Servicing

Two classes of Merit Securities Corp. residential mortgage-backed securities series 12-1 have been downgraded by Fitch Ratings.Class 3A-1 was downgraded from AAA to AA, and class B-2 was downgraded from A to BBB. The rating on one other class in the transaction was affirmed. Fitch said the downgrades reflect a continued deterioration in the relationship between credit enhancement and expected loss levels. The collateral consists of conventional first-lien mortgage loans and manufactured housing installment sales contracts. Fitch can be found online at http://www.fitchratings.com.

The Federal Agricultural Mortgage Corp., Washington, D.C., has announced the issuance of a long-term standby purchase commitment that boosted its portfolio of loans, guarantees, and commitments to a record level of $6 billion.The standby purchase commitment was made to a Farm Credit System institution on a $479 million pool of agricultural real estate mortgage loans, Farmer Mac said. "The transaction is a product of Farmer Mac's ongoing efforts to diversify its marketing focus to include large program transactions that emphasize high asset quality, with greater protection against adverse credit performance and commensurately lower compensation for the assumption of credit risk and administrative costs," said Henry D. Edelman, chief executive officer of the government-sponsored enterprise. Farmer Mac can be found online at http://www.farmermac.com.

The risk of price declines over the next two years has risen in 48 of the nation's 50 largest housing markets, but the rate of appreciation has slowed in 21 of the markets, according to PMI Mortgage Insurance Co., Walnut Creek, Calif.The average score in the PMI U.S. Market Risk Index rose from 261 to 287, the company reported. This means the company's estimate of the probability of experiencing a home price decline in the next two years has risen from 26.1% to 28.7% in the 50 largest metropolitan statistical areas. According to the index, there are now 14 markets with a greater than 50% chance of price declines over two years, up from 11 in the fourth quarter. PMI also reported the results of a study of the value of homeownership from 1986 through 2005. "What we found was that across the nation's 50 largest MSAs, owning a home for 10 years or more resulted in a positive return in 100% of the cases," said Mark Milner, chief risk officer of PMI Mortgage Insurance. "This dropped to 95% with a seven-year ownership term and to 92% with a five-year ownership term -- still a pretty impressive rate." PMI can be found online at http://www.pmigroup.com.

Two classes of BCF LLC mortgage-pass through certificates, series 1997-R2, have been downgraded by Fitch Ratings.Class B-4 was downgraded from BB to B-minus, and class B-5 was downgraded from B to C. In addition, Fitch affirmed the ratings on 10 other classes in the transaction. The rating agency said the deal consists of three mortgage groups, each of which has component certificate classes B4 and B5. Mortgage group 2 has the poorest performance, and therefore its components determine the ratings for the total class, Fitch said. The downgrades were attributed to the performance of classes 2B-4 and 2B-5, in which 55.3% of the loans are 60-plus days delinquent, according to the rating agency.

Three classes of GS Mortgage Participation Securities mortgage pass-through certificates have been downgraded by Fitch Ratings.The downgrades, from GSMPS Mortgage Loan Trust 2003-3, were as follows: class B-3, from BB to B; class B-4, from B to CCC; and class B-5, from CCC to C. In addition, the ratings on three other classes from the deal were affirmed. The downgrades were attributed to higher-than-expected collateral losses and a deterioration in the relationship between loss expectations and credit support levels. The collateral for the deal consists of reperforming loans backed by the Federal Housing Administration or the Department of Veterans Affairs, Fitch said. The rating agency can be found online at http://www.fitchratings.com.

Matrix Bancorp, Denver, has sold its servicing advisory group to Security National Holding Co. and former employees of the unit for about $4.1 million.The advisory group, Matrix Bancorp Trading, evaluates and sells residential servicing portfolios. It also manages an active whole-loan trading desk. The former MBT will be housed under a limited liability company called SN Capital Markets LLC. MBT employed 31 full-timers, all of whom will shift over to SNCM.

Cerberus Capital Management, New York, and two partners have inked a deal to buy 51% of General Motors Acceptance Corp., the parent of Residential Capital Corp., the nation's fifth-largest mortgage banker.Cerberus, Citigroup Inc., and Aozora Bank will pay $14 billion for the stake. The sale places GMAC's residential empire -- GMAC Residential, GMAC-RFC, and Homecomings -- in the odd position of being owned by competitors. Citigroup owns Citigroup Mortgage and subprime lender CitiFinancial, and Cerberus owns a controlling interest in Aegis Mortgage, a top-20-ranked nonconforming lender. Besides mortgages, GMAC controls other financial services assets, including auto finance, credit cards, and insurance. A few weeks ago, General Motors sold a controlling stake in its commercial mortgage banking affiliate to Kohlberg, Kravis & Roberts and two partners. GM, which is facing possible bankruptcy, is trying to raise cash and restore its debt ratings and that of GMAC. Rick Wagoner, GM's chairman and chief executive officer, said the sale will preserve "the mutually beneficial relationship between GM and GMAC."

A unit of Fortress Investment Group has agreed to purchase Centex Home Equity Co., Dallas, in a deal valued at about $575 million.Late in the day on March 30, Centex Homes, the homebuilder parent of CHEC, disclosed it had signed a definitive agreement to sell the nation's 28th largest subprime lender to Fortress, which bills itself as a "global alternative investment and asset management firm." Fortress was one of the investment companies that purchased Green Tree from Conseco when the latter was in bankruptcy. The sale is subject to certain conditions, including regulatory approvals, and is expected to close within three to four months. Among subprime servicers, CHEC ranks 22nd, according to National Mortgage News and the Quarterly Data Report.

Irwin Financial Corp., Columbus, Ohio, is toying with the idea of selling $14 billion in servicing rights housed at its mortgage affiliate, sources told MortgageWire.A spokeswoman for IFC declined to comment. In January IFC announced that it was exiting the conventional market by selling subsidiary Irwin Mortgage Corp., which is based in Fishers, Ind. IMC ranks 31st among residential servicers. The bank parent has been fielding offers for the unit and in February rumors began to surface that subprime giant New Century Financial Corp., might be the winning bidder. However, the IFC spokeswoman clarified that no sale announcement is pending and the company is not commenting on any market rumors.

Freddie Mac, which is still not current on its financial reporting, unveiled preliminary earnings of $2.5 billion for 2005 while revealing a $500 million write down in the fourth quarter tied to its holdings of interest-only assets.During a Friday morning conference call, company EVP of investments Patty Cook described the hit as a "mark to market" accounting adjustment designed to make its financial reporting more transparent. She said that in the IO market "spreads widened" which contributed to the write down. Compared to 2004, Freddie's earnings fell 13%. GSE chairman and CEO Richard Syron called it a "solid year," while president Eugene McQuade noted that the company increased its GSE market share to 45% from 41%. The company will release final 2005 results in late May. Mr. McQuade noted that 5% of Freddie's retained portfolio includes "non-traditional" mortgages, including interest-only loans.