Servicing

Employment in the mortgage industry inched up in August as mortgage rates declined, home sales leveled off, and refinancing activity edged up to 40% of loan applications.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector increased by 200 full-time positions to 502,000 in August, up from 501,800 in July. (The BLS revised the July employment number downward from 502,100.) Rates on fixed-rated 30-year mortgages steadily declined throughout August, from 6.63% to 6.44%, while existing- and new-home sales leveled off after multimonth declines. The Mortgage Bankers Association recently reported that the number of loans closed per loan officer dropped 9% in 2005 to 83 loans per year. MBA vice president Jay Brinkman said mortgage companies are facing lower sales productivity this year. The BLS can be found online at http://stats.bls.gov.

Three classes from Credit Suisse First Boston Mortgage Securities Corp. commercial mortgage pass-through certificates, series 2001-CF2, have been downgraded by Moody's Investors Service.The downgrades were as follows: class L, from Caa1 to Caa2; class M, from Caa3 to Ca; and class N, from Ca to C. In addition, Moody's upgraded one class from the deal and affirmed the ratings on 12 others. The downgrades were attributed to realized and expected losses on four specially serviced loans. The pool consists of 142 mortgage loans secured by commercial and multifamily properties. The rating agency can be found on the Web at http://www.moodys.com.

Luminent Mortgage Capital Inc., San Francisco, has announced a $435 million repurchase agreement with Barclays Capital that will be used to acquire triple-A-rated mortgage-backed securities.The facility has a term of up to two years. The company said it will "help shield Luminent from liquidity risk" by diversifying its financing facilities and reducing its reliance on short-term repurchase financing. The company can be found online at http://www.luminentcapital.com.

Chase has selected Fidelity National Information Services Inc.'s Mortgage Servicing Package to replace and upgrade multiple legacy software platforms for servicing its $600 billion portfolio.Chase services its own loan portfolio and provides servicing for third-party loans. FNIS said Chase will replace and upgrade the systems over the next two years to streamline business processes and provide faster rollout and better support for new products. The updated system is expected to reduce costs, handle larger volumes, and improve disaster recovery capability. A leading mortgage lender, Chase originated $128 billion in mortgage loans and $54 billion in home equity lines and loans in 2005. It also purchases servicing rights to mortgage portfolios. Jacksonville, Fla.-based FNIS said its Mortgage Servicing Package automates all areas of mortgage servicing, including loan setup and maintenance, cashiering, escrow administration, investor accounting, and regulatory reporting. FNIS can be found online at http://www.fidelityinfoservices.com.

The profitability of mortgage bankers fell 61% on a per-loan basis in 2005 as origination costs increased by 38%, according to a Mortgage Bankers Association study, but loan servicing turned in a "stellar" performance.Profitability dropped from $657 per loan in 2004 to $258 in 2005, while origination costs increased from $1,485 per loan in 2004 to $2,049 last year, the MBA reported. "The year 2005 demonstrated the challenges that mortgage companies are still facing in 2006," said MBA vice president Jay Brinkman. "These challenges include narrowing warehouse interest spreads, lower sales productivity, and higher per-loan sales and fulfillment costs." However, servicing profits jumped from $21 per loan in 2004 to $104 last year. "The largest servicers outperformed their smaller peers both operationally and financially, with lowest cost to service and highest net servicing financial income," the MBA study says. The association can be found online at http://www.mortgagebankers.org.

Two classes from two GS Mortgage Securities Corp. residential mortgage pass-through certificate deals have been placed on Rating Watch Negative by Fitch Ratings.The affected classes are class B-3 of series 2005-S2 and class B-2 of series 2006-S1. The rating actions were taken because losses have exceeded excess spread for the past three months, Fitch said. The collateral in the transactions consists of closed-end, fixed-rate loans secured by second liens on residential properties.

FICO scores are the best indicator of mortgage default risk, and underwriting standards used to distinguish between prime, alternative-A, and subprime borrowers have a "substantial influence" on default and loss, according to Fitch Ratings.In a new report setting out the rating agency's new loan default model, Fitch has identified three major predictors of mortgage loan defaults -- FICO scores, credit sector, and combined loan-to-value ratios. The new model identifies 13 mortgage credit factors for projecting loan-level defaults, and incorporates regional economic stress factors to reflect the varying regional levels of risk. "Fitch’s new model is based on actual historical loss severity data, rather than projections of home price movements and expenses," the rating agency said. "The model provides insight into which loan attributes are predictive of higher loss severity, and fully captures the difference in severity among the various credit sectors." Fitch said ResiLogic, the public version of the new default model, will be available for beta testing beginning Nov. 6. The rating agency can be found online at http://www.fitchratings.com.

The American Mortgage Law Group, a national law firm focused exclusively on the mortgage banking industry, has been formed in Novato, Calif., according to Arthur Prieston, founder of The Prieston Group, a mortgage fraud insurance provider that will work closely with the new firm.American MLG will be headed by partners James Brody and Ryan Thomas, who have moved to the new firm from the mortgage banking group of Lanahan & Reilley, Santa Rosa, Calif., which has worked with TPG on loss mitigation. "There is clearly a need for an experienced national law firm dedicated solely to serving the unique needs of all within the mortgage banking industry, from lenders to investors to servicers to other entities," Mr. Prieston said. "The marketplace has changed, not only leaving lenders more vulnerable to fraud, but also squeezing profits for all. It is vital that the industry have access to a law firm that can effectively address all their concerns, regardless of location." TPG can be found online at http://www.priestongroup.com.

Investment banker Friedman, Billings, Ramsey has closed its mortgage-related asset-backed securities group.A spokeswoman for the Arlington, Va.-based company said mortgage ABS "is a small part of our overall business. It represents less than 2% of our total revenue." As of MortgageWire's deadline, she could not provide a number for its ABS issuance volume for the year. FBR also owns subprime lender First NLC Financial Services, Deerfield Beach, Fla., which ranks 21st among subprime lenders, according to the Quarterly Data Report.

NetBank Inc., Columbia, S.C., a top-40-ranked mortgage lender, says its chairman and chief executive officer, Douglas Freeman, has resigned effective Oct. 5.The resignation comes as the company finalizes a deal to sell a majority of its $15 billion servicing portfolio, using Countrywide Servicing Exchange, Pasadena, Calif., as its broker. Initially, Phoenix Capital, Denver, had represented NetBank in the sale, but then the company changed advisers. A spokesman for NetBank told MortgageWire that "We wanted a bigger firm to represent us." The depository named Stephen Herbert as its new CEO. In a statement, Mr. Herbert said, "We believe our bank and conforming mortgage businesses have upside potential." Through the first six months of the year NetBank has lost about $42 million. Blaming its woes on the flat yield curve, "competitive operating pressures within our mortgage channels, and other market factors," it anticipates that it may lose money in the third quarter just ended.