly tied to markdowns on the value of its $120 billion subprime portfolio. It experienced GAAP mark-to-market losses of $3.6 billion in the quarter, which includes $2.3 billion in credit items and $1.5 billion in interest-rate items. "Weakening house prices and deteriorating credit have hurt Freddie Mac's results, as well as those of other participants in the mortgage market," said Buddy Piszel, chief financial officer. "You can see the impact of these trends in our credit results and throughout our financial statements. Year-to-date, we have recognized $4.6 billion in net credit-related items on a pre-tax basis."

Fannie Mae has priced an offering of $500 million of noncumulative, perpetual, fixed-rate preferred stock.The 20 million shares of series R stock (CUSIP 313586760) have a stated value of $25 per share, with an annual dividend rate of 7.625%. Fannie Mae will have the option to redeem all or part of the series R preferred stock on or after Nov. 21, 2012. Lehman Brothers Inc. and Morgan Stanley are the lead underwriters of the issue, Fannie Mae said.

The long-term issuer default ratings of Fulton Financial Corp., Lancaster, Pa., and certain affiliates have been downgraded from A to A-minus by Fitch Ratings, which cited early payment defaults on 80/20 piggyback mortgage loans originated by Fulton's Resource Bank subsidiary.The short-term ratings of Fulton and its affiliates were affirmed at F1, and the rating outlook is stable. Fitch said it expects "continued pressure on earnings in tandem with the likelihood of further increases in nonperforming assets." Resource Bank had been originating piggyback, low-documentation loans through a national broker network, and investors began requesting that the bank repurchase the loans in the first quarter due to early payment defaults, Fitch reported. The rating agency can be found online at http://www.fitchratings.com.

Meanwhile, Marshall & Ilsley Corp., Milwaukee, has reported that its total credit exposure to Franklin Credit Management and a subsidiary stood at $282 million as of Oct. 31, and M&I said any losses related to that exposure are not expected to be material to its financial results.M&I said all its loans to Franklin and the subsidiary, Tribeca Lending Corp., were current and performing as of Oct. 31. Of the mortgage pools securing M&I's loans to Franklin, more than half of approximately $123 million originated since 2005 are current and performing, and "any losses imbedded in the remaining amount are not expected to be material to M&I's financial results," the company said. M&I can be found on the Web at http://www.micorp.com.