Servicing

Standard & Poor's has released an updated version of its credit risk analysis product for residential mortage-backed securities.S&P had added several new fields of information that "has been shown to play a critical role in a loan's foreclosure frequency or loss severity expectation" to the product. Among these is a compliance field that takes into account anti-predatory lending laws. S&P can be found online at http://www.standardandpoors.com.

Fitch Ratings has placed ORIX Capital Market's special servicer rating for commercial mortgage loans on "negative watch" due to strategies the company uses to work out troubled loans.Fitch said that in its opinion, the strategies "are more consistent with a Fitch rating of CSS2 or CSS3 than the current ORIX rating of CSS1. Stephany Petosa, a senior director at Fitch Ratings, said ORIX pursues resolution of perceived errors or loopholes in loan or deal documents "by initiating aggressive litigation." She said this strategy presents a risk to the financial interests of investors in the securities backed by the loans.

The New York Federal Home Loan Bank is warning member institutions to expect very low quarterly dividends going forward while the bank rebuilds its retained earnings.The FHLBank suspended its third quarter dividend after it sold nearly $2 billion in impaired manufactured housing securities at a $190 million loss. This loss reduced the bank's retained earnings from $240 million to $100 million. In a letter to shareholders, New York FHLBank president Alfred DelliBovi noted that the bank's federal regulator wants dividends paid out of earnings after a set-aside is made to build retained earnings to an appropriate level. "Given our need to rebuild retained earnings and the loss of investment income from the nearly $2 billion in MBS investments we sold in September, we expect that future dividends paid by the Home Loan Bank will be at a lower level relative to prevailing market interest rates than the dividends of the recent past," Mr. DelliBovi says in the letter. In the second quarter, the NY bank paid a 5.05% dividend. Mr. DelliBovi also noted that FHLBank officers and employees will not receive a year-end bonus this year.

Sovereign Bancorp's shares reached a new 52-week high on Monday amid speculation that the thrift is a takeover target of Royal Bank of Scotland.As MortgageWire went to press on Tuesday Sovereign's shares were trading up slightly at $23.18. The Philadelphia-based company is a top 60 ranked residential lender and a top 50 ranked servicer. A Sovereign spokesman said the company, "doesn't comment on rumors and speculation." Earlier this year Sovereign chairman Jay Sidhu said he would sell the thrift but only if he was offered a price that he liked. The spokesman noted that Mr. Sidhu never specified what that price might be. According to the Independent of London, Royal Bank of Scotland recently made a $7.5 billion bid for Sovereign but was rejected. The thrift, a retail and wholesale mortgage funder, has branches in the mid-Atlantic and New England area. A call placed to Royal Bank of Scotland had not been returned at press time.

The Mortgage Bankers Association is urging members to offer mortgage relief to victims of Southern California's wildfires.In a letter to members dated Oct. 31, MBA chairman Robert Couch noted that Fannie Mae and Freddie Mac and the federal departments of Housing and Urban Development and Veterans Affairs allow for disaster relief such as temporary suspension or reduction of mortgage payments or (in certain cases) modification of existing mortgages. "We ask that you consider implementing these options for affected borrowers," the letter says, referring to those who have lost homes, suffered property damage, or incurred a loss of employment due to workplace damages. Mr. Couch also urged MBA members to seek out such borrowers. "During these trying times, individual homeowners may feel overwhelmed by the issues they must address, the emotional toll of losing their homes, and the financial hardship the events have imposed," he said. "We, therefore, encourage MBA members to reach out to potentially affected customers to inform them of the relief options available to them and to assist them where possible." The MBA can be found online at http://www.mbaa.org.

There was a total of $36.7 billion of primary new mortgage insurance written in September by the members of the Mortgage Insurance Cos. of America, up some 5% from August's $34.9 billion.Since July, the industry data has not included information from Radian Guaranty, Philadelphia, which dropped out of MICA in a policy dispute. The number of applications, which declined by 25,886 between July and August, fell another 10% or 26,624 between August and September, from 265,792 to 239,168. New pool risk written was $601.5 million, with $17.1 billion of pool risk in force. The cure/default ratio declined slightly between August and September from 91.2% down to 87.2%. New cures totaled 39,990, while defaults were at 42,432.

San Jose, Calif. is the most likely metropolitan area to see a decline in home prices in the United States, according to The PMI Risk Index.PMI Mortgage Insurance Co., the Walnut Creek, Calif.-based mortgage insurer that created the index, uses it as one of its tools to assess and manage risk levels in its own portfolio. As of October, the index value of the top 50 largest metropolitan areas was 162, meaning these cities have on average a 16.2% probability of experiencing a home price decline in the next two years. The index for San Jose is 437. The other cities at the top of the scale are Portland Ore.-Vancouver, Wash. at 370; Detroit, 306; Seattle-Bellevue, Everett, Wash., 297; and Dallas, 297. At the other end of the scale are Riverside-San Bernardino, Calif., 63; Nassau-Suffolk (Long Island), N.Y., 74; Baltimore, 74; Las Vegas, 79; and Miami, 83.

IndyMac Bancorp Inc., Pasadena, Calif., the holding company for IndyMac Bank, has reported record net earnings of $49.7 million ($0.87 per share) for the third quarter, up 34% from earnings in the third quarter of 2002.Mortgage loan production totaled a record $8.5 billion in the third quarter, up 64% from the volume recorded a year earlier, IndyMac said. "Based on our ratelocks and pipeline at the end of the third quarter, our forecast for fourth-quarter production ranges from $5.8 billion to $6.6 billion, which represents a decline of 23% to 32% from the third quarter," said Michael W. Perry, IndyMac's chairman and chief executive officer. This would be significantly better than the 52% decline projected for the industry as a whole by the Mortgage Bankers Association of America, he noted. IndyMac declared a cash dividend of $0.20 per share, up from $0.15 per share in the previous quarter. The company can be found online at http://www.indymacbank.com.

The ratings on 128 classes from 43 manufactured housing deals by Conseco Finance Corp. (formerly Green Tree Financial Corp.) have been placed on review for possible downgrade by Moody's Investors Service.The actions were prompted by high levels of cumulative repossessions and losses, Moody's said. The repossessions were triggered by the company's suspension of its repossessed refinancing and default transfer-of-equity programs as well as poor industry conditions, the rating agency said. The suspension of the DTOE program "caused repossessions to spike because loans previously eligible for this program had to be reclassified as repossessions," Moody's said. "In addition, since Conseco's exit from the MH origination business, the company has been forced to liquidate repossessed units through wholesale channels rather than retail channels," Moody's said. This led to lower recovery rates and higher loss severities. The rating agency can be found online at http://www.moodys.com.

A little less than a third of the homeowners who refinanced their homes in the third quarter got a mortgage at least 5% larger than the original loan, unchanged from the 32% figure recorded in the previous quarter, according to Freddie Mac.The figure was down from 44% in the third quarter of 2002, the government-sponsored enterprise said in its quarterly refinance review. "Over the past three months, mortgage rates began to rise slightly," said Amy Crews Cutts, Freddie Mac's deputy chief economist. "Not surprisingly, we then started to see overall refinancing begin to fall off somewhat from previously high record levels earlier in the year." Freddie Mac can be found online at http://www.freddiemac.com.