Servicing

Freddie Mac increased its purchases of private-label mortgage-backed securities by nearly 50% in 2005, while Fannie Mae's purchases fell by 50%, according to a report by the Office of Federal Housing Enterprise Oversight."Private-label MBS purchases by Fannie Mae fell 54% by $41.1 billion, while purchases by Freddie Mac jumped 49% to $180.0 billion," the OFHEO reports says. Freddie Mac is increasing it purchases of highly rated variable-rate securities, chairman and chief executive Richard Syron told a recent investors conference. "These purchases are essential to meeting our housing goals, and they also provide good financial returns," he said. The OFHEO mortgage market report also points out that combined MBS issuance by Fannie and Freddie fell 1%, to $908 billion, in 2005 -- the lowest level in five years.

Countrywide Financial Corp., Calabasas, Calif., the nation's largest residential lender, has confirmed that it will cut up to 10% of its "general and administrative" work force in the coming months.A Countrywide spokesman confirmed the job cuts to MortgageWire but could not offer a head count for the reduction. Layoffs have already begun, he said. Countrywide employs about 56,000 nationwide. He stressed that the layoffs -- which the company hopes to achieve mostly through attrition -- will not affect the lender's sales staff. One source told MW that the company has even canceled its regular practice of providing employees with free doughnuts on the last Friday of every month. (For further details, see the Sept. 25 issue of National Mortgage News.)

Wachovia Securities, which services securitized commercial mortgages and facilitates related defeasance transactions, has announced the receipt of a private letter ruling from the Internal Revenue Service that may help reduce defeasance costs for borrowers.Charlotte, N.C.-based Wachovia said the ruling expands the time period for using securities in the defeasance process, but noted that it has not been published by the IRS and "may only be relied upon by the taxpayer who requested it." In a defeasance, a borrower substitutes government securities as collateral for a loan to obtain a release of the property that originally secured the loan, Wachovia noted. Existing practice required the securities to provide a stream of payments to fund the loan's debt service within four months of receipt. The IRS letter, which Wachovia received on behalf of a client, indicates that tax rules would not be violated by using securities maturing within 12 months rather than four, the company said. T.J. Maher, a managing director in Wachovia's Municipal Products Group, said expanding the period from 120 to 365 days will expand the security combinations available to borrowers.

The use of "trigger leads" to solicit mortgage customers is raising concern among state regulators and mortgage lenders, according to William Lund, director of the Maine Office of Consumer Credit Regulation.Mr. Lund told MortgageWire that some complaints have come from mortgage lenders concerned about tactics used by competitors who receive trigger leads from credit reporting agencies. Speaking at the New England Mortgage Bankers Conference in Providence, R.I., Mr. Lund said Maine is considering whether trigger leads should be regulated to prevent misleading solicitations. Trigger leads occur when a credit reporting agency sells information about credit requests from lenders, indicating that a consumer is applying for a mortgage loan. That information, when sold to a competing lender or broker, allows the originator to contact the customer and make a competing offer. Mr. Lund said this does not necessarily violate any rules or ethics. But in some cases, brokers or lenders have been accused of calling consumers and pretending to be their current lender offering a new loan product, or pretending that a referral was made because the original lender cannot fund the loan. Those practices may violate the Federal Fair Credit Reporting Act, he said.

Fieldstone Investment Corp., a real estate investment trust that originates both nonconforming and conforming mortgages, has been given a No. 5 (Strong Sell) rating by Zacks.com, Chicago.Zacks pointed to a drop in analysts' earnings estimates for Fieldstone, which now stand at $0.84 per share, down $0.12 over the past 30 days. Fieldstone missed its earnings estimates for the second quarter by $0.04 per share, and the results were 70% below those of the same period in 2005, Zacks said. Zacks can be found online at http://www.zacks.com.

Rapidly slowing appreciation and declining affordability have produced "a marked increase" in the risk of home price declines in the nation's 50 largest housing markets, according to PMI Mortgage Insurance Co., Walnut Creek, Calif.The average score in the PMI U.S. Market Risk Index rose from 288 to 328 in the third quarter, the company reported. This means the company's estimate of the probability of experiencing a home price decline in the next two years has risen from 28.8% to 32.8% in the 50 largest metropolitan statistical areas. According to the index, there are now 18 markets with a greater than 50% chance of price declines over two years, up from 13 in the second quarter. "No one should be surprised by the slowdown we're seeing," said Mark F. Milner, chief risk officer of PMI Mortgage Insurance. "Over the past five years home prices appreciated much faster than incomes, and that can't continue forever." PMI can be found online at http://www.pmigroup.com.

John Johnson has been elected chairman of MERS, the industry-owned system for tracking ownership of mortgage loans and servicing rights.Mr. Johnson is president and chief executive officer of MortgageAmerica Inc., Birmingham, Ala. He has served as president of the Mortgage Bankers Association of Alabama and was chairman of the national Mortgage Bankers Association's Residential Board of Governors. The announcement of Mr. Johnson's election as chairman of MERS came at the organization's annual Strategic Planning Conference. MERS, based in Vienna, Va., can be found online at http://www.mersinc.org.

The educational wing of the Mortgage Bankers Association has awarded 13 mortgage executives the designation of Certified Mortgage Servicer.The designations were given out during a ceremony at Fidelity National Information Services headquarters in Jacksonville, Fla., on Sept. 15. Graduates received the CMS designation in one of three areas of concentration: loan administration, financial controls/investor administration, and default administration. To be eligible for the CMS designation, which was launched early last year, candidates must amass a total of 63 points through a combination of industry experience and CampusMBA course work. After accumulating the points, candidates must also pass a three-hour online examination.

Fitch Ratings has announced the release of new basis-risk stress criteria for securitizations involving the U.S. dollar London interbank offered rate.The new criteria are expected to have the most immediate effect on consumer asset-backed securities and residential mortgage-backed securities, according to Claire Mezzanotte, an ABS managing director at Fitch. "The majority of U.S. consumer ABS transactions, including credit card receivables, student and home equity loans, are exposed to basis risk due to mismatches between the asset and liability coupon rates," Ms. Mezzanotte said. The criteria were developed in conjunction with Fitch's new interest rate stress criteria, which were published in May. Fitch said it will be updating the interest rate and basis-risk stresses each month. The report, "Basis Risk in Structured Finance Transactions: T-Bill, CP, and Prime versus USD LIBOR," can be found on Fitch's website, http://www.fitchratings.com.

Zacks Equity Research, Chicago, has declared The Mills Corp. its "Bear of the Day" -- a stock expected to underperform the markets over the next three to six months -- for Sept. 18.Mills is an Arlington, Va., retail real estate investment trust that recently received bids from potential buyers and investors. "The company is dealing with myriad problems, including a restatement of its financial results from 2000 through the first three quarters of 2005, failed developments, and executive departures," Zacks said. "Additionally, the company is under investigation by the [Securities and Exchange Commission] for accounting irregularities." Zacks said the company is struggling and noted that the common dividend has been cut "significantly." It predicted much lower-than-expected earnings when Mills releases its 2005 and year-to-date 2006 results. Zacks can be found online at http://www.zacks.com.