Servicing

Fitch Ratings has announced the introduction of Distressed Recovery ratings for U.S. and European structured finance transactions (including residential and commercial mortgage-backed securities) that are designed to estimate recoveries for distressed and defaulted securities.Fitch said the new DRs will affect 314 RMBS transactions, 60 CMBS deals, 64 asset-backed securities deals, and 101 collateralized debt obligations. Olivier Delfour, a Fitch managing director, said the new ratings are "part of an effort to provide an enhanced analytical approach" to structured finance securities that are rated B or below and are distressed or defaulted. The ratings will range from DR1 (the highest) to DR6 to designate a transaction's recovery prospects. Fitch can be found online at http://www.fitchratings.com.

Fannie Mae needs to "do more" so that working families trying to afford a home have an alternative to exotic mortgages, according to the mortgage giant's top executive.Being a low-risk enterprise does not mean "avoiding risk entirely," Fannie Mae president and chief executive Daniel Mudd told a National Association of Realtors regional summit. "Our job is to look deeply into our mortgage data and try to stretch our tolerances so that we can serve more people who need serving the most -- working families struggling to own or rent a home," Mr. Mudd said. He noted that borrowers are choosing interest-only and payment-option adjustable-rate mortgages so they can "squeeze" into a house. "But there's a problem here, of course. For working families, exotic mortgages can be a poison apple," he said, as the mortgages reset and the monthly payment goes up. Fannie Mae can be found online at http://www.fanniemae.com, and the NAR can be found at http://www.realtor.org.

IndyMac Bancorp, which acquired Freedom Financial from Lehman Brothers in 2004, may now spin off a stake in the nation's largest reverse mortgage lender through an initial public offering.In response to a question during IndyMac's quarterly earnings call, IndyMac chairman and chief executive Michael Perry said his company is "seriously considering" an IPO for its Financial Freedom subsidiary. He added that there is a "75% to 90% chance we'll do it." A spinoff of Financial Freedom would allow the company to recruit and maintain top management with stock options and let them run the company, Mr. Perry said. Financial Freedom, based in Irvine, Calif., closed $2.9 billion of reverse mortgage accounts last year. It is also the largest servicer of reverse home loans, managing a 77,000 loan portfolio.

Four classes of Ocwen Residential MBS Corp. Home Equity Loan Trust securities have been downgraded by Fitch Ratings.The downgrades were as follows: series 1998-R1, class B-3, from BBB-minus to BB; series 1998-R3, class B-1, from A to BBB; series 1999-R1 group A, class B-4A, from BB to B; and series 1999-R1 group F, class B-4F, from CC to C. In addition, Fitch upgraded four classes from two Ocwen deals and affirmed the ratings on 19 classes from five Ocwen transactions. Fitch said the downgrades resulted from a deterioration in the relationship between credit enhancement and loss expectations. Fitch can be found online at http://www.fitchratings.com.

IndyMac Bancorp Inc., Pasadena, Calif., has reported earnings of $80 million ($1.18 per share) for the first quarter, up 26% from $63 million ($0.98 per share) a year earlier, and record mortgage volume of $20 billion.IndyMac touted the record loan production, which was up 72% from the level of a year earlier, and said it had doubled its market share to 3.89%. "In the first quarter, we deployed a total of $509 million of our capital in our mortgage production divisions, an 83% increase over last year," said Michael W. Perry, IndyMac's chairman and chief executive officer. "However, given mortgage industry margin pressures and our lower-margin conduit operations comprising a higher percentage of our production volume, the [return on equity] on this capital declined from 97% last year to 51% this quarter, still a strong return on our capital." The mortgage pipeline totaled a record $10.4 billion as of March 31, up 39% from that of a year earlier, the company said. IndyMac, the holding company for IndyMac Bank FSB, can be found online at http://www.indymacbank.com.

New foreclosure activity fell 16% in New York City in February, according to Foreclosures.com, a real estate investment advisory firm based in Fair Oaks, Calif."While this is an improvement over the slowly rising foreclosure rate of the last few months, you have to remember that New York City is a city of renters," said company president Alexis McGee. "Only 26% of the city's housing stock is owner-occupied." The company can be found online at http://www.foreclosures.com.

Freddie Mac has announced the timeframe for submitting stockholder proposals in connection with its annual stockholders' meeting later this year.To be considered for inclusion in Freddie Mac's proxy statement, stockholder proposals must be submitted in writing to Corporate Secretary, Freddie Mac, 8200 Jones Branch Drive MS 200, McLean, Va., 22102, and received by May 24. Freddie Mac said it will announce the dates for submitting stockholder proposals to be introduced from the floor and for stockholder nominations of candidates for election as directors when it announces the date of the annual meeting. Procedural requirements for such proposals and nominations are available online at http://www.freddiemac.com.

Moody's Investors Service has published a report explaining its approach to assessing the risks of U.S. collateralized debt obligations backed by the debt of real estate investment trusts.CDOs backed by REIT trust securities or subordinate debt are "the newest phase in the continued expansion of the $30 billion trust preferred market," Moody's said. "The TRUPs space also includes transactions backed by bank and insurance sector assets." In the report, titled "Moody's Approach to Rating U.S. REIT CDOs," Moody's said its rating approach to REIT CDOs is an extension of its methodology for CDOs backed by bank and insurance TRUPs. REIT CDOs are important sources of funding for small to midsize REITs that have had limited access to the capital markets, the rating agency said. REIT TRUPs are typically nonamortizing, with 30-year maturities and five- or 10-year noncall periods, while subordinate REIT securities are generally nonamortizing and usually have maturities of 10 to 20 years, Moody's said. The rating agency can be found online at http://www.moodys.com.

Meanwhile, foreclosures rose significantly in several Western and Southwestern housing markets in the first quarter, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm.Alexis McGee, president of the firm, said the increases coincided with the cooling of previously overheated markets. "The biggest increases were in major urban centers around the West," Ms. McGee reported. "For example, Los Angeles County recorded 6,314 pre-foreclosure filings and foreclosures through March, up from 4,911 in Q4 of 2005, while in San Diego the numbers jumped from 1,565 in Q4 of 2005 to 2,241 in Q1 of 2006." The company can be found online at http://www.foreclosures.com.

RealtyTrac, an online foreclosure marketplace based in Irvine, Calif., has reported that 323,102 properties nationwide entered some stage of foreclosure in the first quarter, a 38% increase from the level recorded in the previous quarter and a 72% year-over-year increase.The company's 2006 Q1 U.S. Foreclosure Market Report is based on the company's database of pre-foreclosure and foreclosure properties, which it says includes more than 600,000 properties in more than 2,500 counties across the country. "The sharp increase in foreclosures in Q1 continues a steady upward trend that we've observed since the beginning of last year," said James J. Saccacio, RealtyTrac's chief executive officer. "Foreclosures have now increased in four consecutive quarters and are on track to go above 1.2 million in 2006, which would push the nation's annual foreclosure rate to more than 1% of U.S. households." Mr. Saccacio added, however, that foreclosures had declined 13% in March, which he said could indicate that the foreclosure rate is leveling off. The company said Georgia, Colorado, and Indiana had the nation's highest foreclosure rates in the first quarter. RealtyTrac can be found online at http://www.realtytrac.com.