Servicing

Four classes from two Ocwen Home Equity Loan Trust transactions have been downgraded by Fitch Ratings.The downgrades were as follows: Ocwen mortgage loan asset-backed certificates series 1998-OFS3, class M-2, from A to A-minus, and class B, from BBB to BB; and Ocwen Residential MBS Corp. mortgage pass-through certificates series 1998-R3, class B-2, from AA to A, and class B-3, from CCC to C. The rating agency also affirmed the ratings on 22 classes from six Ocwen deals. The downgrades were attributed to consistent or rising monthly losses that have reduced credit enhancement. The 1998-OFS3 certificates are backed by fixed- and adjustable-rate mortgage loans, and the Ocwen Residential deal is collateralized by seasoned, re-performing mortgage loans acquired from the Department of Housing and Urban Development, Fitch said. The rating agency said it defines a re-performing loan as one that has experienced a default and is 30 days or more delinquent on regular payments, but has made at least three payments in the past four months. Fitch can be found online at http://www.fitchratings.com.

Scam artists are preying on troubled homeowners across the country and stripping millions of dollars in equity from thousands who are facing foreclosure, according to Foreclosures.com, Fair Oaks, Calif.Citing a report from the National Consumer Law Center, Foreclosures.com president Alexis McGee described three variants of scams being practiced in many states. "Some so-called foreclosure rescuers charge huge fees to 'negotiate' with the lender, or to complete simple paperwork," Ms. McGee said. "And in most cases, the so-called rescuer simply abandons the distressed homeowner after collecting the money." Another scheme involves transferring the house title to a third party, allowing owners to stay on as tenants with an option to buy back the house on terms that cannot be met. "The bandits then evict the former owners and walk off with their equity," the company said. In a third scheme, the scam artist fraudulently induces the owner to give away the house by signing a quit-claim deed under the guise of obtaining a new mortgage. Foreclosures.com can be found online at http://www.foreclosures.com.

Federal banking regulators have changed the reporting requirements for delinquent loans in Ginnie Mae mortgage-backed securities, despite opposition from Ginnie issuers.Since seller-servicers have an "unconditional" option to repurchase delinquent mortgages from Ginnie Mae pools, the regulators have determined that these loans should be reported as delinquent in the June 30 Call Report. "A seller-servicer must report all delinquent rebooked Government National Mortgage Association loans that have been repurchased or are eligible for repurchase as past due in Schedule RC-N in accordance with their contractual repayment terms," according to supplemental instructions for the June 30 Call Report. To accommodate industry concerns, the regulators have created a new line item for Ginnie repurchased loans. "We do read the comments," one regulatory accounting expert said. Ginnie Mae can be found online at http://www.ginniemae.gov.

The delinquency rate on both closed-end home equity loans and home equity lines of credit increased in the first quarter of this year, according to the American Bankers Association.The delinquency rate on closed home equity loans held by banks rose from 2.37% to 2.43% in the fourth quarter. The HELOC delinquency rate rose from 0.33% to 0.40%, according to the ABA. The rise in home equity overdues was in contrast to improvement in the manufactured housing and credit card sectors. Credit card delinquencies, at 4.03% in the first quarter, are now at their lowest level in three years, ABA chief economist James Chessen pointed out. The mobile home delinquency rate improved from 5.03% to 4.46% in the fourth quarter of 2004. The ABA can be found online at http://www.aba.com.

Spending on mortgage technology increased 14% in the past year, according to the second annual Mortgage Bankers Association Technology Study.Study participants spent an average of $156 per loan application and $250 per closed loan on origination-related technology costs. In addition, those that serviced loans spent an average of $25 per loan on servicing-related technology costs, the MBA reported. About 75% of 2004 technology spending (operating expense before depreciation, plus capital expenditures) was dedicated to origination functions and 25% to servicing functions. Of 2004 technology spending, 73% was baseline maintenance (required in order to continue conducting business), while the remaining 27% was discretionary (needed to improve functionality and performance). Regulatory and compliance obligations accounted for 9% of technology budgets. Looking ahead, participants expect their technology budgets to increase by 5% over the next year. The participants represented approximately 20% of the U.S. mortgage origination market, according to the MBA. The association can be found online at http://www.mortgagebankers.org.

The stocks of three real-estate-related companies will be added to the Russell 3000 and the Russell 2000 indices on July 1, and two of them will be added to another Russell index.E-Loan Inc., an online mortgage, home equity, and auto lender based in Pleasanton, Calif., and Delta Financial Corp., a nonconforming mortgage lender based in Woodbury, N.Y., are scheduled to be listed on the Russell 3000 Index, the Russell 2000 Index, and the new Russell Microcap Index. (Membership in the Russell 3000 means automatic inclusion in either the large-capitalization Russell 1000 Index or the small-cap Russell 2000, the companies said.) American Retirement Corp., a national provider of senior-living housing and care, will be added to the Russell 3000 and the Russell 2000. The indices are published by Russell Investment Group, Tacoma, Wash., which can be found on the Web at http://www.russell.com

Class M-2 of American Residential HELT series 1998-1 has been downgraded from A-minus to BBB by Fitch Ratings, and class B of the deal has been downgraded from CCC to C.Fitch also affirmed the AA rating on class M-1 in the transaction. The downgrades stemmed from concerns about the adequacy of credit enhancement in the light of declining collateral performance, the rating agency said. Fitch can be found online at http://www.fitchratings.com.

Residential Capital Corp., Minneapolis, has announced the closing of a $4 billion private offering of senior notes.The debt was issued in three parts: $1 billion of floating-rate notes due 2007; $2.5 billion of 6.375% notes due 2010; and $500 million of 6.875% notes due 2015. ResCap said it plans to use the net proceeds from the offering to repay debt owed to its parent company, General Motors Acceptance Corp., and for general corporate purposes. GMAC recently established ResCap as a holding company and transferred to it the ownership of GMAC Mortgage Corp. and Residential Funding Corp. GMAC said the move would provide added operational and financial flexibility and improve the liquidity of the operations.

Class BF of Bear Stearns Asset Backed Securities Inc. series 1999-2 has been downgraded from B2 to Ca by Moody's Investors Service.Moody's said the securitization is backed by fixed-rate and adjustable-rate subprime mortgage loans that have multiple originators, including ContiMortgage Corp., Amresco Residential Mortgage Corp., and Provident Funding Associates LP. Class BF, the subordinate fixed-rate certificate, was downgraded because the transaction has taken "significant losses" -- the fixed-rate pool had realized cumulative losses of 6.41% as of May 25 -- that have gradually eroded the overcollateralization, the rating agency said. Moody's can be found online at http://www.moodys.com.

KKR Financial Corp., a San Francisco-based specialty financing company that invests in mortgage-related assets among others, has priced an initial public offering of approximately 33.33 million shares of common stock at $24 per share.The offering included 28,750 shares being sold by existing stockholders. The company's shares began trading June 24 on the New York Stock Exchange under the ticker symbol "KFN." KKR said it has granted the underwriters an option to buy up to 4.17 million additional shares to cover any overallotments. The joint book-running managers of the offering are Citigroup Global Markets; Bear, Stearns & Co.; Credit Suisse First Boston; Lehman Brothers; J.P. Morgan Securities; and Friedman, Billings, Ramsey & Co.