Servicing

The issuance of U.S. asset-backed commercial paper, used to finance such assets as residential mortgages and credit cards, is expected to surpass $1 trillion for the first time in 2006, according to Standard & Poor's Ratings Services.Citing its own econometric model and a recent survey of nine conduit sponsors, S&P predicted ABCP issuance of $1.15 trillion this year, which would represent a 24.6% increase. Issuance climbed 24.4% last year, driven largely by mortgage and collateralized debt obligation warehousing facilities and structures aimed at minimizing the use of bank-provided liquidity, such as repo programs, S&P said. The company can be found online at http://www.standardandpoors.com.

The long seller's market in residential real estate is coming to an end on the East Coast, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm.Alexis McGee, president of the firm, said fourth-quarter price declines are showing up in most Eastern markets. "The median home price in Boston fell 4.5% over the last three months," Ms. McGee reported. "In Washington, D.C., prices were flat over the last 30 days, but down 5.4% over the last 90 days. Realtors outside Manhattan in New York City report a shift to a buyer's market." Miami recorded a smaller home price decrease, but the inventory of unsold homes rose by 39.1%, she said. The company can be found online at http://www.foreclosures.com.

The Financial Accounting Standards Board is very close to issuing a new standard that will simplify hedge accounting for mortgage servicing rights.The board is expected to issue the standard, which will allow servicers to mark MSRs to market, before the end of March. Servicers can continue to use the lower of cost or market (LOCOM) approach. But servicers who elect to use fair-value accounting will be able to mark to market MSRs and their derivative hedging instruments without going through all the hoops of Financial Accounting Standard 133 that require documentation of hedging strategies and hedge effectiveness. The Mortgage Bankers Association has asked the board to issue the new accounting standard as soon as possible. "We are pleased with the way FASB has handled the issue, and we are very much looking forward to release of the final statement," MBA senior director Alison Utermohlen said. The MBA also supports a FASB project that would allow lenders to mark to market loans that are held for sale for 60-90 days. FASB has released an exposure draft, and the comment period ends April 10.

IndyMac Bancorp Inc., Pasadena, Calif., the holding company for IndyMac Bank, has reported record net earnings of $300.2 million ($4.54 per share) for 2005, up 42% from pro forma net earnings of $211.3 million ($3.40 per share) in 2004.Mortgage loan production totaled a record $60.8 billion, up 60% from the volume recorded the year before, IndyMac said. For the fourth quarter, the company reported net earnings of $72.3 million ($1.09 per share), compared with pro forma net earnings of $58.4 million ($0.91 per share) in the fourth quarter of 2004. Mortgage loan production totaled a record $18.0 billion during the quarter, up 60% from that of a year earlier. "The 2005 fourth-quarter results clearly demonstrated the power of our hybrid thrift/mortgage bank business model," said Michael W. Perry, IndyMac's chief executive officer. "Of our $1.5 billion of average capital during the fourth quarter, we allocated 34% to our mortgage production divisions, 20% to our MSR division, and 45% to our thrift segment, with each providing strong returns on equity in line with our established targets." The company can be found online at http://www.indymacbank.com.

In order to promote homeownership and recovery efforts in Mississippi's Hurricane Katrina disaster areas, Freddie Mac is purchasing $40 million of Mississippi Home Corp. bonds that will be used to finance mortgages with a 5.61% interest rate.The move, expected to help an estimated 350 borrowers, marks the first installment on Freddie Mac's commitment to fund up to $1 billion in below-market-rate mortgages for storm recovery in Mississippi and Louisiana. Freddie Mac is buying the bonds at a price that will enable MHC to make available an additional $1.2 million to cover 3 points of downpayment or closing cost assistance, which works out to an estimated $3,000 per borrower. The mortgages, which can be used to repair or purchase homes in federally designated storm disaster areas, are available on a first-come, first-served basis. "Because we are buying these tax-exempt mortgage bonds for our investment portfolio, we can safely price them so their rate is a quarter-point below market," said Patricia Cook, Freddie Mac's executive vice president of investments and capital management. A list of participating lenders can be found on MHC's website, at http://www.mshomecorp.com.

Class B3 of CWMBS (IndyMac) Inc. mortgage pass-through certificates, series 2000-H (RAST 2000-A8), has been downgraded from B to CCC by Fitch Ratings.In addition, the ratings on six classes in three CWMBS (IndyMac) deals were affirmed. The downgrade was attributed to poor collateral performance and a deterioration of asset quality beyond original expectations. As of the December distribution date, serious delinquencies represented over 40% of the mortgage pool, the rating agency said.

Two classes of Fremont Home Loan Trust's residential mortgage-backed certificates, series 2002-1, have been downgraded by Fitch Ratings.Class M-3 was downgraded from BBB to BB, and class M-4 was downgraded from BBB-minus to BB-minus. Fitch also affirmed the ratings on two classes in the transaction. The downgrades were attributed to concerns about the adequacy of credit enhancement in view of loss expectations. "In May 2005, the transaction passed stepdown tests and allowed the credit enhancement to be lowered to new target amounts," the rating agency said. "The stepdown has allowed for a significant amount of principal allocation to the subordinate classes. However, in recent months, losses have increased relative to the available excess spread and have caused the overcollateralization amount to decline below the target amount."

Flagstar Bancorp Inc., Troy, Mich., has announced that it will restate earnings for 2002, 2003, and 2004, resulting in an overall $5.9 million reduction in net earnings.The company said the restatement was necessitated by the discovery of errors in the computation of state tax liabilities that understated the liabilities by $9.5 million. The restatement will reduce net earnings by approximately $2.5 million for 2002, approximately $2.4 million for 2003, and approximately $1.0 million for 2004, Flagstar said. The mortgage lender reported net earnings of $79.9 million ($1.25 per share) for 2005, compared with $142.7 million ($2.22 per share) for 2004. (The 2004 figures reflect the aforementioned restatement, the company said.) Flagstar can be found online at http://www.flagstar.com.

National City Corp., Cleveland, has announced the formation of a Structured Products Group in its Capital Markets Division that will include a Mortgage Capital Markets Group.Peter J. McCarthy will be senior managing director and head of the Mortgage Capital Markets Group within the larger Structured Products Group, which will be headed by senior managing director Timothy J. Yanoti. "As our mortgage origination efforts have grown over the last few years, we identified a need to have a strong in-house securitization team," said John D. Gellhausen, executive vice president and head of National City's National Consumer Finance Division. "Many of our origination competitors have this capability, and it makes sense for National City to operate one as well." Mr. McCarthy was most recently head of mortgage trading and sales at GMAC Residential Funding Corp., and Mr. Yanoti was in charge of global securitization at General Electric Capital. National City can be found online at http://www.nationalcity.com.

Irwin Financial Corp., Columbus, Ind., is fielding offers for its conventional mortgage banking affiliate, which ranks 35th among residential funders.However, the bank holding company is keeping its home equity division. IFC chairman Will Miller cited declining profit margins in the conventional sector as a reason for the sale, adding that "our servicing activities have grown to a size where we believe they can be managed and grown more effectively within another organization." Among residential servicers, Irwin Mortgage Corp. ranks 31st nationwide, with a receivables portfolio of $23.7 billion. According to the Quarterly Data Report (a MortgageWire affiliate), 90% of IMC's production is sourced through loan brokers or correspondents. The mortgage division has 47 offices in 26 states. (See the Jan. 30 issue of National Mortgage News for more details.)