Servicing

The rate-indicative 10-year Treasury yield on Wednesday fell to 3.90%, a level thought to be significant in terms of prepayments.A move to 3.90% or lower could result in a "significant increase in refi activity," according to Art Frank, director of mortgage-backed securities research at Nomura Securities International Inc. RBS Greenwich Capital Markets MBS researcher Alec Crawford also said he considers the move into a range below 3.90% to be significant.

The Eleventh Federal Home Loan District Cost of Funds Index for April was 2.515%, up over 11 basis points from March's 2.400%.This continues the measured rate that COFI has increased since it reached rock bottom in May 2004. The rise is just slightly larger than the increase in the index between January and February of this year. Since that point, when COFI was 1.708%, the index has risen a total of 81 basis points. In contrast, the Federal Open Market Committee raised the Federal Funds Rate 25 basis points on June to 1.25%, from the rock-bottom setting of 1.00% in June 2003. Since then, it has increased it seven more times at 25 basis points each and that rate is now 3.00%. COFI is traditionally a lagging indicator, usually moving three-to-six months behind other rates.

Radian Group, a Philadelphia-based mortgage insurer, plans to issue $250 million of 30-year unsecured unsubordinated debt securities, the company said.The debt securities will consist of fixed rate notes, Radian said. The company intends to use approximately $219.3 million of the net proceeds of the offering to redeem, by the end of the third quarter, all of its outstanding 2.25% senior convertible debentures due 2022, with the balance of the net proceeds to be used for general corporate purposes. Banc of America Securities and Bear, Stearns & Co. are the joint book-running managers of the offering.

The good times that the private mortgage insurance companies had in March did not last into April, as both dollar volume of primary new insurance and the number of applications received both declined, according to the Mortgage Insurance Cos. of America.Its most recent data for its members (all private mortgage insurers with the exception of Radian), found that in April, they wrote $16.16 billion of primary new insurance, of which $12.52 billion was traditional and $3.65 billion was bulk. This is down 6% from a revised total for March of $17.18 billion (the original report was $17.15 billion). Applications fell by 14%, from 147,105 in March to 126,596 in April. A sign of how much the business has slowed is that in April 2004, the industry received 181,471applications, the second highest total in that year (behind March 2004). Defaults slightly outweighed cures in April, 35,268 compared with 34,084 respectively, for a cure/default ratio of 96.6%. The trade group can be found on the Internet at http://www.micanews.com.

NovaStar Financial subsidiary NovaStar Mortgage has completed its second securitization of 2005, the company said.Lead managers RBS Greenwich Capital, Wachovia Securities and Deutsche Bank Securities, underwrote the transaction with co-manager Morgan Stanley. The transaction -- NovaStar Mortgage Funding Trust, series 2005-2 -- includes 17 rated classes of certificates with a face value of about $1.78 billion. NovaStar Mortgage retained the class C certificate in the deal, which has a notional amount of $1.8 billion and entitles the company to excess and prepayment penalty fee cash flow from the underlying loan collateral and serves as overcollateralization. The company said class C is subordinated to all other classes. NovaStar can be found on the Web at http://www.novastarmortgage.com.

Twenty-six classes from eight Long Beach home equity and mortgage loan securitizations were recently downgraded by Fitch Ratings, not 23 as the rating agency originally reported.

Two classes from Option One Mortgage Loan Trust series 2000-3 and 2001-1 have been placed on review for possible downgrade by Moody's Investors Service.The affected securities are class M3 of series 2000-3 and class M2 of series 2001-1. In addition, Moody's placed on review for possible upgrade 30 certificates from 12 Option One deals. The reviews for possible downgrade were prompted by credit enhancement levels that are low in view of projected losses on the underlying pool. "The transaction has taken losses, and pipeline loss could cause eventual erosion of the overcollateralization," the rating agency said. The transactions are backed by first- and second-lien adjustable- and fixed-rate subprime mortgage loans. Moody's can be found online at http://www.moodys.com.

Six classes of Chase Funding subprime mortgage loan asset-backed certificates have been downgraded by Fitch Ratings.The downgrades were as follows: Chase Funding series 2000-1 group 1, class IB, from BBB to BBB-minus; series 2000-2 group 1, class IB, from BBB to BBB-minus; series 2000-3 group 1, class IM-2, from A to A-minus, and class IB, from BBB to BB; series 2001-4 group 2, class IIB, from BBB to BBB-minus; and Chase Funding Loan Acquisition Trust series 2001-C2 group 1, class IB, from BBB to BBB-minus. In addition, Fitch upgraded two classes from one Chase Funding deal and affirmed the ratings on 101 classes from 16 Chase Funding issues. The downgrades reflect worse-than-expected performance by the underlying collateral and concerns about the adequacy of credit enhancement for the remaining subordinate bonds, the rating agency said. Fitch can be found online at http://www.fitchratings.com.

NovaStar Financial Inc., a Kansas City, Mo.-based residential mortgage lender and investor, has priced a public offering of 1.5 million shares of common stock at $35 per share.JMP Securities LLC is the lead managing underwriter of the offering, and Flagstone Securities LLC is the co-manager. NovaStar said it has granted the underwriters an option to buy up to 225,000 additional shares to cover any overallotments. The company's subsidiary NovaStar Mortgage can be found online at http://www.novastarmortgage.com.

Freddie Mac, which has long been the "little brother" to "big sister" Fannie Mae, bought more loans than its crosstown competitor during April, the first time it has out-purchased Fannie in about a decade.During the month, Freddie acquired $48.5 billion in mortgages to Fannie's $45.2 billion. Historically, Fannie Mae's purchases are $10 billion to $25 billion greater than Freddie's each month, but in the wake of Fannie's $12 billion accounting scandal, Fannie has been losing market share and Freddie has been closing the gap. Seller/servicers say Freddie Mac is gearing up to aggressively purchase interest-only mortgages, a product that Fannie Mae, so far, has ignored. Even though Freddie out-purchased Fannie in April, so far this year Fannie has acquired $175.7 billion to Freddie's $159.9 billion, a difference of $15.8 billion. Freddie Mac can be found on the Web at http:///www.freddiemac.com, and Fannie Mae can be found at http://www.fanniemae.com.