Servicing

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.

Sanders Morris Harris Group Inc., a Houston-based investment banking firm, has announced the formation of an expanded fixed-income unit based in New York.William Sprague, a Sanders Morris Harris managing director, said the firm capitalized on a unique opportunity after Merrill Lynch acquired assets of the Advest Group from AXA Financial. "A complete 30-person fixed-income team chose to join Sanders Morris Harris, giving us the nucleus that we plan to expand in the months ahead," Mr. Sprague said. The firm offers a full range of investment banking services, including brokerage services for hedge funds and mortgage-related fixed-income security sales and trading. It can be found online at http://www.smhgroup.com.

The delinquency rate on home equity loans fell 42 basis points in the third quarter, reflecting overall improvement in the consumer credit sector, according to the American Bankers Association.The delinquency rate on home equity loans dropped from 2.75% in the second quarter to 2.33%. However, past-due accounts among home equity lines of credit increased slightly to 0.46%, from 0.43% in the second quarter, according to the ABA survey. The delinquency rate on mobile home loans fell from 3.74% to 3.31%. ABA chief economist James Chessen said that despite improvement in consumer credit overdue rates, there are still "signs of financial stress" related to rising short-term interest rates, higher fuel prices, and last year's hurricane season. The ABA can be found on the Web at http://www.aba.com.

Eight classes from Long Beach Mortgage Loan Trust, series 2002-2, have been downgraded by Fitch Ratings.The downgrades were as follows: group 1, class I-M2, from A to BBB, class I-M3, from BBB-minus to B, and classes I-M4A and I-M4B, from B to CCC; and group 2, class II-M2, from A to BBB, class II-M3, from BBB-minus to B, and classes II-M4A and II-M4B, from B to CCC. Fitch also affirmed the rating on one other class in the deal. The downgrades were attributed to a deterioration in the relationship between credit enhancement levels and loss expectations. Group 1 of the transaction is backed by first-lien adjustable- and fixed-rate conforming mortgage loans, and group 2 is backed largely by first- and second-lien adjustable- and fixed-rate nonconforming mortgage loans. Fitch can be found online at http://www.fitchratings.com.

Investment banking firm Sandler O'Neill has dropped coverage of Fannie Mae and Freddie Mac due to what it calls a "realignment" of the companies it covers.Analyst Laura Kaster, who last covered the government-sponsored enterprises for Sandler, could not be reached for comment by MortgageWire's deadline. Prior to Ms. Kaster, Sandler analyst Mike McMahon had covered the two GSEs for several years but moved on in 2005 to following only depositories. Until accounting scandals at Fannie and Freddie, Mr. McMahon had been mostly bullish on the stocks. When Sandler terminated coverage, it had a "buy" rating on Fannie and a "hold" on Freddie.