Servicing

Prepayment rates for 30-year mortgages in Fannie Mae mortgage-backed securities rose by 10% in December, driven by stronger-than-expected turnover, according to Bear Stearns & Co.The aggregate speed on 30-year Fannie Maes was a constant prepayment rate of 12.0 CPR, up from 10.9 CPR in November, said Bear Stearns analyst Dale Westhoff. The aggregate speed for Freddie Mac 30-year collateral rose from 10.3 CPR in November to 11.1 CPR in December. The speeds of discount coupons rose 5%-7% despite slowing seasonal factors, but these faster-than-expected speeds do not necessarily suggest a stronger housing market, according to Mr. Westhoff. He said sellers have become more flexible on asking prices since the summer of 2006. "As the housing market goes through this price discovery process, we are likely to see some rebound in home sales that counter seasonal effects," the analyst said. Meanwhile, aggregate speeds for 30-year Ginnie Mae collateral remained nearly unchanged in December. Bear Stearns can be found online at http://www.bearstearns.com.

A New York law firm says it has "commenced" a shareholder lawsuit against Countrywide Financial Corp., but so far there is no evidence a lawsuit has been filed.As previously reported, Stull, Stull & Brody alleges that certain Countrywide executives and directors backdated and "manipulated the prices of stock option grants." But Countrywide officials have not seen a complaint, and attorneys at the law firm have not responded to inquiries about the supposed filing. "The company has not seen a copy of any lawsuit brought by Stull, Stull and Brody, and we generally do not comment on pending litigation matters," Countrywide said in a statement. It added: "However, we believe the allegations laid out in the news release to be improper and lacking any merit and if the suit moves forward we will defend against it vigorously." The publicly traded company, based in Calabasas, Calif., can be found online at http://www.countrywide.com.

Freddie Mac expects to post a loss for the third and fourth quarters of 2006 despite strong results in the first half of the year, according to the company.Freddie Mac estimated that net income will total $2.5 billion for the first nine months of 2006, up from $1.4 billion for the first nine months of 2005. But the company estimated that it will report a loss of about $550 million for the third quarter of 2006. A 50-basis-point decline in long-term interest rates during the third quarter reversed previous mark-to-market gains in its derivative and credit guarantee portfolios, the government-sponsored enterprise said. Those conditions persisted in the fourth quarter, the company noted. In a conference call with investors and analysts, chief executive officer Richard Syron said Freddie Mac has previously warned investors that changes in accounting policy will add "volatility" to quarterly results. Freddie Mac estimated that its share of the GSE guarantee market slipped to 43% through November 2006, down from 45% in the same period of 2005. Mr. Syron struck a positive tone when talking about housing markets, saying he believes that conditions are starting to improve. The GSE can be found online at http://www.freddiemac.com.

Mortgage lenders cut 2,900 full-time employees from their payrolls in November, wiping out a 2,500 increase in October that established a new high for jobs in the mortgage industry.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banking/broker sector declined from 507,000 in October to 504,100 in November. Housing economists have been expecting a cutback, with single-family originations trending down during the second half of last year. Freddie Mac estimates that originations of conventional mortgages dropped from $715 billion in the second quarter to $597 billion in the fourth quarter. For the whole year, originations totaled $2.65 trillion, compared with $3.17 trillion in 2005, according to a December economic outlook report by the secondary-market agency. The Bureau of Labor Statistics can be found online at http://stats.bls.gov.

Class M-3 of Soundview Home Equity Loan Trust 2001-2 has been downgraded from Baa2 to Ba2 by Moody's Investors Service.The downgrade was attributed to low credit enhancement levels relative to expected losses. "The collateral has taken losses, and the pipeline loss could cause continual erosion of the overcollateralization," Fitch said. The transaction is backed by first- and second-lien, fixed- and adjustable-rate subprime mortgage loans. The rating agency can be found online at http://www.fitchratings.com.

The servicer ratings of Mortgage Lenders Network USA Inc. have been placed on watch for possible downgrade by Moody's Investors Service.Moody's said the action was due in part to "MLN's recent announcement that it has ceased funding wholesale loans, has laid off a portion of its staff, and has placed on temporary furlough a substantial portion of its remaining staff." MLN is currently rated SQ3 as a primary servicer of prime, subprime, and second-lien mortgage loans. The rating scale ranges from SQ1 (strong) to SQ5 (weak). The rating agency can be found online at http://www.moodys.com.

Foreclosures climbed sharply in 2006 as a result of several factors, including the growth of subprime mortgages, rising energy costs, and slowing home sales, according to Default Research Inc., a foreclosure research company based in Mt. Pleasant, Pa.The largest increase was recorded in Nevada, where foreclosures skyrocketed 166%, the company reported. Serdar Bankaci, president and chief executive officer of Default Research, said the company processed more than 250,000 pre-foreclosures last year. "You can expect to see the foreclosure rate continue to increase in 2007 -- not as much as [in] 2006 -- but there will be excellent opportunities to help homeowners in distress and turn a profit, too," he said. Default Research can be found online at http://www.defaultresearch.com.

New Century Mortgage Corp., a subsidiary of Irvine, Calif.-based New Century Financial Corp., has completed the purchase of certain assets (and the assumption of certain lease obligations) of Irwin Mortgage Corp.'s servicing operations, according to New Century Financial.The terms of the transaction were not disclosed. The operation will be managed by Carla Wise, and the servicing employees of Irwin Mortgage, based in Fishers, Ind., will join New Century Mortgage, New Century said. "This acquisition will allow us to increase scalability, reduce servicing costs, and improve time zone management, while also expanding our expertise in servicing alt-A and prime mortgage loans," said Kevin M. Cloyd, executive vice president of New Century Financial. The companies can be found on the Web at http://www.ncen.com and http://www.irwinfinancial.com.

Subprime lender Mortgage Lenders Network, Middletown, Conn., says it is involved in "strategic negotiations" with several Wall Street firms concerning the sale of its wholesale operation.Wholesale production accounts for 75% of the company's originations, according to National Mortgage News. The announcement concerning its wholesale network came on Tuesday, after the firm failed to return telephone calls placed to it by several media outlets, including MortgageWire. The tight-lipped MLN would only say -- via a news release -- that it has "temporarily" discontinued funding loans through the wholesale channel. For now, it remains a retail lender only. It also has a $17.8 billion nonconforming servicing portfolio, ranking 18th nationwide. Sources said the company has been hit hard by buyback requests. Its warehouse providers, sources said, include Merrill Lynch and GMAC-RFC.

Two classes of Homestar Mortgage Acceptance Corp. asset-backed pass-through certificates, series 2004-2, have been downgraded by Moody's Investors Service, and one class from series 2004-3 has been placed on watch for possible downgrade.Class M-4 of series 2004-2 was downgraded from Baa1 to Baa3, and class M-5 was downgraded from Baa2 to B1. Class M-5 of series 2004-3 was placed on watch for possible downgrade. The rating actions were based on deteriorating credit enhancement, Moody's said. "While the collateral is performing better than expected, the overcollateralization has been falling significantly below its target as a result of lower-than-expected excess spread levels," the rating agency said. The deals are backed by Homestar-originated collateral consisting primarily of alternative-A loans, with a small percentage of subprime loans. Moody's can be found online at http://www.moodys.com.