Servicing

Four classes of Ocwen Residential MBS Corp. mortgage-backed securities have been downgraded by Fitch Ratings.The downgrades were as follows: Ocwen 1998-R1, class B-3, from BBB to BBB-minus; Ocwen 1998-OFS1, class B, from BBB to BBB-minus (and removed from Rating Watch Negative); and Ocwen 1999-R2, class B-2, from A to BBB, and class B-3, from B to CCC. Fitch also affirmed the ratings on 10 classes from the aforementioned Ocwen deals plus two others. The downgrades were attributed to "poor collateral performance and the deterioration of asset quality beyond original expectations."

Fitch Ratings is warning that disparities in the alternative-A sector of the residential mortgage-backed securities market have rendered the term Alt-A nearly meaningless for investors.The rating agency said bonds issued by many sellers in the alt-A market "bear unprotected credit risks because of the implications from borrower credit, risk layering, and intangibles." Fitch maintains that the alt-A sector should be segmented into three subsectors: Prime Alt-A, Alt-A-minus, and Alt-B. "As lenders have embraced a wider credit spectrum under the alt-A banner, there is such a blurring of the original definition of alt-A that the term should hold little meaning to investors," said Cheryl Glory, co-author of a new Fitch report titled "Who Put the Alt in Alt-A?" The report is based on a study of over 71,000 alt-A loans issued by GMAC-RFC and Indy Mac Mortgage Corp. in 1999 and 2000. "The analysis of intangibles is vital to understanding the credit risk in alt-A," said the other report co-author, Sarbashis Ghosh. "An issuer's underwriting and credit standards have a great impact on pool performance." Examples of such intangibles are FICO sourcing, valuation procedures, and multiple risk layering, Fitch said. The rating agency can be found online at http://www.fitchratings.com.

Fannie Mae has announced that it will not issue Callable Benchmark Notes in October.The company had previously announced that it might not issue Callable Benchmark Notes in a minimum of eight months, as originally planned. Fannie Mae said it will notify the market of its issuance intentions on the scheduled monthly announcement date. The government-sponsored enterprise can be found on the Web at http://www.fanniemae.com.

Freddie Mac has announced its 2005 funding calendar for Reference Notes and Reference Bills and issued its Quarterly Funding Announcement & Summary for the fourth quarter.The government-sponsored enterprise also announced that it will henceforth release the quarterly funding announcements before the pertinent quarter begins. Under Freddie Mac's 2005 funding program, two- or three-year Reference Notes may be issued every month except August; five-year Reference Notes may be issued in March, June, September, and December; and 10-year Reference Notes may be issued in January, April, July, and October. The report indicates that the company issued $287.6 billion of debt instruments in the third quarter, consisting of $259 billion of Reference Bills and discount notes, $24.5 billion of callable debt (including syndicated callable notes, euro-denominated callable notes, callable medium-term notes, and FreddieNotes), and $4 billion of Reference Notes. The report said Freddie Mac plans to offer $8 billion to $13 billion in Reference Notes in the fourth quarter, and $2 billion to $6 billion of syndicated callable notes. The funding announcement for the first quarter of 2005 is scheduled to be issued Dec. 10.

New York-based C-BASS has announced a definitive agreement to acquire a portfolio of assets from PCFS Mortgage Resources for an undisclosed amount.The company said the transaction includes: a portfolio of residual interests from securitizations backed by loans with a total principal balance of approximately $900 million; third-party mortgage servicing rights on a portfolio of loans with a total principal balance of approximately $8 billion; and the PCFS servicing operation. PCFS is a division of Provident Bank, which was acquired by National City Corp. in July 2004. C-BASS specializes in acquiring, servicing, and securitizing "credit-sensitive" residential mortgages. The company can be found online at http://www.c-bass.com.

Deutsche Bank has hired two managing directors to posts in its mortgage-backed securities unit.Neil Ahuja has been named managing director and head of the MBS group, and Jon Roach has been named managing director and head of mortgage derivative trading. Mr. Ahuja had previously been responsible for trading, origination, and risk management for the agency, collateralized mortgage obligation, residential conduit, and mortgage derivative desks at RBS Greenwich Capital. Mr. Roach was previously head of mortgage derivative trading at RBS Greenwich Capital. A Deutsche Bank spokeswoman could not be reached for comment by MortgageWire's deadline on whether the hiring was done to expand the company's staff or to fill vacancies.

Employment in the mortgage sector hit a new high in August as lenders resumed hiring and added 4,000 full-time employees to their payrolls, according to the September employment report by the U.S. Bureau of Labor Statistics.The August increase erased a loss of 1,600 jobs in July. Total employment in the mortgage sector has increased by 27,200 since January. Friday's BLS report shows that jobs in the mortgage banking/broker sector rose from 455,700 in July to 459,900 in August. In 2003, jobs in the mortgage sector peaked at 457,300. (There is a one-month lag in BLS reporting of mortgage sector employment data. The September data will be released Nov. 5.) Meanwhile, the BLS reported that the economy generated 96,000 new jobs in September, and the unemployment rate was unchanged at 5.4%. The BLS can be found online at http://stats.bls.gov.

The high number of structured finance deals done by unrated issuers, particularly in the residential mortgage-backed and asset-backed securities markets, has prompted Moody's Investors Service to begin formally assessing the "governance" of selected RMBS and ABS deals.Nicolas Weill, asset finance chief credit officer at Moody's, said the rating agency is specifically looking at the governance of the aforementioned deals because, "in the few instances where transactions have performed significantly below original expectations, transaction governance has often been the core issue." In assessing transaction governance, Moody's said it plans to look at "the level of oversight, controls and procedures in place in a deal that could mitigate the risk of loss to investors in a securitization." The rating agency can be found on the Web at http://www.moodys.com.

Prepayment rates for Fannie Mae and Freddie Mac mortgage-backed securities recorded "modest gains" in coupons below 6.5% and "modest declines" in higher coupons, according to Bear Stearns.Analyst Dale Westhoff said speeds of new Fannie Mae 6.0% coupons increased by a constant prepayment rate of nearly 4 CPR, but that speed-ups in other coupons fell short of expectations. Mr. Westhoff attributed this to "the significant flattening of the yield curve from April to August" and to limited news coverage of the recent decline in mortgage rates. "The biggest surprise in today's numbers was the decline in prepayments in higher coupons in the face of a significant rally in mortgage rates," Mr. Westhoff said. "Over the last two reporting periods we have seen almost a 35 bp rally in 30-year mortgage rates with very little prepayment response. Across the entire coupon spectrum, speeds today are lower than they were in June 2004, while mortgage rates are at least 20 bps lower than for the June reporting period." Bear Stearns can be found online at http://www.bearstearns.com.

Twelve classes from five BankAmerica Manufactured Housing Contract Trusts have been downgraded by Moody's Investors Service.The downgrades were as follows: Trust I, series 1996-1, class B-1, from B2 to Ca, and class B-2, from Ca to C; Trust II, series 1997-1, class B-1, from B2 to Ca, and class b-2, from Caa2 to C; Trust III, series 1997-2, class B-1, from Caa2 to C, and class B-2, from Ca to C; Trust IV, series 1998-1, class M, from Aa3 to Baa1, class B-1, from Baa2 to Caa2, and class B-2, from Ba2 to C; and Trust V, series 1998-2, class M, from Aa3 to Baa2, class B-1, from Baa2 to Ca, and class B-2, from Ba2 to C. Moody's also confirmed the ratings on eight classes. Moody's said the review was prompted by the continued deterioration in the performance of BankAmerica's manufactured housing pools, in which repossessions have remained high, leading to high cumulative losses.