Servicing

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.

The dollar volume of U.S. net interest margin securities issued hit a record high in the second quarter, according to Standard & Poor's.NIMS issued during the quarter reached approximately $1.54 billion, according to S&P. S&P can be found online at http://www.standardandpoors.com.

Thornburg Mortgage Inc., Santa Fe, N.M., has priced an offering of 4.0 million shares of common stock at $27.60 per share.Net proceeds from the transaction, which are estimated at $104.6 million, will be used mainly to fund adjustable-rate mortgage loans originated by the company and to buy additional ARM securities, Thornburg said. UBS Investment Bank acted as the book-running lead manager for the transaction. A.G. Edwards & Sons was the co-lead manager, and RBC Capital Markets acted as co-manager. The underwriters have been granted a 30-day option to buy up to an additional 600,000 shares of common stock to cover any overallotments. Thornburg can be found online at http://www.thornburg.com.

IndyMac Bancorp Inc., Pasadena, Calif., the holding company for IndyMac Bank, has reported record net earnings of $41.4 million ($0.73 per share) for the second quarter, up 20% from $34.6 million ($0.56 per share) a year earlier.The Mortgage Banking Group produced a record $8.0 billion of loans in the second quarter, up 73% from the volume recorded a year earlier, IndyMac said. "In light of the recent significant increase in long-term Treasury and mortgage rates, the industry appears to be in for an abrupt return to a more normal purchase-dominated mortgage market," said Michael W. Perry, IndyMac's vice chairman and chief executive officer. "Given that the majority of our capital is devoted to investment portfolio activities as opposed to mortgage origination activities and we currently have $259 million of excess capital, we believe we are reasonably well positioned for this likely challenging transition." IndyMac declared a cash dividend of $0.15 per share, up from $0.10 per share in the previous quarter, and pointed to recent changes in the tax laws regarding dividends as the reason for the hike. The company also announced that Terrance G. Hodel, the former president and chief operating officer of North American Mortgage Co., has been appointed to IndyMac's board. IndyMac can be found online at http://www.indymacbank.com.

The Default Risk Index issued by the Nonprime Mortgage Report rose slightly to 103 this quarter from a revised level of 102 in the last quarter, according to University Financial Associates of Ann Arbor, Mich.The index measures the risk of default on newly originated nonprime mortgage loans, UFA said. "The index has been flat for over a year because falling interest rates, which reduce payment burdens for borrowers, are offsetting the eroding prospects for the underlying housing collateral," said Dennis Capozza, professor of finance at the University of Michigan and a principal in UFA. A reading of 103 means that the risk of default on new loans is only 3% higher than the average risk on nonprime loans originated during the 1990s. The analysis is based on a "constant quality" loan, defined as a loan with the same borrower, loan, and collateral characteristics, the company said. UFA can be found online at http://www.ufanet.com.

A new outsource service firm specializing in helping mortgage brokers and mortgage bankers streamline their back-office functions has been established in Houston by Doug Thorpe.The company, Post-Close America, will offer compatibility with all major loan origination systems and document preparation services, said Mr. Thorpe, who will serve as president and manager of the operation. "Coming out of the past three-year run of historically low mortgage interest rates, lenders of all sizes are reeling from record-setting volumes," Mr. Thorpe said. "The investor firms that have purchased these loans are likewise swelled with increased activity. Our firm will help bridge the gap for successful loan sales into the secondary market." The company can be found online at http://www.postcloseamerica.com.