Servicing

Prepayment rates for 30-year mortgages in Fannie Mae mortgage-backed securities fell by only 10% in December despite a 28-basis-point rise in mortgage rates, but the aggregate speed was the lowest in five years, according to Bear Stearns & Co.The aggregate speed on 30-year Fannie Maes was a constant prepayment rate of 13.8 CPR, down from 15.4 CPR in November, marking the first time it has been below 15 CPR since January 2001, said Bear Stearns analyst Dale Westhoff. The aggregate prepayment rate on Freddie Mac 30-year collateral declined 13%, from 14 CPR in November to 12.1 CPR in December. Meanwhile, aggregate speeds for 30-year Ginnie Mae collateral fell by 10%, from 21.4 CPR in November to 19.3 CPR in December. Mr. Westhoff said the speed decline for Ginnie Maes was uniformly distributed across the coupon stack. "Despite the relatively stable mortgage rates over the last two months, we would expect prepayments to decline by over 15% [in January], with premium coupons showing a larger decline," the analyst said. Bear Stearns can be found online at http://www.bearstearns.com.

A National Association of Realtors study last year found that investors accounted for about 23% of home sales transactions, but the NAR's chief economist said investor activity in 2006 is a "wildcard" that could affect home prices and home sales activity.David Lereah, like other economists who participated in a Homeownership Alliance teleconference, said he expects investor activity to decline in 2006. If investors pull out of the market too quickly, that could "hurt housing," he said. David Seiders, chief economist at the National Association of Home Builders, said the biggest risk would be that investors not only stop buying, but also move the properties they have purchased back onto the market en masse, putting downward pressure on prices. Economists said that investor activity will have the most impact in markets where home values have risen quickly in recent years and those with significant resort and tourism industries. The alliance can be found online at http://www.homeownershipalliance.com.

Mortgage companies shed 200 employees in November, according to the latest national employment report, ending a 20-month hiring spree that added over 53,000 full-time employees to their payrolls.The U.S. Bureau of Labor Statistics reported that employment in the mortgage industry slipped from 533,900 in October to 533,700 in November. The last hiccup in hiring occurred in August 2004 when employment slipped by 100 positions in September 2004. The Mortgager Bankers Association says it expects to see more declines this year in mortgage industry employment as origination volumes decline from 2005 levels. However, the contraction in employment could be offset because purchase mortgage originations, which are labor-intensive, are expected to remain at high levels, MBA financial economist Jay Brinkmann pointed out. And loan officers can still do fairly well with lower volumes because the average loan size has risen substantially over the past few years. "So we might not see some of the same shrinkage" in loan officers and mortgage brokers as in the past, Mr. Brinkmann said.

Thornburg Mortgage Inc., Santa Fe, N.M., has reported doubling the size of its asset-backed commercial paper facility to $10 billion.The company said the facility provides it with another way to finance its adjustable-rate mortgage securities portfolio. Thornburg Mortgage Capital Resources LLC, a special-purpose bankruptcy-remote entity created especially for the CP facility, acts as the financing vehicle by issuing commercial paper in the form of short-term notes, Thornburg said. Lehman Brothers Inc. is the structuring agent and lead dealer for the transaction. Thornburg, a real estate investment trust and mortgage lender focused on the jumbo ARM segment, can be found online at http://www.thornburg.com.

CharterMac, a New York-based real estate finance company focused on the multifamily sector, has announced the receipt of formal listing approval from the New York Stock Exchange.The company said it plans to transfer the trading of its common stock from the American Stock Exchange to the NYSE on Jan. 10 under its current symbol, CHC. CharterMac can be found on the Web at http://www.chartermac.com.

Luminent Mortgage Capital, San Francisco, has announced that it intends to reposition its spread portfolio assets to improve profitability and dividend-paying capacity and that it has discontinued the use of hedge accounting.The repositioning will involve the sale of some mortgage-backed securities and will entail the recording of a noncash impairment charge of approximately $112 million in the fourth quarter, the company said. Luminent said it believes the move will accelerate its diversification into high-yielding residential mortgage credit investments and enable it to achieve higher returns on equity. As a result of the discontinuation of hedge accounting, as defined in Statement of Financial Accounting Standards No. 133, all changes in the value of Luminent's portfolio of hedges will be reflected in the company's consolidated statement of operations under generally accepted accounting principles, Luminent said. The company can be found online at http://www.luminentcapital.com.

Capital Alliance Income Trust Ltd., a San Francisco-based real estate investment trust, has arranged a two-year, $7.0 million credit facility with Franklin Bank SSB, Houston.The facility has a one-year extension option. It will enable CAIT, a specialty residential mortgage lender, to "pledge its core mortgage portfolio and obtain increased interest rate spreads of approximately 300 basis points" over its existing financing, said Richard Wrensen, the company's executive vice president and chief financial officer. The REIT invests in conforming and high-yielding nonconforming residential mortgage loans on one- to four-unit residential properties, chiefly in California and other Western states. It can be found online at http://www.calliance.com.

Classes M-3 and M-4 from Asset-Backed Securities Corp. mortgage-pass through certificates series 2002-HE3 have been placed on Rating Watch Negative by Fitch Ratings.The rating actions were attributed to relatively high monthly losses that have been greater than the available excess spread, resulting in a deterioration of the amount of overcollateralization. The group 2 overcollateralization target amount has stepped down, while the group 1 OC target amount has not been allowed to step down due to a cumulative-loss trigger event, Fitch said. "The issuer and the trustee are currently reviewing the cumulative-loss trigger event language, which they believe may have been erroneously drafted," the rating agency reported. "If the trigger language were to be corrected (as proposed), group 1 would pass the trigger test and the OC target amount would be allowed to step down." Fitch can be found online at http://www.fitchratings.com.

The Federal Trade Commission has launched a preliminary investigation into the residential servicing practices of Bear Stearns' servicing affiliate to see whether the company is violating consumer protection laws.The investment banker disclosed that it has received a civil investigative demand from the FTC "seeking documents and data relating to EMC Mortgage Corp.'s business and servicing practices." Based in Irving, Texas, EMC Mortgage services $51.8 billion in first and second mortgage loans, according to the Quarterly Data Report, a MortgageWire affiliate. The company is known in the industry as a "scratch-and-dent" servicer, specializing in troubled mortgages. The FTC confirmed the investigation, and Bear Stearns said EMC Mortgage is cooperating with the government. Bear disclosed the inquiry in a mortgage securitization filing with the Securities and Exchange Commission.

Classes M-4, M-5, and M-6 of Ace Securities Corp. asset-backed securities, series 2003-FM1, have been placed on Rating Watch Negative by Fitch Ratings.In addition, the rating agency affirmed the ratings on three other classes from the Ace transaction. Fitch said the negative rating actions resulted from higher-than-expected monthly losses that have been greater than the available excess spread, causing a deterioration in the amount of overcollateralization. The pool consists of 30-year adjustable- and fixed-rate mortgage loans secured by first and second liens.