Servicing

Freddie Mac has announced the retention of Charles M. Elson, an expert on corporate governance with a background in law and academia, as an adviser.Professor Elson is the Edgar S. Woolard Jr. Chair in Corporate Governance and the director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. He is also "of counsel" to the Holland & Knight law firm. Mr. Elson is considered an expert on the current practices, trends, and developments in corporate governance, Freddie Mac said. The government-sponsored enterprise also reported that it has retained David Martin, formerly director of corporation finance for the Securities and Exchange Commission, to help it improve financial disclosures. The GSE said it is training its 4,300 employees on the provisions of the Sarbanes-Oxley Act, and setting up a hotline to enable them to register complaints or concerns anonymously.

Standards & Poor's has revised its outlook on the Chicago, Indianapolis, and Seattle Federal Home Loan Banks from Stable to Negative because of interest rate risk concerns about their secondary-market programs."The higher balance of fixed-rate mortgage loans in the earnings asset mix, combined with sizable investments in fixed-rate MBS, has elevated the interest rate risk exposure to a level that is not commensurate with a bank's current 'AAA' long-term counterparty credit ratings," S&P said. The change in outlook puts S&P in a position to downgrade any of the three banks if they start to have problems managing their mortgage investments in a rising interest rate environment. "We really have to see how they manage through this interest rate cycle," said S&P analyst Jonathan Ukeiley. Chicago FHLBank president Alex Pollock said he understands S&P's interest rate concerns, but that his bank's secondary-market program is performing very well. "We plan to continue on our very successful strategic course," he said. Mr. Pollock also noted that the triple-A rating of FHLBank bonds and discount notes is not affected by S&P's latest action. The rating agency can be found online at http://www.standardandpoors.com.

Two classes of a Bear Stearns asset-backed securities issue have been downgraded by Fitch Ratings.Class M-2 of series 2001-A was downgraded from BBB to BB, and class B was downgraded from BB to CCC. In addition, Fitch affirmed the ratings on five other classes in the deal. The downgrades reflect the depletion of overcollateralization and a reduction in the amount of excess spread due to poor loan performance, the rating agency said. The trust is collateralized by high loan-to-value subordinate lien loans originated and serviced by Conseco Finance Corp. Fitch can be found online at http://www.fitchratings.com.

Predatory subprime lenders in the Phoenix-Mesa metropolitan area have spurred a wave of foreclosures in Arizona's Maricopa County, according to Foreclosures.com, a distressed property investment advisory firm based in Sacramento, Calif."We've been tracking foreclosure fallout from the 2001 recession in Arizona for more than a year, and we see an alarming rise in the number of homeowners that have been stripped of much of their equity by the imposition of outrageous loan fees, and loans that they cannot possibly afford to repay," said Alexis McGee, president of Foreclosures.com. ".... Legislation to restrict abusive lending (HB 2468) has been pending since last February and needs to be expedited." The company also predicted that home loan defaults will rise in the New York boroughs of Brooklyn and the Bronx late this year and early next year as a result of the city's high unemployment rate. The firm can be found on the Web at http://www.foreclosures.com.

ING Direct, Wilmington, Del., has announced a payment moratorium for its Orange Mortgage customers whose homes were damaged or destroyed by wildfires in Southern California.The moratorium will allow customers to postpone their full mortgage payment for up to four months, based on a case-by-case determination of the severity of the loss, the company said. ING Direct can be found online at http://www.ingdirect.com.

Consolidated earnings of the 12 Federal Home Loan Banks fell 42.3% in the third quarter due to lower interest rates and losses recorded by three FHLBanks.The FHLBanks' Office of Finance reported that earnings totaled $285 million in the third quarter, down from $494.0 million in the third quarter of 2002. "The decrease in Q3 relates primarily to an $82 million decline in net interest income due to lower interest rates and a decrease in combined other income of $169 million," the Office of Finance said. The "combined other" income figure also reflects the previously reported losses posted by the New York, Pittsburgh, and Atlanta FHLBanks. The third-quarter financial report shows that the FHLBanks' holdings of one- to four-family mortgages totaled $108.0 billion as of Sept. 30, up from $60.6 billion at the beginning of the year.

The increased amount of credit enhancement required in residential mortgage securitizations affected by predatory lending law risk can be "somewhat mitigated" if an analysis of the originators' compliance procedures shows that the originator has "significant strengths in this area," according to Fitch Ratings.If such strengths are demonstrated, "credit enhancement might then be reduced, although some increased enhancement would remain since no originator is viewed as completely free of concern," Fitch said in a Nov. 12 report. Fitch can be found on the Web at http://www.fitchratings.com.

San Antonio-based USAA has topped the J.D. Power and Associates customer satisfaction rankings for the largest national mortgage lenders.J.D. Power said USAA, which specializes in lending to military personnel, scored higher than the other 30 lenders in its 2004 Home Mortgage Study in each of the four factors that affect satisfaction: day-to-day administration of the account; billing and payment process; customer-initiated contact experience; and the loan origination process. J.D. Power also reported that customer satisfaction with home mortgage lenders in general had risen for the second year in a row. "There is a move to centralize the day-to-day servicing of mortgages," said Jeremy Bowler, director of the finance and insurance practice at J.D. Power. "The challenge lenders face is to deliver the same quality of customer care and still remain economically competitive. USAA has done an exemplary job of delivering personalized service to its members." It was the second consecutive year that USAA topped the J.D. Power rankings. The other lenders ranking in the top five in overall satisfaction were: Branch Banking & Trust, SunTrust, Countrywide Home Loans, and Wells Fargo. J.D. Power can be found online at http://www.jdpower.com.

Mortgage-related securities issuance has continued at a record pace, reaching a total for the first three quarters that exceeds the total for all of last year, according to The Bond Market Association.Total mortgage-related issuance through Sept. 30 was $2.58 trillion, up from last year's record total of $2.31 trillion. TBMA can be found online at http://www.bondmarkets.com.

Fifteen mezzanine and subordinate classes from 12 ContiMortgage Home Equity Loan Trust transactions from 1997 through 1999 have been placed under review for possible downgrade by Moody's Investors Service.The affected classes were as follows: series 1997-1, classes M-1 and M-2; series 1997-2, classes M-1F and M-2F; series 1997-3, class M-2F; series 1997-4, class B; series 1997-5, class B; series 1998-1, class B; series 1998-2, class B; series 1998-3, class B-I and B-II; series 1998-4, class B; series 1999-1, class B; series 1999-2, class B; and series 1999-3, class B. "For the 1997-1 through 1997-5 transactions, high losses have exhausted the credit enhancement provided by overcollateralization, resulting in writedowns on a number of subordinate classes," the rating agency said. "Additionally, recent increases in losses on pools backing the 1998 and 1999 ContiMortgage transactions are resulting in losses that exceed the amount of excess spread available, thus reducing the amount of credit enhancement provided by overcollateralization." Moody's noted that Fairbanks Capital Corp. acquired the servicing rights to all the ContiMortgage transactions in July 2000 from ContiFinancial, and that Fairbanks' servicer ratings were downgraded from Strong to Below Average in May 2003.