Servicing

Freddie Mac says it expects that a flattening yield curve will increase its opportunities to expand its credit guarantee business and invest in fixed-rate mortgages this year.A flattening of the yield curve "plays to our traditional strength," Freddie's president and chief operating officer, Eugene McQuade, told an investor conference sponsored by Citigroup. Freddie is forecasting a decline in adjustable-rate mortgage originations in 2006 and 2007 and projects that banks will find it less profitable to invest in fixed-rate mortgages. "While we have yet to see a selloff of fixed-rate mortgages from bank portfolios, even slightly reduced investment by banks should create better fixed-rate buying opportunities for us in 2006," Mr. McQuade said. The Freddie COO also pointed out that most of the growth in the company's mortgage portfolio came from purchasing subprime mortgage securitizations that are rated triple-A. "We generated most of our retained portfolio growth last year in that sector," he said. Mr. McQuade also told investors that Freddie Mac gained market share from Fannie Mae in 2005 in the issuance of guaranteed mortgage-backed securities. Freddie said its share increased from 41% in 2004 to 45% in 2005.

W Holding Company Inc., Mayaguez, Puerto Rico, has announced that it will postpone the release of its financial results for the fourth quarter and for 2005 until it completes a review of the accounting presentation of certain mortgage-related transactions.W, the holding company of Westernbank Puerto Rico, said the review involves transactions entered into with Doral Financial Corp. from 2000 to 2005, and whether they represent "true sales" under Statement of Financial Accounting Standards No. 140. The review will also look at the hedge accounting treatment of certain rate swaps under SFAS No. 133. The company said the possible revised classification of the mortgage-related transactions -- previously reported as purchases of residential real estate loans -- "will not result in the need for additional reserves" and that the company "will remain well capitalized under FDIC rules." The company can be found online at http://www.wholding.com.

Capital Title Group Inc., Scottsdale, Ariz., has announced the acquisition of the flood zone determination business of America's Flood Services Inc., Rancho Cordova, Calif., by Capital Title's subsidiary, CTG Real Estate Information Services.The terms of the transaction were not disclosed. The acquired business will be merged into Nationwide TotalFlood, a service subsidiary of CTG REIS. (AFS will retain its core business unit, Flood Insurance Agency and Insurance Tracking.) "This acquisition provides us with an enhanced revenue base and will allow us to provide these newly acquired customers access to a full bundle of origination services, including appraisal, title, closing, and foreclosure services, all available through Nationwide Appraisal Services, another service subsidiary of CTG REIS," said Richard A. Alexander, president and chief executive officer of CTG REIS. The company can be found online at http://www.capitaltitlegroup.com and http://www.nationwide-totalflood.com.

Countrywide Financial Corp., Calabasas, Calif., has reported net earnings of $2.5 billion ($4.11 per share) for 2005, compared with $2.2 billion ($3.63 per share) in 2004, citing record annual mortgage volume amid declining profit margins on prime loans.Countrywide said loan production volume totaled a company and industry record $491 billion for the year, compared with $363 billion in 2004. For the fourth quarter, the company reported earnings of $639 million ($1.04 per share), up 73% from $370 million ($0.61 per share) a year earlier. "Importantly, we achieved these results despite an environment that included volatile interest rates; declining production profit margins throughout the industry; and the adverse effects of 2005's hurricanes, primarily Hurricane Katrina," said Angelo R. Mozilo, Countrywide's chairman and chief executive officer. "If not for the hurricane charges, the company would have surpassed its record of $4.18 per diluted share, achieved in the peak refinance boom year of 2003." Countrywide's prime margins declined to 65 basis points in the fourth quarter, down 11 bps from those of the previous quarter and 25 bps from a year earlier, the company said. The servicing portfolio grew to $1.1 trillion as of Dec. 31, up from $838 billion a year earlier. Countrywide can be found online at http://www.countrywide.com.

American Bank of Saint Paul, St. Paul, Minn., has announced the acquisition of Minnesota Mortgage Financial Corp. from Gaertner Meiers Inc. for an undisclosed amount.Minnesota Mortgage is a mortgage broker for residential and commercial properties, with offices in St. Paul and Maple Grove, Minn. It will now be operated under the name Minnesota Mortgage Financial LLC, with Brad Thoreen as president and 17 loan originators, American Bank said. "Our current customer base can benefit from the opportunity of increased lending abilities in secondary-market mortgages," said John Seidel, American Bank's president and chief executive officer. The bank can be fund online at http://www.americanbankmn.com.

Class B-1 notes issued by Eastman Hill Funding I Ltd., a collateralized debt obligation partly composed of residential mortgage-backed securities, has been downgraded from B to CCC by Fitch Ratings.In addition, the ratings on four other classes were affirmed. Fitch said the deal is failing its coverage ratio tests as follows: overcollateralization has declined to 108.7%, below the trigger level of 109.0%, and its interest coverage ratio of 81.1% falls far short of the trigger of 115.0%. RMBS represent 30% of the transaction, the rating agency said. Fitch can be found on the Web at http://www.fitchratings.com.

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.