Servicing

The issuance of mortgage-related securities increased slightly in the first quarter of 2005 vs. the same period last year, even though the portion of that issuance from the government-sponsored enterprises declined 43.9%, according to The Bond Market Association.Issuance of mortgage-related securities inched up to $406.7 billion from $403.0 billion during the quarter, the association said. A combination of a relative decline in refinancing compared with that of recent record-setting periods and the GSEs' "focus on implementing capital and portfolio management strategies" were responsible for the decline in issuance in that category, while rates that are still historically low on a relative basis led to the net increase in issuance in the overall mortgage-related securities category (and some others), according to the association. The home equity area also saw increases during the quarter, the association said. The association can be found on the Web at http://www.bondmarkets.com.

Freddie Mac wants to be more competitive with the Wall Street conduits in securitizing hybrid adjustable-rate mortgages.Freddie's president and chief operating officer, Eugene McQuade, told a Lehman Brothers Financial Services conference in London that many consumers are shifting to intermediate five-year and 10-year hybrids and away from 30-year fixed-rate mortgages. To address this shift in the market, Freddie Mac is retooling its hybrid product line to compete with the private-label securities market. "In order for us to compete, we need a much stronger product set," Mr. McQuade said. Freddie Mac can be found on the Web at http://www.freddiemac.com.

Two subordinate certificates issued by IndyMac ARM Trust, series 2001-H1, have been placed under review for possible downgrade by Moody's Investors Service.Classes B-2 and B-3 of the transaction were placed under review because credit enhancement levels "may be low given the current projected losses on the underlying pools," the rating agency said. Higher-than-expected losses have already resulted in a complete writedown of the two most subordinate classes, leaving class B-3 protected by only an $11,282 balance from class B-4, Moody's reported. The underlying loans consist primarily of first-lien hybrid adjustable-rate mortgage loans originated by IndyMacBank FSB. Moody's can be found on the Web at http://www.moodys.com.

One class of notes issued by Commodore CDO I Ltd., a collateralized debt obligation, has been downgraded by Fitch Ratings.The affected security, class C, was downgraded from BBB to BBB-minus. In addition, the ratings on two other classes in the deal were affirmed. Fitch said the transaction consists of commercial mortgage-backed securities, residential MBS, CDOs, asset-backed securities, and corporate securities. The rating agency attributed the downgrade to deteriorating collateral quality. Fitch can be found on the Web at http://www.fitchratings.com.

The Federal Home Loan Bank of Seattle announced Thursday that two of its directors -- Roy Whitehead of Washington Federal and Allan Landon of Bank of Hawaii -- have resigned in connection with questionable GSE stock repurchases their institutions engaged in last fall.The thrifts the two men work for have agreed to restore the repurchased stock to the FHLBank. The April 25 issue of National Mortgage News broke the news that the Seattle FHLBank would likely fire two directors. In a statement, the FHLBank said the two men did not comply with conflict-of-interest rules and that there was "the appearance of impropriety" with respect to the stock repurchase requests of $25 million by BoH and $48 million by Washington Federal. Messrs. Landon and Whitehead are member-directors of the government-sponsored enterprise, and allegations have been made that the two (as directors) may have had access to nonpublic information about the deteriorating financial condition of the bank. The GSE noted that the two men disagree with the FHLBank's conclusions. (See the May 16 issue of NMN for the full details.)

Four classes of notes issued by Mid Ocean CBO 2000-1 Ltd. have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are classes A-1L, A-2, A-2L, and B-1. Fitch said the transaction, a collateralized debt obligation managed by Deerfield Capital Management, is composed of residential mortgage-backed securities, commercial MBS, asset-backed securities, and CDOs. The rating agency attributed the watchlist placement to deteriorating collateral quality that has caused overcollateralization to decline.

Four classes of notes issued by Oceanview CBO I Ltd. have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are classes A-2, B-F, B-V, and C. The transaction, a collateralized debt obligation managed by Deerfield Capital Management, is supported by a diversified portfolio of residential mortgage-backed securities, CDOs, commercial MBS, asset-backed securities, corporate debt, and real estate investment trusts, according to the rating agency. Fitch attributed the watchlist placement to deteriorating collateral quality that has reduced overcollateralization. Fitch can be found online at http://www.fitchratings.com.

Two classes of MESA 2002-1 Global Issuance Co. have been downgraded by Moody's Investors Service.Class B-1 of the deal was downgraded from Baa2 to Ba1, and class B-2 was downgraded from Ba2 to B3. In addition, Moody's confirmed the rating on one certificate in the deal. The downgrades were based on "the weak performance of the underlying security as well as the reduced level of credit enhancement provided by the overcollateralization and the subordinated classes relative to the current projected losses," the rating agency said. The transaction is a resecuritization backed by another residential mortgage-backed security.

Citing a significant increase in the number of rated loan servicers and the amount of data the servicers provide to the rating agency, Moody's Investors Service is augmenting its servicer ratings with "plus" and "minus" signs to provide further differentiation.When added to Moody's SQ (servicer quality) ratings, the new plus modifier will indicate that the servicer ranks at the higher end of the designated rating category, while the minus modifier will indicate that a servicer ranks in the lower end of the category, the rating agency said. The changes apply to all Moody's SQ ratings across all asset classes within asset-backed securities and residential mortgage-backed securities. Moody's currently rates more than 40 servicers on a scale from SQ1 (strong) to SQ5 (weak).

Three classes of subordinated tranches from three mortgage-backed securitizations issued in 2002 by Credit Suisse First Boston Mortgage Securities Corp. have been downgraded by Moody's Investors Service.The downgrades were as follows: series 2002-AR8, class C-B-4, from Ba3 to B1; series 2002-AR28, class III-M-2, from A2 to Baa2; and series 2002-AR31, class VII-M-2, from A2 to Baa2. In addition, Moody's upgraded 35 classes of mezzanine and subordinated tranches from nine CSFB transactions and confirmed the rating of one subordinate tranche. The downgraded classes "suffer primarily from the performance of the underlying loans, with cumulative losses exceeding our original expectations," Moody's said. The pools are jumbo-A/alternative-A first-lien adjustable-rate loans. The rating agency can be found on the Web at http://www.moodys.com.