Servicing

The Federal Housing Administration's capital ratio rose to 5.21% in fiscal year 2003 from 4.52% in fiscal 2002, but capital reserves rose by only $100 million to $22.7 billion, according to the annual actuarial report prepared by Deloitte & Touche."Two large offsetting impacts" contributed to the increase in the capital ratio, the auditors said. The quality of FHA single-family loans endorsed in fiscal 2003 increased the economic value of the FHA mortgage insurance fund by $2.8 billion. "Countering this effect is the extraordinarily high prepayment activity that has adversely impacted the FHA's economic value during FY 2003, as well as the claim activity that has exceeded the levels predicted in our 2002 study," the Deloitte & Touche report says. FHA loan endorsements totaled $147.4 billion in fiscal 2003, but runoff totaled $193.2 billion. The total FHA portfolio fell to $382.2 billion in fiscal 2003 from $435.4 billion the previous year. Meanwhile, claims from default loans jumped from $3.9 billion in fiscal 2002 to $7.3 billion in fiscal 2003.

National City Corp., Cleveland, has agreed to buy Provident Financial, Cincinnati, for $2.1 billion in stock, a deal that will create the nation's eighth-largest subprime servicer.National City, which is also the ninth-largest prime lender, owns the fifth-largest subprime lender, First Franklin Financial of San Jose, and the 12th-largest subprime servicer, National City Home Mortgage of Pittsburgh. Provident's PCFS Financial Services unit has $10.7 billion in subprime receivables, ranking 14th nationwide, according to National Mortgage News. But among subprime funders, PCFS is ranked much lower, at 38th. (The rankings are based on third-quarter numbers.) Both banks have warehouse lending divisions that provide credit to nondepository mortgage bankers.

American Business Financial Services, Philadelphia, has reported a loss of $24.8 million ($8.35 per share) for the fiscal second quarter ended Dec. 31, 2003, down from net income of $2.1 million ($0.69 per share) a year earlier.Albert W. Mandia, executive vice president and chief financial officer of ABFS, attributed the quarterly loss to several factors, "including financial and human resource issues," which he said reduced the company's ability to originate loans and generate revenue. "The company also experienced $12.0 million of pretax noncash valuation adjustments on our securitization assets charged to the income statement," he said. "Additionally, operating expense levels that would support greater loan origination volume also contributed to the quarterly loss." The noncash adjustment mentioned by Mr. Mandia also included $2.7 million charged to other comprehensive income, a component of stockholders' equity. The securitization assets are interest-only strips and servicing rights, and the writedown in value is because of higher-than-anticipated prepayments on securitized loans. Mr. Mandia added that ABFS would likely incur operating losses through its fiscal fourth quarter.

Cohane Rafferty Securities, White Plains, N.Y., is selling a $528 million portfolio of Ginnie Mae servicing rights.Moreover, several other bulk deals are either in the market or about to come to market, servicing brokers told MortgageWire.The bid deadline on the Cohane portfolio is Wednesday, Feb. 18. In one other pending sale, Mortgage Industry Advisory Co., New York, is offering a $100 million bulk package of Ginnie servicing rights. The bid deadline for that package is Friday, Feb. 13. For more details on other deals see the Monday Feb. 16 issue of National Mortgage News.

American Home Mortgage Investment Corp., a mortgage real estate investment trust based in Melville, N.Y., has announced a public offering of 10 million shares of common stock.The company also announced that its board has declared two special dividends in lieu of one regular dividend for the first quarter due to the timing of the offering. The first dividend, $0.36 per share, will be payable March 10 to stockholders of record on Feb. 25, and the second, $0.19 per share, will be payable April 14 to stockholders of record on March 31, the company said. The lead managers of the stock offering are Friedman, Billings, Ramsey & Co. and Lehman Brothers Inc. The underwriters have been granted an option to buy up to 1.5 million additional shares to cover any overallotments.

Affordable Residential Communities Inc., Denver, has priced an initial public offering of common stock at $19 per share and of 8.25% series A cumulative redeemable preferred stock at $25 per share.Of the common stock, 22.25 million shares are being offered by the company and approximately 2.26 million shares are being offered by stockholders, ARC said. The common stock was scheduled to begin trading on the New York Stock Exchange Feb. 12 under the symbol "ARC," and the preferred stock was expected to be listed within 30 days under the symbol "ARC Pr A." The joint book-running managers of both stock offerings are Citigroup Global Markets and Merrill, Lynch, Pierce, Fenner & Smith.

Two classes of CIT Home Equity Loan Trust series 1998-1 have been downgraded by Moody's Investors Service.Class B-2 was downgraded from Ba2 to Ba3, and class B-3 was downgraded from B2 to C. Moody's attributed the downgrades to weaker-than-expected performance of the underlying collateral. "The class B-3 certificates have taken writedowns, and future losses based on pipeline delinquencies are expected to further erode this class," the rating agency said. Moody's said the structure of the deal "differs significantly" from that of other senior/subordinate pass-through home equity deals in that "excess spread is not captured to cover losses; the subordinate certificates provide the only form of credit support for the senior certificates." Moody's can be found online at http://www.moodys.com.

In an effort to prop up the sagging manufactured housing sector, Fannie Mae has reinstituted a 5% down, 30-year loan program for factory-built houses with nine lenders on a negotiated basis.The big secondary-market institution also pledged to work with the nine companies to transform the manufactured housing market by developing processes and procedures that lower the risk associated with mortgages on houses that are assembled in a factory, trucked to a building site, and fixed to the land. "This is both more and better," said Rep. Barney Frank, D-Mass., in praising the initiative. Fannie Mae invests in manufactured housing loans, but stepped back last year because of problems in the business. Shipments have fallen to their lowest level in decades, and many manufacturers and retailers have exited the market or declared bankruptcy, largely because of high delinquencies and loan losses. The number of repossessed and foreclosed manufactured homes also is said to be at record high levels. The nine lenders -- AgFirst Farm Credit Bank, Flagstar Bank, GMAC Manufactured Housing, Huntington Mortgage Group, Origen Financial, RBC Mortgage, 21st Mortgage, Vanderbilt Mortgage, and Washington Mutual -- have all demonstrated the "high levels of expertise necessary to understand the property, titling, appraisal, and servicing issues associated with manufactured homes," Fannie Mae said.

Fannie Mae has announced that it will not issue Callable Benchmark Notes in February.The company had previously announced that it might not issue Callable Benchmark Notes in up to four months this year. It reiterated that policy, noting that it plans to issue Callable Benchmark Notes on at least eight of its 12 defined monthly pricing dates.

Impac Mortgage Holdings Inc., Newport Beach, Calif., has priced an offering of 5.0 million shares of its common stock at $19.50 per share.The offering produced estimated net proceeds of $92.5 million, Impac said. It was led by UBS Investment Bank; Friedman, Billings, Ramsey & Co.; Sandler O'Neill & Partners LP; and JMP Securities. The company has granted the underwriters a 30-day option to buy up to 750,000 additional shares to cover any overallotments. Impac, a mortgage real estate investment trust, can be found online at http://www.impaccompanies.com.