Servicing

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.

Mortgage companies reduced their payrolls by 1,600 full-time positions during May as refinancing activity ratcheted down from nearly 50% of originations in the first quarter.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector fell from 501,600 in April to 500,000 in May. Employment in the mortgage sector hit a 12-month high of 504,800 in February, when refinancings were running at 49% of originations. In May, refi applications as a percentage of total originations dropped into the mid-30s, according to the Mortgage Bankers Association's mortgage application survey. The latest BLS employment report shows that the U.S. economy created 121,000 new jobs in June, compared with 92,000 in May. (There is a one-month lag in reporting mortgage industry employment data.) The BLS reported that construction employment was "essentially unchanged for the fourth consecutive month" and that there has been "little job growth" in the financial services sector for the second month in a row. The BLS can be found online at http://stats.bls.gov.

Triad Guaranty Inc., a mortgage insurer based in Winston-Salem, N.C., has announced its inclusion in the new NASDAQ Global Select Market.Triad said the market has the highest initial listing standards of any exchange in the world, based on financial and liquidity requirements. Before the relisting, Triad had been listed on the NASDAQ National Market. Beginning July 3, companies listed on NASDAQ markets were reclassified into three tiers: the NASDAQ Global Select Market, the NASDAQ Global Market, and the NASDAQ Capital Market. The companies can be found online at http://www.triadguaranty.com and http://www.nasdaq.com.

Class B4 of CWMBS (Countrywide Home Loans) Inc. residential mortgage-backed securities, series 2005-10, has been downgraded from B to CC by Fitch Ratings.In addition, Fitch affirmed the ratings on 54 classes in 10 CWMBS transactions. The downgrade was attributed to higher-than-expected collateral delinquencies and deterioration in the relationship between loss expectations and credit support levels.

Four classes of Long Beach residential mortgage-backed securities, series 2002-5, have been downgraded by Fitch Ratings.The downgrades were as follows: class M-2, from A to A-minus; class M-3, from BB-plus to B-plus; and classes M-4A and M-4B, from BB-minus to C. The last two classes were also assigned a Distressed Recovery rating of DR5. In addition, Fitch affirmed the rating on one other class in the deal. The downgrades were attributed to "continued deterioration" in the relationship between credit enhancement and loss expectations. The rating agency said it expects the overcollateralization to be depleted within 12 months. Fitch can be found on the Web at http://www.fitchratings.com.

W Holding Co., Mayaguez, Puerto Rico, has reported that its bank subsidiary, Westernbank Puerto Rico, recently bought additional rights from San Juan, Puerto Rico-based Doral Financial Corp. and its affiliates to perfect the acquisition of mortgage loan pools purchased since 1995.The pools have an aggregate unpaid principal balance of $937.3 billion, the holding company said. The purchases of the loan pools were originally accounted for as sales of the loans by both parties, but Westernbank later determined that it had to recharacterize the transactions on its balance sheet as commercial loans secured by mortgages. Westernbank and Doral then agreed to restructure the transactions. "As a result of this transaction, the bank will record the loan acquisitions as 'true sales'," said Freddy Maldonado, W Holding Co.'s president and chief investment officer. "Thus, the bank will record the mortgage loans as its own, rather than a financing transaction with Doral." Under the terms of the restructuring, the bank received a net compensation of $42.8 million, he said. Westernbank can be found online at http://www.wbpr.com.

Freddie Mac in August plans to begin providing monthly updates of the loan-level disclosures it has been providing for single-family mortgage participation certificates issued after Dec. 1, 2005.Freddie Mac began disclosing loan-level information at issuance for all of its newly issued single-family PC securities in December of last year. "With loan-level monthly updates, additional data will be available to assist investors in assessing the factors that may affect Freddie Mac mortgage security performance, which may enable investors to value the securities more precisely," the government-sponsored enterprise said. "The company is working with mortgage-securities data providers to accommodate the monthly loan-level updates and expects that the data providers will incorporate loan-level information into their securities analysis tools."

Teji Singh has been named chief servicing officer for Option One Mortgage Corp., an Irvine, Calif.-based national residential lender and subsidiary of H&R Block Inc.Since joining the company in 1998, Ms. Singh has played various roles in the Servicing Division, including strategic and business planning, call center management, customer advocacy, quality assurance, and default, the company said. She is also a member of Option One's enterprisewide customer advocacy team and oversaw the introduction of a servicing customer engagement survey with Gallup. Before joining Option One, she worked for seven years at KPMG Peat Marwick. The company can be found on the Web at http://www.optiononemortgage.com.

Fannie Mae purchased $47.9 billion in mortgages during May, an 8% decline from April's total but a slight improvement over that of a year earlier.Through the first five months of 2006, Fannie purchased $243.4 billion in loans from its seller/servicers. Fannie's chief competitor, Freddie Mac, acquired $35 billion in loans during May, an 11% decline from April's level and a 30% drop from that of May 2005. Fannie's retained portfolio continues to shrink, and at month's end it had $733.8 billion in mortgages on its books, an 11% decline from the level recorded a year earlier. At the end of May Freddie Mac had $723 billion in mortgages on its books, up 8% from the level of a year earlier. The figures are based on monthly reports issued by the two government-sponsored enterprises.