Servicing

The collapse of Treasury bond prices has had mixed effects on the returns of U.S. mortgage market participants, with mortgage banks -- especially those that are "more pure origination shops" -- seeing "the most stress," according to Moody's Investors Service.While production-only mortgage companies are suffering, most other industry businesses are seeing their returns affected "both positively and negatively, and sometimes at the same time," Moody's said. The rating agency said it does not expect the effects to result in "material negative credit implications." Moody's can be found online at http://www.moodys.com.

The Federal Home Loans Banks are doing a fairly good job of retaining their mortgage customers and building their mortgage portfolios, despite the record-setting pace of refinancings during the first half of this year.The FHLBank System's second-quarter financial report shows that mortgage purchases by the banks totaled $46.3 billion for the first half, while prepayments totaled $16.3 billion. As a result, the FHLBanks held $90.4 billion in residential mortgage loans on their books as of June 30, up from $60.6 billion at the beginning of the year. Residential mortgage loans constitute 11.2% of total system assets. The financial report also shows that FHLBanks' earnings and lending activity (advances) were flat when comparing the first and second quarters. Earnings declined by $5 million to $451.0 million in the second quarter and advances rose by $7 billion to $506.3 billion.

Community organizers with National Peoples Action have created a "Fairbanks Hot Spot Initiative" to identify and remedy consumer disputes with the troubled subprime servicer, Fairbanks Capital Corp., Salt Lake City.In the past four weeks, NPA has helped over 100 homeowners in five cities file complaints against the servicer. "Fairbanks has already waived thousands of dollars of fees and drastically reduced interest rates for many of these borrowers," NPA said. Fairbanks has instituted a policy whereby it temporarily halts the foreclosure process when it receives a qualified written dispute. Fairbanks has completed a management reorganization, and it has stopped accepting new business since it came under investigation by the federal government for its servicing practices. A company spokeswoman said Fairbanks is willing to work with community groups, but she maintained that the number of consumer complaints has been going down significantly.

Hanover Capital Mortgage Holdings, Edison, N.J., has priced a public offering of 3.0 million shares of its common stock at $10 per share.The company said it plans to use the net proceeds of approximately $27.4 million to buy subordinated mortgage-backed securities and other mortgage-related assets. The underwriters have been granted a 30-day option to buy up to 450,000 additional shares of the stock to cover any overallotments. JMP Securities is the lead manager of the offering, and Stifel, Nicolaus & Co. is the co-manager. Hanover Capital, a mortgage real estate investment trust, can be found online at http://www.hanovercapitalholdings.com.

Fannie Mae and Freddie Mac are reporting that the New York blackout has not impaired their debt operations."It is business as usual," said Fannie Mae spokeswoman Janis Smith. Although the bond market was expected to close early Friday, at 2 p.m., Fannie Mae said it was still planning to go to settlement Friday on a $1 billion five-year Subordinated Benchmark Note. It also announced a new deal, a noncallable Benchmark Note, that will be priced on Aug. 20. Meanwhile, Freddie Mac spokeswoman Sharon McHale said the blackout has "not impacted" the giant mortgage company, although trading in the bond market was light. As planned, Freddie Mac said it was going to settlement Friday on a $5 billion, three-year Reference Note.

Two classes of GE Home Equity 1997-HE4 mortgage pass-through certificates have been downgraded by Fitch Ratings.Class B-1 was downgraded from BBB to BB and removed from Rating Watch Negative, and class B-2 was downgraded from CCC to C. The rating agency said losses have depleted the credit support for class B-2, which recently took a principal writedown. "Although the transaction's structure allows for the writedown amount to be repaid from future recoveries, the structure does not allow for interest on the written-down amount to be repaid," Fitch said. The rating agency can be found on the Web at http://www.fitchratings.com.

The Seattle Federal Home Loan Bank has teamed up with a mortgage servicer to enable participants in its Mortgage Purchase Program to sell their loans on a servicing-released basis.This new MPP feature will allow participating banks and thrifts to sell their one- to four-family loans to the FHLBank and concurrently sell the servicing rights to Principal Residential Mortgage Inc., Des Moines, Iowa. "As a member-owned cooperative, we're always looking for ways to add value to our products and services," said Seattle FHLBank executive vice president David Bley. "With servicing released, our financial institution members have another choice in managing their mortgage business." In connection with the announcement, the Seattle bank is launching a marketing campaign to encourage more members to participate in the MPP. The FHLBank has funded over $10 billion loans since the MPP was started three years ago.

Two classes of Access Financial Manufactured Housing series 1996-1 have been downgraded by Fitch Ratings.Class B-1 was downgraded from BBB-minus to BB-minus, and class B-2 was downgraded from CCC to C, Fitch said. In addition, the ratings on two other classes in the deal were affirmed, as were the ratings on three classes of series 1995-1. The actions were attributed to losses and the level of delinquencies relative to the applicable credit support.

Thirteen classes from four subprime mortgage transactions issued by Metropolitan Asset Funding Inc. and Metropolitan Mortgage Funding Inc. have been placed on review for possible downgrade by Moody's Investors Service.The classes placed on review for possible downgrade were as follows: series 1998-A, classes B-1 and B-2; series 1998-B, classes M-2, B-1, and B-2; series 1999-A, classes M-2, B-1, and B-2; and series 2000-B, classes A-1A, A-1, M-1, M-2, and B-1. In addition, Moody's placed on review for possible upgrade 11 classes of mezzanine and subordinated classes from four mortgage transactions issued by Metropolitan Asset Funding. Moody's said the mortgage pools backing the classes on review for possible downgrade have experienced higher-than-expected losses -- especially the pool backing the 2000-B transaction -- and the levels of credit enhancement for those classes appear to be insufficient to maintain their current ratings.

Class M of Morgan Stanley's commercial mortgage pass-through certificates, series 1998-HF2, has been downgraded from CCC to CC by Fitch Ratings.Five other classes in the deal were upgraded and the ratings on eight other classes were affirmed. Fitch attributed the downgrade to estimates of future losses. Five loans in the deal, representing 3.7% of the pool, are currently in special servicing.