Servicing

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.

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.