Servicing

Affordability products dominated the alternative-A mortgage sector in the second quarter, pushing the issuance of alt-A securities to a record high after a brief downturn early in the year, according to Standard & Poor's Ratings Services.Issuance rose about 33%, from $76 billion in the first quarter to $101 billion in the second quarter, and 50% when compared with the $66 billion volume a year earlier, S&P reported. Affordability products such as payment-option adjustable-rate mortgages and interest-only ARMs represented 77% of the total volume in the second quarter, up from 61% a year earlier, S&P said. "This growth is a result of the dramatic increase in the popularity of affordability products during the first half of 2006," said credit analyst Jeff Watson. "Standard & Poor's expects total volume in second-half 2006 to stabilize, rather than to continue to grow above current levels." The data were published in a report titled "Trends in U.S. Residential Mortgage Products: Alt-A Sector Second-Quarter 2006." S&P can be found online at http://www.standardandpoors.com.

Fitch Ratings has assigned Financial Freedom Senior Funding Corp. an RPS3-plus residential primary servicer rating for reverse-mortgage loans.Fitch said the rating is based on Financial Freedom's expertise in servicing reverse mortgages, integrated payment processing and reverse-mortgage systems, and established quality-monitoring procedures. Fitch said the rating also reflects the financial strength of parent company IndyMac Bank, which has a long-term debt rating of BBB-minus from Fitch. Financial Freedom is based in Irvine, Calif., and has a specialized reverse-mortgage servicing platform in San Francisco. Financial Freedom serviced approximately 93,000 loans totaling more than $9.8 billion as of May 31.

Fannie Mae chief executive Daniel Mudd says he believes the company's retained portfolio could fall dramatically, to just $10 billion, if limits imposed by a Senate GSE bill prevail.In a 39-page letter to members of the Senate Banking Committee, Mr. Mudd writes that "in our analysis a literal reading of the bill would lead to a reduction in the size of our portfolio to a range of $10 billion to $100 billion." At the end of July, Fannie's retained portfolio totaled $731.4 billion. The letter -- penned by Mr. Mudd and company chairman Stephen Ashley -- is dated July 31 and addresses questions raised by senators before and after a June hearing on the company's accounting scandal. Mr. Mudd's estimate on the company's retained portfolio addresses loan limits imposed by S. 190, a government-sponsored enterprise reform bill introduced by Senate Banking Committee Chairman Richard Shelby, R-Ala. Mr. Mudd also said that if S. 190 became law, it would bar Fannie (and Freddie Mac) from investing in mortgage-backed securities "in almost all instances." Fannie Mae can be found online at http://www.fanniemae.com.

Four classes from four net-interest-margin securitizations issued by Lehman Brothers (SASCO) have been downgraded by Moody's Investors Service.The downgrades were as follows: SARM Net Interest Margin Notes, series 2005-5, class A, from A3 to B1; SAIL Net Interest Margin Notes, series 2003-2, class A, from Baa2 to Ba2; SASCO Net Interest Margin Trust 2003-36XS, class A, from A1 to Baa2; and SASCO Net Interest Margin Trust 2003-3XS, class A, from A3 to Baa2. NIM deals typically represent the securitization of excess spread, prepayment penalties, and cap payments generated by the underlying residential mortgage-backed securities. Moody's attributed the downgrades to "low and diminishing levels" of residual cash flows from the underlying transactions. The transaction underlying SARM 2005-5 has experienced high prepayments, reducing the payments to the A-IO2 class that serves as collateral, the rating agency said. "For the other NIM securities, losses incurred by the underlying pools have diverted cash flow away from the residual tranches, which provide collateral to the NIMs," Moody's reported. The rating agency can be found online at http://www.moodys.com.

The PMI Group, San Francisco, has inked a deal to buy back $345 million worth of its common stock through Goldman Sachs & Co.A spokesman for the company said the accelerated buyback commitment will offset a debenture program that will result in the issuance of about $345 million worth of new stock to bondholders. The mortgage insurer said the company is trying to avoid a dilution in its share price. Not only is Goldman serving as broker on the share buybacks, but it has also arranged for $345 million in financing to fund the program. According to the Quarterly Data Report, PMI is the nation's second-largest mortgage insurance company. PMI can be found on the Web at http://www.pmigroup.com.

Three subordinate certificates from three subprime securitizations issued by Saxon Asset Securities Trust in 2001 have been downgraded by Moody's Investors Service.The downgrades were as follows: series 2001-1, class MF-2, from Ba2 to Ba3; series 2001-2, class B-1, from Ba2 to B1; and series 2001-3, class B, from Ba1 to B1. The downgrades were based on weaker-than-expected performance by the mortgage pools and the resulting erosion of credit support, Moody's said. In the 2001-1 deal, the overcollateralization is almost fully depleted and the BF-1 tranche has realized losses, the rating agency reported. In the 2001-2 and 2001-3 deals, pipeline losses could cause further erosion of the overcollateralization and put pressure on the most subordinate tranches, Moody's said. Saxon Mortgage Inc. is the master servicer of the transactions, and Saxon Mortgage Services Inc., a sister company, is the primary servicer.

Interactive Mortgage Advisors, Denver, is offering a $145.7 million portfolio of bulk Fannie Mae servicing rights.The average loan size of the portfolio is $106,967. The average yield is 5.96%. IMA, a servicing brokerage and advisory firm, did not disclose the identity of the seller. The bid deadline is Aug. 31.

H&R Block Inc., Kansas City, Mo., has announced that it expects to record a $102.1 million provision for losses in the current quarter related to its subsidiary Option One Mortgage Corp.Block said the expected loss provision would reflect an increase in the estimated recourse liability recorded by Option One for loan repurchases and premium-recapture reserves. "The increased level of loan repurchases, which have been noted industrywide, are primarily due to a higher level of repurchase requests from loan buyers and an increase in early payment delinquencies," the company said. The provision would represent an after-tax amount of $61.3 million, or $0.19 per share, Block reported. The company can be found online at http://www.hrblock.com.

Five classes of the Long Beach Mortgage Loan Trust series 2002-1 subprime mortgage deal have been downgraded by Fitch Ratings.The downgrades were as follows: group 1, class I-M2, from BBB to BB, and class I-M3, from CCC/DR2 to C/DR4; and group 2, class II-M1, from A-plus to BBB-plus, class II-M2, from BBB to BB, and class II-M3, from CCC/DR2 to C/DR4. In addition, the rating on one class in group 1 was affirmed. The downgrades stem from the fact that the transaction is experiencing monthly losses that exceed the available excess spread, causing "substantial deterioration" of the overcollateralization, the rating agency said. The performance of the deal has also been hurt by a growing concentration of loans secured by manufactured homes, Fitch said. Fitch can be found online at http://www.fitchratings.com.

Eight classes from five Ameriquest Mortgage Securities Inc. securitizations have been downgraded by Moody's Investors Service.The downgrades were as follows: series 2003-1, class M-4, from Baa3 to B1; series 2003-2, class M-3, from Baa2 to Baa3, and class M-4, from Baa3 to Ba3; series 2003-7, class M-5, from Baa3 to Ba1; series 2003-8, class M-5, from Baa2 to Baa3, class MV-6, from Baa3 to Ba3, and class MF-6, from Baa3 to Ba3; and Quest Trust 2003-X4, class M-3, from Baa3 to Ba3. In addition, class M-4 of series 2003-AR2 was placed under review for possible downgrade, and nine classes from four Ameriquest deals were upgraded. The negative rating actions were based on projected losses versus available support from excess spread and overcollateralization, Moody's said. The rating agency can be found online at http://www.moodys.com.