Servicing

Freddie Mac says it will purchase up to $1 billion in tax-exempt mortgage revenue bonds so that housing finance agencies in Louisiana and Mississippi can provide below-market rate mortgages and home repair loans to victims of hurricanes Katrina and Rita."We are committed to buy these MRBs at below-market rates so that as many as 10,000 low-income families affected by the disasters can rebuild their homes at the lowest rates available," said Freddie chairman and chief executive Richard Syron. The government-sponsored enterprise has been an investor in mortgage revenue bonds for some time. Freddie held $9.1 billion in MRBs in its $652.9 billion investment portfolio at the end of 2004. Rep. Richard Baker, R-La., a long-time GSE critic, welcomed Freddie's initiative to facilitate low-cost housing loans for storm victims. "Freddie Mac's announcement will certainly help," the Louisiana congressman said. Freddie Mac can be found online at http://www.freddiemac.com.

The nationwide inventory of foreclosed residential properties declined 6% in September, according to Foreclosure.com, an online foreclosure listing service based in Boca Raton, Fla.The decline is mainly attributable to the removal of all Department of Housing and Urban Development real-estate-owned properties in 11 states following Hurricane Katrina, including Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, and Texas, Foreclosure.com said. There were 20,347 new foreclosed residential properties listed in the United States in September, and such properties totaled 87,717 overall, the company reported. "During the second quarter of 2005, new foreclosure inventory in the U.S. has stayed relatively flat," said Brad Geisen, president and chief executive officer of Foreclosure.com. ".... Some influences such as high fuel costs, rising interest rates, recent natural disasters, and changes in bankruptcy law could quickly disturb the current environment." The company can be found online at http://www.foreclosure.com.

The mortgage industry's average profit per loan declined by almost 50% in 2004, according to an annual cost study conducted by the Mortgage Bankers Association of America.The MBA cost study found that average loan production profits fell to $657 per loan in 2004, down from $1,272 in 2003. As loan production volume shrank, per-loan operational costs increased and were only partially offset by secondary marketing income, including loan servicing values. "The year 2004 marked a departure from the recent years of unprecedented mortgage activity and profitability," said Douglas Duncan, MBA chief economist and senior vice president. "Narrowing warehouse interest spreads, increased pricing pressures, and higher sales and fulfillment costs on a per-loan basis posed challenges for mortgage bankers. But at the same time, we did see recoveries in the area of servicing -- after three years of worsening losses, servicing operations posted a profit in 2004 on a per-loan basis." That servicing profit averaged $21 per loan last year, compared with a net loss of $166 per loan in 2003. The MBA can be found online at http://www.mortgagebankers.org.

Moody's Investors Service has placed Residential Capital Corp.'s ratings under review for possible downgrade after its corporate parent, General Motors, experienced downgrades related to the Oct. 9 bankruptcy filing of Delphi Corp., a former nonmortgage subsidiary to which GM still has financial ties.The ResCap ratings had previously been assigned a negative rating outlook. Moody's said the move "is not a result of any change in Moody's views regarding ResCap's intrinsic creditworthiness … but rather reflects the rating reviews for possible downgrade of its parent, GMAC, and ultimate parent, GM." The rating agency added that, "Although the residential real estate finance business of ResCap, and auto finance business of GMAC, are separate from an operating perspective, ResCap continues to be substantially dependent on the support of GMAC in regard to its capital structure, though such support should continue to diminish."

LandAmerica Financial Group Inc., a provider of real estate transaction services based in Richmond, Va., has reported a tax servicing loss and a related $38 million noncash writedown of customer relationship intangible involving Washington Mutual Inc.LandAmerica said WaMu has decided to in-source future tax services in California and Colorado, while LandAmerica will continue to manage its remaining portfolio of tax and flood services. "In the last two years, LandAmerica has acquired the businesses it needs to deliver quality lender services to major national mortgage originators and servicers," said Theodore L. Chandler Jr., the company's chief executive officer. "We have largely completed the accumulation stage and are now fully integrating our tax and flood business into our complete lender services offering." The company can be found online at http://www.landam.com.

Countrywide Home Loans, the nation's largest residential lender, funded $49 billion in mortgages during September, a 58% gain from the volume in the same month last year, but the news didn't help its stock price.For the quarter ended Sept. 30, Countrywide funded a record $146 billion, according to figures released by the company Oct. 11. In trading Tuesday, its share price fell about 1% to $30.70, just 40 cents above its 52-week low. Even though Countrywide's September-to-September production increased nicely, it was down 7.8% from the August level. At the end of the third quarter its servicing portfolio totaled $1.047 trillion, a 32% annualized gain. Over the past two months many publicly traded subprime stocks -- especially real estate investment trusts -- have tested new lows. Countrywide, though, is not a REIT. It ranks third among subprime funders, according to the Quarterly Data Report.

Fannie Mae has filed a Form 8-K informing the Securities and Exchange Commission that the impact of hurricanes Katrina and Rita is likely to cost the company $250 million to $550 million on an after-tax basis.Updating the SEC on its capital restoration plan, Fannie Mae also said it believes the company exceeded its 30% capital surplus requirement as of Sept. 30. In September 2004, Fannie Mae entered into an agreement with regulators stipulating that the company should hold 30% excess capital above its minimum capital standard. Fannie Mae can be found on the Web at http://www.fanniemae.com.

Two classes in Soundview Home Equity Loan Trust series 2001-1 have been downgraded by Fitch Ratings.Class M-1 was downgraded from AA to AA-minus, and class M-2 was downgraded from B to BBB-minus. Fitch also affirmed the ratings on one other class in the transaction. The downgrades were attributed to higher-than-expected losses that have caused a reduction of the overcollateralization and principal writedowns to the supporting class B. Fitch can be found on the Web at http://www.fitchratings.com.

Mortgage servicing rights on a portfolio of $170 million of Fannie Mae home loans from the Midwest are being offered for sale by Prestwick Mortgage Group, Alexandria, Va.The portfolio has a weighted average note rate of 5.968% and a weighted average servicing fee of 0.3430%. The weighted average seasoning is 32 months, and the delinquency ratio is 1.19%. Most of the properties are located in Ohio or Indiana. Bids are due Oct. 18.

Prepayment rates on 30-year, fixed-rate, agency mortgage-backed securities dropped 20% in September as a result of higher mortgage rates, fewer business days, and the beginning of the fall slowdown in housing turnover, according to Bear Stearns.The largest percentage speed declines came in the lower coupons, where 4.5s, 5.0s, and 5.5s fell 20%-25%, compared with 10%-12% declines on 6.5s and higher coupons, according to Steven M. Bergantino, managing director of mortgage research. However, discount speeds were still "well above historical norms," he said, citing the example of fully seasoned 5% coupons that prepaid at 15 CPR, versus a historical level of 9 CPR. "Moreover, these elevated discount speeds have persisted in the face of a pronounced flattening in the mortgage yield curve, providing a strong indication of the continued influence of cash-out refinancings on fixed-rate prepayments," the analyst said. Average speeds on 30-year Fannie Maes stood at 19.4 CPR overall in September, down 4.5 CPR from their August level, compared with 17.5 CPR (down 4.7 CPR) for Freddie Macs and 25.2 CPR (down 4.4 CPR) for Ginnie Maes. Bear Stearns can be found online at http://www.bearstearns.com.