Servicing

ITLA Capital Corp., La Jolla, Calif., has announced that its wholly owned banking subsidiary, Imperial Capital Bank, has signed a loan purchase and servicing agreement with Fannie Mae.Under the agreement, the bank will originate small, fixed-rate multifamily loans with 5-, 7-, 10-, and 15-year terms for sale to Fannie Mae as a Fannie Mae-approved M-Flex Lender. ICB will originate these loans, along with its existing multifamily and commercial real estate loans, through its national network of loan production offices, ITLA said. "The small multifamily fixed-rate loans, to be originated by the bank and sold to Fannie Mae, will give the bank's customers a competitive financing alternative, in addition to our longstanding and successful adjustable-rate multifamily and commercial real estate loan products," said ITLA's president and chief executive officer, George W. Haligowski.

Citing excellent compliance with its high-cost loan criteria, Fitch Ratings has announced that it will no longer require third-party reports for rated transactions at the time of closing for loans originated in New Jersey, New Mexico, Kentucky, Massachusetts, and Indiana.The rating agency said compliance systems have become a critical component of the underwriting and quality control process, and the revisions to its residential mortgage-backed securities guidelines recognize the industry's progress in managing compliance with anti-predatory-lending laws and regulations. Kevin Cuff, president of the Massachusetts Mortgage Bankers Association, said the industry is still waiting to see how the new Massachusetts law will affect the market, since it has only been in place for two months. "Fitch is recognizing how we all feel in the state," Mr. Cuff said. "We're in a wait-and-see period to see how compliance will go -- to see if it's effective and to make sure there's consumer protection while continuing to provide adequate access to credit for consumers. No one is throwing their arms up and saying people are leaving the state." Fitch had previously said the laws in the five states might expose RMBS issuers to unlimited assignee liability for damages resulting from high-cost loans.

The risk of a general decline in home prices over the next two years has declined in recent months, according to the winter 2005 PMI Risk Index, which fell 25 points from its autumn 2004 level.The average value of the index for the 50 largest metropolitan statistical areas stood at 161 as of January, said PMI Mortgage Insurance Co., the Walnut Creek, Calif.-based mortgage insurer that created the index. The index value means that these cities have on average a 16.1% probability of experiencing a home price decline in the next two years. PMI said its analysts attribute the decline in the index to improving nationwide economic conditions indicated by generally lower regional unemployment rates. The MSAs topping the index were Boston-Cambridge-Quincy (Mass. and N.H.), at 533; San Jose-Sunnyvale-Santa Clara (Calif.), at 530; and San Francisco-Oakland-Fremont (Calif.), at 479.

NovaStar Financial Inc., Kansas City, Mo., has announced that its subsidiary NovaStar Mortgage has completed its first securitization of 2005, a deal with a face value of approximately $2.07 billion.The transaction, NovaStar Mortgage Funding Trust, series 2005-1, was underwritten by lead managers RBS Greenwich Capital, Wachovia Securities, and Deutsche Bank Securities, along with co-manager Morgan Stanley. NovaStar Mortgage can be found on the Web at http://www.novastarmortgage.com.

Countrywide Financial Corp.'s revision of the timing of the gain on sale from certain mortgage-backed securitizations appears to be an isolated financial reporting concern, company chairman and chief executive officer Angelo Mozilo said in a Tuesday afternoon conference call."We have not been provided any information from our auditors that there are any other issues," Mr. Mozilo said. Conference call participants expressed some concern that the development might have broader implications based on a report Countrywide said it planned to file with the Securities and Exchange Commission indicating that the development was "a material weakness in internal controls over financial reporting." But Mr. Mozilo said it did not reflect any other concerns at the company. He said only small portions of a few, primarily subprime, transactions (equal to 0.1% to 2.2% of the principal balance of the related loans that were sold after the end of the quarter) were involved in the revision. At the heart of the accounting concerns in these deals were embedded derivatives with little value and their compliance with Statement of Financial Accounting Standards 140 on when they should be reported, he said.

When it comes to wooing customers, mortgage brokers and loan officers may be the first in line, but a recent study suggests that servicers are the ones who win the customers' loyalty in the long run.According to the J.D. Power & Associates 2005 Home Mortgage Study, a far greater number of consumers name their mortgage servicer as "their" mortgage company than name the originator. When asked, "Which do you think of as your mortgage company?", 76% of consumers named their mortgage servicer, while 24% named their mortgage originator. The survey also finds some areas of concern for servicers. Jeremy Bowler, a director at J.D. Power who spoke at the MBA National Mortgage Servicing Conference in Orlando, Fla., said that only 18% of mortgage servicing customers reported being "delighted" overall with their lender. Just 16% said they were delighted with their originator. Mr. Bowler said the stakes are high for achieving customer satisfaction, because satisfied customers are much more likely to recommend doing business with a lender. By contrast, dissatisfied customers can become word-of-mouth "brand terrorists," he said.

Servicers of subprime mortgage loans face a perplexing conundrum: only about a quarter of the loans include escrow accounts to ensure payment of insurance premiums and property taxes, yet subprime borrowers are the least likely to save money to make such payments.Speaking at a panel discussion at the MBA National Mortgage Servicing Conference in Orlando, Fla., several B&C servicers said they believe the escrow rate for insurance and tax payments should be higher. Nigel Brazier, senior vice president for business development and strategic initiatives at Select Portfolio Servicing, said only about 25% of the loans in his company's subprime portfolio have escrow accounts. He said that is typical for the subprime industry. Some in the industry believe that failing to escrow can lead to higher delinquency and default rates among subprime borrowers. Mr. Brazier said investors are "starting to realize" that they should perhaps be concerned about the low rate of escrowing in the nonprime sector. And Fabiola Camperi, a senior vice president at Option One Mortgage, said her company has been trying to promote escrowing in its portfolio. "We have seen our ratio of escrow loans increase significantly," to more than 50%, she said.

Fannie Mae acquired $48 billion in home mortgages in January, its lowest purchase volume in more than three years.Meanwhile, the company's on-balance-sheet portfolio fell to $890 billion at the end of January, which translates into an annualized growth rate of negative 16.8%. Fannie Mae, which is facing a $9 billion earnings restatement, is operating under the close scrutiny of its regulator, the Office of Federal Housing Enterprise Oversight. Last week its stock fell to a new 52-week low after Federal Reserve Chairman Alan Greenspan suggested that the company and its chief competitor, Freddie Mac, should be no larger than $200 billion. In a recent report, analyst Matt Vetto of Smith Barney predicted that Fannie's portfolio would grow in the "single-digit" range after 2005, adding that the company may face a "permanent" 20% to 30% capital surplus requirement. Smith Barney is maintaining a "buy" rating on the government-sponsored enterprise. Fannie Mae can be found online at http://www.fanniemae.com.

The ratings on 19 classes in five manufactured housing transactions from four issuers have been lowered by Standard & Poor's Ratings Services.The downgrades from IndyMac Manufactured Housing Contract Pass-Thru Trust 1998-2 were as follows: classes A-2 through A-4, from BBB to BB; and class M-1, from B-plus to CCC. All four classes were removed from CreditWatch negative. The downgrades from Bombardier Capital Mortgage Securitization Corp., series 1998-C, were as follows: class A-1, from BB-plus to BB-minus; class M-1, from B to CCC-plus; class M-2, from CCC-plus to CCC; and class B-1, from CCC to CCC-minus. The downgrades from Bombardier series 1999-A were as follows: classes A-2 through A-5, from BB to B-plus; class M-1, from B-minus to CCC-plus; class M-2, from CCC-plus to CCC-minus; and class B-1, from CCC to CC. In Associates Manufactured Housing Contract Pass-Thru Certificates, series 1996-2, class B-1 was downgraded from BBB to BB-plus and class B-2 was downgraded from B-plus to CCC. And in UCFC Funding Corp. Manufactured Housing Pass-Thru Certificates, series 1998-3, class M-1 was downgraded from B to CCC-plus and class M-2 was downgraded from CCC-plus to CCC. S&P attributed the downgrades to "continued adverse performance trends" in the underlying MH installment sales contracts and mortgage loans. S&P can be found online at http://www.standardandpoors.com.

Countrywide Financial Corp., Calabasas, Calif., has revised the timing for gain on sale from certain mortgage-backed securitizations originally recognized during 2004 in a move the company said will slightly reduce its earnings for that year and increase them by an equal amount for the first quarter of this year."The net effect of the change is a reduction in 2004 earnings of $0.20 per diluted share, to $3.63 per diluted share (compared to previously announced unaudited 2004 earnings of $3.83 per diluted share), and a corresponding increase of approximately $0.20 per diluted share to be recognized in the first quarter of 2005," Countrywide reported. The company said the change "applies to unaudited financial results for 2004 that have been reported by Countrywide, and does not apply to any previously issued financial statements." Countrywide made the change because its independent auditor, KPMG LLP, has informed the company that it reported certain mortgage-backed security sales too soon. The company said it believed at the time that it was reporting the transactions in compliance with all applicable accounting principles. Countrywide can be found online at http://www.countrywide.com.