Servicing

Fitch Ratings has joined other rating agencies in downgrading the servicer ratings of Fairbanks Capital Corp., Salt Lake City, in the aftermath of a controversy regarding the company's loan administration practices.Fitch downgraded Fairbanks' residential subprime servicer rating to RPS2-minus from RPS1, the highest rating Fitch bestows. Fitch also lowered Fairbanks' alternative-A, home equity, and special servicer ratings to the same '2-minus' level. All the ratings remain on Rating Watch Negative. Fitch said the downgrades reflect uncertainty regarding Fairbanks' financial viability, management stability, and operational strength. Fitch can be found online at http://www.fitchratings.com.

Twenty-four classes of PNC Mortgage Securities Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings, and 15 of them have been removed from Rating Watch Negative.The affected classes come from 20 separate PNC securitizations issued in 1998, 1999, and 2000. Fitch also placed five classes on Rating Watch Negative. The rating agency attributed the actions to high delinquencies relative to applicable credit support. Fitch can be found online at http://www.fitchratings.com.

Fairbanks Capital Holding Corp., a subprime servicer based in Salt Lake City, has announced that Brad Shuster has been named chairman of the company and James Ozanne will take over as chief executive officer.Mr. Shuster and Mr. Ozanne are currently directors of the company and its subsidiaries. Mr. Ozanne will step down from the board and be replaced by Alex Makowski, a managing director of Financial Security Assurance. Tom Basmajian, former Fairbanks chairman and CEO, will "assist with its constituent relations," working with Mr. Ozanne, the company said. William Garland will remain as president, with duties now to include systems, investor reporting, and alternative-A servicing. Fairbanks is under investigation by the Department of Housing and Urban Development and the Federal Trade Commission in connection with its servicing practices.

Three classes of Merrill Lynch Mortgage Investors Inc.'s mortgage pass-through certificates, series 1999-C1, have been downgraded by Fitch Ratings.The downgrades were as follows: class F, from BBB-minus to BB-plus; class G, from B-plus to B; and class H, from CCC to CC. The rating agency also removed class F from Rating Watch Negative and affirmed the ratings on eight other Fitch-rated classes in the deal. Fitch attributed the downgrades to its re-evaluation of specially serviced loans, which resulted in higher expected losses of approximately $25 million since its previous annual review. "In addition, Fitch is concerned with the increasing amount of specially serviced loans and the interest shortfalls," the rating agency said.

Seven classes from four home equity securitizations issued by GE Capital Mortgage Services Inc. have been downgraded by Fitch Ratings.The downgrades are as follows: series 1997-HE3, class B-1, from A-minus to BBB-minus, and class B-2, from B to CC; series 1997-HE4, class B-2, from B to CCC; series 1999-HE1, class B-2, from BBB-minus to BB, and class B-3, from B-minus to CC; and series 1999-HE3, class B-3, from BB to B, and class B-4, from CCC to D. Fitch also placed class M of series 1997-HE3 and class B-1 of series 1997-HE4 on Rating Watch Negative and affirmed 16 other classes from the four transactions. The rating agency attributed the downgrades to loss levels and high delinquencies relative to the applicable credit support. Fitch can be found online at http://www.fitchratings.com.

In response to the GMACCM announcement, Standard & Poor's placed its commercial mortgage servicer rankings for GMACCM and two Lend Lease business units on CreditWatch.S&P said its Above Average commercial servicer and master servicer rankings for GMACCM have been placed on CreditWatch with developing implications, and its Strong commercial special servicer ranking for that company has been placed on CreditWatch with negative implications. In addition, its Strong commercial servicer and master servicer rankings for CapMark Services and its Strong commercial special servicer ranking for Lend Lease Asset Management LP have been placed on CreditWatch with negative implications, the rating agency said. Citing the magnitude of the acquisition, S&P said it will monitor all the entities "for signs of any operational disruptions in their abilities to fulfill their respective ongoing master, primary, and special servicing obligations." Regarding its special servicer ranking on Lend Lease, S&P said it will "re-examine the depth of the company's revised organizational structure after it transfers many of its asset managers to GMACCM with the special servicing contracts." S&P can be found online at http://www.standardandpoors.com.

GMAC Commercial Mortgage Corp., Horsham, Pa., has announced that it plans to acquire three businesses from Lend Lease Corp. Ltd., an Australian global real estate group.The terms of the deal were not disclosed. The three units are CapMark Services, the Debt Advisory Group, and the North American Asset Management business. David E. Creamer, chairman of GMAC Commercial Holding Corp., the parent company of GMACCM, said CapMark has a $60 billion servicing portfolio that will be a significant addition to GMACCM's portfolio. The acquisition will also include $5 billion in management accounts from the Debt Advisory Group and $21 billion in special servicing through the asset management unit. GMACCM can be found on the Web at http://www.gmaccm.com.

Washington Mutual Inc., Seattle, has announced that year-to-date sales by its subsidiaries of Fannie Mae 1/4-coupon mortgage-backed securities have exceeded $10 billion.The 1/4 coupon MBS -- coupons that can be denominated in 1/4-percentage-point increments such as 6.25% rather than 1/2-point increments -- "more closely aligns the MBS coupon with the rate on the underlying mortgage loans, resulting in greater predictability for prepayment speeds," WaMu said. Marito Domingo, executive vice president of capital markets in WaMu's Home Loans and Insurance Services Group, termed the greater acceptance of such coupons "a tremendous development" that indicates "the capital markets are ready to evolve toward more efficient MBS execution." WaMu said the ability to sell MBS in smaller increments also permits "easier management of excess servicing fees and, ultimately, a servicer's mortgage servicing rights." The company can be found online at http://www.wamu.com.

Prepayment rates for agency mortgage-backed securities shot up for new 30-year coupons at and below 6.5% in April, with Freddie Mac MBS speeds outpacing those of Fannie Mae, according to the Bear Stearns Prepayment Commentary.Among Fannie Maes, speeds for the 2002 vintage 5.5s, 6.0s, and 6.5s increased by constant prepayment rates of 9-12 CPR, reaching 20, 50, and 63 CPR, respectively, analysts Dale Westhoff and Bruce Kramer reported. For comparable Freddie Macs, speeds were 3-6 CPR faster. "We trace this difference to two sources: 1) the heavy concentration of Wells Fargo loans (they tend to prepay faster because of large loan sizes); 2) the shorter refinancing aging ramp associated with ABN Amro pools," the analysts said. Noting the recent return of mortgage rates to near their 40-year lows, the Bear Stearns analysts said they expect about $2.3 trillion of agency fixed-rate pools -- which they estimated to be about 80% of the market -- to be exposed to a refinancing incentive of at least 40 basis points. Bear Stearns can be found online at http://www.bearstearns.com.

The rapid growth in the issuance of residential mortgage-backed securities cannot be sustained much longer, according to speakers at S&P's annual structured finance seminar in Orlando.The issuance of nonconforming mortgage products surged in the first quarter, reaching a level 42% higher than that of a year earlier, S&P reported. It was the fifth consecutive quarter of rising issuance. "It is unusual to have such a significant drop in interest rates and appreciation of real estate prices simultaneously," said Rod Dubitsky, a director in Mortgage ABS Research at Credit Suisse First Boston. Mr. Dubitsky expressed doubt that the conditions will continue for long. "Volume will still be strong, but not as strong as we have seen," he said. Thomas Zimmerman, executive director of UBS Warburg, told the seminar that low interest rates and the refinancing boom are not the only factors involved in the RMBS volume growth. "It is difficult to sort out exactly whether the explosion in volume over the past few years is because of the decline in rates or from a broadening of the product in the subprime market," Mr. Zimmerman said. "It may also be ... the general credit decline by consumers in the U.S. that has pushed them back into the subprime area."