Servicing

Freddie Mac -- which has been in turmoil since June when it ousted its three top officers -- acquired $80 billion in mortgages during July, a new record for the company.However, its purchase commitments, a barometer of future activity, fell to $44 billion in July, a 20% decline from the previous month and Freddie Mac's lowest reading since April. (Freddie also said its average duration gap for July widened to positive-one month from zero in June.) Some seller-servicers are hoping that the company might give "guarantee fee" discounts to lure mortgage bankers away from Fannie Mae. One concern of Freddie Mac's board is that it has lost market share to Fannie. When Freddie fired the three officers in June, some seller-servicers took the opportunity to slam the company for its past business practices, in particular a g-fee floor of 16 basis points that it established in late 2001. On Friday, under pressure from its regulator, Freddie Mac removed Greg Parseghian as its chief executive, though he will remain in an interim capacity. Mr. Parseghian was promoted to CEO in early June when the other three left the company. An internal report by Freddie Mac said Mr. Parseghian was involved in some of the accounting maneuvers designed to smooth out the company's earnings. Freddie Mac can be found online at http://www.freddiemac.com.

Class BF-1 of Saxon Asset Securities Trust, series 1999-5, has been placed on Rating Watch Negative by Fitch Ratings.In addition, Fitch upgraded two classes of residential mortgage-backed securities in two other Saxon deals and affirmed the ratings on 19 classes in five deals. The rating agency attributed the Rating Watch placement to loss levels and high delinquencies in relation to applicable credit support.

Class BF of IndyMac ABS Inc. series SPMD 2000-A, Group 1, has been downgraded from BBB to BB and removed from Rating Watch Negative by Fitch Ratings.In addition, the ratings on three classes in the same home equity deal were affirmed. Fitch attributed the downgrade to "adverse collateral performance and the deterioration of asset quality outside of Fitch's original expectations." The deal originally contained 9.35% of manufactured housing collateral, but the percentage had increased to 18.25% as of July 2003, the rating agency said. "To date, MH loans have exhibited very high historical loss severities, causing Fitch to have concerns over the available enhancement in this deal," Fitch said.

Meanwhile, citing the Parseghian announcement, Fitch Ratings has downgraded Freddie Mac's subordinated debt and preferred stock ratings from AA to AA-minus, although the company's senior debt ratings were affirmed.Freddie Mac's long-term senior debt rating was affirmed at triple-A and its short-term debt rating was affirmed at F1-plus. The subordinated debt and preferred stock ratings remain on Rating Watch Negative, Fitch said. "The action on the subordinated debt and preferred stock follows Friday's late announcement of another significant change within senior management at Freddie Mac," Fitch said. "When the board's initial actions were taken, great emphasis was placed on the skills and experience the then-newly-named CEO, Greg Parseghian, possessed and the material contributions he has made in developing and building the risk management infrastructure that remains today. Fitch believes continuity in managing interest rate risk was and continues to be important." The rating agency can be found online at http://www.fitchratings.com.

Under pressure from its regulator, Freddie Mac agreed late Friday night to remove its chief executive, Greg Parseghian, and launch a search for a successor.Mr. Parseghian, however, will remain as CEO until a replacement can be found. As reported by MortgageWire early Friday, the board had been considering a successor for at least three weeks. Late Friday, though, the Office of Federal Housing Enterprise Oversight officially asked the board to immediately remove Mr. Parseghian and its general counsel, Maud Mater. The congressionally chartered mortgage giant agreed. OFHEO is conducting an investigation of the accounting and management practices of the company. Freddie Mac is expected to restate earnings upward for the past three years by about $4.5 billion. In June, it fired its president, David Glenn, and forced its long-time chairman and CEO, Leland Brendsel, into retirement. In the wake of the scandal, several company officials have been fired or resigned. Three names are being mentioned as possible successors to Mr. Parseghian: retired Fannie Mae chairman James Johnson; former Bush administration economic adviser Lawrence Lindsey; and Peter Fisher, the soon-to-be-departing secretary for domestic finance at the Treasury Department. A source familiar with the matter said that a month or so ago Mr. Parseghian was considering tapping Mr. Johnson as an informal adviser. A recent shareholder lawsuit filed against Freddie Mac, and Messrs. Parseghian, Brendsel, Glenn, and former chief financial officer Vaughn Clarke, accuses all four men of making "insider trading proceeds." Mr. Parseghian has denied any wrongdoing in regard to his stock sales. The other three men have yet to comment.

Kroll Inc., New York, has completed its acquisition of Factual Data Corp., a Loveland, Colo.-based provider of information used in mortgage lending, employment screening, resident screening, bulk loan acquisition and other business segments.Kroll pegged the transaction cost at approximately $115 million. In the first half of 2003, Factual Data had sales of $45 million and net income of $6.2 million.

The governor of Illinois has signed a new law that strengthens the state's existing predatory lending law and makes it easier for consumers to sue lenders and investors who purchase high cost mortgage loans.The High Risk Home Loan Act sets lending standards on loans with interest rates or fees that exceed 5% of the total loan amount. But the American Financial Services Industry is warning that the assignee liability provisions in the law may dry up the secondary market for subprime loans coming from Illinois. "It remains to be seen how the rating agencies will react and whether Illinois turns into another Georgia, which had such a negative effect on the people and economy of that state that it had to be substantially overhauled within six months of being enacted," AFSA said. The new law amends the Illinois Consumer Fraud and Deceptive Practices Act and it gives the state attorney general authority to prosecute unscrupulous lenders.

GMAC Commercial Mortgage still holds sway as the number one servicer of commercial mortgages by volume for the second quarter (with a $172.281 billion portfolio), according to the Mortgage Bankers Association's CMBS servicing survey.Wachovia Securities came in next at $96.073 billion, followed by Midland Loan Services (78.822 billion), CapMark Services ($75.592 billion) and GEMSA Loan Services ($57.042 billion). The MBA survey only includes firms with at least $1 billion of total named servicing -- primary, master and special -- for CMBS loans. Considering only CMBS servicing portfolios, GMAC was still at the top of the list ($103.903 billion), followed by Wachovia ($70.863 billion), Midland ($55.804 billlion), CapMark ($39.996 billion) and ORIX Capital Markets ($31.298 billion). The survey includes servicing of commercial mortgage-backed securities, life company loans and others.

Class A of Nomura Asset Capital Corp.'s mortgage pass-through certificates, series 1994-1, has been downgraded from Aa2 to Caa1 by Moody's Investors Service.Moody's said the downgrade was the result of writedowns being experienced by the class A certificates. The rating agency can be found on the Web at http://www.moodys.com.

Residential Funding Corp., Minneapolis, has reported a record $25.3 billion issuance of mortgage- and asset-backed securities in the first half of this year.GMAC-RFC said the total included: $6.2 billion in residential subprime securities; $6.0 billion in jumbo A-quality loan securities; $4.6 billion of alternative-A securities; $1.7 billion in securities backed by second-lien products, such as home equity lines of credit, closed-end home equity loans, and loans with high loan-to-value ratios; and $6.6 billion in "program exceptions," seasoned product, and HLTV first-lien product. The company can be found online at http://www.gmacrfc.com.