Servicing

Washington Mutual Inc., Seattle, has reported earnings of $489 million ($0.55 per share) for the second quarter, down from $995 million ($1.07 per share) a year earlier, a decline that it attributed chiefly to a net loss of $63 million in its mortgage banking segment.The mortgage banking segment had recorded net income of $489 million a year earlier, WaMu said. "The principal drivers of the year-to-year difference were the results of the company's mortgage servicing rights hedging program, a high cost structure in the mortgage banking segment, and declining loan volumes," the company said. Originations of home loans totaled $59.49 billion for the quarter, down from $106.68 billion a year earlier. "While second-quarter results were affected by the volatility of our mortgage servicing rights, the root of our problem is the unacceptably high cost structure in our mortgage banking business," said Kerry Killinger, WaMu's chairman, president, and chief executive officer. "We know what we need to do, our efforts are well under way, and we will not be satisfied until we have fixed it." WaMu can be found online at http://www.wamu.com.

Countrywide Financial Corp., Calabasas, Calif., has reported consolidated net earnings of $699.6 million ($2.24 per share) for the second quarter, up 83% from $382.9 million ($1.37 per share) in the second quarter of last year.The earnings per share represented the company's second-best quarter on record, Countrywide said. Pretax earnings by the company's mortgage banking operations were 118% higher than those recorded a year earlier, and contributed 77% of the company's consolidated pretax earnings. "Based on recent financial data released by our major competitors, Countrywide appears to have maintained the No. 1 market position in originations during the second quarter," said Angelo R. Mozilo, Countrywide's chairman and chief executive officer. ".... This surge in production helped us maintain an excellent trend in our servicing portfolio, with growth of $43 billion during the quarter, which equates to an annualized growth rate of 25%." Countrywide's mortgage servicing rights appreciated in value by $2.2 billion, which enabled the company to recover a previously recorded MSR impairment of $1.4 billion. The difference between the two numbers represents an unrecognized increase in MSR value of $810 million, Mr. Mozilo said. The company can be found online at http://www.countrywide.com.

Delta Financial Corp., Woodbury, N.Y., has priced a public offering of 4.375 million shares of common stock at $6.50 per share.Of the total, approximately 3.14 million will be sold by the company and the remainder will be sold be selling stockholders, Delta said. The underwriters have been granted an option to buy an additional 656,250 shares of common stock to cover any overallotments. The managers of the offering are JMP Securities LLC, SunTrust Robinson Humphrey, and Roth Capital Partners LLC. Delta can be found online at http://www.deltafinancial.com.

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.