Servicing

Home equity deals accounted for nearly half of all asset-backed securities issuance in the first six months of this year, Fitch Ratings has reported.The record-low mortgage rates in the market drove the $109.3 billion in issuance in this sector, according to Fitch. Fitch can be found online at http://www.fitchratings.com.

Standard & Poor's Ratings Services is raising concerns about the Federal Home Loan Bank of New York's investments in asset-backed securities secured by manufactured homes, but it has affirmed the government-sponsored enterprise's overall credit rating of AAA/A-1-plus.The rating agency lowered its outlook for the FHLBank from "stable" to "negative," noting that the ABS "have proven to contain larger portions of credit risk than the bank and Standard & Poor's expected." Originally rated AAA, the ABS have been downgraded in recent months. But they are still investment-grade and represent less than 1% of the bank's total assets, according to the FHLBank's chief credit officer, Paul Heroux. "Management is assessing various strategies to address this matter," Mr. Heroux said. "We do not expect any action the bank might take to have a material adverse effect on our ability to meet our financial obligations or on our ability to meet our regulatory capital requirements."

Prepayment rates for agency mortgage-backed securities rose to "unprecedented heights" in the July reporting period, according to the Bear Stearns Prepayment Commentary.The record speeds extended even to the lowest MBS coupons, and two vintages of 6.0% coupons surpassed constant prepayment rates of 80 CPR for both Fannie Mae and Freddie Mac securities, said analysts Dale Westhoff and Bruce Kramer. Except for the most seasoned (1993) and least seasoned (2003) cohorts, all vintages of the 6.0% issues recorded speeds of over 70 CPR, they said. Speeds of Freddie Mac MBS were consistently faster than those of comparable Fannie Maes in every new to moderately seasoned vintage from 5.5s to 7.0s, the analysts noted. "This is a continuation of the trend in GSE prepayments that we have observed and commented on throughout the current refinancing wave," Mr. Westhoff and Mr. Kramer said. "Nevertheless, with mortgage rates now over 100 basis points above their lows in June, we expect to see [Fannie Mae and Freddie Mac] speeds converge over the next four months." The analysts said they expect prepayments to slow 50%-80% for 5.5% to 7.0% coupons over the next four reports. Bear Stearns can be found online at http://www.bearstearns.com.

Class B-4 of Chemical Mortgage Securities Inc. mortgage pass-through certificates, series 1993-3, has been downgraded from BBB to D (default) by Fitch Ratings.Fitch also affirmed the ratings on five other classes in the transaction. "The deal is currently paid down 98%, indicating adverse selection of the underlying collateral in the transaction," the rating agency said. The credit support for class B-4 (originally rated B by Fitch) has been reduced to zero due to loss levels as of the June 25, 2003 remittance, Fitch said.

Foreclosure rates are likely to climb in California and New Jersey as a result of rising interest rates, according to an online seller of foreclosed property.Foreclosures.com, Fair Oaks, Calif., says the recent trend toward "steep declines" in California foreclosure activity is likely to be reversed soon. "The Southern California markets stayed hot much longer than anyone thought they would, and low interest rates were the reason," said Alexis McGee, president of Foreclosures.com. "Now that's over." Ms. McGee cited data from Loan Performance Inc., San Francisco, indicating that more than twice as many loans in Los Angeles were seriously delinquent than had gone into foreclosure. "That's an early warning signal of problems to come," she said. Meanwhile, the company predicted rising mortgage defaults in New Jersey despite improving economic conditions in surrounding areas. "The problem is that Northern New Jersey and Manhattan are joined at the hip," Ms. McGee said. "New York City's persistent recession has spread across the Hudson to plague homeowners in the Garden State." The company can be found online at http://www.foreclosures.com.

In his first major speech to the investment banking community, Freddie Mac's new chief executive has promised that the mortgage giant will "foster an open culture" at the company and overhaul its disclosure practices.At a private luncheon closed to the news media, CEO Greg Parseghian promised equity analysts that, "You are going to hear it from us straight -- whether we have a great year or a bad year -- and we're going to tell you why it happened." Mr. Parseghian was named CEO 60 days ago after the company's board ousted its three top officers in the wake of an accounting scandal. A copy of the speech was provided to MortgageWire Wednesday morning, a few hours before Mr. Parseghian was set to deliver it. In the prepared speech, Mr. Parseghian promised, among other things, that Freddie Mac will rectify "each and every accounting policy issue" identified in the so-called Doty Report, an internal investigation into its accounting problems. Freddie Mac has also hired the law firm of Covington & Burling to help it benchmark its disclosure processes. (See the Aug. 11 issue of National Mortgage News for complete details.) Freddie Mac can be found online at http://www.freddiemac.com.

Class B of Fund America Investors Corp. II adjustable-rate mortgage pass-through certificates, series 1993-A, has been downgraded from Ba2 to Caa1 by Moody's Investors Service.The rating agency said the downgrade is based on the weak performance of the underlying loans and cumulative losses that have exceeded original expectations. The B class is currently experiencing writedowns, Moody's said. The senior classes are insured by MBIA.

Seven classes of CWMBS (IndyMac) Inc. residential mortgage-backed certificates have been downgraded by Fitch Ratings.In addition, the ratings on 57 classes from 17 CWMBS deals were affirmed, and 21 classes were upgraded. The downgrades of the mortgage pass-through certificates were as follows: CWMBS (IndyMac) series 1995-C, class B5, from B to CCC and removed from Rating Watch Negative; CWMBS (IndyMac) 1999-E (RAST 1999-A5) series 1999-E, class B5, from B to CCC and removed from Rating Watch Negative; CWMBS (IndyMac) 1999-G (RAST 1999-A7) series 1999-G, class B4, from BB to CCC and removed from Rating Watch Negative, and class B5, from CC to C; CWMBS (IndyMac) 1999-H (RAST 1999-A8) series 1999-H, class B3, from BB to CCC and removed from Rating Watch Negative; and CWMBS (IndyMac) 1999-I (RAST 1999-A9) series 1999-I, class B4, from BB-minus to CCC, and class B5, from CCC to C. Fitch attributed the actions to loss levels and the level of delinquencies in relation to the applicable credit support. Fitch can be found online at http://www.fitchratings.com.

Thirty classes in 10 Oakwood Homes manufactured housing transactions have been downgraded by Fitch Ratings.Fitch also affirmed the ratings on 33 other classes in the deals. The rating agency attributed the downgrades to the "continued poor performance" of the underlying collateral. Oakwood Homes, a major manufacturer and lender in the manufactured housing industry, filed for Chapter 11 bankruptcy protection on Nov. 15, 2002. Fitch said Oakwood received approval from the bankruptcy court to continue servicing its portfolio. "The servicing fee has been moved to a senior position in the waterfall in accordance with the pooling and servicing agreement," the rating agency said. "Additionally, Oakwood was able to secure continued access to a $200 million loan purchase facility and $215 million in debtor-in-possession facilities, which have provided liquidity during the bankruptcy proceedings." After the bankruptcy filing, loss severities on liquidations "increased dramatically," Fitch said. The rating agency can be found online at http://www.fitchratings.com.

Debt spreads have widened and indices have been down 5% in the specialty and mortgage finance area, according to a recent report by Citigroup.Spreads in the sector "[seem] to have widened" due to "debt-selling market speculation" by the European Central Bank, according to the Aug. 1 report by analyst Matthew Vetto of Citi's Smith Barney unit. Some of the worst-performing companies in the indices are mortgage-related businesses, and these firms have been down by as much as 11%, Mr. Vetto said in the report.