Servicing

Fannie Mae will issue its 2005 annual 10-K financial report in August and its 2006 annual report by the end of this year, according to the mortgage company's chief financial officer.CFO Robert Blakely made the announcement during a presentation at a Credit Suisse financial services forum. The new guidance indicates that the government-sponsored enterprise is making more progress in correcting its accounting systems. Fannie Mae vice president Thomas Lund told the investors that market fundamentals have become very positive for the GSE because it stayed away from the subprime market and other risky products. Mr. Lund said he expects Fannie's mortgage securitization business to achieve steady growth and increased market share. "We are confident in our ability to grow faster than the market," he said.

Fannie Mae is working on new structures that would allow the mortgage giant to guarantee and securitize mortgages it likes (in terms of pricing and risk) and sell off the pieces it doesn't like to other investors."We tested our first structure to transfer risk to other market participants who have a different view of risk than us," Fannie executive vice president Thomas Lund told a Credit Suisse financial services forum Feb. 8. "These structures will allow Fannie to serve its customers and participate in more transactions," he said, and it works with many products, including subprime mortgages. The EVP for single-family mortgages noted that Fannie started purchasing subprime loans from a "very limited" number of its lenders last year. "We began to dip our toe in the water of subprime whole loans to determine if we could bring value to that segment of the market," Mr. Lund said. He indicated that Fannie wants to increase its involvement in the subprime market. The government-sponsored enterprise can be found on the Web at http://www.fanniemae.com.

Five classes from Ameriquest Mortgage Securities Inc. home equity issues have been downgraded by Fitch Ratings.The downgrades were as follows: series 2002-4, class M-4, from BB-minus to B; series 2003-AR2, class M-4, from BB-minus to B; and series 2003-1, class MF-3, from BBB-minus to BB, class MV-3, from BBB-minus to BB, and class M4, from BB to B. In addition, Fitch upgraded 18 classes and affirmed the ratings on nearly 300 classes from 44 Ameriquest deals. The downgrades were attributed to a deterioration in the relationship between credit enhancement and expected losses. Fitch can be found online at http://www.fitchratings.com.

The Mortgage Partnership Finance program of the Federal Home Loan Banks has announced a new partnership with the U.S. Department of Agriculture's Rural Development Program.Under the arrangement, approved FHLBanks participating in the MPF program can purchase RHS Section 502 government-guaranteed loans from qualified members, including commercial banks, thrifts, credit unions, and insurance companies. USDA Rural Development Guaranteed Loans are offered to qualifying low- and moderate-income families to purchase or refinance homes in rural areas with a population of less than 10,000 and non-metropolitan communities with populations of 10,000-25,000, the MPF reported. The partnership enables the FHLBank of Chicago, which pioneered the MPF program, and the FHLBank of Pittsburgh to buy such loans from their members as "a competitive alternative to the secondary mortgage market." The MPF program can be found online at http://www.fhlbmpf.com, and the Rural Development Program can be found at http://www.rurdev.usda.gov.

Prepayment rates for 30-year mortgages in Fannie Mae and Freddie Mac mortgage-backed securities fell modestly in January, driven by a seasonal decline in turnover that offset a 15-basis-point rally in mortgage rates, according to the Bear Stearns Prepayment Commentary.The aggregate speed on 30-year Fannie Maes was a constant prepayment rate of 11.5 CPR, down from 12.0 CPR in December, compared with 10.2 CPR for comparable Freddie Macs, down from 11.1 CPR in December, said Bear Stearns analysts Dale Westhoff and V.S. Srinivasan. "The biggest surprise in today's numbers was the decline in prepayments in higher coupons in the face of a significant rally in mortgage rates," the analysts said, noting that the rally exposed mainly newly originated mortgages backing 6.0% and 6.5% coupons. "These borrowers have seen little or no home price appreciation, reducing the cash-out incentive that has been such a critical component to the prepayment response in recent years." Meanwhile, aggregate speeds for 30-year Ginnie Mae collateral declined by 9% in January. Bear Stearns can be found online at http://www.bearstearns.com.

Anticipating a major spike in subprime second-lien delinquencies, HSBC Holdings, London, on Wednesday increased the bad-debt reserve on its U.S. B&C unit to $10.56 billion -- a stunning 125% increase from the reserve level on Sept. 30.During a Feb. 7 conference call, HSBC officials in London noted that adjustable-rate mortgage resets are set to explode -- and that most of the anticipated damage will come from residential loans funded through the wholesale/broker division of HSBC Financial, Prospects Heights, Ill. (the old Household Finance). In response to the deteriorating situation, HSBC officials signaled that the channel will be scaled back significantly, focusing only on broker-originated loans that have cross-sell or emerging market opportunities. HSBC bought Household Finance almost four years ago, agreeing to pay $14 billion for the business. In a December conference call with analysts, HSBC said it had increased the bad-debt reserve on its subprime business to $8.8 billion. According to a third-quarter Securities and Exchange Commission filing by HSBC Finance (the unit that houses HSBC Financial, the lender), the reserve was $4.64 billion. According to the Quarterly Data Report, HSBC services $51 billion in subprime mortgages, ranking seventh nationwide. In the third quarter, HSBC funded $11.7 billion in subprime loans, ranking third. (For more details, see the Feb. 12 issue of National Mortgage News..)

Classes B-1 and B-2 of First Franklin Mortgage Loan Trust, series 2003-FFB, have been placed under review for possible downgrade by Moody's Investors Service.The rating actions were based on low credit enhancement levels in comparison with loss projections, Moody's said. The overcollateralization amount has declined below the required level, and mortgage insurance does not cover all the losses, "leaving the subordinate tranches with eroding credit protection," the rating agency said. The subprime deal consists of closed-end, fixed-rate, second-lien residential mortgage loans. Moody's can be found online at http://www.moodys.com.

In the fourth quarter, 84% of the homeowners who refinanced their homes got a mortgage at least 5% larger than the original loan, down from 87% in the previous quarter, according to Freddie Mac.However, the percentage was higher than the 81% level recorded a year earlier, the government-sponsored enterprise said in its quarterly refinance review. "Falling mortgage rates encouraged some people to refinance to lower their payments -- for example, if they had an adjustable-rate mortgage that was scheduled to reset soon," said Frank Nothaft, Freddie Mac's chief economist. "But the primary driver of refinance continues to be equity extraction." Freddie Mac can be found on the Web at http://www.freddiemac.com.

Two classes of Bank of America Alternative Loan Trust mortgage pass-through certificates have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are class 15-B5 of series ALT 2004-9 pool 4 and class 15-B5 of series ALT 2004-10 pool 3. Fitch also affirmed the ratings on 324 classes from 14 BoA ALT transactions. The negative rating actions were based on a deterioration in the relationship between credit enhancement and loss expectations, Fitch said.

Mortgage Lenders Network USA, Middletown, Conn. -- once a top-15 subprime lender -- filed for Chapter 11 bankruptcy protection on Feb. 5, a spokesman for the company has confirmed to MortgageWire.The filing comes a few days after MW broke the news that Marathon Asset Management, New York, which had considered investing in the struggling company, had pulled out of talks with the nondepository. At deadline time MLN was preparing a statement. MLN recently began cutting workers in its servicing department. In late December, faced with a liquidity crisis, it closed the wholesale unit that accounted for 90% of its production. It has since been barred from funding new loans by several states. Its warehouse providers have included Merrill Lynch and RFC-GMAC. It owns roughly $17 billion in housing receivables. MLN can be found on the Web at http://www.mlnapproves.com.