Servicing

Western companies such as Countrywide Financial Corp. and Wells Fargo & Co. lead the U.S. financial services industry in shareholder performance, according to an analysis released by Mercer Oliver Wyman, a risk management consulting firm.Research on risk-adjusted returns over the past five years shows that financial services companies headquartered on the West Coast and in states west of the Rocky Mountains have outperformed the rest of the U.S. industry by 60% since 2002, the firm reported. The West "substantially outperformed" the East on the firm's Shareholder Performance Index, with the West scoring a 141 and the East a 57, Mercer Oliver reported. "Though the technology industry captures most of the attention on the West Coast, our research shows that the region is building similar leadership in financial services," said Clarence Koo, managing director and head of Mercer Oliver's new San Francisco office. "As a group, Western financial firms lead the U.S. in terms of risk-adjusted shareholder performance."

Class B3 of Structured Asset Security Corp. residential mortgage-backed certificates, series 2005-S5, has been downgraded from CCC/DR2 to C/DR4 by Fitch Ratings.In addition, Fitch affirmed the ratings on 51 classes from four SASCO transactions. The downgrade was attributed to a deterioration in the relationship between credit enhancement and expected losses. The mortgage pool consists of conventional, fixed-rate, fully amortizing and balloon, second-lien residential mortgage loans. Fitch can be found online at http://www.fitchratings.com.

Seven certificates from two Countrywide securitizations of reperforming loans have been placed under review for possible downgrade by Moody's Investors Service.The affected classes from CWMBS Reperforming Loan REMIC Trust issues are as follows: series 2004-R1, classes 1B-3, 1B-4, 2B-3, and 2B-4; and series 2004-R2, classes B-2, B-3, and B-4. The review action was attributed to underperforming collateral and higher-than-expected losses. "Some of the unrated tranches have already experienced writedowns, which in turn have reduced the credit enhancement levels for the rated tranches that have a higher seniority," the rating agency said. The underlying collateral consists of reperforming loans insured by the Federal Housing Administration or guaranteed by the department of Veterans Affairs, virtually all of which were repurchased from Ginnie Mae pools.

AIM Investments, Houston, has announced that a proposed reorganization of AIM Select Real Estate Income Fund as an open-end fund has been approved by shareholders of the fund.The reorganization will become effective as of March 12, the company said. Shareholders of the closed-end fund will receive class A shares of the open-end fund, and for 12 months after the March 12 closing date those who redeem class A shares of the open-end fund received in connection with the reorganization will pay a 2.00% redemption fee, AIM said. The company can be found online at http://www.aiminvestments.com.

Foreclosure filings in Massachusetts reached a record high of 2,207 in January, more than double the 1,076 recorded a year earlier, according to ForeclosuresMass.com, a provider of foreclosure data based in Framingham, Mass.The company said lenders initiated foreclosure proceedings against 20,618 homeowners over the past 12 months, a 77% increase from the 12-month level recorded a year earlier. "The flood of foreclosures in Massachusetts is not only continuing, it has reached a new high," said Jeremy Shapiro, president and co-founder of ForeclosuresMass.com. ".... The fact that we are starting the year with the highest number of foreclosure filings we've ever recorded for a single month is more than significant -- it's ominous." The company can be found online at http://www.foreclosuresmass.com.

The stagnant residential production market is affecting loan purchases by Fannie Mae and Freddie Mac.In January, Fannie purchased $51 billion in mostly residential loans from its seller/servicers, a slight decline from the level recorded in the same month a year ago. Compared with December's level, though, Fannie's purchases fell 12%. Freddie acquired $44.7 billion in product during January, a 4% gain from that of a year earlier. In 2006 Fannie bought $614.7 billion in mortgages, Freddie $501.9 billion, for a combined $1.11 trillion, a 7% decline from that of 2005.

Fannie Mae executives said during a conference call Feb. 27 that the company's purchases of subprime credit quality loans and mortgage-backed securities may continue to grow.Fannie chief executive Daniel Mudd stressed that at year-end 2006, only about 0.2% of Fannie Mae's single-family mortgage credit book of business consisted of subprime mortgage loans or Fannie Mae MBS backed by subprime home loans. However, an additional 2% of the book of business consisted of private-label MBS backed by subprime home loans. Mr. Mudd said Fannie Mae will make prudent and incremental decisions about continuing to expand its subprime credit business. "I like where we are," he said. "We have enough engagement so far to be knowledgeable about the market, but we don't have so much that this is a major exposure on our books." He reported that cumulatively, the loan-to-value ratio on Fannie Mae's book of business is 55% and the average credit score is 721. Fannie can be found online at http://www.fanniemae.com.

Starting Sept. 1, Freddie Mac will stop purchasing subprime 2/28 ARM securitizations unless the loans are underwritten to the fully indexed rate and consideration is given to the borrowers' ability to pay taxes and insurance on their homes.The government-sponsored enterprise has been a major investor in subprime mortgage-backed securities, and it is changing its policies in response to regulatory and congressional pressures on the industry and the GSEs to clean up the underwriting of these subprime adjustable-rate mortgages, which are exhibiting extremely high default and foreclosure rates. Freddie also said it is developing subprime fixed-rate and hybrid ARM products that it will purchase for its mortgage portfolio. These subprime products will limit payment shock by offering reduced adjustable-rate margins, longer fixed-rate terms, and longer reset periods. In addition, the company will not purchase no-documentation loans. "The steps we are taking today will provide more protection for consumers and enhance the level of underwriting standards in the market," said Richard Syron, Freddie's chairman and chief executive officer. Freddie Mac current holds $185 billion in triple-A-rated subprime MBS in its $700 billion mortgage portfolio. The GSE can be found online at http://www.freddiemac.com.

Moody's Investors Service has downgraded one class of certificates and has placed under review for possible downgrade seven other classes from CDC Mortgage Capital Trust deals.The affected multiple originator transactions were issued in 2001, 2002, and 2003 and consist primarily of first-lien, adjustable- and fixed-rate subprime mortgages, according to Moody's. "The subordinate certificates are being downgraded or reviewed for possible downgrade based on the fact that existing credit enhancement levels are low given the current projected losses on the underlying pools," Moody's said. The downgrade affects series 2001-HE1, class B, which has seen its rating slip from B3 to Caa2. The review for possible downgrade affects the following classes: series 2002-HE1, class B; series 2002-HE3, class B-1; series 2003-HE1, class B-1; series 2003-HE1, class B-2; series 2003-HE1, class B-2; series 2004-HE1, class B-2; and series 2004-HE1, class B-3.

Two classes from Credit Based Asset Servicing and Securitization LLC series 2002-CB6 have been downgraded by Fitch Ratings, and two classes from C-BASS series 2002-CB5 have been placed on Rating Watch Negative.Class B-2 of series 2002-CB6 was downgraded from BBB-minus to BB-minus, and class B-3 was downgraded from BB to B-plus. Classes B-2 and B-3 of series 2002-CB5 were placed on Rating Watch Negative. In addition, Fitch upgraded 16 classes and affirmed the ratings on 236 classes from 31 C-BASS deals. The negative rating actions reflect a deterioration in the relationship between credit enhancement and loss expectations, the rating agency said.