Servicing

The residential subprime and residential special servicer ratings of Fairbanks Capital Corp. have been lowered from Strong to Below Average and removed from CreditWatch negative by Standard & Poor's.As a result, Fairbanks' status as an S&P Select Servicer has been withdrawn, which means it can no longer be named as a primary servicer on future S&P-rated residential mortgage-backed securities deals. S&P said it has conducted surveillance of Fairbanks' servicing operations over the past 18 months, and that recent information from the company reveals "a number of process breakdowns," including a pattern of apparent violations of the Fair Debt Collection Practices Act. "Fairbanks has not fully managed the portfolio growth and integration of functions and platforms associated with the acquisitions that occurred during the past 36 months," S&P said. "The reasons include insufficient management oversight and controls, inadequate technology and training, and ineffective vendor oversight, resulting in an environment that poses significant risk exposure." S&P also pointed to "the amount of consumer-oriented litigation" against Fairbanks in the past year, which has prompted reviews by the Department of Housing and Urban Development and the Federal Trade Commission. S&P can be found online at http://www.standardandpoors.com.

Forty-three percent of the homeowners who refinanced their homes in the third quarter tapped into their equity by getting a mortgage at least 5% larger than the original loan, according to Freddie Mac's quarterly refinance review.The figure was up slightly from 41% in the fourth quarter but down dramatically from 60% in the first quarter of 2002, the government-sponsored enterprise said. "Interest rates on 30-year fixed-rate mortgages have been below 6% for the last 18 weeks, setting five record lows this year," said Amy Crews Cutts, Freddie Mac's deputy chief economist. "This added tremendous fuel to the longest refi boom in U.S. history. Additionally, homeowners have continued to extract equity from their homes when they refinance due to the strong growth in home values over the past several years and the very low cost of mortgage financing." Freddie Mac can be found online at http://www.freddiemac.com.

A key U.S. mortgage-backed security price hit an all-time high April 30 as a Treasury rally brought the benchmark 10-year government bond yield into a lower trading range close to 3.8% and month-end buying boosted the market's appetite for MBS, a Nomura Securities International researcher said.Art Frank, director of MBS research at Nomura, said the benchmark Fannie Mae 5.5% mortgage pass-through coupon slated for May settlement set a record when it closed at 102 7/8 on April 30 and was trading slightly lower at mid-day May 1. The rate-indicative 10-year Treasury bond yield, which moves in the opposite direction from that of bond prices, has been drifting lower but had remained more or less in the 3.9% to 4.0% range until April 30.

Fannie Mae's charter as a government-sponsored enterprise is "a balancing of pluses and minuses," according to Franklin D. Raines, the GSE's chairman and chief executive officer.Mr. Raines made the comment in response to a question at the UBS Warburg Global Financial Services Conference in New York, asking whether Fannie Mae would ever consider giving up its GSE status. If the minuses began to outweigh the pluses, he would have "a fiduciary duty" to the company's stockholders to do something about that, Mr. Raines said. "The burdens on us are not so overwhelming that it makes it impossible to raise private capital," he continued. Later, at the breakout session, he was asked about Fannie Mae's battles with opposition groups in Washington. Mr. Raines said these groups have hired lobbyists "who are being paid to stir the pot," but that they are not making any progress. FM Watch is losing supporters, he continued, but he stopped short of declaring victory over the group. Fannie Mae can be found online at http://www.fanniemae.com.

IndyMac Bancorp Inc., Pasadena, Calif., the holding company for IndyMac Bank, has reported net earnings of $36.9 million for the first quarter and record earnings per share of $0.66.The savings and loan produced a record $6.5 billion of mortgage loans in the first quarter, up 59% from the level of a year earlier, IndyMac said. The company's mortgage pipeline stood at a record $6 billion as of March 31, up 101% from that of a year earlier. IndyMac's portfolio of mortgage loans serviced for others totaled $28 billion, up 22% from the level recorded on March 31, 2002. IndyMac can be found online at http://www.indymacbank.com.

The residential primary servicer and special servicer ratings of Fairbanks Capital Corp. have been placed on Rating Watch Negative by Fitch Ratings pending a review of certain reporting and remittance practices.The rating agency said Fairbanks has changed its servicing procedures regarding certain transactions to allow for the charging of interest on advances paid by Fairbanks, raising questions about whether the practice is considered "reasonable and customary" for the industry. To evaluate the practice, Fitch's Operational Risk Group has scheduled an on-site review at the company's four servicing facilities in Utah, Texas, Florida, and Pennsylvania. The review, which is scheduled to be completed within 30 days, will also address allegations by consumers that Fairbanks has engaged in predatory and deceptive business practices. Those allegations, and related lawsuits, have prompted reviews by the Department of Housing and Urban Development and the Federal Trade Commission. Fairbanks' current residential primary servicer ratings are RPS1 for subprime loans and RPS1-minus for alternative-A and home equity loans, and its residential special servicer rating is RSS1. Fitch can be found online at http://www.fitchratings.com.

Countrywide Financial Corp., Calabasas, Calif., which has reported taking a nearly $1 billion writedown to the value of its mortgage servicing rights in the first quarter, says those MSRs are poised to generate earnings when rates rise.In a conference call with investors and analysts, Countrywide chairman Angelo Mozilo said servicing rights will "provide a significant share of the earnings mix when rates ultimately rise." He also noted that the MSR asset is valued at $5.3 billion on Countrywide's books, a relatively small portion of the firm's $74 billion balance sheet. He said the intrinsic value of the MSR asset is "significantly higher" than the value recorded on the balance sheet because of the potential for ancillary income from cross-sales and other sources. Investors seemed to agree, focusing on the fact that Countrywide beat analyst expectations for first-quarter income and raised its guidance on income for the rest of the year. The company's stock rose almost 9% April 29 to close at $67.83, a 52-week high for the firm.

Countrywide Financial Corp., Calabasas, Calif., has reported record earnings of $326 million ($2.44 per share) for the first quarter, up 95% from $168 million ($1.32 per share) a year earlier.Pretax earnings by the company's mortgage banking operations totaled $354 million in the first quarter, up 85% from $192 million in the first quarter of 2002. "This marks the second consecutive quarter in which fundings surpassed the $100 billion mark and exceeded loan portfolio prepayments by over $50 billion," said Angelo R. Mozilo, Countrywide's chairman and chief executive officer. "Our servicing portfolio has surpassed $500 billion, driven almost exclusively by our internal production efforts." The servicing portfolio stood at $355 billion in March 2002. Mr. Mozilo also pointed to the expansion of the company's new business lines, which achieved pretax earnings of $170 million in the first quarter, representing 32% of total pretax earnings. The company can be found online at http://www.countrywide.com.

Nearly 450 members of America's Community Bankers are selling mortgages to Fannie Mae, Freddie Mac, and private wholesalers participating in the trade group's Mortgage Solutions program.Those institutions, which represent nearly 40% of ACB's membership, have sold $10 billion in loans to the wholesalers so far this year. Last year, loan volume totaled $22 billion. The Mortgage Solutions program, which was started in early 2001, offers thrifts and savings banks special deals as well as access to technology. Countrywide Home Loans, Principal Residential Mortgage, and Financial Freedom Senior Funding Corp. also participate in the conduit program. "Collectively, our members have accrued bottom-line value of more than $60 million through the unprecedented member-advantaged features of these programs," ACB spokesman Robert Schmermund said. ACB can be found online at http://www.acbankers.org.

CBC Cos., Columbus, Ohio, has announced an expansion of its mortgage and real estate services with the acquisition of Nationwide Document Service, Scottsdale, Ariz., and Denali Ventures Inc., Cheyenne, Wyo.The terms of the transactions were not disclosed. CBC said the acquisition of Nationwide Document Service enables it to offer mortgage lenders the services of more than 6,000 trained notaries who can deliver closing documents to the borrower's home or office for signature. With the acquisition of Denali Ventures, CBC said it now offers nationwide property preservation, clean-up service, winterization, and maintenance to lenders with residential real estate owned properties. "With the acquisition of these companies, CBC Companies will be able to offer a comprehensive group of mortgage and real estate services to customers nationwide, saving them both time and money," said Richard Alexander, CBC's director of business development. The companies can be found on the Web at http://www.cbc-companies.com, http://www.nationdocs.com, and http://www.denaliventures.com.