Servicing

Employment in the mortgage industry fell in April for the second month in a row.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector slipped by 2,500 jobs, from 503,600 in March to 501,100 in April. Meanwhile, the U.S. economy created 75,000 new jobs in May, and the unemployment rate fell to 4.6%. (There is a one-month lag in BLS reporting of mortgage-sector employment data. The May data will not be released until early next month.)The BLS can be found online at http://stats.bls.gov.

Twenty-five subordinate certificates from 12 subprime home equity loan transactions issued by Structured Asset Securities Corp.'s Amortizing Residential Collateral Trusts have been placed under review for possible downgrade by Moody's Investors Service.The affected classes are as follows: series 2001-BC1, class M1 and class M2; series 2001-BC6, class M2; series 2002-BC1, class M2 and class B; series 2002-BC2, class M1, class M2, and class B; series 2002-BC3, class M2 and class B; series 2002-BC4, class M3 and class B1; series 2002-BC5, class M3; series 2002-BC6, class M3 and class B; series 2002-BC7, class B1, class B2, and class B3; series 2002-BC8, class M3, class M4, and class B; series 2002-BC9, class M3, class M4, and class B; and series 2002-BC10, class M3. The rating actions were based on the weaker-than-expected performance of the mortgage pools and the resulting erosion of credit support, Moody's said. The rating agency can be found online at http://www.moodys.com.

The number of rating upgrades in the first quarter for U.S. structured finance transactions was nearly triple that of a year earlier, with commercial mortgage-backed securities leading the way, according to Fitch Ratings.Upgrades totaled 1,203 in the first quarter, compared with 421 in the first quarter of 2005, Fitch says in its latest global update report. The ratio of upgrades to downgrades also improved dramatically, rising from 1.1 to 1 in the first quarter of 2005 to 4.1 to 1. "By far the best-performing U.S. structured finance sector was CMBS, as evidenced by its 28.4:1 upgrade-to-downgrade ratio," the rating agency reported. "A sharp rise in defeasance was largely responsible for 483 upgrades, compared to just 17 downgrades." Residential MBS also turned in a strong rating performance, recording a 3.4 to 1 upgrade-to-downgrade ratio in the first quarter, far ahead of its 0.9 to 1 ratio a year earlier. "Longer term, however, the rate of RMBS upgrades will likely dwindle due to slowing prepayment speeds and subsequently slow build-up of credit enhancement," Fitch predicted. The rating agency can be found online at http://www.fitchratings.com.

The Prestwick Mortgage Group, Alexandria, Va., is brokering the sale of servicing rights on a $46 million portfolio of loans backed by Ohio homes.The weighted average note rate is 6.054%, and the average loan balance is 84,358. Bids are due at 5 p.m. EDT on June 6.

A portfolio of servicing rights on $262 million of Fannie Mae and Ginnie Mae loans is being offered for sale by Interactive Mortgage Advisors, Denver.IMA is brokering the sale of the portfolio, which consists of two parts: an $88 million Ginnie Mae piece and a $174 million Fannie Mae piece. Bidders can bid on either portion or for the entire portfolio. Bids are due June 7 at 5 p.m. Mountain time.

First BanCorp, San Juan, Puerto Rico, has reported a cash payment of approximately $2.4 billion from Doral Financial Corp. to First BanCorp's subsidiary FirstBank, "substantially reducing" the balance of approximately $2.9 billion in mortgage-related commercial loans outstanding to Doral.The commercial loans resulted from First BanCorp's previously announced revised classification of several mortgage-related transactions with Doral. The payment reduced the balance of the commercial loans to Doral to approximately $450 million, First BanCorp said, adding that it "expects additional accelerated payments by Doral." The loans had been recorded as purchases of residential real estate loans from Doral by FirstBank, and they were later reclassified as commercial loans secured by mortgages. FirstBank has agreed to reimburse Doral for 40% of the net losses incurred by Doral as a result of sales of the mortgages, subject to certain conditions. First BanCorp can be found online at http://www.firstbankpr.com.

Freddie Mac has reported that its net income fell 27% to $2.1 billion last year, from $2.9 billion in 2004, primarily because of $600 million in costs associated with settling securities litigation, charges related to Hurricane Katrina, and certain accounting changes.Freddie Mac also warned that its earnings would likely show increased volatility in the future due to "asymmetric mark-to-market accounting treatment" of certain assets and liabilities. Those accounting changes affect another measure of Freddie Mac's performance, the value of net assets, before capital transactions, attributable to common shareholders. The net value declined slightly last year, to $26.7 billion at the end of 2005. In a conference call with investors and analysts, Freddie Mac executive vice president Patricia Cook said wider mortgage-to-debt option-adjusted spreads reduced the fair value of net assets, but that the wider spreads will actually benefit Freddie Mac in the long term. Freddie Mac chairman and chief executive Richard Syron and chief operating officer Eugene McQuade said the fundamentals of the business remain good, stressing that Freddie Mac gained market share last year and exceeded a 30% surplus capital target by some $3.5 billion.

Class B of First Union Home Equity Loan mortgage pass-through certificates, series 1997-3, has been downgraded from B to CCC by Fitch Ratings and assigned a Distressed Recovery rating of DR2.Fitch said the downgrade reflects the deterioration of credit enhancement relative to expected losses, largely as a result of liquidations that have reduced the amount of overcollateralization supporting the transaction. The collateral consists of mixed fixed-rate and balloon mortgages extended to subprime borrowers.

Two classes from two Ameriquest Mortgage Securities Inc. home equity issues have been downgraded and removed from Rating Watch Negative by Fitch Ratings.Class M2 of series 2002-C and class M-4 of series 2002-3 were downgraded from BBB-minus to B. In addition, Fitch affirmed the ratings on four classes from the two Ameriquest transactions. The downgrades were attributed to a deterioration in the relationship between credit enhancement and expected losses.

Three classes of Argent Securities Inc.'s ARSI series 2004-PW1 home equity issue have been downgraded and removed from Rating Watch Negative by Fitch Ratings.The downgrades were as follows: class M9, from BBB-minus to BB; class M10, from BB-plus to B-plus; and class M11, from BB to B. Fitch also affirmed the ratings on nine other classes from the transaction. The downgrades were attributed to a deterioration in the relationship between credit enhancement and expected losses. The transaction consists of loans originated or acquired by Argent Mortgage Co. or Olympus Mortgage Co., Fitch said.