Servicing

GMAC Mortgage, the nation's second-largest subservicer, has realigned subservicing responsibilities within its business development division.As part of the new leadership, Ray Morris has been appointed vice president of sales and marketing. Ty Miller will serve as vice president for client relationship management. For the past year, Mr. Morris served as director of strategic partnerships at GMAC, where he was responsible for establishing key subservicing accounts. In his new position, Mr. Morris will lead the team that is developing all third-party subservicing arrangements. Mr. Miller will lead GMAC Mortgage's CRM team, managing daily interaction with subservicing clients. Mr. Miller has been with GMAC Mortgage for seven years, serving most recently as vice president for sales and prior to that as site director for default administration. GMAC's subservicing portfolio exceeded $54.2 billion at the end of the third quarter.

The AA-minus risk-to-the-government, subordinated debt, and preferred stock ratings on Fannie Mae have been affirmed by Standard & Poor's Ratings Services and removed from CreditWatch.The outlook is negative. "The rating action reflects Fannie Mae's progress in its accounting restatement process and the build-up of a stronger capital position," S&P said. The rating agency said Fannie has maintained a mandated 30% capital surplus above its regulatory minimum capital for four consecutive quarters, chiefly through management of balance sheet growth and lower returns to shareholders. S&P noted that Fannie Mae has now filed its 2004 annual report, including restatements, with the Securities and Exchange Commission and has made "extensive changes" in its senior management and board over the past two years. Fannie Mae's recent SEC filing is a "significant milestone," S&P said, but added that "we continue to view the pervasiveness of the deficiencies discovered in its internal controls over financial reporting as a concern" and noted that Fannie's 2005 and 2006 quarterly financial statements remain outstanding. S&P can be found online at http://www.standardandpoors.com.

Class M-2 of Structured Asset Securities Corp. mortgage-backed securities, series 2003-25XS, has been downgraded from A2 to Baa2 by Moody's Investors Services.Moody's also confirmed the rating on one other class in the transaction. The downgrade was attributed to realized losses (including loss severities) and projected losses. The underlying collateral consists of conventional fixed-rate, fully amortizing and balloon, residential mortgage loans.

Class B-1 of Metropolitan Mortgage & Securities Co.'s series 1999-A securitization has been downgraded from B to CCC by Fitch Ratings and assigned a Distressed Recovery rating of DR2.In addition, two classes in Metro Mortgage's series 1998-B deal have been downgraded as follows: class B-1, from DR1 to DR2, and class B-2, from DR2 to DR6. Fitch also upgraded eight classes and affirmed the ratings on 18 other classes in nine Metro Mortgage deals. The downgrades were attributed to a deterioration in the relationship between credit enhancement and loss expectations. The majority of the mortgage loans were originated or acquired by Metropolitan Mortgage, which filed for Chapter 11 bankruptcy in February 2004. The collateral consists primarily of fixed- and adjustable-rate mortgage loans secured by first liens on residential properties or commercial real estate.

The residential primary servicer rating for subprime product and the special servicer rating of AMC Mortgage Services Inc. have been placed on Rating Watch Evolving by Fitch Ratings.The company's primary servicer rating is RPS2-plus, and its special servicer rating is RSS2-plus. (Fitch rates residential servicers on a scale of 1 to 5, with 1 being the highest rating.) Fitch said AMC is "experiencing financial pressure," pointing to the situation of its parent company, ACC Capital Holdings. "Fitch believes that ACH's financial flexibility is constrained by significant settlement and restructuring charges taken in recent quarters as well as the increasingly challenging operating environment in the subprime mortgage market," the rating agency said. "While other originators and servicers face these challenges as well, AMC's sharp decline in origination volume has caused considerable seasoning of the servicing portfolio, which is resulting in increasing delinquency levels and contributing to a cost of servicing that is significantly higher than the industry average." Fitch can be found online at http://www.fitchratings.com.

Mortgage-related bond and derivatives prices have seen notable changes in the past few days that appear to reflect recent housing finance market concerns.Agency mortgage-backed securities were one to three ticks wider vs. the 10-year Treasury for discount and current coupons on Dec. 7 in a move that a report by RBS Greenwich Capital mortgage strategist Alec Crawford attributed to subprime lender Ownit's Chapter 7 bankruptcy. In addition, the ABX tradable synthetic index of U.S. home equity asset-backed securities, which is considered reflective of housing market sentiment, has seen a "freefall" in the past few days, according to Andrew Davidson & Co.

Prepayments on 30-year fixed-rate mortgages in agency mortgage-backed securities fell 5% in November, reflecting a seasonal slowdown in housing turnover as well as the short Thanksgiving week, according to Bear, Stearns & Co.MBS backed by 30-year Fannie Mae collateral recorded an overall constant prepayment rate of 10.9 CPR for the month, down 0.8 CPR from that of October, senior managing directors Dale Westhoff and V.S. Srinivasan reported. Meanwhile, comparable Freddie Mac collateral recorded an overall speed of 10.3 CPR, down 0.3 CPR from that of October. The latest speeds "support our current thesis that today's prepayment environment has important parallels to 1996," the Bear Stearns analysts said. A 200-basis-point rally in mortgage rates in 1996, following the massive 1993 refinancing wave, produced "a notably muted refinancing response that stands out from all other refinancing events," the analysts said. The current situation also involves a significant weakening of the housing market and follows a massive refi wave in 2003. "The recent rally has exposed predominantly newly originated mortgages backing 6.0% and 6.5% coupons," the Bear Stearns analysts said. "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." Bear Stearns can be found online at http://www.bearstearns.com.

Employment in the mortgage industry rose to a new high in October as lenders added 2,900 full-time employees to their payrolls, though overall employment in the mortgage industry has been surprisingly steady all year.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banking/broker sector increased from 504,500 in September to 507,400 in October. Since October 2005, employment is up only 0.6%. However, it is surprising to see lenders hiring when sales of existing homes are down 11% and new-home sales are down 25% over the past 12 months. Orawin Velz, director of forecasting at the Mortgage Bankers Association, noted that mortgage rates were falling in September and October and refinancing activity had picked up. Nevertheless, "it is surprising that we haven't seen a year-over-year decline," Ms. Velz said. The MBA forecaster said she expects to see some payroll trimming in the coming months. The BLS can be found online at http://stats.bls.gov.

GMAC-RFC Insurance Claims Services and Fidelity National Information Services Inc.'s Field Services division have announced a strategic alliance to jointly promote their services.GMAC-RFC Insurance Claims helps financial institutions optimize the property insurance claims recovery process to generate higher recoveries for clients. FIS Field Services is a provider of asset inspection and preservation services to financial institutions around the world. "The marketplace needs another competitive solution that will enable financial institutions and other real estate investors to optimize their insurance claims recovery process, repair homes faster, and minimize reputational risk between the financial institution and its borrowers," said Ron Reitz, vice president and director of GMAC-RFC Insurance Claims Services. Fidelity can be found online at http://www.fidelityinfoservices.com.

Fannie Mae's long-awaited revised financial results reduce the company's retained earnings by $6.3 billion through June 30, 2004.For periods prior to the start of 2002, retained earnings fell by $7 billion, Fannie Mae said. For 2002, there was a $705 million net decrease, while net earnings for 2003 increased by $176 million. And for 2004, net income was revised upward by $1.2 billion. The total downward revision is smaller than Fannie Mae's previous estimate that the accounting restatement might reduce cumulative earnings by $10.8 billion through June 30, 2004. Additionally, Fannie Mae said the restatement yielded a $4.1 billion increase in reported stockholders' equity through June 30, 2004, despite the reduction in retained earnings. The equity adjustment reflected a reversal of previously recorded derivative cash flow hedge adjustments and the recognition of fair-value adjustments on available-for-sale securities that were previously classified as held-to-maturity securities and recorded at amortized cost, Fannie Mae said. Fannie is still not current in reporting financial results and has not said when it will release results for 2005 and 2006. The government-sponsored enterprise can be found online at http://www.fanniemae.com.