Servicing

Freddie Mac has announced the addition of a Tier One Gold designation to its Tier One Premium Awards to recognize high-performing small and midsize servicers with small default portfolios.Noting that nearly 40% of Freddie's servicers are small to medium-sized institutions, Janet Eakes, Freddie Mac's vice president of sourcing operations, said the new program "means that these servicers, like larger institutions, can now achieve best-in-class recognition for servicing excellence and top scores in investor reporting and default management on our Servicer Performance Profiles." Freddie Mac also announced that its existing Tier One Performance awards for larger servicers are being renamed Tier One Platinum awards. Freddie Mac can be found online at http://www.freddiemac.com.

As regulatory scrutiny has intensified, servicers of U.S. residential mortgage-backed securities have implemented mostly positive operational changes, according to a recent survey by Fitch Ratings.The predominant changes took place in customer service, borrower communications, dispute resolution, fees charged, payoff practices, collections, and default management, the rating agency reported. "Developments such as online call scripting, enhanced monthly billing statements and payoff quotes, and the advent of the one-call resolution indicate that while servicers have different approaches to customer service, all of them take the quality of borrower interaction very seriously," said Thomas Crowe, a Fitch director. Most of the changes are positive, but the use of extended or multiple repayment plans and modifications, and incentives to collectors to keep loans out of foreclosure, may lead to higher losses on some mortgage pools in the long run, the rating agency said.

Temple Inland Corp., Austin, Texas, will take a $13 million after-tax hit on its mortgage business in the third quarter as it prepares reserves related to key asset sales and layoffs.Temple, the parent of Guaranty Residential Lending, is in the process of selling its 100-branch nonbank mortgage network, as well as $8 billion in servicing rights. Temple, a paper products company, said some 1,500 employees will be "affected" by the sale of the branches and the servicing. However, it would not comment on any layoffs. A Temple spokesman said the company hopes employees working in the branches being sold will have an opportunity to retain their jobs. The company expects to complete the servicing and branch sale by the end of the fourth quarter. As recently reported by National Mortgage News, at least 30 firms have expressed interest in the network or regional pieces of it. First Horizon Home Loans, Irving, Texas, is believed to be the winning bidder on the West Coast operation. Aegis Mortgage of Houston has expressed interest in the network.

Select Portfolio Servicing Inc. (formerly Fairbanks Capital Corp.) has renewed several credit facilities to fund its subprime servicing activities, according to the Salt Lake City company.JPMorgan Chase led a $250 million syndicated facility that finances servicing advances, mortgage servicing rights, and working capital. Credit Suisse First Boston extended a $200 million credit facility for servicing advances and purchases of MSRs. RBS Greenwich Capital executed a $120 million structured financing for servicing advances on loans originated by ContiFinancial, a defunct subprime lender. "These credit facilities solidity the company's financial position, and allow us to pursue our business plan of acquiring new servicing rights and growing the portfolio," said SPS chief executive Matt Hollingsworth.

Freddie Mac has restructured certain mortgage securities operations, chiefly by ending the market-making activities of its Securities Sales & Trading Group unit and transferring the unit's mortgage sourcing and investment operations to other business units, according to the government-sponsored enterprise.Freddie said the restructuring, aimed at focusing on its core mission, also includes the discontinuation of its Money Manager program, through which it designated eight investment advisers to manage part of its capital under prescribed guidelines. The GSE said it will continue "active support" for the liquidity of its mortgage securities through its securitization and investment business activities. A Freddie Mac spokesman said he couldn't comment on whether the 100 people employed by the unit might be redeployed or laid off. Redeployment of the unit's functions appears to be both viable and a smart move in the context of Freddie's mission and its business strategies, according to Linda Lowell, a mortgage-backed securities researcher who is familiar with the unit's role in the market. Freddie Mac can be found online at http://www.freddiemac.com.

As the yield curve flattened, mortgage rates dropped by about 32 basis points in August, dragging down the value of mortgage servicing rights, according to Mortgage Industry Advisory Corp., New York.According to the MIAC index, the value of servicing rights on 30-year, agency loans declined by 10.7% on average between Aug. 1 and Sept. 1. However, MIAC noted that several portfolios of mortgage servicing rights were offered for sale in August. "Although volumes are still down substantially from their peak, there is no question that the supply of bulk portfolios being offered for sale has increased dramatically this year," MIAC said in its monthly MSR update. MIAC is located at http://www.servicing.com on the Internet.

Five classes of IndyMac Home Equity Mortgage Loan Asset Backed Trust series SPMD 2000-C have been placed under review for possible downgrade by Moody's Investors Service.The affected classes are: class MF-1, class MF-2, class BF, class MV-2, and class BV. The securitization is backed by subprime mortgage and manufactured housing loans that were originated by IndyMac Bank FSB. The negative rating action was attributed to erosion of credit support and a pipeline of seriously delinquent loans. "The transaction has lender-paid mortgage insurance which will reduce the severity of loss associated with many of the riskier loans, including the manufactured housing loans," Moody's said. "However, the mortgage insurance may not fully insulate investors against the losses associated with defaulted loans."

Two classes of CIT Group Securitization Corp. II manufactured housing securitizations have been downgraded by Moody's Investors Service.The downgrades were as follows: series 1995-1, class A-5, from Aa2 to A2; and series 1995-2, class B, from Baa2 to Ba1. Moody's attributed the downgrades to delinquency and repossession rates that have exceeded original expectations. As of the Sept. 15 remittance report, cumulative losses and cumulative repossessions totaled 9.09% and 17.05%, respectively, for the 1995-1 transaction and 9.30% and 18.50%, respectively, for the 1995-2 deal. CIT, a diversified finance company, discontinued the origination of manufactured home financing in April 2002, Moody's said.

Four classes of subordinate certificates from two Access Financial Manufactured Housing Contract Trust deals have been downgraded by Moody's Investors Service.The downgrades were as follows: series 1995-1, class B-1, from Baa3 to Ba2, and class B-2, from Ba2 to C; and series 1996-1, class B-1, from Baa3 to Caa2, and class B-2, from Ba2 to C. In addition, Moody's confirmed the ratings on four other Access MH classes. The downgrades were prompted by "continued deterioration in the performance of Access Financial's manufactured housing pools, and the resulting erosion in credit support," Moody's said. The 1996-1 deal is undercollateralized, while overcollateralization in the 1995-1 transaction is "almost completely eroded," the rating agency said. Access Financial Lending Corp., Minneapolis, is a wholly owned subsidiary of Cargill Financial Services Corp.

Twelve classes from the Lehman ABS manufactured housing contract senior/subordinate asset-backed certificates, series 2001-B, have been downgraded by Moody's Investors Service.The downgrades were as follows: class A-IO2, from Aaa to A1; class A-IOC, from Aaa to A1; class A-1, from Aaa to A1; class A-2, from Aaa to A1; class A-3, from Aaa to A1; class A-4, from Aaa to A1; class A-5, from Aaa to A1; class A-6, from Aaa to A1; class M-1, from Aa2 to Baa3; class M-2, from A2 to B2; class B-1, from Baa2 to Caa2; and class B-2, from Ba2 to Caa3. (Class A-7 is not being downgraded because it benefits from an insurance policy issued by Ambac Assurance Corp., Moody's said.) The downgrades were prompted by delinquencies and repossessions that have exceeded original expectations, the rating agency said.