Servicing

Freddie Mac has announced the pricing of 20 million shares of noncumulative perpetual preferred stock at $25 per share.The shares (CUSIP: 313400681) bear a dividend rate of 5.90%, the government-sponsored enterprise said. Freddie Mac said it will have the option to redeem all or part of the shares on or after Sept. 30, 2011, at $25 per share plus accrued dividends. The preferred stock is being offered via a syndicate of dealers headed by Lehman Brothers and Merrill Lynch. Fitch Ratings assigned a rating of AA-minus to the preferred stock.

A negative rating outlook has been assigned to Realogy Corp. by Moody's Investors Service because of "continued weakness in the residential real estate market."Moody's also affirmed Realogy's Baa2 long-term ratings and assigned a Baa2 rating to its proposed $800 million offering of senior notes. In explaining the negative outlook, the rating agency cited expectations of double-digit volume declines in home sales and modest price declines in the second half of 2006, as well as mid-single-digit volume declines and modest price declines in 2007. The ratings could be downgraded if profitability continues to decline sharply in 2007 because of falling home sales or prices, or a "material increase" in leverage caused by a large acquisition, Moody's said. Realogy is one of the largest real estate service companies in the world, Moody's said. The rating agency can be found online at http://www.moodys.com.

RealtyTrac, an online foreclosure marketplace based in Irvine, Calif., has reported that new properties entering some stage of foreclosure fell about 1% in September, although they were 63% higher than the level recorded a year earlier.The company's U.S. Foreclosure Market Report indicates that 112,210 new foreclosure properties were added to the rolls in September. "September was the second straight month in which more than 110,000 new foreclosure filings were reported nationwide, evidence that the spike in August was not just a one-month anomaly," said James J. Saccacio, RealtyTrac's chief executive officer. "Foreclosure filings are up 39% year-to-date and have already surpassed the total number reported in all of 2005." The company said Colorado, Nevada, and Michigan recorded the highest foreclosure rates in September. RealtyTrac can be found online at http://www.realtytrac.com.

The Seattle Federal Home Loan Bank has received regulatory approval to use existing excess stock to capitalize advances so that member banks and thrifts don't have to purchase additional stock in the troubled FHLBank.As approved by the Federal Housing Finance Board, members can tap a shared pool of about $350 million in excess stock when borrowing from the FHLBank during the next two years. Members are generally required to meet a stock purchase requirement when borrowing advances. But the Seattle bank is having a hard time selling stock (with a five-year redemption period) since it suspended dividend payments. By using excess stock, the Seattle bank hopes to increase its advance business and rebuild its earnings. Since the start of the year, advances increased by $5.5 billion to $26.9 billion as of June 30. The Seattle FHLBank has been operating under a supervisory agreement since December 2004.

Class B-4 of Bear Stearns Mortgage Securities Inc. mortgage pass-through certificates, series 1997-6 FRM pool, has been downgraded from CC to C by Fitch Ratings and its distressed recovery rating has been lowered from DR3 to DR4.In addition, three classes in another Bear Stearns deal were upgraded and the ratings on 11 classes in three transactions were affirmed. The downgrade reflects a deterioration in the relationship between the credit enhancement and expected losses, Fitch said.

Five classes of United Companies Financial Corp. manufactured housing securities have been downgraded by Fitch Ratings.The downgrades were as follows: series 1997-4, class A-4, from BBB-plus to BBB-minus; series 1998-1, class A-3, from A-minus to BBB-minus; series 1998-2, class A-3, from A-minus to BBB-plus, and class A-4, from B-plus to B; and series 1998-3, class A-1, from B-plus to B. Fitch also affirmed the ratings on six classes in five UCFC manufactured housing deals, raised the distressed recovery ratings on three classes, and lowered them on two. The downgrades were attributed to a deterioration in the relationship between credit enhancement and expected losses. The loans were originated by United Companies Funding Inc., a wholly owned manufactured housing lending subsidiary of UCFC. In 1998, UCFI announced plans to close down its manufactured housing business, and UCFC filed for Chapter 11 bankruptcy protection the following year. The MH portfolio, servicing rights, and residual interests were later acquired by EMC, a wholly owned subsidiary of Bear Stearns Cos., Fitch reported.

Meanwhile, a new Fitch Ratings report says the recent rise in U.S. loan repurchase activity is likely a "self-correcting mechanism" rather than the beginning of a troubling trend.Although early payment defaults were the root cause of rising repurchases, the report contends that secondary-market behavior was largely responsible for the unexpected repurchase provisions recognized by some mortgage originators. "Fitch explores the accounting for mortgage loan repurchases and suggests that investors would benefit from more disclosure, especially where repurchase charges spike and materially affect earnings," the rating agency said. Although the effect of alternative mortgage products and adjustable-rate mortgage resets has yet to be felt, Fitch said it views the recent repurchase uptick as a rational, self-correcting mechanism. But in the longer term, as originators take steps to prevent early payment defaults, Fitch said loan repurchase activity should normalize. Vincent Arscott, a director in Fitch's financial institutions group, said mortgage originators are tightening underwriting guidelines to prevent loan repurchase requests as a result of EPDs.

The loan buyback scourge that's been sweeping through the nonconforming mortgage sector is only about half over, according to one veteran subprime executive.Speaking on a recent conference call, Accredited Home Lenders executive vice president Stuart Marvin estimated that "we're probably in the middle of the repurchase activity lifecycle." He said there is now an increased focus and scrutiny on stated-income loans, credit scores, and mortgages with high loan-to-value ratios. A top-15-ranked subprime funder based in San Diego, Accredited saw its loan buybacks jump to $38.6 million in the second quarter, a 145% increase from the level recorded a year earlier. Mr. Marvin said the problem is "clearly manageable" for Accredited. "It's under focus and being dealt with on a daily basis," he said. The conference call he spoke on was hosted by investment banker Friedman, Billings, Ramsey. FBR recently closed its asset-backed securities underwriting unit.

Two classes of First Franklin Financial Corp. residential mortgage-backed certificates, series 2002-FF1, have been downgraded by Fitch Ratings, and two classes from another deal have been placed on Rating Watch Negative.Class M-2 was downgraded from A to A-minus, and class M-3 was downgraded from BBB to BBB-minus. Class M-4 and class B of series 2003-FF3 were placed on Rating Watch Negative. The downgrades were attributed to a deteriorating relationship between credit enhancement and expected losses. The collateral for the transactions consists of first-lien subprime loans divided into two collateral groups, the first containing loans with principal balances that conform to Fannie Mae and Freddie Mac guidelines and the second containing loans that may or may not conform to the guidelines.

The Federal Agricultural Mortgage Corp. has announced that it will restate earnings for the last three years to correct errors in hedge accounting.Farmer Mac said the restatement for 2003 through 2005 reflects the company's interpretation of Statement of Financial Accounting Standards No. 133, which covers derivatives and hedging instruments. The government-sponsored enterprise determined that its documentation did not support the use of hedge accounting for derivatives used to manage interest rate risk. Therefore, changes in the fair value of its derivatives should have been included in the statements of operations rather than being deferred or offset. While earnings will change under generally accepted accounting principles as a result, Farmer Mac said the restatement will have an "insignificant" effect on the company's financial position, stockholders' equity, cash flows, and business model. Farmer Mac also said the restatements will not have a significant effect on its capital position or its "core earnings," a non-GAAP measure of profitability. Farmer Mac can be found online at http://www.farmermac.com.