Servicing

Washington Mutual Inc., Seattle, has reported earnings of $2.88 billion ($3.26 per share) for 2004, down from $3.88 billion ($4.21 per share) in 2003.WaMu cited lower mortgage origination volume and a one-time reverse of loan loss reserves in 2003 as factors behind the decline in earnings. Home loan origination volume totaled $41.59 billion, down from $51.50 billion in the fourth quarter of last year. But WaMu chairman and chief executive Kerry Killinger said the mortgage unit exceeded his expectations. Earlier this year, he had warned that the mortgage unit's earnings might be "negative or slightly positive" for 2004 as the company struggled to overhaul its expense structure and deal with lower volume. But in a conference call with analysts, he said operational improvements and other factors resulted in higher-than-expected mortgage earnings. WaMu's mortgage banking segment earned $570 million for 2004, down from $1.30 billion in 2003. Mortgage servicing rights, including amortization and the effect of hedges, contributed a net cost of $277 million in the fourth quarter. WaMu can be found online at http://www.wamu.com.

Fannie Mae could be moving closer to slashing its minimum servicing fee to as low as 13 basis points, industry executives have told MortgageWire.If Fannie does cut its servicing fee (currently set at a minimum of 25 bps), it's expected that Freddie Mac might follow suit. "Some of our customers have asked us to evaluate the current level of the required minimum mortgage servicing fee," a spokesman for Fannie Mae said. "Since any change in the minimum servicing fee may affect the market for delivery of Fannie Mae to-be-announced mortgage-backed securities -- one of the most liquid securities trading in the fixed-income markets today -- we are engaged in a process to gather information and input from a wide range of industry participants. That process is ongoing, and no decisions have been reached at this time." A Freddie Mac spokesman would say only that the company has talked to some of its customers "about their needs and the servicing fee." He would not elaborate. (See the full, exclusive story in the Jan. 24 issue of National Mortgage News.)

Bank of America Corp., Charlotte, N.C., has reported net income of $14.14 billion ($3.69 per share) for 2004, up from $10.81 billion ($3.57 per share) in 2003.Mortgage banking income declined an unspecified amount as a result of lower origination volume and adjustments to the value of mortgage servicing rights, BoA said. The company touted its commercial MBS underwriting operations, declaring that it had become the top U.S. deal manager in CMBS in 2004. For the fourth quarter, BoA reported net income of $3.85 billion ($0.94 per share), up from $2.73 billion ($0.92 per share) a year earlier. The company can be found online at http://www.bankofamerica.com.

Fannie Mae has announced a 50% reduction in its common stock dividend, from $0.52 per share to $0.26, for the first quarter to "accelerate an increase in the company's capital."The government-sponsored enterprise noted that its regulator, the Office of Federal Housing Enterprise Oversight, had classified Fannie Mae as "significantly undercapitalized," requiring approval by the OFHEO director before the payment of any dividends. (The announced dividends have been approved by OFHEO.) The common stock dividend will be paid Feb. 25 to registered stockholders as of the close of business on Jan. 31, 2005. Preferred stock dividends announced by Fannie Mae are as follows: $0.65625 per share of series D; $0.63750 per share of series E; $0.1713 per share of series F; $0.2938 per share of series G; $0.7263 per share of series H; $0.6719 per share of series I; $0.5895 per share of series J; $0.6406 per share of series L; $0.5938 per share of series M; $0.6875 per share of series N; $0.8847 per share of series O; and $1,358.68 per share of convertible series 2004-1. For series K preferred stock, the dividend rate will be replaced on March 18 by the applicable swap rate plus 1.33%. All the preferred dividends will be paid March 31 to registered stockholders as of the close of business on March 15, 2005. Fannie Mae can be found online at http://www.fanniemae.com.

Astoria Financial Corp., Lake Success, N.Y., has reported that it expects to record a nontemporary after-tax impairment charge of $9.6 million for the fourth quarter related to $120 million of perpetual preferred stock issued by Freddie Mac.The impairment was previously recorded as an unrealized mark-to-market loss on securities available for sale. (The Freddie Mac stock is held in the company's available-for-sale securities portfolio.) The decision to reclassify the impairment "is based on a very conservative interpretation of accounting literature and does not reflect the expected long-term value of these investment-grade securities," said George L. Engelke Jr., chairman, president, and chief executive officer of Astoria Financial. The company, which is the holding company for Astoria Federal Savings and Loan Association, can be found online at http://www.astoriafederal.com.

Wells Fargo & Co. earned a record $1.8 billion ($1.04 per share) in the fourth quarter, up 10% from its earnings in the fourth quarter of 2003.But the mortgage unit saw its contribution to earnings decline from the record-setting 2003 performance, with Wells Fargo reporting origination volume of $87.7 billion in first mortgages and $52.2 billion in second mortgages during the quarter. For the full year, Wells Fargo originated $298 billion of residential mortgages, down 37% from the industry record of $470 billion the company set in 2003. The Wells Fargo owned mortgage servicing portfolio reached $805 billion, up 13% from that of 2003, the company said. Wells Fargo said the carrying value of its mortgage servicing rights totaled $7.9 billion at year-end, or 1.15% of loans serviced. That is up from an MSR valuation of $6.9 billion at the end of 2003. The company can be found on the Internet at www.wellsfargo.com.

Ten classes of mezzanine and subordinated tranches from four mortgage-backed securitizations issued by Credit Suisse First Boston Mortgage Securities Corp. have been placed under review for possible downgrade by Moody's Investors Service.The affected securities are as follows: series 2001-11, class III-M; series 2001-AR19, classes C-B-2 and C-B-3; series 2001-28, classes I-B-1 through I-B-5; and series 2002-22, classes II-B-1 and II-B-2. In addition, Moody's has placed 23 classes from seven MBS deals under review for possible upgrade. Moody's attributed the negative rating actions to cumulative losses on the underlying loans that have exceeded the rating agency's original expectations. Moody's can be found online at http://www.moodys.com.

Class BV of IndyMac ABS Inc. Home Equity series SPMD 2000-C, group 2, has been downgraded from B to CCC by Fitch Ratings.In addition, Fitch affirmed the ratings on three other classes in the transaction. The negative rating action was attributed to poor collateral performance and "the deterioration of asset quality beyond original expectations." Series SPMD 2000-C, group 2, originally contained 9.51% in manufactured housing collateral, and the percentage had increased to 25.3% as of December 2004. "To date, the MH loans have exhibited very high loss severities, causing Fitch to have concerns regarding the adequacy of enhancement in this deal," the rating agency said. MH collateral has been responsible for 55% of cumulative losses. Fitch can be found online at http://www.fitchratings.com.

In what may be a harbinger for other banks, BB&T Corp. has reported a net recapture of valuation for its mortgage servicing rights in the fourth quarter totaling $4 million.BB&T, one of the first banks to report fourth-quarter earnings, said the recapture was lower than the $20.1 million recorded in the fourth quarter of last year. Revenue from mortgage banking activity totaled $26.9 million in the fourth quarter, down $14 million from that of a year earlier, and the bank cited fluctuation in the valuation of its MSRs as the primary reason for the decrease. Overall, BB&T reported net income of $416.9 million in the fourth quarter, or $0.75 per share, compared with $305 million, or $0.55 per share, a year earlier.

Jackson & Associates, an Irvine, Calif.-based provider of legal services and legal process management to the real-estate owned industry, has launched a new platform for managing recovery of occupied REO.The company said its platform, Symphony, is a specialized system designed to control the risk associated with occupied REO, and manages the legal and related processes involved in post-foreclosure property recovery. "The risks incident to the recovery of occupied REO are quite different from vacant REO, both in terms of the frequency and severity of risk exposure," said Robert Jackson, president and senior managing attorney at the firm.