Servicing

The Federal Home Loan Bank of Seattle is weighing whether it should ask two member directors to resign from its board as it continues to investigate "inside information" allegations regarding FHLBank stock sales, industry officials have told MortgageWire.A spokesman for the Seattle FHLBank declined to comment. A source close to the situation said a Seattle FHLBank independent review committee consisting of five nonmember directors is "looking at its options" but "has yet to make a determination." As previously reported by National Mortgage News, the IRC is looking into charges that three of its member institutions had inside information about the condition of the government-sponsored enterprise when they requested stock redemptions from the bank last fall. About $337 million in stock was redeemed in October -- several months before the GSE said it would pay minimal or no dividends and report a $260 million unrealized loss. Washington Mutual of Seattle is one of the three firms, but a spokeswoman for the thrift said it redeemed B(2) FHLBank stock, also known as "excess" stock. The other two institutions -- whose identities are not known -- redeemed "activity" or B(1) stock, which is needed if a member wants to get advances from the FHLBank.

Five classes from three Structured Asset Mortgage Investments Inc. securitizations have been downgraded by Fitch Ratings.The downgrades were as follows: series 1999-1 group 2, class 2B-4, from BB to B, and class 2B-5, from CCC to CC; series 1999-2 group 3, class 3-B-3, from BBB to BB, and class 3-B-4, from B to CCC; and series 2000-1 group 2, class II-B-5, from BB-plus to B-plus. In addition, Fitch upgraded four classes from two of the deals and affirmed the ratings on eight other classes from the three deals. The downgrades reflect deteriorating credit enhancement relative to "consistent or rising monthly losses" and rising delinquencies, Fitch said. The rating agency can be found online at http://www.fitchratings.com.

Washington Mutual Inc., Seattle, has reported net income of $902 million ($1.01 per share) for the first quarter, down from $1.05 billion ($1.18 per share) a year earlier, although earnings from its mortgage business rose.WaMu attributed the overall decline to discontinued operations from the sale of Washington Mutual Finance Corp. Net income for WaMu's mortgage banking segment totaled $243 million in the first quarter, up from $228 million a year earlier, the company said. Originations of home loans totaled $38.50 billion for the quarter, down from $43.72 billion a year earlier. The company attributed the increase in the mortgage segment's net income to higher gain from mortgage loans (net of risk management activities) and lower noninterest expense. WaMu can be found online at http://www.wamu.com.

Doral Financial Corp., San Juan, Puerto Rico, has announced that it may restate its earnings for 2000 through 2004 to decrease the fair value of its portfolio of floating-rate interest-only strips by $400 million to $600 million.The IO strips are backed by fixed-rate nonconforming mortgage loans that are pooled and sold on a floating-rate basis, Doral said. The company estimated that the after-tax effect of the required adjustments as of Dec. 31, 2004, will range from $290 million to $435 million, but said it has not yet determined how the adjustments will be distributed among the affected periods. Doral said it is working with First Manhattan Consulting Group, a risk management specialist, to assess its risk measurement and risk management techniques, and that the restatement process will delay the release of its earnings for the first quarter of 2005. The company is the largest residential mortgage lender in Puerto Rico.

National City Corp., Cleveland, has reported earnings of $484 million for the first quarter ($0.74 per share), down from $710 million ($1.16 per share) for the first quarter of 2004.Chairman and chief executive officer David Daberko said earnings-per-share comparisons with those of a year ago were "distorted by large gains from mortgage hedging." He went on to say that "mortgage-related activities, as expected, are now earning at more normal rates following the 2003-2004 period when we took advantage of the largest mortgage volumes in U.S. history." National City said its mortgage banking revenue in the first quarter of this year was $283 million, compared with $579 million for the first quarter of 2004. Net hedging gains related to mortgage servicing rights were $70 million for the first quarter, compared with a gain of $295 million in the first quarter of last year.

Wells Fargo & Co., San Francisco, has reported record net income of $1.86 billion ($1.08 per share) for the first quarter, up 5% from $1.77 billion ($1.03 per share) a year earlier.Mortgage originations totaled $65 billion. "Home Mortgage saw a strong pick-up in application activity in the quarter, as applications of $91 billion increased 14% over fourth-quarter 2004, and the March 31, 2005 pipeline of $59 billion was up 18% from year-end," said Mark Oman, group executive vice president for home and consumer finance. "The rise in interest rates during the quarter and the growth in the servicing portfolio resulted in an increase in the mortgage servicing rights asset to $9.0 billion, or 1.24% of loans serviced for others, up from 7.9 billion, or 1.15%, at year-end. Reflecting the increase in fair value of the servicing asset, a $271 million reversal of the valuation allowance was realized in the quarter." The company can be found online at http://www.wellsfargo.com.

Three classes of notes issued by HarbourView CDO III Ltd., a collateralized debt obligation that includes mortgage-backed securities, have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are classes A, B, and C. The rating agency said the deal has triggered an event of default, in response to which a majority of the controlling class of noteholders may accelerate the maturity of the transaction, a majority of all the noteholders may choose to liquidate the portfolio, or some other remedy may be chosen. Fitch said HarbourView III is composed of 34.2% residential MBS, 27.9% asset-backed securities, 15.3% commercial MBS, 8% real estate investment trusts, 7.3% CDOs, and 7.3% corporate debt. The rating agency can be found online at http://www.fitchratings.com.

The national inventory of foreclosures decreased slightly in February despite widespread expectations that foreclosures will rise in 2005, according to RealtyTrac, an online marketplace for foreclosure properties based in Lake Forest, Calif.The company's Monthly U.S. Foreclosure Market Report indicates that the latest foreclosure inventory totaled 53,222. "On the other hand, certain regions appear to be experiencing higher foreclosure rates," said Jim Saccacio, RealtyTrac's chief executive officer. "Florida and Colorado had the largest number of foreclosures, more than three times the national average." In Texas, the company said, more than 50% of all foreclosures in February took place in three counties: Bexar (San Antonio), with 10.1%; Dallas, 16.4%; and Harris (Houston), 25.3%. RealtyTrac can be found online at http://www.realtytrac.com.

The share price of Doral Financial Corp., Puerto Rico's largest mortgage lender, fell by as much as 16% Thursday after Merrill Lynch downgraded the company to "sell" from "neutral."At MortgageWire's deadline, the shares had recovered somewhat and were trading at $17, down 12% on the day. Merrill analyst Kenneth Bruce cited concerns about Doral's first-quarter earnings and "the potential for significant changes to the company's business model, which we think could introduce yet more volatility into the stock." Doral is the 70th-largest residential servicer in the U.S. or its territories. The lender's shares have fallen significantly in recent weeks over concerns about how it is valuing some of its mortgage-backed securities. Last month Doral said it was in preliminary talks to sell some interest-only strips to an unspecified financial institution.

Laureate Capital, Charlotte, N.C., a subsidiary of Branch Banking and Trust Company, has acquired R.J. Twitty & Co., a Tampa, Fla.-based mortgage banker.The terms of the transaction were not disclosed. The acquisition adds R.J. Twitty's $275 million loan servicing volume to Laureate's $6.64 billion commercial and multifamily servicing portfolio and also gives the company another loan production office in Florida (in addition to its existing one in Naples). The company's new Tampa office will be led by Steven Marshall from R.J. Twitty & Co, Laureate said. R.J. Twitty's chief executive officer, Robert Twitty, plans to pursue other interests following the sale.