Servicing

Morgan Stanley is recommending to clients that they short the stock of Golden West Financial Corp., Oakland, Calif., one of the nation's largest originators of adjustable-rate mortgagesIn a research note released March 2, analyst Ken Posner suggests that the company is overpriced compared with two of its peers, Countrywide Home Loans, Calabasas, Calif., and IndyMac, Pasadena, Calif. (All three lenders are active ARM funders.) Both Countrywide and IndyMac trade at 1.6 times book value, compared with 2.6 times for Golden West. In addition, the market is valuing GWF's production franchise at twice that of Countrywide's -- $7.7 billion versus $3.8 billion, according to Morgan Stanley research. At midday Thursday, GWF's shares were trading down 47 cents, at $70.40.

Two publicly traded mortgage lenders -- one prime, the other subprime -- are delaying financial disclosures because of valuation and accounting concerns.PHH Corp., Mt. Laurel, N.J., which owns the nation's 10th-largest servicer, said it will not file its annual 10-K statement with the Securities and Exchange Commission on March 16 as originally scheduled. At MortgageWire's deadline on Thursday, PHH's shares were trading down 16%, at $24.17. Fitch Ratings placed the company on Rating Watch Negative. PHH gave several reasons for the holdup, saying it needs more time to document and analyze goodwill, intangibles, and "certain tax assets." Meanwhile, Saxon Mortgage, Glen Allen, Va., a top-40-ranked subprime funder, is delaying is fourth-quarter and full-year results for several weeks as management reviews its application of Statement of Financial Accounting Standards No. 133, accounting for derivatives and hedging.

ECC Capital Corp., Irvine, Calif., saw its share price get clobbered Feb. 27 after the subprime lender revealed that it would not pay a dividend for the first quarter of 2006.The lender blamed the dividend policy on "losses in its mortgage banking segment." The lender's general counsel declined to discuss the matter with MortgageWire. Its shares closed down 28%, to $1.36 a share, on Feb. 27. ECC, a real estate investment trust, trimmed 440 full-timers in early January, about 27% of its work force. ECC, the parent of Encore Credit Corp., went public a year ago. It is scheduled to report fourth-quarter and full-year 2005 earnings by the end of March.

Beverly Hills Bancorp, Calabasas, Calif., has announced that it will restate its 2004 audited financial statements as a result of errors that included the computation of taxable "excess inclusion income" on its interests in real estate mortgage investment conduits.As a result of the REMIC-related error, and an error related to the amount of net operating losses used in computing taxes for 2004 and prior years, the company said it overstated its deferred tax asset, which included future tax benefits associated with its net operating losses. This overstatement had no effect on the company's balance sheet or income until the fourth quarter of 2004 "because the company had established a valuation allowance against this asset," the holding company said. The company can be found online at http://www.bhbc.com.

Doral Financial Corp., San Juan, one of Puerto Rico's major mortgage lenders, has completed the restatement of its financial results, a process that shaved $694.4 million from the company's retained earnings through the end of 2004.In the restatement, Doral reduced earnings by $508.1 million for 2002 through 2004, with the remaining $186.3 million being subtracted from periods prior to 2002. The company now says it earned $214.8 million in 2004. As a result of the restatement, Doral Financial's stockholders' equity and Tier One capital each fell by 35%, the company said. However, Doral said the company "remains well capitalized for bank regulatory purposes." Doral said it has concluded that its internal control over financial reporting "was not effective" as of Dec. 31, 2004, and that it has "identified a number of material weaknesses, including but not limited to an ineffective control environment." Last August, Doral announced the termination of its chief financial officer and the resignation of several senior executives in connection with the restatement. It also named Antonio F. Faria, a former commissioner of financial institutions in Puerto Rico, chief executive officer of its subsidiary Doral Bank.

Fitch Ratings has affirmed the long-term issuer default rating and short-term rating for Astoria Financial Corp. and Astoria Savings and loan.The long-term issuer default rating is BBB-plus, and the short-term rating is F2 with a stable outlook. Fitch said the ratings reflect consistent financial performance despite a challenging operating environment. Astoria continues to originate and hold hybrid, 3/1, and 5/1 adjustable-rate mortgages, as well as multifamily mortgages, to offset margin pressure from rising short term interest rates, Fitch said.

Classes B-1 and B-2 of GS Mortgage Securities Corp. residential mortgage pass-through certificates, series 2003-HE1, have been placed on Rating Watch Negative by Fitch Ratings.In addition, four classes from two other GSAMP transactions were upgraded, and the ratings on 42 classes from eight GSAMP deals were affirmed. The negative rating actions were attributed to monthly losses that have exceeded excess spread in four of the last six months, causing overcollateralization to fall below its target.

Two classes from two Ameriquest Mortgage Securities Inc. home equity issues have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are class M2 of series 2002-C and class M-4 of series 2002-3. In addition, Fitch upgraded 22 classes from eight Ameriquest transactions and affirmed the ratings on 89 classes from 24 deals. The negative actions were attributed to a deterioration in the relationship between credit enhancement and expected losses, the rating agency said.

Class A of Structured Finance Advisors Collateralized Asset Backed Securities Trust I Ltd. has been downgraded from B to CCC by Fitch Ratings.SFA CABS I is a collateralized debt obligation supported by residential and commercial mortgage-backed securities and CDOs, Fitch said. The downgrade "reflects the continued deterioration of the collateral and the decline in the coverage of the notes," the rating agency said.

Three classes from two Credit Based Asset Servicing and Securitization LLC mortgage loan securitizations have been downgraded by Fitch Ratings, and four classes from two other C-BASS transactions have been placed on Rating Watch Negative.The downgrades were as follows: series 2001-CB3, class B-2, from BB to B-plus; and series 2002-CB2, class B-1, from BBB to BB-plus, and class B-2, from BB-plus to BB. The Rating Watch placements were classes 1B-1 and 1B-2 of series 1999-CB2 group 1 and classes B-2 and B-3 of series 2002-CB5. Fitch also upgraded 16 classes and affirmed the ratings on 178 classes from 26 C-BASS deals. The negative rating actions reflect a deterioration in the relationship between credit enhancement and loss expectations, the rating agency said. Fitch can be found on the Web at http://www.fitchratings.com.