Servicing

Six months ago at its annual convention, the Mortgage Bankers Association was looking for $1.8 trillion in loan originations in 2003.Two months ago, the MBA raised its forecast to $2 trillion. Now, Chief Economist Doug Duncan expects this year's volume to reach a "best ever" $2.6 trillion. "Half of that is already in the pipeline, so it's not too much a stretch" to believe loan production this year will top last year's record of $2.5 billion, Mr. Duncan said at the MBA's National Secondary Market Conference in New York. The economist expects 58% of this year's total to be refinancings, just about the same as the 59% recorded in 2002. But he thinks home sales will remain flat. Mr. Duncan also predicted "only a modest uptick" in mortgage rates over the year, to 6.1% in the third quarter and 6.3% in the fourth. "Rates will rise through the end of the year, but only modestly," the economist said. As for the overall economy, Mr. Duncan said jobs remain key. "War is on everyone's mind, but at the end of the day, jobs are what is going to make the difference," he said. Unfortunately, he is looking for the unemployment rate to rise. Over 400,000 jobs have been lost of the payroll side in the last two months, he pointed out.

In February, mortgage insurers underwrote $26 billion of new, primary MI coverage and the performance of existing policies improved, according to the Mortgage Insurance Cos. of America.The new insurance volume is down 6.5% from January's $27.8 billion. By category, February volume breaks down to $22.7 billion traditional and $3.3 billion bulk. Application volume declined by nearly 5% from January, from 247,955 to 236,050. For the first time in nearly a year, there are more primary insurance cures than there are defaults. There were 52,288 cures compared with 49,334 defaults for a ratio of 106%. The last time the ratio was over 100% was in March 2002. In January, the ratio hit a recent low of 75.9%.

The ratings on four classes of Merrill Lynch Mortgage Investors Inc.'s mortgage pass-through certificates, series 1998-C2, have been lowered by Standard & Poor's Ratings Services and removed from CreditWatch with negative implications.The ratings were lowered as follows: class F, from BB to B; class G, from BB-minus to B-minus; class H, from B to CCC; and class J, from B-minus to D. The rating agency also affirmed the ratings on seven other S&P-rated classes of the deal. S&P attributed the lowered ratings on classes H and J to interest shortfalls resulting largely from appraisal subordinated entitlement reduction amounts, or ASERs. The lowered ratings on classes F and G were due to an erosion of credit support that is expected to occur upon the disposition of some of the specially serviced assets, the rating agency said. S&P can be found online at http://www.standardandpoors.com.

The U.S. job engine continues to stall -- but not in the mortgage industry. According to figures released April 4 by the Bureau of Labor Statistics, the mortgage banking and brokerage sectors added 3,300 full-time positions during March.Mortgage employment now stands at an all-time high of 425,000. A year ago the industry employed 356,000. Year-to-year mortgage employment is up a stunning 19%. Of course, industry veterans are well aware that when production begins to fall, layoffs are all but certain. But for now, refis and purchase-money loans are keeping funders busy from coast to coast. And if the Federal Reserve cuts rates further, production could easily stay strong through the end of December. Overall, the U.S. unemployment rate stayed steady at 5.8% in March.

The Federal Home Loan Banks' portfolio of Mortgage Partnership Finance loans reached $50 billion in the first quarter as originations jumped nearly 33% and the first securitization of MPF loans was completed.The Chicago FHLBank bank reported that single-family loan originations jumped from $12.2 billion in the fourth quarter to $16.2 billion in the first quarter. Originations in the third quarter totaled $6.1 billion. Despite runoff from refinancings, the MPF loan portfolio held by participating FHLBanks grew from $41.7 billion in the fourth quarter to $53.6 billion as of March 31. Just before the end of the first quarter, three FHLBanks purchased the senior tranches of a $475 million collateralized mortgage obligation -- backed by MPF loans originated by National City Mortgage and Wells Fargo Home Mortgage. The $475 million CMO is the first "shared funding" transaction, and it is designed to make the MPF program more attractive to the FHLBanks' largest members.

Abington Bancorp, Weymouth, Mass., has reported requesting an extension for filing its 2002 Form 10-K in order to revise previously reported results to account for changed prepayment assumptions and errors in accounting related to mortgage-backed securities.Abington, the holding company for Abington Savings Bank, said it expects to file the form with the Securities and Exchange Commission by April 15. Abington said an internal review by the bank's accounting department found that prepayment assumptions used in calculating net interest margins in 2002 did not adequately reflect actual prepayment rates for some of its MBS. The bank also determined that certain payments received on portions of its MBS portfolio were not property applied. Abington estimated that the corrections and revised assumptions will cause the bank's adjusted earnings for 2002 to decrease by no more than $0.58 per share from the previously reported $2.07. The bank can be found online at http://www.abingtonsavings.com.

American Business Financial Services Inc., Bala Cynwyd, Pa., has closed a $450 million fixed-rate mortgage loan securitization via three subsidiaries.The real estate mortgage investment conduit deal, ABFS Mortgage Loan Trust 2003-1, was the largest ever by the company. It was increased from $400 million at the request of Bear Stearns & Co. Inc., the lead manager, and Credit Suisse First Boston, the co-manager, in order to accommodate demand, ABFS said. The company's three subsidiaries are American Business Credit Inc., Upland Mortgage, and American Business Mortgage Services Inc. The company's website address is http://www.abfsonline.com.

Fannie Mae has announced that all new issuances of its mortgage-backed securities will be accompanied by the six additional "pool-specific" disclosures it recently pledged to provide, and that the same information will be provided for existing MBS beginning in June.The new data elements are: loan-to-value ratios, borrowers' credit scores, loan purpose, occupancy type, property type, and servicer identity. A federal task force consisting of the Office of Federal Housing Enterprise Oversight, the Treasury Department, and the Securities and Exchange Commission recommended in February that Fannie Mae and Freddie Mac make such disclosures, and the two government-sponsored enterprises quickly agreed to do so. The information on new Fannie Mae MBS will be included in its Single-Family MBS Prospectus Supplements, and the data for new pools and pools issued since May 1, 1996 will be updated monthly (starting in June) in Fannie Mae's online PoolTalk, the GSE said.

Fitch Ratings has announced that it "does not currently expect" to change its servicer ratings of Fairbanks Capital Corp. as a result of federal regulatory reviews of Fairbanks' subprime servicing practices or potential liability from existing lawsuits.Fitch said many lawsuits have been filed against Fairbanks alleging predatory and deceptive business practices, which the rating agency said it takes very seriously. "However, Fairbanks has been the specific target of groups who have formed a combined effort to bring their issues to the attention of the media, regulators, and the rating agencies," Fitch said. The reviews cited by Fitch have been announced by the Department of Housing and Urban Development and the Federal Trade Commission. Fairbanks' residential primary servicer ratings by Fitch are RPS1 for subprime loans and RPS1-minus for alternative-A and home equity loans, and its residential special servicer rating is RSS1, the rating agency said. "If at any time Fitch determines that Fairbanks has not fully met the requirements of a servicer at its current rating level, or if there is any legal or regulatory finding that Fairbanks has engaged in practices that violate federal or state laws, Fitch will take immediate and definitive action with regard to their servicer rating," Fitch said.

Fitch Ratings has introduced a new set of indexes for residential mortgage-backed securities designed to offer performance analysis based on loan-level data.The RMBS Market Sector Performance Indices will present delinquency and foreclosure statistics on the prime, alternative-A, and subprime market sectors, although only the subprime indexes were available as of March 31, Fitch said. The indexes will offer a short commentary on each market sector's performance, and the statistics and commentary will be updated monthly, the rating agency said. "The new Fitch RMBS Market Sector Indices offer high-quality mortgage loan data, flexibility in data analysis, and static mortgage pools," said Susan Kulakowski, a senior director at Fitch. She said Fitch standardizes monthly performance data, grouping mortgages into appropriate pools that are then linked to the appropriate RMBS. Subscribers to Fitch's website can access the indexes at http://www.fitchratings.com.