Servicing

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.

The insurer financial strength rating of Mortgage Guaranty Insurance Corp. has been affirmed at AA-plus by Fitch Ratings, but the outlook for the AA-minus debt ratings of MGIC Investment Corp. has been changed from Stable to Negative.Fitch said MGIC's "very strong" insurer financial strength rating reflects "its leadership position in the mortgage insurance marketplace, its consistent profitability and [consequent] capital generation capabilities, and its high-quality balance sheet." However, the negative rating outlook on its MGIC Investment subsidiary's debt ratings "reflects Fitch's concern with the parent company's more aggressive management of its financial leverage," the rating agency said. "At March 31, 2003, the ratio of debt to adjusted total capital was 19.0%, up from 13.7% at year-end 2001."

Eleven classes in various structured finance deals have been downgraded by Fitch Ratings following a review of 90 subprime and specialty transactions entirely or partially serviced by Fairbanks Capital Corp.The downgrades were as follows: DLJ 1994-Q7, class B-1, from B to CCC; DLJ 1994-Q8 P1, class IB-1, from BB to B; DLJ 1995-Q10, class B2, from CCC to C; DLJ 1996-Q2, classes B-1 and B-2, from CCC to D; DLJ 1996-Q4, class B-2, from BB-minus to D; IMC 1997-3, class M-2, from BBB-minus to BB; IMC 1997-5, class M-2, from BBB-minus to BB; IMC 1998-1, class B, from BBB-minus to BB; IMC 1998-5, class B, from BBB to BB-minus; and WMC 1997-2, class B, from BB to B. Fitch also affirmed 381 other classes, and 11 were placed or left on Rating Watch Negative. The review stemmed from recent downgrades of Fairbanks' servicer ratings as follows: residential primary servicer for subprime and home equity, from RPS2-minus to RPS3-minus; alternative-A primary servicer, from RPS2-minus to RPS3; and special servicer, from RSS2-minus to RSS3. "If Fitch's opinion were solely based upon the Fairbanks rating actions, many classes would have been downgraded," the rating agency said. "However, in the recent environment the consideration of seasoning, performance, and most notably LIBOR movements were significant mitigants."

Provident Financial Group Inc., Cincinnati, has announced the sale of $471 million of subprime residential mortgage loans as part of an effort to align its core businesses with its corporate strategy.Provident said it sold the mortgage loans at a $40 million net discount. "Removing these subprime mortgage loans from our balance sheet significantly improves our credit quality metrics, including lowering the level of nonperforming loans," said Robert L. Hoverson, Provident's president and chief executive officer. "These subprime mortgage loans represented approximately 5% of our total loan portfolio, and approximately $53 million, or 26%, of nonperforming assets." Provident also reported the sale of its Merchant Services payment systems business and an agreement to sell its 13 Florida branches to RBC Centura Bank. Provident can be found online at http://www.provident-bank.com.

Class B-5 of ICIFC (Impac) Secured Assets Corp. mortgage pass-through certificates, series 1997-2, has been downgraded from CCC to D by Fitch Ratings.The rating agency also affirmed the ratings on six other classes in the deal. Fitch attributed the downgrade to high delinquencies relative to applicable credit support as of the June 25 distribution.

Prepayment rates for Fannie Mae and Freddie Mac mortgage-backed securities surged in June for recently originated 30-year 5.5% coupons and rose significantly for 6.0% coupons as well, according to the Bear Stearns Prepayment Commentary.Speeds for Fannie Mae '03 vintage 5.5s jumped from a constant prepayment rate of 7.2 to 20.8, while speeds for the '02 vintage soared from 18.6 CPR to 42.4 CPR, a record increase, Bear Stearns analysts Dale Westhoff and Bruce Kramer reported. The analysts said the "most notable aspect" of the June report was the divergence in response between lower coupons (6.0% and lower) and higher coupons (6.5% and higher). "The lower coupons, especially the 5.5s, saw a spectacular jump in speeds based on a first-time opportunity to refinance," they said. ".... Since today's report corresponds to a mortgage rate of approximately 5.5% and a [Mortgage Bankers Association of America] Refinancing Index of between 7500 and 8000, we expect to see additional increases develop in next month's report in response to a record low in mortgage rates of 5.25% and a 10000 peak in the Refinancing Index." Bear Stearns can be found online at http://www.bearstearns.com.

Contrary to expectations, a weak economy and rising unemployment have not weakened the performance of subprime mortgage loans, according to Moody's Investors Service."Through analysis of Moody's Home Equity Index, we see that the increase in unemployment has so far had minimal impact on subprime performance as delinquency rates and losses have held steady," said Julia Tung, a Moody's analyst. However, Moody's warned that future subprime performance could suffer if increased lender competition leads to a relaxation of underwriting standards. Moody's can be found online at http://www.moodys.com.

The ratings on two classes of Morgan Stanley Capital I Inc.'s commercial mortgage pass-through certificates, series 1997-XL1, have been lowered by Standard & Poor's Ratings Services.The downgrades were as follows: class G, from BB to B, and class H, from B to CCC. The ratings on four other classes in the deal were raised, and three others were affirmed. S&P attributed the downgrades to the deterioration in the performance of four of the seven remaining nondefeased loans, which represent 25% of the outstanding pool balance. The loans are: Grand Kempinski Hotel, secured by a luxury hotel in Dallas; Mark Centers Pool, secured by 17 community and neighborhood retail shopping centers in seven Eastern states; Westgate Mall, secured by a regional mall in Fairview Park, Ohio; and Westshore Mall, secured by a mall in Holland, Mich. S&P can be found on the Web at http://www.standardandpoors.com.

Irwin Financial Corp., Columbus, Ind., has announced that it expects its earnings per share for the second quarter to fall "significantly below" its first-quarter EPS because of a revised economic outlook that will hurt the credit quality of its home equity portfolio.Irwin, the parent company of Irwin Mortgage Corp., Irwin Home Equity Corp., and several other subsidiaries, said its EPS for all of 2003 is still expected to be in line with previous guidance of at least $2.25, however. Irwin said its home equity lending segment has been hurt by the weak economy, especially unemployment. Recent forecasts by third-party economists and the Federal Reserve have led the company to believe that its home equity portfolio will be hurt more severely than previously estimated, Irwin said. The company can be found online at http://www.irwinfinancial.com.