Servicing

Four classes of MKP CBO I Ltd., a collateralized debt obligation supported in part by residential and commercial mortgage-backed securities, have been downgraded by Fitch Ratings and removed from Rating Watch Negative.The downgrades were as follows: class A-1L, from A-minus to BBB-minus; class A-2L, from BB to CCC; class B-1A, from B-minus to CC; and class B-1L, from B-minus to CC. The downgrades were attributed to "continued deterioration in the credit quality of MKP CBO's collateral pool and the continued negative impact of its interest rate hedge." In addition to RMBS and CMBS, the portfolio supporting the CDO is backed by commercial and consumer asset-backed securities. Fitch can be found online at http://www.fitchratings.com.

Fannie Mae, which is in the process of restating three years' worth of earnings, has told its 5,000 employees that they can no longer buy or sell the company's stock.The edict from the congressionally chartered mortgage giant came April 29, a company spokesman said. The ban is expected to be temporary and likely will be lifted once the company works its way through the restatement process. Last fall Fannie barred a handful of employees with access to certain nonpublic information from trading in the stock. In January National Mortgage News reported that as the accounting scandal worsened at the government-sponsored enterprise, company insiders -- including top officers and directors -- unloaded thousands of shares. In the preceding six months insiders sold 91,000 shares, according to the Securities and Exchange Commission's Edgar Online system.

Class I of Credit Suisse First Boston Mortgage Securities Corp.'s mortgage pass-through certificates, series 1998-C1, have been downgraded from CC to C by Fitch Ratings.Fitch also upgraded three classes in the deal and affirmed the ratings on five other classes. The downgrade was attributed to expected losses on specially serviced loans. Fitch expressed concern about the number of specially serviced loans in the transaction, of which there are currently eight. Of those, three loans totaling 0.9% of the deal are real-estate-owned properties. "Losses have been projected on the majority of specially serviced loans," Fitch said. "Appraisal subordinate entitlement reduction adjustments have already been realized to the trust for many of these loans."

The common stock of United Financial Mortgage Corp., Oak Brook, Ill., has been approved for listing on the Nasdaq SmallCap Market, according to UFMC.The company said the first trading date for its stock on Nasdaq is expected to be May 18, and that it will continue to trade on the American Stock Exchange until the close of business on May 17. The expected ticker symbol is UFMC. Steve Khoshabe, president and chief executive officer of UFMC, said the company has been pleased with its dealings with Amex but that the move to Nasdaq is expected to "improve the liquidity in our common stock and increase our visibility, while at the same time providing investors in our common stock with better pricing and faster execution." The company can be found online at http://www.ufmc.com.

The Mortgage Partnership Finance program offered by a number of Federal Home Loan Banks is a long-term proposition and the "political scrutiny" surrounding the government-sponsored enterprises hasn't changed that, according to an executive from one of the Federal Home Loan Banks."The MPF program has always intended to be here [in the long run]," said Renee Pfender, a vice president at the Federal Home Loan Bank of Pittsburgh, at the Mortgage Bankers Association's National Secondary Market Conference. Speaking during a session on the "Role of the FHLB Today," she said the program includes several hundred participating financial institutions.

In the first quarter, 64% of the homeowners who refinanced their homes got a mortgage at least 5% larger than the original loan, up from 56% in the previous quarter, according to Freddie Mac.The percentage was much higher than the 42% level recorded a year earlier, the government-sponsored enterprise said in its quarterly refinance review. "The first quarter had record home sales and single-family housing starts and a lot of refinancing activity," said Frank Nothaft, Freddie Mac's chief economist. "The share of borrowers who decided to cash out some home equity as part of their refinance increased too, which helped prop up consumer spending on home improvements even though total consumer expenditures grew more slowly." Freddie Mac can be found online at http://www.freddiemac.com.

The agencies have been eyeing the possibility of creating a to-be-announced market for adjustable-rate mortgages, a Freddie Mac executive has told attendees at the Mortgage Bankers Association's National Secondary Market Conference in San Francisco.A TBA ARM market is likely to be among the main issues in the mortgage market over the next decade, said Mark Hanson, vice president of mortgage funding at Freddie Mac. He said the agencies "have really missed out" so far on ARM market share. But it is a market that Freddie Mac "very much wants to pursue," Mr. Hanson said. While speaking as part of a conference panel on "Ten Years of Change" in the mortgage capital markets, he also expressed faith in the strength of the existing fixed-rate TBA market, which has been threatened somewhat in recent times by increased specified pool trading. "It's so resilient," he said of the TBA mortgage-backed securities market, which has maintained the advantage of trading efficiently, generically, and in high volumes in ways specified pools do not.

Rising interest rates and home prices and a recently passed job creation act may spur a big increase in the issuance of home equity lines of credit in the residential mortgage-backed securities sector, according to Fitch Ratings."HELOCs were not able to be securitized using a REMIC structure, as each additional draw was considered a new loan prior to the passing of the American Jobs Creation Act of 2004, which went into effect Jan. 1 of this year," said Andrea Murad, a Fitch director. "The jobs act addresses the revolving nature of a HELOC that allows borrowers to draw on their lines, after the loan has been securitized." The analysis was published in the latest edition of Mortgage Principles and Interest, the rating agency RMBS newsletter. Fitch can be found on the Web at http://www.fitchratings.com

Freddie Mac has laid off 1,500 consultants -- or about 44% of its consulting team -- since last fall.The government-sponsored enterprise began hiring outside contractors in large numbers in 2003 in the wake of its $5 billion accounting scandal. These temporary employees have been assisting Freddie Mac in getting its books and accounting systems in order. However, the company also terminated the positions of about 10 full-time communications/marketing people as part of a "centralization" effort. (About 12 outside communications specialists also were let go.) A Freddie Mac spokeswoman stressed that the 10 on-staff workers were not let go for cause but were reorganized out of a job. She said Freddie's nonconsulting head count has remained steady.

Irwin Financial Corp., Columbus, Ind., has reported net income of $3.6 million ($0.13 per share) for the first quarter, compared with $14.4 million ($0.48 per share) a year earlier, a decline it attributed chiefly to a loss in its mortgage banking operations.The mortgage banking segment recorded a $9.6 million loss in the first quarter, compared with net income of $9.7 million in the first quarter of 2004, the company reported. "Like many in the industry, we have found it difficult to reduce the size of operations after the refinance boom of 2001-2003 in a rapid enough fashion to align with the reduced margins of the past several quarters," said Will Miller, Irwin Financial's chairman. He noted that interest rates had fallen rapidly, prompting Irwin to reposition its hedges, but then rebounded, driving the company's servicing values above the "lower of cost or market" cap under generally accepted accounting principles. "The economic value of our servicing rights continued to rise and would have offset the hedge losses had we been allowed to book the increase in value under GAAP," Mr. Miller said. The company can be found online at http://www.irwinfinancial.com.