Servicing

Four classes of certificates in the Merit Securities Corp. series 12 manufactured housing deal have been downgraded by Moody's Investors Service.The downgrades were as follows: class 1-A-3, from Aaa to Baa2; class 1-M-1, from Aa2 to Ca; class 1-M-2, from A2 to C; and class 1-B, from Baa2 to C. Moody's said the rating actions were based on weaker-than-expected performance by the manufactured housing loans that make up the collateral pool. As of March, cumulative losses equaled 10.33%. "Because of the high cumulative losses and insufficient excess spread, overcollateralization in the transaction continues to erode," the rating agency said. Merit is a wholly owned subsidiary of Dynex Capital Inc., Glen Allen, Va. Moody's can be found online at http://www.moodys.com.

AmNet Mortgage Inc. (formerly American Residential Investment Trust), San Diego, has reported a net loss of $5.7 million ($0.72 per share) for the first quarter, compared with net income of $12.2 million ($1.53 per share) a year earlier.The loss included a $2.6 million after-tax charge relating to a pending asset sale. "As a result of our decision to sell the majority of the remaining mortgage asset portfolio and focus entirely on our mortgage banking business, we reclassified certain portfolio assets from 'held for investment' to 'held for sale'," said AmNet chief executive officer John M. Robbins. "When we made that reclassification, we were obligated to mark those assets to market, and we took a pretax valuation adjustment of $4.4 million.... The sale will simplify our balance sheet, virtually double our cash reserves, eliminate nearly all future prepayment or credit risk represented by the portfolio, and unlock the cash equity previously invested in these assets." The company can be found online at http://www.amnetmortgage.com.

American Business Financial Services, Philadelphia, has reported a loss of $33.2 million ($10.53 per share) for the fiscal third quarter ended March 31, compared with net income of $221,000 ($0.06 per share) a year earlier.Albert W. Mandia, executive vice president and chief financial officer of ABFS, attributed the quarterly loss to adjustments stemming from the adoption of a new business model focused more on whole loan sales and less on securitization. "Since January 2004, we have added approximately 129 professionals to our broker origination channel, bringing the total broker loan origination network to a team of 150 professionals nationwide," Mr. Mandia said. "These efforts are generating traction, and we are on pace to originate close to $500 million of new loans during our fourth quarter ending June 30, 2004, which would be a company record."

Oak Street Financial Services Inc., Carmel, Ind., has announced a filing with the Securities and Exchange Commission for an initial public offering of common stock.Oak Street Financial, the parent company of Oak Street Mortgage LLC, said it intends to qualify as a real estate investment trust for federal income tax purposes. The managing underwriter for the planned IPO is Friedman, Billings, Ramsey & Co. Oak Street Mortgage originates nonconforming, jumbo, and, conforming mortgage loans secured primarily by first liens on single-family residences.

Although the volume of new home equity securitizations increased in the first quarter, the bulk of the mortgage-related securities market saw a decline in issuance, The Bond Market Association has reported.New-issue activity in the home equity sector increased to $88.9 billion, up 74.3% from that of a year earlier and up 56.4% from that of the fourth quarter of 2003. New issuance of other types of mortgage securities dropped to $404.4 billion between January and March of this year from $776.1 billion in the first quarter of 2003 and $552.2 billion in the fourth quarter, the association said. The trade group can be found on the Web at http://www.bondmarkets.com.

Based on a study of over 40 federal, state, and municipal anti-predatory-lending laws, Standard & Poor's has decided to require additional credit enhancement for loans governed by such laws in 12 states and the District of Columbia and that are included in mortgage-backed securities it rates.For some of the "covered loans" and "high cost home loans," S&P said the risk for potential assignee liability may exceed the original principal balance of the loan. S&P said the state laws contain subjective or unclear standards for determining whether a loan is "predatory," including poorly defined or undefined net-tangible-benefit and repayment ability tests. The credit enhancement is based on the assessment of potential losses to the securitization and the number of lawsuits likely to be filed against the issuer, the rating agency said. "Our new criteria and study will further clarify the credit risk posed by some of these loans and help investors become more familiar with the issue of assignee liability," said Joanne Rose, executive managing director of S&P's structured finance group. The affected states are Arkansas, Ohio, Colorado, Florida, Georgia, Illinois, Maine, Massachusetts, New Jersey, New Mexico, New York, and Oklahoma. S&P can be found online at http://www.standardandpoors.com.

Freddie Mac became too complacent and resistant to change under its previous leadership, according to its new top executive, who says he wants to make a clean break and "elevate" the enterprise's commitment to its housing mission and expanding homeownership.Freddie's chairman and chief executive Richard Syron said the mortgage giant has viewed its affordable housing goals as a regulatory requirement, instead of a core part of its mission as a government-sponsored enterprise. "We must rectify this by focusing on housing and on our special obligation as a GSE, and by taking a long-term view that achieving these obligations is integral to our financial success," he said in a speech at the LBJ School of Public Affairs in Austin, Texas. A former Federal Reserve Bank president, Mr. Syron took over the top job at Freddie Mac in January, replacing former chairman and chief executive Leland Brendsel, who was ousted last summer as a result of a $5 billion accounting scandal. Freddie is still restating its earnings, which Mr. Syron called an "embarrassment." But he said the company is making real progress to correct the situation and "rebuild our credibility."

There is about a one-in-seven chance of a general decline in home prices over the next two years, according to the PMI Risk Index, which has improved in recent months.The average value of the index for the 50 largest metropolitan statistical areas stood at 140 in May, down from 174 in February, said PMI Mortgage Insurance Co., the Walnut Creek, Calif.-based mortgage insurer that created the index. The index value means that these cities have on average a 14.0% probability of experiencing a home price decline in the next two years. San Jose, Calif., topped the index with a 442 (and therefore a 44.2% chance of a decline), followed by Denver, with 307, and the Charlotte-Gastonia-Rock Hill N.C.-S.C. MSA, with 303. PMI can be found online at http://www.pmigroup.com.

The Prestwick Mortgage Group, Alexandria, Va., is brokering the sale of servicing rights on a $37 million portfolio of Ginnie Mae loans.The portfolio has a 6.749% weighted average note rate and a 44-basis-point average servicing fee. The average loan balance is $105,437 and the weighted average seasoning is 29 months. The delinquency rate is 12.39%. States with the highest concentration of loans are Georgia, Michigan, Texas, and Tennessee. Bids are due May 25.

Freddie Mac and the National Association of Professional Mortgage Women have announced an educational alliance to strengthen the association members' origination and secondary-market knowledge and further their professional development.The offerings will include on-site and Web-based courses as well as customized classes provided by Freddie Mac. The NAPMW will award scholarships to members to attend alliance training courses. Training topics (for both novices and experienced professionals) include loan underwriting, loan pricing and delivery, and servicing. Freddie Mac offers more than 15 courses nationwide and over 30 online. The NAPMW can be found on the Web at http://www.napmw.org.