Servicing

Class DB-4 of PNC Mortgage Securities Corp. series 1999-10 has been downgraded from B to B-minus by Fitch Ratings.In addition, the rating agency upgraded one class from the deal and affirmed the ratings on three other classes. The downgrade was attributed to an increasing threat of high delinquencies in relation to declining credit support provided by class DB-5 as a result of cumulative losses. Fitch can be found on the Web at http://www.fitchratings.com.

Foreclosure rates in the Chicago metropolitan area were down significantly in the second quarter compared with those recorded late in 2004, according to Foreclosures.com, an online seller of foreclosed property.Foreclosures.com also said mortgage fraud continues to be a problem in the Windy City. "At the end of last year, we were seeing about 1,700-1,900 new [foreclosure] cases per month filed in Cook County," said Alexis McGee, president of Foreclosures.com. "Now we're down to a little over 1,300 per month." She added that the Chicago housing market is still strong, but that inventories of unsold homes are beginning to rise, suggesting a cooling market. Regarding mortgage fraud, Ms. McGee said it is clouding the foreclosure picture. "There are signs that organized crime is getting into that scam," she said, citing a report by the Chicago police superintendent. The Fair Oaks, Calif.-based company can be found online at http://www.foreclosures.com.

Credit Suisse First Boston, New York, has agreed to buy 100% of the outstanding stock of SPS Holding Co. and its subsidiary, Select Portfolio Servicing, for $144.4 million.SPS, a major servicer of nonprime mortgage loans, is being acquired from the PMI Group, FSA Portfolio Management, and Greenrange Partners. Under the agreement, CSFB will make future contingency payments of up to $39.9 million for mortgage loans currently serviced by SPS on behalf of third parties. The transaction is expected to close in the fourth quarter. SPS services collateral underwritten by CSFB, and CSFB said it plans to integrate SPS into its mortgage securities business. SPS was formerly known as Fairbanks Capital Corp.

Friedman, Billings, Ramsey & Co., Arlington, Va., believes that the number of cities facing home price bubbles increased 55% in the first quarter compared to research it conducted last year.In a just released, updated report on housing bubbles, FBR says 42 cities (urban areas or "UAs") are at risk compared to 27 identified in an earlier report. FBR economist Michael D. Youngblood says the UAs are overpriced based on per capita personal income compared to the median home price. Nine of the top 10 UAs most likely to burst are in California and 27 of California's 28 UAs have home prices that are bubbles waiting to burst. However, Mr. Youngblood cautions that he does not expect the bubbles to burst in any UA until economic activity contracts for a minimum of four quarters. Mortgage lenders have been criticized for fueling high prices by offering interest-only and payment option loans that allow consumers to make low monthly payments at the expense of building equity.

If home price appreciation slows -- as many economists believe it will -- subprime credit borrowers could be hurt the most.According to John Silvia, chief economist for Wachovia Corp., $550 billion worth of B&C credit debt (about half the market) is expected to "reset" by the end of next year. "The challenge in housing will come in 2006," he predicted during an economic panel on housing prices Tuesday. "The lower income borrower[s] -- will they be able to reset?" he questioned. (Reset is in reference to adjustable-rate loans that are set to reprice over the next 18 months.) Economists speaking on the panel cautioned that consumers who, over the past few years, barely qualified for mortgage credit will be hurt the most because they have been using their homes like piggy banks. The concern is that if appreciation slows, the marginal borrower will have no equity to tap. Dean Baker, an economist for the Center for Economic Policy and Research, predicted that the housing bubble would only end once conventional rates reach 7%. He said once that happens, home prices on average could fall by 20%.

A total of 90,590 foreclosed residential properties were available for sale in the U.S. during July, according to online listing service Foreclosure.com.The total represents a 4.6% increase from June, according to the online service. Foreclosure.com added 12,009 properties to its database in July. These additional properties were not included in the June comparison percentage, the company said.

Next year, Ginnie Mae plans to expand the electronic reporting of data from servicers and issuers of its securities."In 2006, Ginnie Mae will be significantly changing the way we collect data from you," said Mike Garcia, director of single-family housing at Ginnie Mae. Speaking at the Western States Loan Servicing Conference sponsored by the California Mortgage Bankers Association, Mr. Garcia said the electronic reporting initiative would require issuers to report data earlier than they do today and would make it easier to correct inconsistencies in loan data.

Irwin Financial Corp., Columbus, Ind., has reported the completion of a private placement of $51.75 million of 30-year trust preferred securities issued by IFC Capital Trust VIII.The securities bear interest at a fixed rate of 5.963% for the first five years and then convert to a variable interest rate of the three-month London interbank offered rate plus 153 basis points, Irwin said. The company said it plans to use the proceeds to redeem the entire $51.75 million par value of 10.50% securities due Sept. 30, 2030, that underlie the trust preferred securities issued by IFC Capital Trust II in 2000. Irwin can be found online at http://www.irwinfinancial.com.

The PMI Group Inc. has amended terms relating to the proposed acquisition of Select Portfolio Servicing and SPS's corporate parent, SPS Holding Co., by Credit Suisse First Boston and its affiliate, DLJ Mortgage Inc. The amendment extends CSFB's option to buy SPS until Aug. 12 from the previous expiration date of Aug 5. "The proposed transaction is subject to negotiation and the execution of mutually acceptable definitive documentation. There can be no assurance that the proposed transaction will be consummated or that CSFB will exercise its option to purchase SPS," PMI said.

Fannie Mae has announced that it will reduce the minimum weekly three-month and six-month auction amounts of Benchmark Bills to $1 billion each as of Aug. 10.The minimum size for the monthly one-year auction will remain at $1 billion. Fannie Mae said it is committed to a schedule of weekly issues in three- and six-month maturities and monthly issues in one-year maturities for Benchmark Bills, which are unsecured general obligations issued in book-entry form through the Federal Reserve Banks. Fannie Mae can be found online at http://www.fanniemae.com.