Servicing

The Washtenaw Group Inc., Ann Arbor, Mich., has reported a loss of $3.1 million ($0.69 per share) for the first quarter, compared with a profit of $2.7 million ($0.60 per share) a year earlier.This is the first quarter Washtenaw is reporting as a stand-alone company. Until Dec. 31, 2003, its subsidiary Washtenaw Mortgage Co. was a subsidiary of Pelican Financial Inc. Washtenaw was hurt both by reduced origination volume for the quarter, as well as a valuation adjustment to its servicing portfolio of $2.9 million, equivalent to $0.65 per share. One year earlier the adjustment was $1.8 million or $0.40 per share. Mortgage origination volume was $395.6 million, less than half of the $896.9 million of production from the first quarter of 2002. Charles C. Huffman, chairman and chief executive of Washtenaw, said, "We're hopeful that the spring and summer home buying season will lift new mortgage volume and that homeowners will return to the refinance market because rates are still very attractive even though they are up from recent lows."

Fannie Mae and Freddie Mac's claims that their purchases and holdings of mortgage-backed securities increases liquidity in the secondary market and lowers mortgage rates is not very convincing to Federal Reserve Board chairman Alan Greenspan.In response to written questions by Senate Banking Committee chairman Richard Shelby, R-Ala., the Fed chairman said the two government-sponsored enterprises do "not influence mortgage rates either up or down" by purchasing MBS and growing their mortgage portfolios. "I am not aware of any evidence that convincingly shows we would see an effect on liquidity if the Congress channeled GSE activity toward mortgage securitization and away from holding MBS in portfolio." By purchasing MBS, Fannie and Freddie simply take advantage of their low borrowing costs to "maximize profits for their shareholders," Mr. Greenspan added. At press time, a Fannie spokesman said the company is not ready to respond to Mr. Greenpan's comments.

More than 125 members of Association of Community Organizations for Reform Now will demonstrate outside Wells Fargo's annual meeting on Tuesday, April 27, at the bank's San Francisco headquarters to protest what ACORN calls "abusive mortgage loans."A small group of ACORN members will also attend the meeting to speak in support of a shareholder resolution presented by the Coalition for Responsible Growth. The shareholder resolution calls on Wells to review the relationship between executive compensation and performance in preventing predatory lending practices. Representatives for ACORN say that lawsuits related to predatory lending have cost other large lenders hundreds of millions of dollars. "We're at a loss to understand exactly what it is they want," said Janice Smith, corporate communciations spokesperson for Wells Fargo. "Our mortgage business meets or exceeds what ACORN has demanded from other lenders."

Ginnie Mae's decision last year to reduce servicing fees on Ginnie II mortgage-backed securities has really paid off.Lenders are securitizing more 30-year fixed rate mortgages in GNMAs IIs and the average servicing fee has declined to 48 basis points from 78 bp, according to Ginnie Mae vice president for MBS Theodore Foster. In March, 47.2% of all 30-year fixed rate mortgages went into Ginnie II securities, as opposed to Ginnie I securities. Before Ginnie Mae lowered its minimum servicing fee requirement from 44 basis points to 19 bp last July, only 25% to 33% of fixed-rate product went into Ginnie IIs. Execution has improved and spreads between GNMA Is and GNMA IIs have narrowed, Mr. Foster stated at the Mortgage Bankers Association's secondary market conference. Meanwhile, Federal Housing Administration has given lenders the green light to originate hybrids adjustable rate mortgages, and Ginnie Mae is ready to handle the new product, Mr. Foster said. So far, Ginnie has guaranteed $3.2 billion in three-year hybrid adjustable-rate mortgages backed by the Department of Veterans Affairs. VA lenders started to originate hybrids in October. "We really look forward to next months' pooling, which will include the FHA product," Ginnie Mae vice president Michael Frenz said.

Freddie Mac chairman and chief executive Richard Syron is planning for both the passage of government-sponsored enterprise oversight reform legislation and the release of revised earnings, but indicated in talks at The Bond Market Association annual meeting in New York that it may take some time for both to come to fruition.When asked at a press briefing about a planned release of Freddie Mac's revised earnings slated for June 30, Mr. Syron stopped just short of promising the GSE would adhere to that schedule, noting that he would rather ensure that they would be completely accurate when they were released than keep to a timetable. "Things are coming along pretty well," he said. However, he added that the company was not making any "locked-in-concrete guarantees." He also indicated in a question and answer session following his speech that he expects that GSE oversight reform legislation will likely be an issue that carries over into next year, at which time Mr. Syron hopes the company will be in better shape to address it. While he declined to comment more broadly on negotiations involving regulatory reform for strategic reasons, he said - when asked about the receivership issue that has been a sticking point - that that would be an issue of concern to Freddie Mac mostly to the extent that it "would affect our rating." Standard & Poor's has indicated that original versions of proposed legislation that would have allowed receivership to occur without congressional review were a concern in terms of the GSEs' ratings. But the subsequent version changed via an amendment that included congressional review would not affect GSE ratings, S&P said.

Ken Hackel has joined RBS Greenwich Capital Markets as managing director and co-head of fixed-income strategy, and Alec Crawford has joined RBS Greenwich Capital as managing director in the mortgage pass-through trading group.Mr. Hackel, who previously was chief U.S. fixed-income strategist at Merrill Lynch, will be responsible for coordination and oversight of RBS Greenwich Capital's mortgage-backed securities strategy as well as asset allocation. Mr. Crawford previously was a managing director and head of the mortgage and cross-rates strategy group at Deutsche Bank Securities.

Fannie Mae has priced $5 billion of two-year Benchmark Notes with a 2.5% coupon at 99.929.The joint lead managers for the issue (CUSIP 31359MVA8) were Credit Suisse First Boston Corp., Lehman Brothers Inc. and Morgan Stanley & Co. There were 10 co-managers and a designated selling group comprised of 12 additional dealers. The issue is due June 15, 2006 and yields 2.535% at a spread of 34.5 basis points over the 1.5% U.S. Treasury due March 31, 2006. Settlement is scheduled for April 23, and coupon payments will be made each June 15 and Dec. 15, beginning in June of 2004. Fannie Mae can be found on the Web at http://www.fanniemae.com.

SL Green Realty, a New York-based office real estate investment trust, has formed Gramercy Capital, a specialty finance company that will focus on originating and acquiring loans and other fixed-income investments secured by commercial real estate.Gramercy is filing a registration statement with the Securities and Exchange Commission for an initial public offering of common shares, SL Green reported. The offering is expected to raise up to $200 million, which will give Gramercy access to capital, "a public company platform", and the infrastructure to grow SL Green's structured finance business within New York City, as well as into other markets and property types. SL Green is not contributing its existing fixed-income investment portfolio in connection with the IPO, the REIT said, but it will invest up to $50 million in the IPO and own about 25% of Gramercy's post-IPO stock base. An SL Green subsidiary will manage Gramercy, which is also opting for REIT status, for a fee.

Countrywide Financial Corp. reported consolidated net earnings of $691 million in the first quarter, up 112% over net earnings of $326 million in the first quarter of last year.Earnings per diluted share increased 82% to $2.22, Countrywide said. Adjusted to reflect April's three-for-two stock split, EPS would have been $3.33. Total loan production was $76 billion for the quarter, essentially unchanged from the fourth quarter of last year but lower than the $102 billion originated in the first quarter of last year. That $76 billion volume exceeded the originations of Wells Fargo Home Mortgage and Washington Mutual, making Countrywide the largest home loan producer in the quarter. Countrywide's mortgage servicing portfolio rose by $38 billion during the quarter, ending at $683 billion.

General Electric -- which four years ago dumped its 'A' paper mortgage unit and is in the process of getting out of mortgage insurance -- has agreed to buy WMC Mortgage, Woodland Hills, Calif., the nation's 12th largest subprime funder.GE's consumer finance division is acquiring the online wholesale lender for an undisclosed amount from Apollo Management LP, New York, a group headed by famed bargain hunger Leo Black. Mr. Black bought WMC back in 1997 when it was called Weyerhaeuser Mortgage and was funding mostly conventional loans. According to figures compiled by National Mortgage News WMC services $2.4 billion in loans, ranking 29th among all subprime servicers. As MortgageWire went to press on Wednesday, officials from both GE and WMC could not be reached for comment. One former GE Mortgage Insurance official said of his former employer: "I don't know what their motivation is."