Servicing

The Performance Group, a mortgage consulting firm based in Concord, N.H., and Equinox Corp., a provider of business process outsourcing for the mortgage industry based in Irvine, Calif., have formed an alliance to offer both outsourcing and consulting services.TPG assists clients through each phase of the outsourcing process, and helps them establish the metrics and controls necessary to monitor and manage the outsourcing relationship, the company said. "With the end of the refinance boom, many of our clients are seeking ways to gain better control over their variable costs, while improving service to customers," said Larry Bonifant, founder and president of TPG. "Outsourcing ... offers a viable alternative for originators and servicers to effectively resolve the issues of escalating salaries, employee training, workload leveling and, in many situations, quality improvement." The companies can be found online at http://www.tpgltd.com and http://www.equinoxco.com.

Fitch Ratings has downgraded 132 classes from 52 Conseco Finance/Green Tree Finance manufactured housing transactions.Fitch also affirmed the ratings on 96 classes from the deals. The total dollar amount of all rated classes is approximately $13 billion. Fitch said the downgrades reflect expectations of reduced credit enhancement combined with high losses and delinquencies. "While Fitch's rating actions reflect the deteriorating performance of the MH pools as well as the limitation of capital, changes in servicing fees from 125 basis points to 115 bps (as of July 2004) may be a source of future capital," the rating agency said. Fitch can be found online at http://www.fitchratings.com.

Wells Fargo & Co., the nation's second-largest mortgage servicer, reported net income of $1.71 billion ($1.00 per share) in the second quarter, up 12% from $1.53 billion ($0.90 per share) a year earlier.Mortgage originations in its community banking segment totaled $96 billion in the second quarter, an increase of $31 billion from the level recorded in the first quarter, the company said. "With higher interest rates during the quarter, application activity dropped to $100 billion," said Mark Oman, group executive vice president for home and consumer finance. "Reflecting the decline in applications, the mortgage application pipeline ended the quarter at $57 billion, down $15 billion from March 31, 2004, although purchase-mortgage volume remained at or above expectations." The company owned a portfolio of mortgage servicing rights on $749 billion of home loans as of June 30, up 18% from that of a year earlier. Wells Fargo valued its MSR portfolio at $8.5 billion, up from $6.9 billion at the end of 2003. The San Francisco-based company can be found online at http://www.wellsfargo.com.

Despite improving economic news for the Phoenix metropolitan area, foreclosure filings in Maricopa County are running nearly 50% higher than they were last year at this time, according to Foreclosures.com.In the second quarter, 3,246 properties in the Phoenix area went into foreclosure, the Fair Oaks, Calif.-based investment advisory firm said. "Even though rates are on a temporary plateau right now, they have increased enough to close the refinance window for troubled homeowners," said company president Alexis McGee. "Too many people have been using their homes like ATM machines, and some have borrowed out 100% of their home's value. They have no financial headroom in their property if something goes wrong with their income situation."

Foreclosures were on the rise in Northern California in the second quarter, and Southern California may soon follow suit, according to Foreclosures.com, a Fair Oaks, Calif.-based investment advisory firm specializing in distressed property.The steepest rise came in Contra Costa County, where there were 26% more filings than in the first quarter, followed by Alameda County, with a 22.6% increase, the company said. Meanwhile, foreclosures fell 3.3% in Los Angeles County and declined in other parts of Southern California, but the company said this is unlikely to continue. "We expect the Southern California trend to reverse in the near to intermediate future," said Alexis McGee, president of Foreclosures.com. "We have the combination of rising interest rates and very high housing-cost-to-income ratios, especially in Los Angeles, Orange County, and San Diego, and that mix is putting pressure on overextended homeowners there." The company can be found online at http://www.foreclosures.com.

Two classes of Cityscape Corp. Home Equity Loan Trust, series 1997-C group 1, have been downgraded by Fitch Ratings.The downgrades were as follows: class M-2F, from A to BBB; and class B-1F, from BB to CCC. In addition, Fitch affirmed the ratings on three other classes in the transaction. The downgrades were attributed to monthly realized losses that have exceeded the monthly excess spread, depleting the overcollateralization amount. Fitch can be found online at http://www.fitchratings.com.

American Home Mortgage Investment Corp., Melville, N.Y., has announced the sale of an additional 650,000 shares of series A cumulative redeemable preferred stock at $25 per share in a reopening of a public offering.After the closing of the sale, the outstanding shares of preferred stock will total 2.15 million, including 1.4 million shares from the original offering and the exercise of the underwriters' option to buy 100,000 additional shares to cover overallotments, the company said. Total proceeds are estimated at $53.75 million from the offering and the reopening. The underwriters have been also granted an option to buy up to 97,500 shares of preferred stock in connection with the reopening to cover any overallotments. Citigroup Global Markets Inc. acted as sole bookrunning and lead manager of the offering. American Home, a mortgage real estate investment trust, can be found online at http://www.americanhm.com.

Although total residential mortgage originations will likely be off by 30% this year, securitization levels for private-label mortgages are off by only about 15%, according to Standard & Poor's Ratings Services.S&P forecast on July 15 that $475 billion in residential mortgage-backed securities will be issued in 2004, down from approximately $550 billion in 2003. S&P can be found on the Web at http://www.standardandpoors.com.

Ginnie Mae's first strip security offering has come to market, a $2.2 billion Ginnie Mae II deal with a 5.5% coupon.The deal will be helpful to those who could previously hedge their Ginnie Mae servicing only with Fannie Mae and Freddie Mac principal-only strips, said Linda Lowell, a mortgage-backed securities researcher at RBS Greenwich Capital Markets. In addition, it will allow players in the interest-only strip market to diversify, she said. Goldman Sachs & Co. is the lead underwriter for the offering. Ginnie Mae can be found online at http://www.ginniemae.gov.

Innovations in mortgage servicing technology over the past 10 years have been very helpful in keeping families in their homes after a mortgage default, according to a study by Freddie Mac.The study by Freddie Mac deputy chief economist Amy Crews Cutts and Professor Richard Green of George Washington University found that repayment plans and loan modifications are very effective at keeping borrowers in their homes. "We found that repayment plans lower the probability of home loss by 80% among all borrowers and by 68% among low- to moderate-income borrowers," Ms. Cutts said. "In addition, for servicers, foreclosure alternatives cost less than acquiring the actual property, which may carry legal and home repair costs." Freddie Mac said innovations that have proven beneficial for borrowers and servicers alike include automated reporting, remitting, and tracking; automated voice response systems; and servicing tools based on credit scores. The technology has enabled servicing costs to fall "dramatically" in the past 10 years, from an average of $120 per loan in the early 1990s to $79 per loan in 2001, the government-sponsored enterprise said. Freddie Mac can be found online at http://www.freddiemac.com.