Servicing

Following on the heels of the S&P announcement, Fitch Ratings reported that it has also lowered its minimum servicing fees for U.S. residential mortgage-backed securities."The economies of scale brought about by portfolio size, advances in servicing technology, and lower default and recovery costs, as well as the increase in individual loan sizes, have reduced the costs associated with servicing residential loans," Fitch said. The new minimum fees for first-lien prime loans are: 17 basis points for jumbo fixed-rate mortgages; 20 bps for jumbo adjustable-rate mortgages; 22 bps for conforming fixed-rate loans; and 25 bps for conforming ARMs. The rating agency said it has been reviewing servicers for over 10 years to provide a standardized analysis that is part of the transaction rating process, and noted that it has been issuing servicer ratings since 1999. Fitch can be found online at http://www.fitchratings.com.

Standard & Poor's Ratings Services has lowered the minimum servicing fees required on mortgage-backed security deals containing prime residential mortgage loans.S&P said the revised minimum fees are based on surveys of mortgage loan servicers, servicing cost data provided by its Servicer Evaluations group, and changes in servicing costs relative to loan-size balances. The new minimum fees are: 17.5 basis points for prime jumbo fixed-rate loans; 20.0 bps for prime jumbo adjustable-rate mortgages; 22.5 bps for prime conforming balance fixed-rate loans; and 25.0 bps for prime conforming balance ARMs. S&P said it establishes such requirements "to attract quality servicers should the servicing function need to be transferred." The average loan servicing cost has declined as a result of technological advances, electronic commerce initiatives, outsourcing, and enhanced workflow automation, the rating agency said. In addition, industry consolidation has allowed the remaining participants to spread their fixed-cost base over a larger pool of loans. S&P can be found online at http://www.standardandpoors.com.

IndyMac Bancorp Inc., Pasadena, Calif., has reported record mortgage loan volume and record net earnings of $105 million ($1.49 per share) for the second quarter, compared with $82 million ($1.24 per share) a year earlier.IndyMac's mortgage loan production totaled a record $20.1 billion in the second quarter, up 41% from that of a year earlier, the company said. "While our mortgage volumes were at a record level for the ninth consecutive quarter, they were essentially flat compared with the first quarter, and we are redoubling our efforts to profitably gain market share," said Richard H. Wohl, IndyMac Bank's president. "In keeping with this goal, our mortgage pipeline was at an all-time record level of $12.5 billion as of June 30, up 7% from the first quarter of 2006 and up 29% year over year, boding well for our mortgage production volumes and profits for the third quarter." IndyMac can be found online at http://www.indymacbank.com.

Eight classes from two Residential Asset Securities Corp. home equity transactions have been downgraded by Fitch Ratings.The downgrades were as follows: RASC series 2001-KS2 group 1, class M-I-1, from AA-minus to A-minus, class M-I-2, from A-minus to BBB, and class M-I-3, from B to CC (and assigned a distressed recovery rating of DR4); RASC series 2001-KS3 group 1, class M-I-1, from AA-minus to A-minus, class M-I-2, from A-minus to BBB, and class M-I-3, from B to CCC (and assigned a distressed recovery rating of DR2); and RASC series 2001-KS3 group 2, class M-II-2, from A to BBB, and class M-II-3, from BBB to BB. Fitch also affirmed the ratings on 10 classes from the two deals. The downgrades were attributed to the "potential negative impact" of loan performance on the bonds. Fitch can be found online at http://www.fitchratings.com.

Washington Mutual Inc., Seattle, has agreed to sell its WM Advisors Inc. subsidiary to the Principal Financial Group, Des Moines, Iowa, for $740 million in cash.The sale is expected to generate a pretax gain for WaMu of at least $650 million. WaMu said the gain is expected to more than offset the financial impact of the sale of $140 billion in mortgage servicing rights (its government servicing portfolio and part of its conforming portfolio) to Wells Fargo Home Mortgage, Des Moines, as well as offset other strategic initiatives the company is undertaking. "This transaction is in keeping with our strategy to streamline our business model and sharpen the focus of our products and services, which target U.S. middle-market consumers and small businesses," said Kerry Killinger, chairman and chief executive of WaMu.

Nonconforming lender Lime Financial, Lake Oswego, Ore., has obtained a $10 million leverage capital facility from investment banker Credit Suisse.According to a company spokesman, the line of credit "is closer to subordinated debt" and can be used to leverage its warehouse facilities. "It's a big deal for us to have Credit Suisse standing in our corner," he said. Lime is a wholesale lender that funds in 43 states. It currently has a production run-rate of about $200 million a month. Andy Kimura, co-head of structured products trading at Credit Suisse, said the investment banker made the facility because Lime "is well positioned for long-term growth and financial stability." The company can be found online at http://www.limefinancial.com.

Foreclosures are "skyrocketing" in Massachusetts, according to ForeclosuresMass, a provider of foreclosure data based in Framingham, Mass.The company said 4,292 foreclosures were recorded in the second quarter, up 66% from the level of a year earlier and 114% from that of 2004. "Foreclosures are not simply on the rise here in Massachusetts, they are skyrocketing to new levels," said Jeremy Shapiro, president and co-founder of ForeclosuresMass. "Thousands of Massachusetts homeowners are in distress, and interest rates, dropping home prices, and escalating energy costs will only make the situation worse as we move into the latter half of 2006." The company can be found online at http://www.foreclosuresmass.com.

Thanks to a strong performance in its servicing business, Countrywide Financial Corp., Calabasas, Calif., earned $722 million in the second quarter, a 27% gain compared with earnings from a year earlier.Compared with those of the first quarter, earnings rose about 6%. A nationally chartered bank, a majority of CFC's income ($630 million) came from its mortgage banking operations. Its servicing business had pretax earnings of $279 million in the quarter, a 213% gain compared with those of the second quarter of 2005. Its production business had pretax earnings of $325 million in the quarter, a 21% drop from those of the second quarter of last year. Sandler O'Neill issued a report on CFC, noting that its production margin may have bottomed out. "The third quarter is typically the strongest quarter in the mortgage banking cycle," Sandler added. Despite the strong quarter, Countrywide's shares were trading down about $1 to $38.30 as of MortgageWire's deadline Tuesday. The company can be found online at http://www.countrywide.com.

The Federal Agricultural Mortgage Corp., Washington, D.C., has announced that its outstanding program volume has reached a record level of about $7 billion.The new level was achieved with the completion of a recent guarantee transaction involving $1 billion of five-year agricultural mortgage-backed notes. The notes are collateralized by an obligation of Metropolitan Life Insurance Co. that is, in turn, collateralized by Farmer Mac-eligible agricultural real estate mortgage loans, Farmer Mac said. The government-sponsored enterprise can be found online at http://www.farmermac.com.

Zacks Equity Research, Chicago, announced Friday that it had made Duke Realty Corp. its "Bear of the Day" -- a stock expected to underperform the markets over the next three to six months -- for July 21.Zacks said the Indianapolis-based real estate company reported first-quarter funds from operations that were 10% lower than Zacks' expectations. "We do not expect a material improvement in operating results in the next six months, as the company has assets concentrated in weak, slow-growth markets," Zacks said. Zacks can be found online at http://www.zacks.com, and Duke can be found at http://www.dukerealty.com.