Servicing

Freddie Mac is planning to hold an investor conference call on Nov. 1 to lay out a timetable for releasing its 2004 financial results.As a result of its restatement process, Freddie has not released any quarterly financial reports this year -- although the publicly trade company has pledged to deliver both quarterly and full-year 2004 results by March 31. Meanwhile, Freddie Mac released its 2003 annual report on Sept. 24, and it warns investors that 2004 results, as measured by generally accepted accounting principles, will be volatile due to changes in the value of nonhedged derivatives. "We expect this type of volatility to adversely affect our GAAP results in the first half of 2004," the annual report says. Freddie Mac can be found online at http://www.freddiemac.com.

Class B-1 of Metropolitan Mortgage series 2000-B has been downgraded from B to CCC by Fitch Ratings.In addition, Fitch affirmed the ratings on four other classes in the deal. The rating agency attributed the downgrade to poor collateral performance and the deterioration of asset quality "beyond original expectations."

Class B-2 of C-BASS's series 2000-CB4 issue of mortgage-backed securities has been downgraded from BBB to BBB-minus by Fitch Ratings.In addition, Fitch affirmed the ratings on four other classes in the deal as well as four classes in a separate deal. The downgrade "reflects some level of concern with the high level of losses incurred to date and the high delinquencies in relation to diminished credit support levels," the rating agency said. However, the losses are "somewhat mitigated" by the fact that about 10% of the pool consists of loans guaranteed by the Federal Housing Administration or the Department of Veterans Affairs, and therefore class B-2 can maintain an investment-grade rating, Fitch said. The rating agency can be found on the Web at http://www.fitchratings.com.

Persistent high unemployment in the New York metropolitan area may combine with rising interest rates to spur a new wave of foreclosures in the near future, according to Foreclosures.com, a distressed investment property advisory firm based in Fair Oaks, Calif.Company president Alexis McGee noted that citywide unemployment rate actually rose from 7.4% to 7.6% in July, and increased in Kings County (Brooklyn) from 8.0% to 8.4%. "We saw 1,325 new foreclosure cases filed in Kings County and 1,646 in Queens County in the first half of 2004," Ms. McGee said. "These are the counties that have the highest percentage of owner-occupied dwellings. Now we're seeing a lull in foreclosure activity, but view that as temporary." The high unemployment plus rising rates will create a "double whammy" for homeowners in financial distress, she said.

Three classes of Bear Stearns asset-backed securities series 1999-2, groups 1 and 2, have been downgraded by Fitch Ratings.The downgrades were as follows: group 1, class MF-2, from A to BBB, and class BF, from BBB-minus to B and removed from Rating Watch Negative; and group 2, class BV, from BBB-minus to BB. In addition, the ratings on seven classes in the securitization have been affirmed. Fitch attributed the downgrades to "the worse-than-expected performance of the underlying collateral in these deals and its potential negative impact on the most subordinate classes of debt." The underlying trust is backed by two collateral loan groups: group 1 (fixed-rate) and group 2 (adjustable-rate) originated by Conseco Finance Corp. (69.17%) and Amresco Residential Mortgage Corp. (20.92%). The group 1 and group 2 mortgage pools are not cross-collateralized, but there is limited cross-collateralization in the form of excess spread, Fitch said.

Servicers of loans in commercial mortgage-backed securities deals are using practices that have "dramatically increased" their responsiveness, according to Fitch Ratings."Dedicated surveillance teams and enhanced technology that has improved day-to-day work flow have dramatically increased servicer responsiveness to issues and improved operational efficiency," said Stephanie Petosa, a Fitch senior director. "Additionally, the advent of 24-hour borrower websites and borrower surveys has contributed to borrower satisfaction. Increasingly interactive investor websites that allow for customized portfolios and reports has also emerged as a best practice for the sector." Fitch's review of CMBS servicing, titled "Trends and Best Practices in CMBS Servicing," can be found on the rating agency's website at http://www.fitchratings.com.

More than one in three foreclosed homes in the Chicago area are being lost at auction, a percentage that is rising toward the level reached after the home price collapse of the early 1990s, according to Foreclosures.com, Fair Oaks, Calif.The Chicago metropolitan area is one of six served by Foreclosures.com, an investment advisory firm that specializes in foreclosure properties. In five of those areas, "8% to 20% of homes that go into default actually make it to foreclosure auction," said company president Alexis McGee. "In Chicago, we're seeing at least 35% lost at auction, and our researchers tell us it could go to 50%." The last time 50% of homeowners in default lost their homes to foreclosure auctions was in 1996, the company said. Despite the rising percentage of foreclosure auctions, Foreclosures.com said new foreclosure filings were down slightly in August for the Chicago metropolitan area. The company can be found online at http;//www.foreclosures.com.

Barbara T. Alexander, Geoffrey T. Boisi, William M. Lewis Jr., and Eugene M. McQuade have been nominated for election as directors of Freddie Mac.The four new candidates will be included on a slate of 13 directors to be elected at the corporation's annual meeting Nov. 4. Ms. Alexander, 56, is an independent consultant, and was previously a senior adviser to UBS Warburg LLC and its predecessor firms, Freddie Mac said. Mr. Boisi, 57, is a retired vice chairman and co-chief executive officer of J.P. Morgan Chase and Co., and was the founding chairman and senior partner of the Beacon Group investment and advisory firm from 1993 to 2000. Mr. Lewis, 48, is a managing director and co-chairman of investment banking at Lazard Freres & Co., and held various executive positions at Morgan Stanley over a quarter of a century, according to Freddie Mac. Mr. McQuade, 55, is president and chief operating officer of Freddie Mac, and was previously president of Bank of America Corp. and president and chief operating officer of FleetBoston Financial Corp. The membership of Freddie Mac's board totals 18, of which five are appointed by the president of the United States.

Fannie Mae purchased $52 billion worth of loans in August, its second-worst showing of the year.According to a new analyst report issued by Bernstein Research, the weak showing was caused by a strong adjustable-rate mortgage market and a robust appetite for mortgages by depositories. In connection with the weak numbers, Bernstein slightly reduced its 2005 earnings estimate for Fannie. The research firm says it believes Fannie Mae is now losing market share. Bernstein analysts Jonathan Gray and Adam Weinrich also commented on media reports that the mortgage giant may have smoothed out earnings, saying, "as far as we are aware, the 'smoothing' has been one-sided, deferring, rather than accelerating, earnings recognition." They added: "The only question would appear to be whether accounting rules were violated." Fannie Mae can be found online at http://www.fanniemae.com.

Freddie Mac has announced that its previously reported mortgage relief for victims of Hurricane Charley and Hurricane Frances has been extended to victims of Hurricane Ivan.The relief is available to families whose homes were damaged or destroyed by Ivan in locations declared Major Disaster Areas. Under its disaster relief policies, Freddie Mac encourages its servicers to reduce or suspend mortgage payments for up to 12 months, waive the assessment of penalties or late fees, not report forbearance or delinquencies caused by the hurricane to credit bureaus, and expedite the release of insurance proceeds.