Servicing

Fannie Mae's retained portfolio dropped below the $800 billion mark in July, after the company shed nearly $20 billion in assets.Last summer the congressionally chartered mortgage giant held nearly $900 billion in mortgage assets on its books. In an effort to bolster cash reserves, Fannie has been actively selling loans out of its retained portfolio. However, the company -- which is undergoing a massive earnings restatement -- out-purchased its cross-town rival, Freddie Mac, for the second month in a row. In July, Fannie acquired $52.5 billion in mortgages to Freddie's $41.8 billion. In April and May Freddie out-purchased Fannie, something it had not done for years. Fannie Mae also reported that the ARM share of conventional mortgage applications fell by nearly 2% in July to 29.9%, the lowest monthly average share for adjustable-rate mortgages since March of 2004.

Astoria Financial Corp., Lake Success, N.Y., has announced an outsourcing agreement with Dovenmuehle Mortgage Inc., Schaumberg, Ill., under which Dovenmuehle will subservice on a private-label basis the loan portfolio of Astoria Federal Savings & Loan Association, a subsidiary of Astoria Financial.George L. Engelke Jr., Astoria's chairman, president, and chief executive officer, said the decision was "driven entirely by economics" and was not a reflection on the servicing staff of Astoria Federal, whose loan delinquencies "have never been lower." Operating efficiency is the key consideration, he said. "Today, despite the fact that our individual mortgage loan balances are larger, the number of loans we service has decreased over the past several years, thereby lowering operating efficiency," Mr. Engelke said. The agreement will result in a pretax charge of approximately $1 million in the third quarter, the company reported. The thrift can be found online at http://www.astoriafederal.com.

Seven classes from four Morgan Stanley Dean Witter Capital I Inc. mortgage-backed security transactions have been downgraded by Fitch Ratings.The downgrades were as follows: series 2001-AM1, class M-2, from AA to A-plus, and class B-1, from BBB-minus to BB-minus; series 2002-AM1, class M-2, from AA to A, and class B-1, from BBB-minus to BB; series 2002-AM2, class B-1, from BBB-minus to BB-plus, and class B-2, from BBB-minus to BB-plus; and series 2002-AM3, class B-2, from BBB-minus to BB-plus. In addition, Fitch affirmed the ratings on 10 other classes in the deals. The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations. The loans consist of fixed-rate and adjustable-rate mortgages extended to subprime borrowers and are secured by first and second liens, primarily on one- to four-family residential properties, Fitch said. The rating agency can be found online at http://www.fitchratings.com.

GMAC Mortgage Corp., Horsham, Pa., has announced an agreement with NetBank, an online bank, under which GMAC Mortgage will service NetBank's option ARMs before their sale into the secondary market.NetBank's option ARM is an adjustable-rate mortgage that offers the option of making one of three mortgage payments: a minimum payment, an interest-only payment, or a fully amortizing payment, based on a 15-, 30-, or 40-year term, depending on the product. The company said NetBank also intends to sell option ARM loans to other GMAC Mortgage clients, "significantly reducing transfer-related expenses for both parties and reducing the borrower confusion associated with loan servicing transfers." The companies can be found online at http://www.gmacmortgage.com and http://www.netbank.com.

First Bancorp, San Juan, Puerto Rico, has reported receiving notification of an informal inquiry into the company by the Securities and Exchange Commission in connection with its accounting for certain mortgage loans, among other things.The company noted that it had recently disclosed a review by its Audit Committee of purchases of mortgage loans originated by other financial institutions. The accounting issues being reviewed include whether the company should have recorded such transactions as loans by the company to the sellers rather than purchases of mortgage loans, and whether any transactions resulted in derivatives requiring the application of Statement of Financial Accounting Standards No. 133. First Bancorp said its Audit Committee has retained two law firms and a forensic accounting firm to assist in the review. The company can be found online at http://www.firstbankpr.com.

Two classes from two Access Financial Manufactured Housing Contract Trust issues have been downgraded by Fitch Ratings.Class B-1 of series 1995-1 and class B-1 of series 1996-1 were downgraded from CCC to C. In addition, one class from series 1995-1 was upgraded and the ratings on three classes from the two deals were affirmed. Losses on series 1995-1 have caused the certificates to be undercollateralized by approximately $2 million, and cumulative losses now represent 24% of the original balance, the rating agency said. Series 1996-1 has also experienced higher losses than expected, and the certificates are undercollateralized by $8.5 million, Fitch said.

Five classes in two CSFB Mortgage Securities Corp. mortgage-backed pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: series 2002-22 group 3, class DB3, from BBB to BB, class DB4, from B to CC, and class DB5, from CC to C; and series 2002-32R, class M, from BBB-minus to BB-minus, and class B-1, from BB-minus to CCC. In addition, Fitch affirmed the ratings on 10 classes from five CSFB issues. The downgrades were attributed to the deterioration of credit enhancement relative to consistent or rising monthly losses. The underlying trust for series 2002-22 group 3 consists primarily of 15-year and 30-year fixed-rate one- to four-family residential first-mortgage loans.

Class B3 of series 2001-2 of Structured Asset Securities Corp. residential mortgage-backed certificates has been downgraded from B to C by Fitch Ratings.In addition, the ratings on seven classes from two SASCO deals were affirmed. "The downgrade is the result of Fitch's observation of continuing high monthly pool losses and delinquency levels," the rating agency said. July 25 remittance information indicates that 13.53% of the pool was over 90 days delinquent and cumulative losses totaled 0.99% of the original pool balance, according to Fitch. The collateral consists of conventional, fixed-rate, fully amortizing residential mortgage loans extended to prime and alternative-A borrowers.

Six classes from two Structured Asset Securities Corp. residential mortgage-backed certificate transactions have been downgraded by Fitch Ratings.The downgrades were as follows: series 2002-HF2, class M3, from BBB to BBB-minus, and classes B1 and B2, from BBB-minus to BB; and series 2003-BC2, class M4, from BBB-plus to BBB, class B1, from BBB-minus to BB, and class B2, from BB-plus to B. In addition, Fitch has affirmed the ratings on 12 classes in the two deals. The downgrades were attributed to concerns about the adequacy of credit enhancement in light of declining collateral performance. Fitch said remittance information for SASCO 2002-HF2 indicates that as of July 25, excess spread had not been sufficient to cover losses for the previous three months. The mortgage pool consists primarily of first-lien subprime loans. For SASCO 2003-BC2, comparable remittance information indicates that excess spread had not been sufficient to cover losses for the previous five months, the rating agency said. The mortgage pool consists primarily of subprime first- and second-lien loans. Fitch can be found online at http://www.fitchratings.com.

Moody's Investors Service has downgraded Residential Capital Corp's senior and short-term debt ratings from Baa2 to Baa3 and from Prime 2 to Prime 3, respectively."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 regards to its capital structure, though such support should continue to diminish," the rating agency said. Moody's added that the downgrade "is not a result of any change in Moody's views regarding ResCap's intrinsic creditworthiness, which the rating agency deems to be 'high Baa' on a stand-alone basis." The rating agency said about $5 billion in securities are affected by the downgrade and those securities' ratings have a negative outlook. Moody's can be found online at http://www.moodys.com.