Servicing

Capital Alliance Income Trust Ltd., a real estate investment trust based in San Francisco, has reported a net loss of $85,721 ($0.21 per share) for the third quarter, compared with net income of $80,750 ($0.05 per share) a year earlier.The residential mortgage REIT attributed the loss to several factors, including a decline in the weighted average yield of its loan portfolio from 12.04% to 10.96% in the 12 months ended Sept. 30 and an increase in the weighted average cost of borrowing. In addition, a shorter weighted average maturity in the portfolio "has accelerated the expensing of certain capitalized loan origination costs," CAIT said. The company can be found on the Web at http://www.calliance.com.

Mortgage-related securities issuance rose to $569.8 billion in the third quarter, up 32.5% from $429.9 billion in the second quarter, according to The Bond Market Association."New issue activity volume in the third quarter was the highest since the third quarter of 2003," the association said in its Research Quarterly report. So far in the fourth quarter, housing markets "continue to defy expectations, and strong home sales should continue to drive mortgage market activity," the association said. But "looking ahead, higher mortgage rates … may curtail mortgage market growth," the group said in its report. The association can be found on the Internet at http://www.bondmarkets.com.

Cleveland-based KeyCorp has announced an agreement to acquire the commercial mortgage-backed securities servicing business of Orix Capital Markets LLC, Dallas, for an undisclosed amount.Key said the transaction would expand its CMBS servicing portfolio from $45 billion to more than $70 billion. Under the agreement, the company would acquire the master, primary, and special servicing rights to a limited number of securitizations on which Orix is the special servicer. Key said it expects to retain all Orix employees associated with the servicing operation. The company said the acquisition would position KeyBank Real Estate Capital as one of the top five commercial loan servicers in the United States. KeyCorp can be found on the Web at http://www.key.com.

Two classes of Lehman HEL Trust 1998-1 securities have been downgraded by Fitch Ratings.Class M-1 was downgraded from BBB to CCC, and class M-2 was downgraded from CCC to C. Fitch also affirmed the rating on one other class in the transaction. The downgrades were attributed to higher-than-expected collateral losses that, as of the Oct. 25 distribution, totaled 3.09%. The collateral consists of nonconforming, closed-end, fixed-rate home equity loans originated by First Union Home Equity Bank and initially acquired by Lehman Capital, a division of Lehman Brothers Holdings Inc., Fitch reported.

GMAC Mortgage Corp., Horsham, Pa., says its subservicing volume increased to $32.5 billion in the third quarter, up 45% from $22.4 billion in the second quarter.GMAC was already the fifth-largest subservicer of residential home loans at the end of the second quarter based on unpaid principal balance, the company said. Tom Donatacci, senior vice president for business development at GMAC Mortgage, attributed the growth to GMAC's scalability as a mega-servicer and its ability to handle a variety of loan products on behalf of subservicing clients. At the end of the third quarter, GMAC serviced $276 billion of home loans in total, including both owned servicing rights and subservicing, according to the Quarterly Data Report, a MortgageWire affiliate.

An analyst that closely covers Countrywide Financial Corp. says in a new report that it is "highly unlikely" that Lehman Brothers will buy the Calabasas, Calif.-based company.In a research note, Sandler O'Neill analyst Mike McMahon says that, "Unless CFC's management has undergone a dramatic change in thinking," a sale to Lehman is not in the works. Countrywide, the nation's largest mortgage banker, was the subject of takeover rumors on Tuesday, sending its stock up about 1% in a down market. (The takeover talk was sparked by heavy buying in call options.) Over the years Countrywide has sporadically been the subject of takeover rumors. The suitors have usually been large depositories. A few years back, Countrywide obtained a bank charter and now boasts $34 billion in federally insured deposits.

Two classes of Merrill Lynch Mortgage Investors mortgage-backed securities have been downgraded by Fitch Ratings.Class BF-1 of MLMI series 2002-AFC1 group 1 was downgraded from BBB to BB, and class BV-1 of group 2 of the same series was downgraded from BBB to BBB-minus. In addition, Fitch upgraded one class in the transaction and affirmed the ratings on four classes. Losses have exceeded excess spread in 11 of the last 12 months for group 1 and eight of the last 12 months for group 2, preventing the overcollateralization from maintaining its target amount, according to the rating agency. The deal's performance triggers have failed since the stepdown date and locked out the subordinate bonds from principal cash flow. Fitch said it expects the performance triggers to fail for the remainder of the deal's life. Group 1 is collateralized by fixed-rate mortgages, group 2 by adjustable-rate mortgages. The loans were initially originated or acquired by Superior Bank and later sold to Merrill Lynch.

Class B-4 of Bear Stearns Mortgage Securities Inc. mortgage pass-through certificates, series 2001-4, has been downgraded from CCC to CC by Fitch Ratings.The rating agency also upgraded eight classes and affirmed the ratings on 23 other classes in five Bear Stearns deals. The downgrade was attributed to credit enhancement levels relative to loss expectations. The underlying collateral consists of 15- to 30-year adjustable-rate and fixed-rate mortgages extended to prime borrowers, Fitch said.

Three classes of United Companies Financial Corp. manufactured housing transactions have been downgraded by Fitch Ratings.The downgrades were as follows: series 1998-2, class M-1, from B to B-minus, and class M-2, from B-minus to C; and series 1998-3, class M-2, from B-minus to CCC. Fitch also affirmed the ratings on six classes in three UCFC manufactured housing deals. The downgrades were attributed to the poor performance of the collateral. The loans were originated by United Companies Funding Inc., which was formed in 1995 as a wholly owned manufactured housing lending subsidiary of UCFC. In 1998, UCFI announced plans to close down its manufactured housing business. In 1999, UCFC filed for Chapter 11 bankruptcy protection, and in December 2000, the MH portfolio, servicing rights, and residual interests were acquired by EMC, a wholly owned subsidiary of Bear Stearns Cos. Fitch can be found online at http://www.fitchratings.com.

Classes A-1 and A-2 of Diversified Asset Securitization Holdings I LP have been downgraded from A-minus to BB by Fitch Ratings.Fitch attributed the downgrades to deterioration in the credit quality of DASH's collateral portfolio. DASH I is a collateralized debt obligation managed by AAM Co. Fitch said 47.2% of the portfolio backing the CDO consists of residential mortgage-backed securities, and the remainder consists of commercial MBS (34.9%), asset-backed securities (13.2%), and other CDOs (4.7%).