Servicing

Freddie Mac has agreed to pay $410 million to settle class action lawsuits filed by investors who lost millions of dollars when the company restated earnings tied to its $5 billion accounting scandal.Unveiled after the market closed on April 20, the settlement will reduce the government-sponsored enterprise's first-quarter income by $220 million (after taxes). Individual and institutional investors, including the Ohio Public Employees Retirement System, sued the mortgage giant, charging the company, its top officers, and its directors with securities fraud tied to alleged misstatements about its finances. The investors lost millions when the share price of their Freddie Mac stock plummeted in value. In June 2003 Freddie's then chairman and chief executive, Leland Brendsel, and other top officers were forced out as allegations about accounting improprieties began to mount. Freddie Mac can be found online at http://www.freddiemac.com.

Three classes of GSRPM Mortgage Loan Trust, series 2002-1, have been downgraded by Fitch Ratings.The downgrades were as follows: class M-1, from AA-minus to A; class M-2, from BBB to BB; and class B, from BB-minus to B. Fitch also affirmed the rating on one class in the transaction. The downgrades were attributed to a deterioration in the relationship between credit enhancement and loss expectations. As of the March 25 distribution, cumulative losses had exceeded the loss trigger maximum at 8.44%, "causing the trigger to fail for the remainder of the pool's life," Fitch reported. The collateral consists primarily of performing and re-performing, seasoned, mainly first-lien residential mortgage loans that were purchased by an affiliate of GS Mortgage Securities Corp. and then sold to GS Mortgage Securities. The rating agency can be found online at http://www.fitchratings.com.

LoanCare Servicing Center Inc.'s residential primary servicer rating for prime product has been upgraded from RPS3-minus to RPS3 by Fitch Ratings.The Norfolk, Va.-based LoanCare, the loan subservicing subsidiary of LandAmerica Financial Group Inc., was cited by Fitch as having "capable and tenured management team, effective loan administration procedures, and improvement to its formal training program." The rating agency also cited the financial strength of the Richmond, Va.-based LandAmerica. Fitch rates residential servicers on a scale of 1 to 5, with 1 being the highest rating.

Fannie Mae has announced the introduction of Benchmark REMICs, a multiclass real estate mortgage investment conduit security with enhanced structural, price transparency, and liquidity features for fixed-income investors.The company said it expects to issue the first Benchmark REMIC in this quarter and up to two deals per quarter thereafter. Fannie said the securities will have four characteristics designed to improve liquidity and price transparency: syndicated dealer distribution; a large Guaranteed Maturity Class, with a stated final maturity; a minimum new-issue size of $1 billion for each GMC; and live price quotes on TradeWeb for the GMCs. The securities will generally be collateralized by pools of Fannie Mae fixed-rate, first-lien, single-family mortgages. Peter Niculescu, executive vice president for capital markets, said the move "should help us better serve our affordable housing mission by attracting more capital to the U.S. housing market through broadened distribution of Benchmark REMICs to a potentially more diverse mortgage investor base globally." Freddie Mac introduced a similar program, Reference REMICs, last year.

Fannie Mae is encouraging lenders and servicers to participate in a Mississippi housing assistance program, despite some legal concerns about the subordination agreements they have to sign to work with homeowners receiving the assistance grants."Servicers that opt-in have our consent to subordinate our lien to the required covenant and will have no liability to Fannie Mae for the consequences of such subordination," the government-sponsored enterprise says in a letter to lenders and servicers. The deadline for signing up for the state housing program is April 21. Homeowners can receive up to $150,000 in grants to rebuild homes that were destroyed or damaged by Hurricane Katrina. By participating, lenders and servicers will help homeowners with the execution of the closing documents for the grants. Lenders are assured that the loan will be made current and taxes will be paid. But after that point, the homeowner has complete control of the funds and there is no guarantee or requirement that the assistance be used to repair the property or pay down the mortgage.

The Prestwick Mortgage Group, Alexandria, Va., is brokering the sale of mortgage servicing rights on a $1.8 billion portfolio of Fannie Mae and Freddie Mac loans.The weighted average note rate is 5.664%, and the weighted average servicing fee is 0.3869%. The portfolio has 33 months of weighted average seasoning and a 1.86% delinquency rate, including foreclosures. The vast majority of the loans, 88.3%, are backed by homes in North Carolina, with most of the rest coming from Virginia, South Carolina, or Georgia. The seller is a Southeastern bank. The bid deadline is April 26.

The net income of Washington Mutual Inc.'s mortgage segment plunged from $323 million in the first quarter of 2005 to $38 million in the first quarter of this year, although profits rose overall, the Seattle-based thrift has reported.WaMu attributed the nosedive in the Home Loans Group's profits to higher short-term interest rates and a flat yield curve, which produced a decline in net interest income and a significant increase in the cost of risk management for mortgage servicing rights. Originations of home loans were actually higher, at $44.998 billion, than they were in the first quarter of 2005, when they totaled $44.495 billion. Overall, WaMu reported net income of $985 million ($0.98 per share) for the first quarter, up from $902 million ($1.01 per share) a year earlier. WaMu can be found online at http://www.wamu.com.

Federal Trust Corp., a holding company based in Sanford, Fla., has announced the sale of 850,000 shares of its common stock at $10 per share in a private placement aimed at raising funds to support mortgage subsidiary operations, among other things.Federal Trust estimated net proceeds at $7.9 million. "Approximately $5.5 million of the proceeds from the offering will be used to repay our holding company revolving credit line," said James V. Suskiewich, the company's president and chief executive officer. Federal Trust can be found on the Web at http://www.federaltrust.com.

RealtyTrac, an online foreclosure marketplace based in Irvine, Calif., has reported that the number of new properties in some stage of foreclosure fell 13% in March.The company's Monthly U.S. Foreclosure Market Report indicates that 101,597 new foreclosure properties were added to the rolls in March. "After rising more than 20% during each of the first two months of the year, foreclosure numbers experienced a fairly sharp correction in March," said James J. Saccacio, RealtyTrac's chief executive officer. "We saw a similar drop in March of '05, followed by four consecutive months of increases. Many buyers and investors typically start looking for properties in the spring, and that could have provided distressed homeowners a better chance of selling their properties to avoid default or foreclosure." The company said Colorado recorded the highest foreclosure rate of any state in March, jumping 31% (to 5,392 new foreclosures) from February's level. RealtyTrac can be found online at http://www.realtytrac.com.

Wells Fargo & Co., San Francisco, has reported record net income of $2.02 billion ($1.19 per share) for the first quarter, up 9% from $1.86 billion ($1.08 per share) a year earlier, despite a revenue plunge at Wells Fargo Home Mortgage.Home Mortgage revenue totaled $853 million, down $665 million from $1.5 billion in the first quarter of 2005, Wells Fargo reported. Mortgage originations totaled $91 billion in the first quarter, up 40% from the first quarter of 2005. "While we have seen a slowdown in refinancing activity, the purchase market where we are the leading lender remained historically strong," said Mark Oman, senior executive vice president in the Wells Home and Consumer Finance Group. "We also saw double-digit growth in our trillion-dollar owned servicing portfolio." The portfolio stood at $1.04 trillion as of March 31, up 24% from that of a year earlier. The company can be found online at http://www.wellsfargo.com.