Servicing

The Federal Home Loan Bank of Seattle saw its third-quarter earnings plunge by 53% to $16.8 million due to hedging mistakes and a poor performance in two key products.The FHLBank admitted in a statement that it did not "efficiently manage the funding and hedging of its investments." These investments include mortgage-backed securities and its mortgage purchase program. The MPP, which competes against Fannie Mae and Freddie Mac, was hurt by decreasing volumes and the bank's decision to limit purchases from larger member banks while it enhances what it calls its "financial infrastructure." On Monday, the Federal Home Loan Bank of Chicago, which operates the bank system's Mortgage Partnership Finance program, said it will delay reporting third-quarter earnings because of concerns over accounting for derivatives.

Class M-2 of American Residential HELT series 1998-1 has been downgraded from A to A-minus and removed from Rating Watch Negative by Fitch Ratings.Fitch also affirmed the rating on one other class in the deal. The downgrade stemmed from concerns about the adequacy of credit enhancement in the light of declining collateral performance, the rating agency said.

Three classes of notes issued by Capital Guardian ABS CDO I Ltd., a collateralized debt obligation partly composed of residential and commercial mortgage-backed securities, have been downgraded by Fitch Ratings.The downgrades were as follows: class B, from AA-minus to BBB; class C, from BBB-plus to B-plus; and $15 million of preference shares, from BB-minus to CCC. In addition, Fitch affirmed the ratings on three other classes in the deal. The rating agency attributed the lowered ratings to deterioration in credit quality due to the downgrading of several assets, including assets with exposure to manufactured housing and aircraft leases. The CDO consists of RMBS, CMBS, asset-backed securities, CDOs, and corporate debt, the rating agency said. Fitch can be found online at http://www.fitchratings.com.

Ameriquest Mortgage Co. and Argent Mortgage, both subsidiaries of Ameriquest Capital Corp., have announced plans to expand their mortgage servicing operations in a move that will create 2,100 new jobs in the Schaumburg, Ill., area.Ameriquest said it will be subleasing an 11-story, 300,000-square-foot office building for the expansion and that the 2,100 new jobs will come online incrementally over the next three years. Ameriquest Mortgage, headquartered in Orange, Calif., is a retail lender. Argent Mortgage, based in Irvine, Calif., is a wholesale lender that works with independent mortgage brokers.

Four classes of notes issued by MKP CBO I Ltd., a collateralized debt obligation partly composed of residential and commercial mortgage-backed securities, have been downgraded by Fitch Ratings.The downgrades were as follows: class A-1L, from AA-minus to A-minus; class A-2L, from BBB-minus to BB; class B-1A, from B-plus to B-minus; and class B-1L, from B-plus to B-minus. The four classes remain on Rating Watch Negative. Fitch attributed the downgrades to declining overcollateralization ratios and the "continued negative impact" of the CDO's interest rate hedge. The CDO consists of RMBS, CMBS, and commercial and consumer asset-backed securities, the rating agency said. Fitch can be found online at http://www.fitchratings.com.

The Federal Home Loan Bank of Chicago, which operates the bank system's Mortgage Partnership Finance program, said Monday that it will delay reporting third-quarter earnings because of concerns about derivative accounting.A spokesman for the bank told MortgageWire that the FHLBank hopes to release third-quarter results sometime "during the next couple of weeks." The FHLBank issued a statement saying an outside consulting firm -- which it would not name -- has advised the bank to change the way it accounts for certain derivatives under FAS 133. The FHLBank uses derivatives to hedge its MPF assets as well as its advances. "The most significant change affecting the bank's financial statements involves the method of accounting for certain payer or receiver swaptions" under FAS 133, it said. The bank now plans to directly account for changes in the value of the swaptions as either income or expense.

Fannie Mae has announced that it will not issue Benchmark Notes of any kind in November.The company had announced recently that it would not issue Callable Benchmark Notes this month. Fannie Mae said, however, that it intends to issue Benchmark securities for the remainder of the year in accordance with its previously announced calendar. The government-sponsored enterprise can be found on the Web at http://www.fanniemae.com.

There is better than a one-in-six chance of a general decline in home prices over the next two years, according to the PMI Risk Index.The average value of the index for the 50 largest metropolitan statistical areas stood at 186 in November, up from 171 in August, said PMI Mortgage Insurance Co., the Walnut Creek, Calif.-based mortgage insurer that created the index. The index value means that these MSAs have on average an 18.6% probability of experiencing a home price decline in the next two years. San Jose, Calif., topped the index with a 509 (and therefore a 50.9% chance of a decline), followed by Boston, with 483, and Oakland, Calif., with 473. San Francisco and San Diego ranked fifth and sixth, with 419 and 405, respectively, and New York ranked seventh, at 383. PMI can be found online at http://www.pmigroup.com.

Thornburg Mortgage Inc., Santa Fe, N.M., has completed a $50 million add-on offering of senior notes.The issuance is an add-on to $255 million of 8% senior notes issued in May and November of last year. The notes have identical terms to those of the previously issued notes, but will be issued at 107.2 of their principal amount to yield 6.88%, Thornburg said. Net proceeds from the transaction will be used mainly to fund loans originated by the company and to buy additional adjustable-rate mortgage securities, the company said. Thornburg can be found online at http://www.thornburg.com.

Two classes of notes issued by Sunrise CDO I have been downgraded by Fitch Ratings.Class B was downgraded from BBB to BBB-minus, and class C was downgraded from B-minus to CCC-plus. The transaction is a collateralized debt obligation supported by asset-backed securities, residential and commercial mortgage-backed securities, CDOs, and corporate debt securities. Fitch said the downgrades stemmed from the fact that the portfolio has performed poorly as a result of impaired and defaulted assets and a negative change to the weighted average rating factor. The rating agency can be found on the Web at http://www.fitchratings.com.