Servicing

Class B of Industry Mortgage Corp. home equity loan pass-through certificates, series 1998-1, has been downgraded from CCC to C by Fitch Ratings.The rating agency also affirmed the ratings on 17 other classes from four IMC HEL transactions. The downgrade was attributed to poor collateral performance. "Class B is experiencing monthly writedown as a result of monthly loan losses," Fitch said.

Class B of ABFC mortgage loan asset-backed certificates, series 2001-AQ1, has been downgraded from Baa2 to Ba2 by Moody's Investors Service.Moody's also upgraded four classes and confirmed one class from Ameriquest Mortgage Co. asset-backed securitization deals from 2001. The transactions consist of fixed-rate and adjustable-rate first-lien subprime mortgage loans. Ameriquest is the servicer and the originator on the transactions. The downgrade was attributed to credit enhancement levels that were deemed to be low given the projected losses on the underlying pools. "The transaction has taken losses, and pipeline loss could cause eventual erosion of the overcollateralization," Moody's said. The rating agency can be found online at http://www.moodys.com.

Fitch Ratings has upgraded the residential primary servicer ratings of Select Portfolio Servicing Inc. (formerly Fairbanks Capital Corp.), Salt Lake City.The servicer ratings were upgraded as follows: for alternative-A loans, from RPS3 to RPS2-minus; for subprime and home equity loans, from RPS3-minus to RPS2-minus; and for special servicing, from RSS3 to RSS2-minus. The upgrades "reflect sustained improvements based on process and procedural changes initiated by SPS to correct deficiencies noted during Fitch's prior reviews in addition to those detailed in the November 2003 settlement with the Federal Trade Commission and the Department of Housing and Urban Development," Fitch said. Among the changes cited by Fitch are the restructuring of the senior management team; systems upgrades; compliance training; increased frequency and scope of internal audits; and the development of a consumer assurance review department, which reviews each loan prior to foreclosure referral.

Prepayment rates for 30-year Fannie Mae and Freddie Mac mortgage-backed securities rose modestly in February, according to Bear Stearns & Co.For Fannie 30-year MBS issues, the aggregate prepayment rate increased by 4.7% in February, compared with an increase of 10% for Freddie Mac issues, Bear Stearns analyst Dale Westhoff reported. "The biggest surprise in Friday's numbers was that [Fannie Mae] prepayments on premium coupons (6.0s and higher) were virtually unchanged from January levels," Mr. Westhoff said. He added that the 7% rise in the speeds of Freddie Mac premium coupons was more in line with expectations. The analyst said the recent rise in the 30-year mortgage rate and the flattening of the yield curve augurs a retreat in the Mortgage Bankers Association's Refinance Index to the 1700 level. "Barring another rally, we expect the mortgage prepayment curve to flatten as well (beginning with the April report), with discount speeds supported by strong spring/summer seasonal effects while premium speeds compress under a flatter curve and diminished refinancing demand." Bear Stearns can be found online at http://www.bearstearns.com.

General Electric, Fairfield, Conn., has announced that it will sell 82 million class A shares of the common stock of Genworth Financial, Richmond, Va.In addition, Genworth will purchase between $400 million and $500 million of class B common stock directly from GE. The sales will leave GE as the 51% share owner of Genworth, whose mortgage insurance subsidiary is headquartered in Raleigh, N.C. GE said the sale proceeds will be used to eliminate the "parent-supported" debt at its GE Capital unit and enable GE Capital to increase the dividend it pays to GE from 10% of its earnings to 40% starting in the second quarter. The global coordinator and bookrunner for the offering is Morgan Stanley, with J.P. Morgan and Merrill Lynch as joint lead managers and bookrunners. The initial public offering in May 2004 spun off 30% of Genworth to the public. As of 11 a.m. on March 7, the day the companies made the announcement, Genworth's shares were trading at $28.58, $0.17 down on the day, after opening at $0.50 down.

Credit card giant Capital One Financial, McLean, Va., has agreed to buy Hibernia Corp., New Orleans, a top-50-ranked residential servicer, for $5.3 billion in stock and cash.Hibernia National Bank is the largest residential lender in the New Orleans metropolitan area, according to National Mortgage News' Home Mortgage Disclosure Act database. However, in the fourth quarter Hibernia's residential loan production fell dramatically, to $150 million, compared with $911 million a year earlier. At year-end, Hibernia serviced $11.5 billion in home loans, ranking 44th nationwide. Capital One services $79.9 billion in receivables -- most of it credit cards or auto loans. The purchase, once completed, will give Capital One 293 branches in Louisiana and Texas, and a foothold in the mortgage industry. As MortgageWire neared its deadline Monday afternoon, Hibernia's shares were trading up 21%, to $32.20.

Will County, Ill.'s student housing revenue bonds (Joliet Junior College project), series 2002A, and taxable series 2002B, have been downgraded from C to D by Fitch Ratings.The downgrade to default status was attributed to a March 2 disclosure filing indicating that the scheduled March 1 interest payment on the bonds was not made. Fitch said the filing reported that First Midwest Bank "did not make the payment in response to a direction by the holders of 69% of the outstanding bonds." The filing indicated that the bondholders are replacing First Midwest as trustee with Manufacturers and Traders Trust Co., Baltimore. Fitch can be found online at http://www.fitchratings.com.

Saxon Capital Inc., a residential mortgage lender and servicer based in Glen Allen, Va., has announced that it expects to transfer its common stock from the NASDAQ National Market to the New York Stock Exchange on March 18.Saxon, a real estate investment trust, said its management is slated to ring the bell to open the NYSE on that morning. The REIT's production subsidiaries, Saxon Mortgage and America's MoneyLine, originate and purchase loans through wholesale, correspondent, and retail channels. Saxon can be found on the Web at http://www.saxoncapitalinc.com.

Mortgage servicers should maintain criteria for selecting and dismissing outsource providers and vendors, ensure fee disclosure, and maintain a quality control program to monitor performance, according to Standard & Poor's Ratings Services.Servicers who want to achieve or maintain S&P's Select Servicer status will be expected to "adhere to certain basic guidelines with respect to outsourcing vendor management and fee disclosure," S&P said. Their selection and dismissal criteria should be objective and transparent and should include "minimum key performance indicators," the rating agency said. In addition, they should establish procedures to ensure that any fees presented for reimbursement to a guarantor "represent a true and accurate rendering of actual monies expended," net of certain cost reductions, S&P said. Quality control should measure performance as well as compliance with state and federal statutes, the rating agency said. S&P can be found online at http://www.standardandpoors.com.

The risk of default on newly originated nonprime mortgage loans remains steady, but the risk level has increased by 25% since 2003, according to University Financial Associates.The UFA's default risk index for the winter of 2005 registered 96 this quarter, up one point from the previous quarter. A reading of 100 means that the risk of default is equal to the average for the decade of the 1990s, and lower readings indicate a lower level of risk. "House price appreciation remains well above trend, but the prospects for future increases are eroding," said Dennis Capozza, professor of finance at the University of Michigan and a principal in UFA. The "constant quality" index measures the impact of the economy on the default prospects for new loans with the same borrower, loan, and collateral characteristics from quarter to quarter.