Servicing

Freddie Mac has announced the pricing of two new classes of perpetual noncumulative preferred stock: $250 million of a fixed-rate dividend class and $750 million of a variable-rate dividend class.The 5 million shares of fixed-rate preferred stock (CUSIP: 313400699) are being offered to investors at $50 per share with a dividend rate of 6.42%, the government-sponsored enterprise said. The 15 million shares of variable-rate preferred stock (CUSIP: 313400715) are priced at $50 per share, with an initial dividend rate of 6.00%. Dividends will reset quarterly beginning on Oct. 1, 2006, at a rate equal to the three-month London interbank offered rate plus 0.50%. Freddie Mac said it will have the option to redeem all or part of both classes of shares on or after June 30, 2011, at $50 per share plus accrued dividends. The preferred stock is being offered via a syndicate of dealers headed by Bear, Stearns & Co. and UBS Securities LLC. Freddie Mac can be found online at http://www.freddiemac.com.

A nationwide surge of foreclosures has become "a driving force" in the otherwise sluggish real estate market, according to Foreclosure.com, an online foreclosure listing service based in Boca Raton, Fla.The company said its 2006 Mid-Year Market Analysis indicates that foreclosure properties are changing hands nearly twice as fast as existing homes. New U.S. foreclosures totaled 23,982 in January and 26,802 in June, but the active foreclosure inventory fell from 95,073 in January to 89,352 in June, Foreclosure.com reported. Thus, despite higher new-foreclosure rates, inventory has been kept in check by high demand for foreclosed homes, the company said. "Everything we are seeing in the current climate in the real estate industry is driven by rising interest rates and a sluggish housing market," said Brad Geisen, president and chief executive officer of Foreclosure.com. "This has fueled interest in the foreclosure market, creating a golden opportunity for investors and people looking for good deals on homes." The company can be found online at http://www.foreclosure.com.

Deutsche Bank has agreed to purchase MortgageIT Holdings Inc., New York, the nation's 21st-largest lender, for $429 million, or $14.75 a share.The purchase is Deutsche Bank's second mortgage-related acquisition in eight weeks. A real estate investment trust, MortgageIT Holdings owns MortgageIT Inc., a residential mortgage lender that employs 2,100 full-timers in 50 branches and is licensed to originate mortgages in all 50 states. The operating company will become a part of Deutsche Bank's residential mortgage-backed securities business in New York. Phil Weingord, Deutsche Bank's head of global markets for the Americas, said the company continues to expand its RMBS business and believes "the vertical integration of a leading mortgage originator like MortgageIT will provide significant competitive advantages, such as access to a steady source of product for distribution into the mortgage capital markets." Doug Naidus, chairman and chief executive officer of MortgageIT, said the transaction "will enable us to accomplish our mutual goal of becoming a top player in the U.S. residential lending and securitization markets in short order." The companies can be found online at http://www.db.com and http://www.mortgageitholdings.com.

The Federal Agricultural Mortgage Corp., a government-sponsored enterprise commonly known as Farmer Mac, has announced an offering of guaranteed notes by Farmer Mac Guaranteed Notes Trust 2006-2.Farmer Mac said the five-year notes will be collateralized by an obligation of Metropolitan Life Insurance Co. that, in turn, will be collateralized by Farmer Mac-eligible agricultural real estate mortgage loans. The GSE, which was chartered to provide a secondary market for agricultural real estate and rural housing mortgage loans, can be found on the Web at http://www.farmermac.com.

Foreclosures have been soaring throughout California and parts of Arizona, according to Default Research Inc., a foreclosure research company based in Mt. Pleasant, Pa."Many people are focused on Southern California as the 'hot spot' of foreclosure activity due to the sheer numbers of foreclosures, but Northern California has seen increases percentagewise nearly as high as Southern California," said Serdar Bankaci, president and chief executive officer of Default Research. "In fact, there has been an average increase in foreclosure of 50% since the beginning of the year." Meanwhile, Pima and Maricopa counties in Arizona have experienced foreclosure increases since January of 40% and 30%, respectively, the company reported. Default Research can be found online at http://www.defaultresearch.com.

National City Corp., Cleveland, is throwing in the towel on its subprime division, placing First Franklin Financial Corp. on the auction block.The bank said it is weighing "strategic alternatives" for the San Jose, Calif.-based unit, including a sale. It also may unload its subprime servicing division, National City Home Loan Services, Pittsburgh, and NationsPoint, Lake Forest, Calif., a direct-to-consumer lender. A bank spokesman told MortgageWire that National City is not committed to a sale and ultimately could wind up keeping the units if it doesn't like the bids. He added that National City has no plans, at this time, to sell its prime mortgage division, National City Mortgage, which is based in Miamisburg, Ohio. Nat City Mortgage is the nation's 18th-largest funder, but its production declined dramatically in the first quarter, according to the Quarterly Data Report, an MW affiliate. First Franklin is the nation's 12th-largest subprime funder, according to QDR. NCHLS is the nation's 12th-largest subprime servicer. Nat City and First Franklin can be found on the Web at http://www.nationalcity.com and http://www.first-franklin.com.

Clayton Holdings Inc., a Shelton, Conn.-based provider of analytic and consulting services to the mortgage and other financial services industries, has been added to the Russell 3000 Index.The index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. As a member of the Russell 3000, Clayton is automatically included in the Russell 2000 and Russell 2500 indices, the company said. Clayton can be found online at http://www.clayton.com.

Prepayment rates on 30-year fixed-rate mortgages collateralizing agency mortgage-backed securities fell slightly in June, with stronger housing turnover offsetting some of the decline in refinancing, according to Bear, Stearns & Co.Overall speeds on 30-year Fannie Mae collateral decreased by a constant prepayment rate of only 0.2 CPR (from 12.6 CPR to 12.4 CPR) and 30-year Freddie Mac speeds fell by only 0.1 CPR (from 11.2 to 11.1), analysts Dale Westhoff and V.S. Srinivasan reported. "Looking across coupons, the deep discount 4.5% and 5.0% coupons posted moderate increases in prepayments while speeds on higher coupons declined marginally," the analysts said. "Given the selloff in rates and seasonal changes from May to June we would have expected a small decline in speeds across the coupon spectrum. However, speeds on [Fannie] 4.5s and 5.0s increased by 0.6 and 0.3 CPR, respectively, suggesting strong housing turnover activity." Speeds on 30-year Ginnie Mae mortgages declined by 5%, from 17.0 CPR in May to 16.1 CPR in June. Bear Stearns can be found on the Web at http://www.bearstearns.com.

A group led by Western Investment Hedged Partners LP, Salt Lake City, has reported filing a preliminary proxy statement in opposition to the proposed merger of Alesco Financial Trust, a Philadelphia-based real estate investment trust, with Sunset Financial Resources, a Jacksonville, Fla.-based REIT.Western said the group will solicit the votes of Sunset's stockholders against the proposed merger, which was announced in April. The Western group, which owns approximately 9.7% of Sunset's outstanding shares, said the proposed exchange ratio of 1.26 Sunset shares per Alesco share is "highly dilutive and unfair to Sunset's stockholders." The group also contends that Sunset has better options than the proposed merger (including remaining a standalone company), that the estimated transaction costs are excessive, and that the merger "represents a fundamental change in investment strategy that has not been justified to stockholders." The REITs said in April that the merged company would pursue Alesco's strategy of focusing on trust preferred securities issued by banks and insurance companies, middle-market loans, and residential mortgage-backed securities.

Fitch Ratings has affirmed Freddie Mac's debt and preferred stock ratings and removed from Rating Watch Negative its subordinated debt and preferred stock ratings.The affirmed ratings were as follows: issuer default, AAA; long-term senior debt, AAA; short-term debt, F1-plus; subordinated debt, AA-minus; and preferred stock, AA-minus. In addition, Fitch said it has assigned a support rating of 1 to the government-sponsored enterprise, meaning that the rating agency believes Freddie Mac's senior debt obligations and guaranteed mortgage-backed securities "would receive external support should it become necessary." Fitch noted that it had placed Freddie's subordinated debt and preferred stock ratings on Rating Watch Negative in June 2003 and lowered them in August 2003 "as internal control, accounting, and management issues unfolded." The rating outlook for all the GSE's rated instruments has now been returned to Stable, Fitch said, "following demonstration of Freddie Mac's ability to sustain solid business performance, address pricing pressures, enhance the accounting and financial reporting infrastructure, and progress towards timely and accurate financial reporting." Fitch can be found online at http://www.fitchratings.com.