Servicing

Two consumer critics of Fairbanks Capital Corp. and its servicing practices have made peace with the nation's largest subprime servicer after getting commitments from the company and its major investors that they will work to resolve consumer disputes.Craig Kenney and Brian Barr said in a news release that they have settled all outstanding litigation and other issues with Fairbanks. "Because we believe that Fairbanks and its primary shareholders are fully committed to addressing and resolving issues raised by a number of borrowers, we will consult with the company in our role as independent consumer advocates to provide advice to the company on implementation of its comprehensive effort to revamp its practices," Mr. Kenney and Mr. Barr said. The Salt Lake City servicer said it is "pleased" to have reached a settlement with its two major critics, who waged a public relations campaign against the company for the past two years. "As part of the settlement, they will provide their views on the company's comprehensive plan to change and improve its loan servicing," Fairbanks said.

Eaton Vance Corp., Boston, has announced a $2 billion initial public offering of common shares of a closed-end fund that will invest in mortgage-backed securities, among others.Eaton Vance Limited Duration Fund issued 101 million shares at an initial price of $20 per share and will trade on the American Stock Exchange under the symbol EVV, the company said. Eaton Vance said the fund plans to use financial leverage initially equal to about 34% of gross assets, which would bring the fund's total assets to approximately $3 billion. "With interest rates on U.S. Treasuries recently at 40-year lows, many investors are increasingly concerned about the possibility of rising rates associated with economic recovery," said James B. Hawkes, chairman and chief executive officer of Eaton Vance. "In the current environment, it may be prudent for investors to shorten the duration of their portfolios to reduce exposure to future changes in interest rates." The company said the fund expects to maintain a duration of two to four years under normal conditions. In addition to MBS, it will invest in senior, secured floating-rate loans and corporate bonds that are below investment-grade quality.

Fairbanks Capital Corp., Salt Lake City, has announced an agreement in principle under which its committed financing for servicing advances and working capital would be extended through Sept. 30, 2004.The agreement in principle was executed May 24 between Fairbanks and a majority of its lenders and shareholders, the company said. Beyond the financing extension, Fairbanks said its primary shareholders have agreed to provide an additional $35 million of financing. "This agreement will provide financial stability for Fairbanks as it moves forward with its multipoint plan and work already initiated to address the concerns recently raised by the rating agencies and other parties," said Jim Ozanne, chief executive officer of Fairbanks. "The company will continue to cooperate fully with the Federal Trade Commission, the Department of Housing and Urban Development, and state regulators on their reviews of the company, and is taking a positive, proactive approach to making borrower-sensitive loan servicing improvements."

Class B-3 of Salomon Brothers Mortgage Securities VII Inc.'s series 1998-AQ1 mortgage pass-through certificates has been downgraded from BB to B by Standard & Poor's.The rating agency also raised its ratings on 12 classes from five Salomon Brothers deals and affirmed its ratings on 158 classes from 48 deals. S&P said the downgrade resulted from the erosion of the class's credit support. "This transaction has been realizing net losses, averaging approximately $334,000 per month during the most recent 12 months, while total delinquencies averaged approximately 14.20% per month during the same period," S&P said.

Five classes in three CWMBS (Countrywide Home Loans) Inc. mortgage pass-through deals have been downgraded by Fitch Ratings and five classes in three other deals have been placed on Rating Watch Negative.The downgrades were as follows: series 2000-1, class B-3, from BB to B, and class B-4, from B to C; series 2000-2, class B-3, from BB to B, and class B-4, from CCC to C; and series 2000-4 ALT 2000-1, class B-3, from B to B-minus and removed from Rating Watch Negative. Classes placed on Rating Watch Negative were as follows: series 2001-3 ALT 2001-2, classes B-3 and B-4; series 2001-10 ALT 2001-6, classes B-3 and B-4; and series 2001-14 ALT 2001-7, class B-2. In addition, five classes out of the six deals were upgraded and the ratings on 12 other classes were affirmed. The actions were based on the number of delinquencies in relation to the applicable credit support, the rating agency said.

Eight classes in three CWMBS (IndyMac) Inc. mortgage pass-through deals have been downgraded by Fitch Ratings.The downgrades were as follows: series 2000-F, class B3, from BB to CCC and removed from Rating Watch Negative, and class B4, from C to D; series 2000-G, class B-3, from BBB to BB, class B-4, from B to CC and removed from Rating Watch Negative, and class B-5, from C to D; and series 2000-H, class B-3, from BBB to BB, class B4, from B to CC and removed from Rating Watch Negative, and class B5, from C to D. In addition, Fitch placed class B-2 of series 2000-F on Rating Watch Negative and affirmed its ratings on five other classes from the three deals. The rating agency said the downgrades stemmed from loss levels and high delinquencies relative to the applicable credit support. Fitch can be found online at http://www.fitchratings.com.

Freddie Mac acquired $64.3 billion worth of mortgages in April, its second-best purchase month of the year, but its retained portfolio continued to suffer from the refinancing boom.At the end of April, Freddie Mac held $568.98 billion in mortgages and others assets, compared with $569.52 billion at the end of March. Compared with the same period a year ago, the company's portfolio is up 9%. But over the past 13 months Freddie Mac has suffered from four sequential declines in its portfolio balance. In April its purchase commitments were a moderately strong $25.2 billion, but down from March's $32.2 billion. Its loan purchases grew 44% in April compared with those of a year earlier, but its chief competitor, Fannie Mae, saw its purchases grow by 140%. The company is in the midst of restating its earnings and will release results for the first and second quarters in July. At noon May 22, its shares were trading down $1.72 to $59.02.

Classes G and H of Morgan Stanley Capital I Inc.'s commercial mortgage pass-through certificates series 1997-XL1 have been placed on Rating Watch Negative by Fitch Ratings.The ratings on nine other classes in the deal were affirmed. The rating agency attributed the Rating Watch placement to the transfer to special servicing of the Westgate Mall loan, secured by a regional mall in Fairview Park, Ohio, and the deterioration in performance of the Grand Kempinski loan, secured by a luxury hotel in Dallas.

Class A-6 of Asset Securitization Corp.'s commercial mortgage pass-through certificates series 1996-MDVI has been placed on CreditWatch with negative implications by Standard & Poor's.S&P also affirmed the ratings on six other classes from the same deal. The action "reflects the refinancing risk associated with the Prime Retail II portfolio loan, which has an outstanding principal balance of $337.1 million (42% of the mortgage pool balance)," S&P said. The loan is collateralized by 13 factory outlet centers in 10 states, the rating agency said.

Fitch Ratings has removed the senior unsecured debt ratings of Countrywide Financial Corp. and Countrywide Home Loans Inc. from Rating Watch Negative.However, the rating outlook is negative, Fitch said. The rating agency placed Countrywide's debt, rated A, on review in February, saying that falling interest rates can substantially reduce the value of assets such as mortgage servicing rights. Fitch attributed the affirmation of the ratings to "the company's additional capital support, strong origination and servicing platforms, declining capitalization of mortgage servicing rights in relation to capital, and continued strength in operating results." On the other hand, the negative outlook "reflects CFC's relatively more aggressive MSR valuations compared to industry peers and the need for improvement in the processes and procedures to effectively manage the complex process of hedging the MSR asset," the rating agency said. Fitch can be found online at http://www.fitchratings.com.