Servicing

H&R Block Inc., Kansas City, Mo., is considering selling Option One Mortgage Corp., Irvine, Calif., one of the nation's largest subprime lenders and servicers.The tax preparation company has also initiated cost-cutting measures at the lender and has hired Goldman Sachs & Co. as an adviser. The nation's sixth-largest subprime originator said it will "consolidate by one-third its loan fulfillment operations by closing 12 branches over the next four months." If Block cannot sell Option One, it might consider spinning it off through the public markets. According to the Quarterly Data Report, Option One services $74 billion in loans, ranking fourth among all subprime servicers. Subprime profit margins are extremely tight right now, and consolidation in the sector is picking up steam. On Monday, NetBank of Georgia said it would close its subprime division. Option One can be found online at http://www.optiononemortgage.com.

Four classes of Structured Asset Securities Corp. Amortizing Residential Collateral Trust, series 2002-BC7, have been downgraded by Fitch Ratings.The downgrades were as follows: class M6, from A-minus to BBB-plus; class B1, from BBB-plus to BB-plus; class B2, from BBB to BB; and class B3, from BBB-minus to BB. Fitch also placed the ratings of classes M2 and M3 of SASCO series 2002-BC10 on Rating Watch Negative. In addition, Fitch affirmed the ratings on six SASCO classes. The negative rating actions were attributed to higher-than-expected delinquencies and losses. Fitch can be found on the Web at http://www.fitchratings.com.

Saxon Capital Inc., a residential mortgage lender and real estate investment trust based in Glen Allen, Va., has reported a net loss of $26.4 million ($0.53 per share) for the third quarter, compared with net income of $31.9 million ($0.63 per share) a year earlier.Saxon, which is being acquired by Morgan Stanley Mortgage Capital Inc., attributed the loss to several factors, including higher short-term interest rates, rising delinquencies, and price competition. The company also reported that its net mortgage loan portfolio stood at $6.8 billion as of Sept. 30, up 9% from the level recorded a year earlier. The REIT can be found online at http://www.saxonmortgage.com.

Irwin Financial Corp., Columbus, Ind., has reported a net loss of $4.2 million ($0.14 per share) for the third quarter, including a loss of $13.4 million from Irwin's conforming mortgage operations, which have been discontinued.A year earlier, Irwin reported net income of $18.5 million. The company noted that it had sold "substantially all" its conforming, conventional mortgage operations in the third quarter, including a majority of the associated mortgage loans and mortgage servicing rights. "Earlier this year, we announced a strategic decision to focus our attention on the growth of our small-business and nonconforming consumer mortgage business and, therefore, determined that we would sell our mortgage origination and servicing platforms," said Irwin chairman Will Miller. "With New Century purchasing our servicing operations and offering employment to the majority of our servicing staff, we now have substantially met our exit goals." The company can be found online at http://www.irwinfinancial.com.

Friedman, Billings, Ramsey Group Inc., an investment banking firm based in Arlington, Va., has reported a net after-tax loss of $67.4 million ($0.39 per share) for the third quarter that it attributed largely to various mortgage-related developments.The results contrasted sharply with net income of $23.0 million ($0.14 per share) for the third quarter of 2005. Noting that it had reclassified its mortgage loan portfolio in connection with a re-evaluation of its mortgage strategy, FBR said the result was a $146.8 million mark-to-market writedown in the value of the portfolio. The company also recorded a $20 million writedown of "other than temporary impairments" in its merchant banking portfolio, the majority of which it attributed to companies doing business in the nonprime mortgage sector. Also contributing to FBR's weakness in the third quarter was a $7.4 million after-tax loss at First NLC Financial Services, a wholly owned nonconforming mortgage lending subsidiary of FBR. The company can be found online at http://www.fbr.com.

IndyMac Bancorp Inc., Pasadena, Calif., has reported record mortgage loan volume and net earnings of $86 million ($1.19 per share) for the third quarter, compared with $78 million ($1.16 per share) a year earlier.IndyMac's mortgage loan production totaled a record $24 billion in the third quarter, up 41% from that of a year earlier, the company said. "While mortgage industry volumes continued to decline, our mortgage production hit a record level for the 11th consecutive quarter, growing 19% over the prior quarter," said Richard H. Wohl, IndyMac Bank's president. "As a result, our market share nearly doubled over last year to an estimated 3.87%, an all-time high for IndyMac, demonstrating strong progress in our core strategy of leveraging our mortgage banking infrastructure." The company said its mortgage servicing portfolio had reached $124 billion, representing 180% growth over the past two years. IndyMac can be found online at http://www.indymacbank.com.

The Prestwick Mortgage Group, Alexandria, Va., is brokering the sale of servicing rights on two bulk portfolios totaling $99 million of Fannie Mae loans.The first portfolio involves $59 million of home loans, mostly from Massachusetts, with a weighted average note rate of 5.888%, a weighted average servicing fee of 0.2634%, and an average loan balance of $148,058. All the loans are fixed-rate, and the portfolio has 38 months of weighted average seasoning. Bids are due Wednesday, Nov. 8 at 5 p.m. EST. The second portfolio totals $40 million of loans from Georgia, Florida, California, and 30 other states. The weighted average note rate is 6.597%, the weighted average servicing fee is 0.3710%, and the average loan balance is $90,784, with 55 months of weighted average seasoning. Twenty-seven loans are in foreclosure or bankruptcy, and the overall delinquency percentage is 16.82%. Bids are due Wednesday, Nov. 15 at 5 p.m. EST.

Fidelity National Information Services Inc., Jacksonville, Fla., has announced the acquisition of Watterson Prime LLC, a Bellevue, Wash.-based provider of due diligence services to financial institutions that invest in and securitize mortgage loans.The terms of the transaction were not disclosed. Fidelity said the due diligence services will be integrated with service offerings such as the FIS Hansen Quality HQ Score, a collateral risk score designed to protect clients against property valuation fraud and overvaluation risk. "This acquisition expands our product breadth and our ability to assess risk and certify the quality of mortgage portfolios," said Eric Swenson, president of the FIS Mortgage Information Services Division. "It also enables us to develop innovative products and provides us with a competitive advantage in the marketplace." The companies can be found online at http://www.fidelityinfoservices.com and http://www.wprime.com.

Mortgage lenders added 2,600 full-time employees to their payrolls in September, according to a government report, despite a slowdown in lending in the third quarter.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector increased from a seasonally adjusted annual rate of 501,900 in August to 504,500 in September. Preliminary results from a National Mortgage News survey show that some top lenders experienced loan production declines of 30% or more, compared with loan volumes of a year earlier. Refinancing activity has remained fairly strong, at 40% of mortgage applications, according to a Mortgage Bankers Association survey. But home sales have been declining, and Friday's jobs report shows a sharp drop in construction jobs. While the homebuilders have been holding on to their core employees, the BLS reported that concrete contractors, plumbers, and other specialty trades cut 17,300 employees in September and another 30,700 employees in October. The BLS can be found online at http://stats.bls.gov.

Dutch bank ABN Amro Holding NV is entertaining offers for its U.S. mortgage division, industry sources have told MortgageWire.A spokesman for ABN Amro Mortgage, Ann Arbor, Mich. -- the nation's eighth-largest servicer, with $220 billion in receivables -- declined to discuss the matter, citing a company policy not to comment on "rumors and speculation." One investment banker told MW that, "I don't know how formal the process is, but it's definitely out there." (For full details, see the Nov. 6 issue of National Mortgage News.)