Servicing

Delinquencies at MGIC Investment Corp., the nation's largest mortgage insurer, rose 13% in the fourth quarter, in part because of storm damage caused by hurricanes Katrina, Rita, and Wilma.MGIC said its delinquency inventory rose to 85,788 at the end of December -- with 5,300 loans going late because of hurricane damage. New insurance written in the quarter fell to $15.3 billion from $15.8 billion a year earlier. (The company continues to rely heavily on bulk insurance, which rose 23% in the quarter.) MGIC's book of business had a delinquency ratio of 4.52% at year-end, up from 3.99% a year earlier. Its earnings fell 4% to $128.1 million. The company is based in Milwaukee.

Friedman Billings Ramsey has identified 56 metropolitan statistical areas that have persistently high default rates on subprime and alternative-A loans.According to FBR research, subprime loans in these MSAs (which cover 16 states) have a default rate of 13.82%, more than double the national subprime delinquency rate of 6.16% (for 331 MSAs). Alt-A loans in the 16 states carry a 2.54% delinquency rate, compared with 0.77% nationally. The MSAs include Buffalo, N.Y.; Charlotte, N.C.; Cincinnati; and Cleveland. FBR analyst Michael Youngblood told MortgageWire that the problem MSAs have "rust belt, cotton belt, and farm belt economies that are stuck in the 19th century." He said delinquencies are rising in these areas in part because of layoffs in the automotive and auto parts industries. Mr. Youngblood said it's appropriate for lenders to "price each loan based on its individual risk."

Meanwhile, RealtyTrac, another online foreclosure marketplace based in Irvine, Calif., has reported that the number of new properties in some stage of foreclosure rose 13.5% in December.The company's Monthly U.S. Foreclosure Market Report indicates that 81,290 new foreclosure properties were added to the rolls in December. "December's higher U.S. foreclosure rates were almost exactly the same foreclosure rates reported in October, which means that the two months with the highest numbers of foreclosures were both in the fourth quarter of 2005," said Jim Saccacio, RealtyTrac's chief executive officer. "These rising numbers to finish off the year may indicate that economic factors such as higher interest rates are making it harder for some homeowners to stay current on their mortgage payments." The company said Texas recorded the highest foreclosure rate of any state in December, surging 61% (to 12,753 new foreclosures) and accounting for over 15% of new foreclosures in the nation. RealtyTrac can be found online at http://www.realtytrac.com.

The nationwide inventory of foreclosed U.S. residential properties jumped 12.7% in December, the biggest surge since March 2005, according to Foreclosure.com, an online foreclosure listing service based in Boca Raton, Fla.The inventory totaled 91,905 properties. Meanwhile, there were 24,124 new foreclosed residential properties listed in December, an increase of 7.7%, the company reported. "The relative stability of U.S. foreclosure inventory ended in December," said Brad Geisen, president and chief executive officer of Foreclosure.com. "With lending institutions closing their books at the end of the year, it is somewhat common for the foreclosure inventory to rise. It is premature to predict that December's inventory indicates a foreclosure crisis in the U.S. However, this rise in inventory, which is higher than in recent years, should be closely monitored as 2006 begins." The company can be found online at http://www.foreclosure.com.

Fannie Mae says it wants to work with lenders and homebuilders to bring standardization to the underwriting and servicing of construction loans and bring down costs, according to Fannie Mae president and chief executive Daniel Mudd.Fannie is developing back-office support for lenders doing acquisition, development, and construction lending, he told the National Association of Home Builders at its national convention in Orlando, Fla. He noted that Fannie Mae is already a "smaller player" in construction lending. The government-sponsored enterprise purchased 42,000 ADC loans in 2004, and it plans to do $10 billion in such lending over 10 years as part of its commitment to affordable housing. The CEO stressed that Fannie wants to bring its expertise in single-family mortgages to the ADC lending market, but not to dominate it. "We're not striving to put a big hairy King Kong footprint on the market," Mr. Mudd said. "We're striving to serve the market."

First Community Bancshares Inc., Bluefield, Va., has announced the prepayment of $77 million in Federal Home Loan Bank advances, resulting in $3.7 million in penalties, as part of a restructuring of long-term borrowings.The holding company said the advances, which were prepaid Dec. 23, bore a weighted average interest rate of 5.96%. On Jan. 3, the company drew new FHLBank advances of $75 million with a floating interest rate based on the three-month London interbank offered rate and a maturity of 15 years. The FHLBank has the option to convert the new advances to a fixed interest rate of 4% after five years. Concurrently, the company entered into an interest rate swap agreement that effectively fixed the rate on $50 million of the new advances for five years. Under the swap, First Community will pay fixed interest of 4.335% on a notional $50 million and receive interest payments based on a floating rate of 45 basis points below the three-month LIBOR, the company said. First Community can be found online at http://www.fcbinc.com.

Annaly Mortgage Management, a New York-based real estate investment trust, has announced a rebalancing of its portfolio through asset sales and a reinvestment of proceeds that resulted in total losses of approximately $148 million in the fourth quarter.The REIT said about $83 million of the total stemmed from noncash losses on securities reclassified as other-than-temporarily impaired, and the other $65 million was a realized loss resulting from the sale of $2.3 billion (in face amount) of securities. "Certain assets that were purchased in the much lower interest rate environment of 2003 and 2004 are unlikely to recover to their amortized cost basis," said Michael A. J. Farrell, Annaly's chairman, chief executive officer, and president. "However, the returns for new capital invested in short-duration assets have improved significantly. As a result, we are taking advantage of the current market conditions by either selling or reducing the cost basis of these assets, and by repositioning the portfolio into higher-yielding investments." The REIT can be found online at http://www.annaly.com.

The Federal Agricultural Mortgage Corp., Washington, D.C., has announced a $500 million offering of guaranteed notes by the newly created Farmer Mac Guaranteed Notes Trust 2006-1.The notes will be collateralized by an obligation of Metropolitan Life Insurance Co. that is, in turn, collateralized by Farmer Mac-eligible agricultural real estate mortgage loans, Farmer Mac said. The government-sponsored enterprise said the transaction is part of the company's effort 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...." The GSE can be found online at http://www.farmermac.com.

Summit Financial Group Inc., Moorefield, W. Va., has announced a fourth-quarter pretax impairment charge of $1.5 million related to preferred stock issued by Fannie Mae and Freddie Mac.Summit said the reason for taking the charge involves the difficulty of projecting the future recovery period of the $5.7 million in preferred stock. "Although the securities are still rated as investment grade, the company recognized the impairment charge at this time, in accordance with generally accepted accounting principles," the holding company said. Summit explained that the securities are held in its available-for-sale portfolio, and therefore the unrealized losses associated with them had already been recorded as "reductions of other comprehensive income." This means that no reductions of investment securities or shareholders' equity were required, and the charge had "no significant effect" on summit's consolidated balance sheet, the company said.

TD Banknorth Inc., a financial services company based in Portland, Maine, has announced a balance sheet restructuring program involving the sale of approximately $2.6 billion of mortgage-backed securities in connection with a pending acquisition.The company said the asset sales would reduce the earnings volatility inherent in MBS as a result of prepayments and call-related features. TD Banknorth will incur a pretax loss of approximately $45 million in the fourth quarter in connection with the restructuring. The company said it expects that approximately $2.7 billion in additional investment securities to be acquired from of Hudson United Bancorp will be sold after the acquisition, with the proceeds used to repay an equal amount of debt. TD Banknorth can be found online at http://www.tdbanknorth.com.