Servicing

Twenty-five classes from six Bombardier Capital Manufactured Housing Contracts deals have been downgraded by Fitch Ratings.The affected deals are series 1998-A, series 1998-B, series 1998-C, series 1999-B, series 2000-A, and series 2001-A. Fitch also affirmed the ratings on 11 classes. The rating agency noted that Bombardier exited the manufactured housing lending business in September 2001 but continues to service its MH loan portfolio. "The departure from the lending business has had an adverse impact on already deteriorating performance," Fitch said. "As a result of exiting the MH lending business, Bombardier is now heavily reliant upon wholesale liquidations of repossessed homes. Recovery rates on wholesale liquidations are generally substantially lower than retail liquidation recoveries."

More than 100 classes in 57 securitizations of manufactured housing contracts by Conseco Finance Corp. and its predecessor, Green Tree Financial Corp., have been downgraded by Fitch Ratings.In addition, the ratings on over 100 classes in the 57 MH deals were affirmed. The downgrades reflect the "continued high level" of delinquencies and losses, Fitch said. CFC filed for Chapter 11 bankruptcy protection in December and announced that it would no longer originate MH loans. "Since the liquidation of repossessed units through the retail channel relies on providing financing for the new purchaser, CFC has relied exclusively on the wholesale channel to liquidate repossessions since the bankruptcy," Fitch said. "This has caused an increase in loss severities due to the lower recoveries available through the wholesale channel." Fitch said the recent finalization of CFC's sale of its MH platform to CFN Investment Holdings LLC is "a positive development that will provide continuity in the servicing of the loans," but added that there is still uncertainty regarding the servicing platform. The rating agency can be found online at http://www.fitchratings.com.

The issuance of U.S. private-label residential mortgage-backed securities will likely set a record this year despite the fact that the origination market that fuels it shows signs of slowing, according to Standard & Poor's.S&P projects that RMBS issuance will surge to $500 billion in 2003, up from $373 billion in 2002. S&P can be found online at http://www.standardandpoors.com.

Loan production under the Mortgage Partnership Finance program jumped nearly 36% in the second quarter, and the Chicago Federal Home Loan Bank purchased its second MPF "Shared Funding" transaction.The Chicago FHLBank reported that single-family MPF loan originations climbed from $16.2 billion in the first quarter to $22.1 billion in the second quarter. (MPF originations in the second quarter of 2002 totaled $4.5 billion.) Over 40 new FHLBank members signed up to participate in the MPF in the second quarter, bringing the total of MPF customers to 530, the Chicago FHLBank said. Nearly 80% are community banks. To appeal to its largest MPF members, the Chicago FHLBank created the Shared Funding program where it purchases highly rate mortgage securities from member institutions. In June, the Chicago bank purchased the senior tranches of a $524 million collateralized mortgage obligation -- backed by MPF loans originated by National City Mortgage and Wells Fargo. The first Shared Funding transaction also involved MPF loans originated by National City and Wells Fargo Home Mortgage. The MPF program can be found online at http://www.fhlbmpf.com.

Fannie Mae reported an increase in its effective guarantee fee rate in the first quarter, and chief financial officer Timothy Howard has suggested that lenders may continue to see upward pressure on guarantee fees.In the second quarter, Fannie Mae said its effective guarantee fee rate was 21.2 basis points, up from 20.3 in the first quarter and 18.3 in the second quarter of last year. In a conference call with analysts, Mr. Howard said Fannie Mae anticipates that the corporation's credit losses may trend upward. He said Fannie Mae's intent is to have the average guarantee fee "keep pace with changes in our average credit losses."

Thornburg Mortgage Inc., Santa Fe, N.M., has announced an exchange offer of $200 million of 8% senior notes due 2013 for the same amount of 8% senior notes issued in a private placement in May.As part of the earlier transaction, Thornburg had agreed to file a registration statement with the Securities and Exchange Commission to register and facilitate resales of the new notes. "We believe this transaction provided us with an opportunity to further diversify our long-term capital sources," said Larry Goldstone, Thornburg's president and chief operating officer. "We continue to see attractive mortgage asset acquisition opportunities in both our wholesale and origination channels, and believe adding capital at a cost of 8% should have a positive impact on earnings and earnings per share." Thornburg can be found online at http://www.thornburg.com.

Wells Fargo & Co., San Francisco, has reported that mortgage banking and other consumer lending drove a 10% increase in its earnings per share in the second quarter, which reached a record level.Wells Fargo reported net income of $1.525 billion in the second quarter, or $0.90 per share. The company said it funded $135 billion in home loans during the second quarter, up $32 billion from its first-quarter volume. "The impact of the lowest interest rates in 40 years and the flood of home financing activity were best reflected in the record $204 billion of applications taken by Home Mortgage during the second quarter," said Mark Oman, group executive vice president of Home and Consumer Finance. The company serviced $582 billion of home loans at the end of the second quarter, an increase of $96 billion from that of a year earlier. The portfolio has a weighted average note rate of 6.21%.

Four classes of notes issued by SFA Collateralized Asset-Backed Securities I Trust have been downgraded by Fitch Ratings.The transaction, a collateralized debt obligation managed by Structured Finance Advisors Inc., is supported by a diversified portfolio of asset-backed securities and commercial mortgage-backed securities. The downgrades were as follows: class A, floating-rate, from AAA to AA-plus; class B-1, floating-rate, from BBB to B-minus; class B-2, fixed-rate, from BBB to B-minus; and class C, fixed-rate, from B to C. Fitch attributed the downgrades to "the recent deterioration of the portfolio to the point where the risk is no longer consistent with the current ratings." Only two assets in the portfolio are classified as defaulted, but a number of them face "probable" default, the rating agency said.

Three classes of Ocwen Residential MBS Corp. mortgage-backed securities have been downgraded by have Fitch Ratings.The downgrades were as follows: Ocwen 1998-R3, class B-2, from BBB to BB; Ocwen 1999-R1 Group A, class B-5A, from B to CCC; and Ocwen 1999-R1 Group F, class B-4, from BB to B. Fitch also placed class B-1 of Ocwen 1998-R3 on Rating Watch Negative and affirmed the ratings on 26 classes from the aforementioned deals plus Ocwen 1998-R1 and Ocwen 1998-R2. The downgrades were attributed to loss levels and high delinquencies relative to applicable credit support as of the May 25 distribution date. Fitch can be found online at http://www.fitchratings.com.

Despite missing analysts' consensus earnings estimate by one penny in the second quarter, Fannie Mae has increased its dividend by six cents.Fannie Mae's net income, at $1.1 billion ($1.09 per share) was down 24.3% from that of a year earlier. However, Fannie Mae's "core earnings" painted a rosier picture. Fannie Mae reported second-quarter core earnings per share of $1.86, just shy of the consensus estimate but up 20% from that of a year earlier. Core earnings exclude unrealized losses on purchased options used for hedging. Those unrealized losses must be factored into net earnings under generally accepted accounting principles. Meanwhile, Fannie Mae has raised its dividend on common shares from $0.39 per share to $0.45 per share. Timothy Howard, vice chairman and chief financial officer of the government-sponsored enterprise, said the dividend increase "reflects management's confidence in the strength and sustainability of the cash flows of Fannie Mae's business," as well as increased investor focus on dividend payouts as a result of recent tax changes. Fannie Mae can be found online at http://www.fanniemae.com.