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Prepayment rates for conventional 30-year fixed-rate mortgages in agency mortgage-backed securities recorded "modest gains" in the February reporting period, according to Bear Stearns & Co.Overall speeds for 30-year collateral came in at a constant prepayment rate of 11.2 CPR for Fannie Maes, up 0.5 CPR from January's level, and 9.7 CPR for Freddie Macs, up 0.7 CPR, Bear Stearns analysts Dale Westhoff and V. S. Srinivasan reported. Prepayments on 30-year Freddie collateral rose a little more than for corresponding Fannie collateral, but continued to be "marginally slower" across most coupons and vintages, the analysts said. Meanwhile, overall speeds for 30-year Ginnie Mae collateral held fairly steady, with discount coupons rising by over 10% and premiums recording comparable declines. "The March prepayment report should reflect the onset of the spring/summer increase in housing turnover activity, which should be a barometer for the housing market and expectation for discount speeds through the summer months," the analysts said. They predicted an increase of over 25% in March prepayments. Bear Stearns can be found online at http://www.bearstearns.com.

Three classes of securities issued by Independence II CDO Ltd., a collateralized debt obligation, have been downgraded by Fitch Ratings.The downgrades were as follows: class A notes, from AA-minus to A-minus; class B notes, from BB-minus to CCC; and class C notes, from CCC to C. Fitch attributed the downgrades to a deterioration of collateral quality and "the compression of the spread between the interest from the collateral and interest paid on the notes." Independence II is composed of approximately 42.3% commercial mortgage-backed securities, 34.5% residential MBS, 16.2% asset-backed securities, 6.4% CDOs, and 0.6% real estate investment trusts.

Three classes of notes issued by Independence I CDO Ltd., a collateralized debt obligation partly composed of residential and commercial mortgage-backed securities, have been downgraded by Fitch Ratings.The downgrades were as follows: class A, from AA to A; class B, from BB to B; and class C, from CC to C. Fitch attributed the downgrades to deteriorating collateral. Assets rated BBB-minus or lower represented approximately 26.8% of the portfolio as of the latest trustee report, Fitch said, adding that "mezzanine and subordinate tranches from underperforming manufactured housing securitizations have taken principal writedowns and, in Fitch's opinion, over 6.5% in collateral that was considered performing from the previous review is now considered distressed." The CDO consists of approximately 44% asset-backed securities, 30.9% CMBS, 16.1% RMBS, and 9% CDOs, the rating agency said.

Freddie Mac's board of directors has announced a dividend of $0.47 per share on the corporation's voting common stock for the first quarter, the same as in the fourth quarter.The board also declared the following preferred stock dividends per share: $0.50 on its 1996 and 1998 variable-rate stock; $0.7675 on its 6.14% stock; $0.72625 on its 1997, 2001, and 2002 5.81% stock; $0.625 on its 5% stock; $0.6375 on its 1998 and 1999 5.1% stock; $0.6625 on its 5.3% stock; $0.72375 on its 5.79% stock; $0.4475 on its 1999 variable-rate stock; $0.49125 on its January 2001 variable-rate stock; $0.46511 on its March 2001 variable-rate stock; $0.48125 on its May 2001 variable-rate stock; $0.75 on its 6% stock; and $0.7125 on its 5.7% stock. The dividends will be payable on March 31 to stockholders of record as of March 10.

CDS IndexCo LLC and Markit Group Ltd., both based in New York, have announced the launch of CMBX, a synthetic index of U.S. commercial mortgage-backed securities.The index consists of five subindices based on the 25 most recent CMBS deals. To qualify for inclusion in the index, a deal must total at least $700 million and an issuer must have ratings from at least two of the following rating agencies: Moody's Investors Service, Fitch Ratings, and Standard & Poor's Ratings Services. CDS IndexCo is a consortium of 16 investment banks licensed as market makers in the Dow Jones CDX indices, and Markit Group is a provider of independent mark-to-market pricing and valuations. The market-makers in the new CMBX index are Bank of America, Bear Stearns, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Lehman Brothers, Merrill Lynch, Morgan Stanley, Nomura International, RBS, Greenwich Capital, UBS, and Wachovia. Markit Group can be found online at http://www.markit.com.

The Federal Home Loan Bank of Seattle has posted a $1.7 million profit for 2005 and says it "no longer anticipates a loss in 2006" as the bank continues to recover from a plunge into the mortgage purchase business and rebuilds its advance business.The Seattle bank reported a net loss of $9.1 million loss in the fourth quarter after taking an $11.8 million loss due to restructuring. "We've significantly grown our advance volumes and we have reduced out risk profile, even though we incurred some costs in the process," said Seattle FHLBank president James Gilleran. "Now, we believe we have positioned ourselves to strengthen our earnings growth and our profitability." During 2005, advance borrowing at the FHLBank grew by 44%, to $21.4 billion as of Dec. 30. The bank also reduced its mortgage purchase portfolio by $3.2 billion, to $7.2 billion as of year-end. The Seattle bank is still carrying $360 million in unrealized losses, however, due to mismatches between the cash flows of its short-term and long-term assets and liabilities. These mismatches "will continue to depress earnings in 2006 and to a lesser extent in future years," the bank said.

In the wake of hurricanes Katrina and Rita, massive property damage and high unemployment rates pushed default rates on subprime mortgages up to 32.6% in Louisiana and 29.9% in Mississippi as of Dec. 30, according to Friedman Billings Ramsey.But the bad news is not over, according to the investment banking firm. FBR said it expects conditions to get worse as this year progresses, with subprime defaults (90 days or more past due) in New Orleans rising from 47.8% to 61.3% by the end of the year, and defaults in Biloxi, Miss., rising from 35.4% to 66.4% by year-end. Nationwide, the default rate on subprime mortgages was 7.07% at the end of 2005. The FBR research report on the performance of residential asset-backed securities also shows that defaults on nonagency prime loans had climbed to 13.20% in Louisiana and to 6.02% in Mississippi as of Dec. 30. Hibernia National Bank, a Fannie Mae/Freddie Mac prime lender based in Baton Rouge, La., reported that its default rate was 6.72% as of Dec. 30, up from 0.33% at year-end 2004, according to the Quarterly Data Report, a MortgageWire affiliate.

Freedom Title Corp., Chicago, has announced that 1031 exchange services will now be offered to its agents through an alliance with Nationwide Exchange Services.Freedom Title said NES is a "qualified intermediary" that provides a full range of 1031 tax-deferred exchange services. Section 1031 of the IRS Code allows owners to exchange property held for investment or business purposes for "like-kind" property, with no federal tax liability, if they meet certain deadlines. The companies can be found online at http://www.freedomtitle.com and http://www.nationwide1031.com.

Genworth Financial, Richmond, Va., has announced the pricing of a General Electric secondary public offering of approximately 71 million shares of Genworth class A common stock at $32.75 per share.Genworth, whose mortgage insurance subsidiary is headquartered in Raleigh, N.C., said it will also repurchase 15 million shares of Genworth's class B common stock directly from GE for $479 million, contingent upon the closing of the secondary offering. After the transactions, GE will not own any shares of Genworth common stock, the company said. The global coordinator and bookrunner for the offering was Merrill Lynch & Co., with Citigroup; Goldman, Sachs & Co; J.P. Morgan; and Morgan Stanley & Co. as bookrunners. Genworth can be found online at http://www.genworth.com.

Two classes of GE Capital home equity loan pass-through certificates, series 1997-HE4, have been downgraded by Fitch Ratings.Class M was downgraded from AA to A, and class B1 was downgraded from CC to C. Fitch also affirmed the ratings on two other classes in the deal. Fitch attributed the downgrades to the deterioration of credit enhancement relative to monthly losses that have risen or held steady. The rating agency can be found online at http://www.fitchratings.com.