Servicing

Mortgage purchases by Fannie Mae fell in February to $106 billion, the secondary giant's weakest purchase month since November, but the decline will likely be short-lived.The company reported that retained commitments (an indicator of future activity) rose to $51 billion during the month, compared with just $25 billion in January. Fannie's "duration gap," which measures asset/liability repricing durations, increased to negative-five months in February. In trading at midday Thursday, Fannie's shares were up about 1%. "In all, February was another solid month" for the company, said Salomon Smith Barney analyst Matt Vetto. Fannie's best purchase month ever occurred in January, when it bought $121 billion in mostly home mortgages. Fannie Mae can be found online at http://www.fanniemae.com.

Fourteen corporate-guaranteed classes of Conseco Finance Corp.-related transactions have been downgraded from CCC-minus to D (default) by Standard & Poor's Ratings Services.In addition, the ratings on all classes above B-2 from the transactions originated between 1995 and 2002 remain on CreditWatch with negative implications. The downgraded classes are the B-2 classes in the following Green Tree Financial Corp. Manufactured Housing Trust series: 1995-2, 1995-3, 1995-4, 1995-5, 1995-6, 1995-7, 1995-8, 1995-9, 1995-10, 1996-1, 1996-2, 1996-7, 1996-10, and 1997-4. S&P said the subordinate B-2 certificateholders of the affected trusts experienced interest shortfalls in February for the second consecutive month. The interest shortfalls (about $3.26 million) represent rating defaults, and without the guarantee payments deposited by Conseco, S&P said it believes that B-2 interest shortfalls "will continue to be prevalent in the future for all of the guaranteed certificates, given the adverse performance trends displayed by the underlying pools of collateral that secure these classes, as well as the location of B-2 interest at the bottom of the transaction payment priorities (after distributions of senior principal)." S&P can be found on the Web at http://www.standardandpooors.com.

Thirteen classes of senior and subordinated mortgage-backed securities issued by Citicorp Mortgage Securities Inc. from 1989 through 1994 have been placed under review for possible downgrade by Moody's Investors Service.The affected securities are as follows: series 1989-05, class A-4; series 1990-05, classes A-4 and A-7; series 1990-08, class A-7; series 1990-09, classes A-3 and B; series 1990-12, class B; series 1990-14, class B; series 1993-08, class B-1; series 1993-10, class B-1; series 1993-14, class B-1; series 1994-02, class B-1; and series 1994-06, class B-1. The review is based on the poor performance of the underlying loans with respect to cumulative losses and available credit enhancement. Moody's has also placed under review for possible upgrade the ratings of 19 MBS classes issued by Citicorp from 1988 through 1994. Moody's can be found online at http://www.moodys.com.

Eight classes of IndyMac Manufactured Housing Contract Trust pass-through certificates have been downgraded by Fitch Ratings.The ratings on 11 other classes of IndyMac MH deals were affirmed. In series 1997-1, the downgrades were as follows: class M, from A to BBB; and class B-1, from CCC to C. In series 1998-1, the downgrades were: class M, from A to BBB; and class B-1, from CCC to C. In series 1998-2, the downgrades were: class M-1, from A to BBB-minus; class M-2, from BBB-minus to BB-minus; class B-1, from CCC to C; and class B-2, from C to D. All four M classes were removed from Rating Watch Negative. Fitch attributed the downgrades to the "continued poor performance" of the underlying collateral. "Although IndyMac exited the manufactured housing lending business in mid-1999, it continues to service its loans from Pasadena, where the company's mortgage loan servicing operation is located," Fitch said. The rating agency can be found online at http://www.fitchratings.com.

C-BASS, New York, has completed a real estate mortgage investment conduit deal backed by approximately $276 million of residential mortgages.The company said the REMIC -- Salomon Mortgage Loan Trust, Series 2003-CB1 C-BASS Mortgage Loan Asset-Backed Certificates -- consists of about $261.2 million of publicly offered certificates underwritten by Salomon Smith Barney, J.P. Morgan, and Blaylock Partners. The servicer on the deal is Litton Loan Servicing LP, a C-BASS subsidiary. C-BASS specializes in acquiring, servicing, and securitizing "credit-sensitive" residential mortgages. The company can be found online at http://www.c-bass.com.

Prepayment rates for agency mortgage-backed securities rose for 30-year coupons below 6.5% in the February reporting period, but speeds generally held steady or slowed for coupons at and above that level, according to the Bear Stearns Prepayment Commentary.The 6.0% Fannie Mae and Freddie Mac coupons were "the focus of increased refinancing activity" in the report, rising by constant prepayment rates of about 4 CPR and 7 CPR, respectively, said analysts Dale Westhoff and Bruce Kramer. "With 30-year mortgage rates consistently under 6.0% since mid-December, the stage was set for fast speeds in February, but the lid was kept on by a low day count (19 business days in the month) and the weather," the analysts said. "As a result, speeds went sideways in most issues except the brand new ones." Messrs. Westhoff and Kramer estimated that 88% of the "mortgage universe" is refinanceable at current mortgage rates. Citing their prepayment models, they projected "a significant upsurge" in speeds through the early summer months as long as rates stay near current levels. Bear Stearns can be found online at http://www.bearstearns.com.

In February the U.S. economy suffered its worst employment drop since the aftermath of the Sept. 11 terrorist attacks -- but the mortgage industry continued to add jobs like there's no tomorrow.Mortgage employment totaled 421,000 full-time positions in February, a 1.8% gain from January's total and a stunning 17.5% increase from that of a year earlier, according to the Labor Department. Countrywide Home Loans chief Angelo Mozilo told MortgageWire March 5 that loan volumes continue to be strong at his shop. "We're gaining market share," he said. First Collateral's Lynn Merkle said his firm recently had its best day ever, funding 2,000 loans. "February is usually the low point in the cycle, but not this year," Mr. Merkle said. (First Collateral is a warehouse funder that finances mortgage bankers.) Application volumes slowed briefly in early February, lenders reported, but picked up again in recent weeks as mortgage rates fell to new lows.

The securitization of nonperforming and reperforming government-guaranteed loans is a fast-growing segment of the residential mortgage-backed securities market, according to Moody's Investors Service.Moody's said $20 billion of nonperforming and reperforming loans backed by the Federal Housing Administration and the Department of Veterans Affairs were securitized in 2002, up from $7 billion in 2001. "The reperforming and nonperforming loans typically have been repurchased out of Ginnie Mae pools," said Warren Kornfeld, a Moody's analyst. He said the credit quality of the loans is "comparable to that of weaker-than-average subprime" MBS transactions. Moody's can be found online at http://www.moodys.com.

Washington Mutual Inc.'s fixed-income institutional broker-dealer has reported that it plans to expand its sales office in New York to include trading, compliance, and support functions.By expanding the office to include trading, WaMu Capital Corp. will have better access to Wall Street firms and increased market opportunities, Washington Mutual said. WaMu Capital is finalizing a midtown Manhattan location and expects the new office to open by the end of June. Washington Mutual can be found online at http://www.wamu.com.

First Republic Bank, San Francisco and its subsidiary, Trainer Wortham & Co., has reported that they have completed a $300 million collateralized bond obligation, the net proceeds of which have been used to purchase a portfolio of mortgage-related securities.The diversified portfolio purchased consists primarily of asset-backed, investment grade securities. These ABS are primarily residential mortgage-backed securities and commercial MBS. First Republic can be found online at http://www.firstrepublic.com.