Servicing

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."

At the MBA's National Secondary Market Conference in Washington, D.C., the issue of fair valuation of mortgage servicing rights to create a more balanced financial picture of mortgage banking businesses was debated.FASB has proposed an amendment to accounting rules that would make it possible for mortgage servicing rights to be quantified at fair value so that these rights can be a part of a company's financial statement. Supporters said that under current rules the only way to value servicing rights is to sell the asset, which is counterproductive because it eliminates the possibility for retaining the customer for cross-selling purposes. Detractors believe the rule doesn't go far enough and will drive small servicers out of business because of ambiguities in the rule as it is stated. FASB is evaluating all viewpoints and has not initiated a formal amendment at this time.

Concerns that homeowners tapped themselves out during the recent refinance binge are overblown, according to Washington area mortgage banker Robert Broeksmit.Far from being over-leveraged and becoming a drag on the economy, consumers have "rearranged their balance sheets" and are now "in an even better position" to keep the country humming for years to come, the president of B.F. Saul Mortgage Co. said at the Mortgage Bankers Association's National Secondary Market Conference and Expo. Even though an uptick in interest rates has "choked off" refinancing for the moment, homeowners "still have room to leverage up" because the typical borrower's loan-to-value ratio is below 60%, Mr. Broeksmit said during a panel session. Rather than spending their equity on frivolous items, consumers who have refinanced have exhibited financial prudence, he also said, pointing to a study by the New York Federal Reserve that found only 16% of the $450 billion in withdrawn equity has been laid out for travel and automobiles. The rest was put into home improvements, paying off high-cost debts and investments in stock and real estate, according to the study.

Wells Fargo & Co., the nation's largest mortgage servicer, reported record net income of $1.8 billion in the first quarter, or $1.03 per share, up 18% and 17% from the first quarter of last year, respectively.But Wells Fargo Home Mortgage saw its revenue fall amid lower mortgage lending volume. Revenue from Wells Fargo's mortgage unit was $800 million in the first quarter, one-third lower than during the first quarter of 2003. Wells originated $65 billion of home loans in the first quarter. The company expects to see stronger loan origination activity in the second quarter due to a drop in interest rates in March. Wells took $119 billion in home loan applications in the first quarter, up from $46 billion in the fourth quarter of last year. And the company owned a portfolio of mortgage servicing rights on $725 billion of home loans, up 19% from a year earlier. The company valued its MSR portfolio at $6.1 billion, down from $6.9 billion at the end of 2003.

Washington Mutual earned $1.05 billion, or $1.18 per diluted share in the first quarter, up 10% on a per share basis from one year earlier.WaMu's first quarter results included a $644 million pretax income from the sale of its former subsidiary, Washington Mutual Finance Corp., offsetting pretax restructuring and technology related charges of $68 million, a pretax charge of $89 million related to the early retirement of high-cost FHLB borrowings, and a pretax reduction of $107 million as a result of a one-time effect from a change in accounting for gain from mortgage loans. Income from mortgage banking was $220 million, less than half of the $497 million in mortgage banking income reported in the first quarter of last year. Adjustable-rate mortgages accounted for 53% of WaMu's $47.9 billion in home loan volume during the quarter. WaMu reported $920 million of impairment, amortization and other reductions in the value of its mortgage servicing rights during the quarter, but this was offset by hedging gains. WaMu increased its common share dividend by one penny to $0.43 per share, payable May 14 to shareholders of record as of April 30.

Fitch Ratings, New York, said it is "concerned with the used of non-full appraisals to value properties in declining markets."As a result Fitch has identified property valuation type as an additional factor in assessing the credit risk of underlying collateral in mortgage-backed securities. The agency believes that with automated valuation models, the risk of property overvaluation is great in declining markets. This is because the data relied upon in the model could be several months old. This is also true for desktop appraisals. Drive-bys are very limited in scope, which Fitch said hinders their accuracy. In markets the rating agency classifies as "weak or soft," Fitch will decrease the values of mortgage properties. This could require a higher level of credit enhancement for that loan. The current list of markets Fitch considers to be "weak" are Salt Lake City-Ogden, Utah; San Jose, Calif. and Denver. Soft markets are the Memphis metropolitan area; the Charlotte, N.C., metropolitan area; Albuquerque; Atlanta; Grand Rapids-Muskegon-Holland, Mich.; Detroit; the Cincinnati metropolitan area; Dallas; Greenville-Spartanburg-Anderson, S.C.; Akron, Ohio; Indianapolis; Dayton-Springfield, Ohio; The Cleveland metropolitan area; Columbus, Ohio; Toledo, Ohio; Baton Rouge, La.; San Francisco; Columbia, S.C.; Tulsa, Okla. and Houston.

The value of mortgage servicing rights "materially declined" in the first quarter, according to an analysis by New York-based MIAC.Market prices for most classes of generic servicing assets tracked by MIAC "have continued to erode as a result of another low interest rate environment and prepayment speeds reminiscent of last September," MIAC said in its MSR monthly update. MSRs on conventional 30-year mortgages lost an average of 9% over the quarter, with the average value falling to an average of 2.95 times the servicing fee for the asset. However, in recent weeks MSR values have edged upward as a result of rising interest rates. MIAC is located at http://www.servicing.com on the Internet, and a sample of MIAC's Generic Servicing Asset valuations, updated daily, can also be found on our website by clicking on Servicing News icon to the left.