Servicing

Silverado Financial Inc., Campbell, Calif., has announced an agreement to acquire San Francisco Funding Inc., a mortgage bank based in San Diego.The terms of the deal were not disclosed. Silverado projected that the acquisition would produce up to $400 million in loan volume and $6 million in gross revenue for the current year. As part of the deal, the company will purchase $15 million in warehouse lines and licenses to operate in eight Western states. "This acquisition represents a key component of our future business mix and will immediately make Silverado a full-fledged mortgage bank," said John Hartman, Silverado's president and chief executive officer. "Management will now pursue acquisitions of mortgage brokerage operations to provide greater distribution of our lending products." In April, Silverado (formerly Rhombic Corp.) announced the adoption of a new business model focused on the acquisition of established, profitable mortgage brokerage and banking operations in Northern California.

Servicing executives take note: the former chief executive officer of Fairbanks Capital has agreed to pay $400,000 as part of the federal settlement over allegedly abusive loan servicing practices.Former CEO Thomas Basmajian's $400,000 payment is part of the firm's settlement with the Federal Trade Commission and the Department of Housing and Urban Development. During the news conference announcing the settlement, HUD Secretary Mel Martinez said the settlement also brings to an end a criminal investigation involving the allegedly abusive practices by Fairbanks.

Fairbanks Capital has reached a settlement with the Federal Trade Commission and the Department of Housing and Urban Development that will create a $40 million "redress fund" to reimburse consumers who were allegedly harmed by Fairbanks' loan servicing practices.The FTC will administer the fund. The settlement also provides insight into what the FTC and HUD consider appropriate guidelines and procedures for servicing subprime home loans. At a news conference in Washington, FTC Chairman Timothy Muris said the settlement brings to a close "deceptive practices" that forced consumers to pay hundreds of dollars in "phony charges" or face foreclosure. Specifically, Fairbanks was accused of failing to post payments in a timely fashion and then charging late fees, and of charging fees for services that were unnecessary or were not performed. "Those who service consumers' loans, no less than those who lend them the money, must treat consumers fairly and honestly," Mr. Muris said. Since consumers cannot voluntarily change loan servicing companies, compliance on the part of servicers is all the more important, he said. Fairbanks chairman Brad Shuster said in a statement that the settlement is a positive development and that the company "now has in place what we believe are leading-edge practices for nonprime consumer home loan servicing." The FTC can be found online at http://www.ftc.gov.

Wildfires in Southern California caused between $2.5 billion and $3.5 billion, somewhat higher than previous industry estimates, according to Moody's Investor Services.The "vast majority" of these losses will be absorbed by primary personal lines insurers, with reinsurance companies taking a larger portion of the liability in "some exceptional cases," Moody's said. The agency doesn't plan to alter its rating or outlook of the insurance sector as a whole because of the damage, but said that "losses will be evaluated in the context of earnings and capitalization expectations for individual firms' ratings." Moody's can be found on the Web at http://www.moodys.com.

American Business Financial Services Inc., Bala Cynwyd, Pa., has closed a $173.5 million fixed-rate mortgage loan securitization, with servicing released, via three subsidiaries.ABFS Mortgage Loan Trust 2003-2, structured as a real estate mortgage investment conduit, was privately placed. It was closed under the company's adjusted business model, which emphasizes whole loan sales, supplemented by smaller privately placed securitizations, ABFS said. JP Morgan Securities was the sole placement agent for the transaction, and EMC Mortgage Corp., a division of Bear Stearns & Co., was selected as the servicer. The company's three subsidiaries are American Business Credit Inc., Home American Credit (d/b/a Upland Mortgage), and American Business Mortgage Services Inc. The company's website address is http://www.abfsonline.com.

Fitch Ratings has announced the addition of transactions involving specialty products to its RMBS Deal Tracker, a Web-based product that identifies original collateral attributes for Fitch-rated residential mortgage-backed securities and mortgage-related asset-backed securities.The specialty-product version of the downloadable Excel-based spreadsheet will consist initially of scratch-and-dent and mixed-asset pools, but more specialty asset types will be added as data become available, Fitch said. RMBS Deal Tracker is now available for Fitch-rated subprime, manufactured housing, prime jumbo A, select alternative-A, and specialty deals, the rating agency said. Data points provided by the product include average balance, loan-to-value and FICO distributions, property type, occupancy type, documentation type, geographic distribution, and credit enhancement levels. Fitch can be found online at http://www.fitchratings.com.

Fidelity National Financial Inc., Irvine, Calif., has announced that property owners who have suffered damage from wildfires in Southern California will be offered title insurance fee reductions of up to 50% for post-disaster reconstruction loans.FNF said the reduced disaster relief rate is available through its Chicago Title, Ticor Title, Fidelity National Title, and Security Union Title companies on private or federal loans for victims whose properties are located in a declared disaster area. The reduced rate will apply to reconstruction loans on residential or commercial properties originated within two years of the declared disaster date for the property's location. FNF can be found online at http://www.fnf.com.

Class B of ContiMortgage Home Equity Loan Trust series 1998-1 has been downgraded from B to CCC by Fitch Ratings.In addition, Fitch affirmed the ratings on four other classes in the deal and on five classes of ContiMortgage Home Equity Loan Trust series 1999-1. The rating agency attributed the downgrade to a decline in enhancement relative to the required credit support levels.

Three classes from two IndyMac ABS Inc. home equity transactions have been downgraded by Fitch Ratings and another class from a third transaction has been placed on Rating Watch Negative.The downgrades were as follows: class BF of series SPMD 2000-A group 1, from BB to CCC; class MF-1 of series SPMD 2001-A group 1, from A-minus to BBB-minus; and class MF-2 of series SPMD 2001-A group 1, from BB to B-minus. Class BV of series SPMD 2000-A group 2 was placed on Rating Watch Negative. In addition, the ratings on seven other classes from the three deals were affirmed, and an eighth rating was left unchanged. The rating agency attributed the downgrades to a significant increase in losses that has depleted overcollateralization. "The structures in the 2000-A and 2001-A transactions are not cross-collateralized, so they do not allow for excess spread to be shared by the groups," Fitch said. The rating agency said those two deals are structured to allow bonds that are written down due to losses to be written back up. Fitch can be found online at http://www.fitchratings.com.

Pretax net income for the average firm in the mortgage banking industry surged to $40.4 million in 2002 from $23.2 million in 2001, according to the Mortgage Bankers Association of America.The MBA's 2003 Cost Study surveyed 193 mortgage companies to determine the income and costs associated with originating and servicing one- to four-unit residential loans. It found that net income from warehousing rose to $522 per loan in 2002 from $456 in 2001. In addition, the study found that net secondary marketing income, capitalized servicing, and servicing release premiums provided the largest contribution to the bottom line in 2002, at $1,609 per loan. Meanwhile, mortgage servicing rights amortization and impairments (net of hedging gains) accounted for $430 per loan in losses in 2002, up from $351 in 2001, according to the MBA study. "Average company profitability surged largely due to favorable warehousing interest spreads and secondary market gains," the MBA reported. "However, one downside to the high refinancing volume was in loan servicing." The MBA can be found online at http://www.mbaa.org.