Servicing

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.

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.