Servicing

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.

Fannie Mae has priced an offering of $300 million of 5.125% noncumulative preferred stock.The 6.0 million shares of Series L stock have a stated value of $50 per share, the government-sponsored enterprise said. Lehman Brothers Inc. and Goldman, Sachs & Co. are the co-lead managers for the issue. Fannie Mae can be found online at http://www.fanniemae.com.

Significant growth in residential mortgage-backed securities volume is being accompanied by regulatory changes and technological advances that will have "a lasting, monumental effect" on the future of that market, according to Standard & Poor's Ratings Services.In a recent commentary, S&P analysts cited the following developments: predatory lending legislation at the state and city levels; advances in alternative valuation modeling; continued standardization of collateral quality characteristics; and the effect of successful modeling in the United States on the advent of global RMBS risk models. "All in all, the explosion of volumes in the residential market has provided opportunities for increased profitability as well as accelerating a number of very positive technological innovations," said Frank Raiter, a managing director in S&P's Structured Finance group in New York. The title of the report is: "As RMBS Issuance Growth Persists, Regulatory Changes and Technological Advances Emerge." S&P can be found online at http://www.standardandpoors.com.

Flagstar Bancorp, Troy, Mich., the holding company for mortgage lender Flagstar Bank, has declared a 2-for-1 split of its common stock in the form of a stock dividend.The dividend will be paid May 15 to stockholders of record at the close of business on April 30, the company said. Cash will be paid in lieu of fractional shares. Flagstar operates 92 bank branches in Michigan and Indiana, 101 loan origination centers in 21 states, and 14 regional correspondent lending offices across the United States. It can be found online at http://www.flagstar.com.

Class B2 of Impac SAC mortgage pass-through certificates, series 1999-2, has been downgraded from B to CCC by Fitch Ratings, and class B1 has been placed on Rating Watch Negative.The rating actions were attributed to high delinquencies relative to the applicable credit support. Fitch can be found on the Web at http://www.fitchratings.com.

Upgrades continued to represent the bulk of rating activity involving U.S. residential mortgage-backed securities in the first quarter, according to Standard & Poor's Ratings Services.S&P's latest Structured Finance Global Ratings Roundup quarterly report indicated that there were 128 performance-related upgrades, six performance-related downgrades, and 21 guarantor-related downgrades in that market in the first quarter. The affected collateral types included prime, home equity, and home improvement mortgage loans. Transactions backed by prime residential mortgage collateral recorded the highest number of upgrades, followed by deals backed by home equity loans, S&P said. In contrast, the only rating actions on home improvement loan deals were negative. "The prime sector's strong performance continues to showcase the stability of prime collateral, evidenced by the consistency of rating activity over the course of the past few years," said Ernestine Warner, a director in S&P's Structured Finance Surveillance group.

Freddie Mac has reported that its total market share (vis-a-vis that of Fannie Mae) fell from 41% to 32% in the first quarter and its total mortgage portfolio declined at a 1% annualized rate.The report was made in lieu of a first-quarter earnings report, which is being delayed pending previously announced restatements of annual financial results for 2000, 2001, and 2002 and quarterly financial results for 2001 and 2002. The government-sponsored enterprise attributed its loss of market share primarily to "the implementation of higher fees and weak PC security price performance early in the quarter" and predicted that its market share would return to "more typical levels" over the remainder of the year. The GSE's retained portfolio grew by $1 billion during the quarter (a 1% annualized rate), while its total PC portfolio declined by $9 billion (a 3% annualized rate). Freddie Mac also reported that its non-credit-enhanced single-family delinquency rate stood at 0.30% at the end of February, and its multifamily delinquency rate was 0.01%. The pending financial restatements stem from the GSE's re-evaluation, in conjunction with its new auditor, PricewaterhouseCoopers, of certain former accounting policies. Freddie Mac can be found online at http://www.freddiemac.com.