Servicing

Richard Karl Goeltz, a former vice chairman and chief financial officer of American Express Corp., has been elected to the board of directors of Freddie Mac.Before joining American Express, Mr. Goeltz was group CFO and a member of the board of National Westminster Bank and executive vice president for finance and CFO at The Seagram Co. Ltd., Freddie Mac said. He is a former member of the Financial Accounting Standards Board Advisory Council and of the United Kingdom's Accounting Standards Board.

Prepayment rates of Fannie Mae and Freddie Mac mortgage-backed securities slowed an average of 20% across the board in the November reporting period, according to the Bear Stearns Prepayment CommentaryAnalysts Dale Westhoff and Bruce Kramer took special note of big declines in the speeds of coupons above 6%. "Given that this sector is still theoretically refinanceable, there has been considerable uncertainty surrounding the timing and magnitude of the slowdown in this sector," the analysts said. "However, 16 months of continuous, heavy refinancing activity has finally produced a classic burnout response from the remaining borrowers in these pools." The analysts also pointed to the fact that the speeds of Fannie and Freddie MBS have "fully converged across the coupon stack" after an extended period in which Freddie Mac speeds were markedly faster than those of Fannie Mae MBS. In the Ginnie Mae sector, the speed declines were not as steep, in part because of servicer buyouts. Mr. Westhoff and Mr. Kramer said another likely reason is the longer processing time for Federal Housing Administration and Department of Veterans Affairs loans with smaller balances. Bear Stearns can be found online at http://www.bearstearns.com.

Mortgage lenders reduced their payrolls in October for the second consecutive month -- this time by 4,700 full-time employees -- as demand for refinancings fell dramatically.The Bureau of Labor Statistics data released Friday show that employment in the mortgage banker/broker sector fell from 421,400 in September to 416,700 in October. The interest rate on the 30-year fixed-rate mortgage stayed below 6% in October. However, origination volume was off by 30%-50% during some weeks in October (compared with that of the same weeks a year earlier). Meanwhile, the November job report for the economy as a whole disappointed many who expected to see a real boost in hiring. Only 57,000 new jobs were created in November, compared with 126,000 in October. (There is a one-month lag in mortgage employment data due to changes the Labor Department made to its employment report earlier this year.) The BLS can be found online at http://stats.bls.gov.

Less than 3% of the 13,419 U.S. structured finance securities issued since 1993 have defaulted, according to a study by Moody's Investors Service.The structured finance default study included 167 asset-backed securitizations, 80 commercial mortgage-backed securitizations, and 143 residential mortgage-backed securitizations. While gross payment defaults are "the simplest measure of performance," according to Moody's analyst Jian Hu, defaults are often cured within a short time in the structured finance arena. Therefore, the rating agency also tracked securities that defaulted and were not subsequently cured, finding that only 94 of the 390 defaults during the study period were later cured. The study found that the average loss severity rate for the 84 securities that defaulted was approximately 42% of their original balances. In the CMBS arena, the study identifies interest shortfalls as the cause of all the defaults to date. Most recent defaults have been "precipitated by appraisal reductions and special servicing fees," Moody's said. Other causes of shortfalls include loan modifications, unanticipated terrorism insurance expenses, and legal expenses. However, losses on CMBS defaults so far have been "extremely low," the rating agency said. Moody's can be found online at http://www.moodys.com.

Thornburg Mortgage Inc., Santa Fe, N.M., has completed a $55 million add-on offering of 10-year senior notes.The original offering of $200 million of 8% senior notes was issued in May. The add-on notes have identical terms to those of the previously issued notes, but were sold at 104.5 to yield 7.33%, Thornburg said. Net proceeds from the transaction will be used mainly to fund mortgage loans originated by the company and to buy additional adjustable-rate mortgage securities, the company said. Thornburg can be found online at http://www.thornburg.com.

Senior managing director Eric Sieracki of Countrywide Financial Corp. told investors Dec. 2 that his company may consider buying loan servicing portfolios and loan production platforms as the refinancing boom slows down.Speaking at a Friedman Billings Ramsey conference, Mr. Sieracki said Countrywide -- which has long heralded "organic growth" while shunning mergers and acquisitions -- may now be ready to be a buyer in the M&A market. As refinancing activity slows next year, Mr. Sieracki said "there probably will be some disadvantaged servicers out there looking to unload servicing." As long as there is not a price war, Countrywide may be a player in that market, he said. In addition, he said Countrywide's growing sales force, currently consisting of some 6,800 commission-paid personnel, makes it feasible for Countrywide to consider buying loan production platforms as well. The company, based in Calabasas, Calif., can be found online at http://www.countrywide.com.

The Pacific Exchange has announced the initiation of trading in options on General Growth Properties Inc., a Chicago-based real estate investment trust.The options will trade on the January expiration cycle, with limits set at 22,500 contracts. The issue will be traded by lead market makers Steven D. Juno and Ethan Dorr of Cutler Group. The exchange can be found on the Web at http://www.pacificex.com.

Standard & Poor's Ratings Services has announced that it will rate structured finance transactions that include New Mexico loans governed by the state's predatory lending law (the Home Loan Protection Act), which takes effect Jan. 1.S&P said the law bars certain practices in connection with what it defines as Home Loans, High-Cost Home Loans, Home Improvement Loans, and Manufactured Housing Loans. "Violations of the act can result in monetary liability for the originator and for purchasers and assignees," S&P said. "Although the liability of purchasers and assignees for a loan that violates the act may exceed the unpaid principal balance of the loan, this liability is capped." For deals that include New Mexico loans, S&P will require the issuer to warrant that the loans comply with all applicable laws, and that its compliance procedures can effectively identify Home Loans, High-Cost Home Loans, Home Improvement Loans, and Manufactured Housing Loans and determine that they don't violate the aforementioned act. S&P can be found online at http://www.standardandpoors.com.

Citing clarifications by the state of New Jersey, Standard & Poor's Ratings Services has announced that it will permit the inclusion of additional New Jersey mortgage loans in structured finance deals rated by S&P.S&P said loans that may now be included in such deals are those defined as Home Loans, Covered Home Loans, Home Improvement Loans, and Manufactured Housing Loans under the New Jersey Home Ownership Security Act of 2002, which is to take effect Nov. 27. However, it will continue to exclude loans defined as High-Cost Home Loans because of "the potential for uncapped statutory and punitive damages," the rating agency said. S&P had announced previously that certain Covered Home Loans, Home Improvement Loans, and Manufactured Housing Loans would be excluded from S&P-rated deals. To qualify for an S&P rating, deals including such loans must carry a representation and warranty that the loans were originated in compliance with all applicable laws, and issuers will be required to show that their compliance procedures can effectively identify such loans and determine that they don't violate the aforementioned act. The rating agency can be found online at http://www.standardandpoors.com.

The Pacific Exchange has announced the initiation of trading in options on Accredited Home Lenders Holding Co., a San Diego-based subprime lender and servicer.The options will trade on the March expiration cycle, with limits set at 31,500 contracts. The exchange can be found on the Web at http://www.pacificex.com.