Servicing

Fitch Ratings has placed the debt of Countrywide Financial Corp. on Rating Watch Negative, citing the risk of impairment to the company's balance sheet.Fitch said mortgage companies in general face an increasing risk of impairment, because falling rates can substantially reduce the value of assets such as mortgage servicing rights. The rating agency said Countrywide's MSR portfolio is particularly large in relation to equity. Countrywide, responding to the move, said it has demonstrated its ability to produce record earnings in a falling rate environment while effectively hedging the value of its MSRs. The servicing hedge produced a gain of $1.8 million in 2002, the company said. "Countrywide's management believes that the company is in the strongest financial position in its history and is well positioned for the future," said Angelo Mozilo, the company's chairman and chief executive officer. Most forecasts call for interest rates to increase this year, which would bolster the value of servicing. Fitch can be found online at http://www.fitchratings.com, and Countrywide can be found at http://www.countrywide.com.

Two classes of Structured Asset Securities Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings.Class 2B4 of SASCO 2000-3 Group 2 was downgraded from BB to CCC and remains on Rating Watch Negative, and class 2B5 of the deal was downgraded from C to D. The rating agency attributed the downgrades to loss levels and expected losses on "the current severely delinquent loans in the pipeline" relative to the applicable credit support. Fitch said 10.61% of the SASCO 2000-3 Group 2 pool is over 90 days delinquent, and cumulative losses total 0.54% of the initial pool.

Charles Schwab & Co. Inc., San Francisco, has announced the introduction of a mutual fund that invests primarily in Ginnie Mae mortgage-backed securities.The Schwab GNMA Fund will generally invest at least 80% of its assets in Ginnie Mae MBS, and the remainder will be invested in other fixed-income securities or held in cash, the company said. "Our decision to introduce this fund is in response to client demand for investments that provide strong income and credit safety," said Randy Merk, president of Charles Schwab Investment Management. The fund's subscription period will continue through Feb. 28, and its first day of operation will be March 3. During the subscription period, Schwab clients can invest in the fund at an offering price of $10 per share. The fund is offered in two classes. Investor Shares have an initial investment minimum of $2,500, with subsequent minimums of $500. Select Shares have an initial minimum of $50,000, with subsequent minimums of $1,000.

Freddie Mac is increasing the financial incentives it offers to servicers for using technology, completing workouts with borrowers to avoid foreclosure, and sustaining superior performance under its system of rating servicers by tiers.The incentive program continues to reward servicers in three areas: investor reporting, default management, and superior overall performance. Freddie Mac announced that it is increasing the amounts awarded to servicers for loss mitigation activities that help keep borrowers in their homes. The most significant increases are for certain loan modification and repayment plans, Freddie Mac said. Freddie Mac also said it has developed a new category to reward servicers that use technology to send documentation and information to foreclosure attorneys when foreclosure cannot be avoided. Since 1996, when Freddie Mac introduced its Servicer Performance Profiles, the company has paid out over $15.6 million in incentives to servicers for their loss mitigation efforts. Freddie Mac can be found online at http://www.freddiemac.com.

PHH Corp., a subsidiary of Cendant Corp. based in Parsippany, N.J., has announced a $1 billion public offering of senior unsecured notes, of which $600 million will be issued as 10-year notes and the remainder as five-year notes.PHH said the proceeds will be used to repay short-term debt. Banc of America Securities LLC and Barclays Capital are the joint book-running managers for the offering, which was assigned a BBB-plus rating and a negative rating outlook by Fitch Ratings. Fitch said it views the offering positively because it extends the maturities of PHH's outstanding debt, but pointed to two offsetting factors: the cyclicality of the mortgage business and the "potential impact of the interest rate environment on mortgage servicing rights."

Fannie Mae started the new year right by purchasing a near-record $163.9 billion of loans in January.The secondary giant bought $57.28 billion in mortgages for its portfolio and issued $106.65 billion in "lender-originated" mortgage-backed securities. (National Mortgage News adds these two figures together to arrive at Fannie's monthly purchases.) Fannie measures its purchases by a data point called "business volume." Fannie's business volume in January totaled $121 billion, a record. Its January portfolio purchases were the second-highest on record. Its retained commitments -- a barometer of future purchase activity -- fell to $25.1 billion in January, compared with $29.2 billion in December and $52.7 billion in November. In 2002 Fannie acquired $1.093 trillion in home mortgages, a 60% increase from 2001, and yet another record. Fannie Mae can be found online at http://www.fanniemae.com.

Freddie Mac has provided new details and formats for six new items it will disclose to investors in its mortgage participation certificates, and says the inclusion of borrower credit scores should not raise concern about privacy rights.A spokeswoman said the credit score disclosure will be made at the pool level. "The individual borrowers will not be identified," she said. Earlier, Ginnie Mae executives expressed concern that disclosing borrower credit scores could run afoul of recently enacted federal privacy laws. The other new disclosure items, all recommended by a federal task force, include original loan-to-value ratio, loan purpose, servicer identity, property type, and occupancy status. Freddie Mac can be found on the Web at http://www.freddiemac.com.

A for-profit subsidiary of the American Bankers Association is going to provide a form of pool insurance for Mortgage Partnership Finance loans so that small community banks selling loans to the Federal Home Loans Banks can earn more fee income."It is cross-pool insurance for individual loans and small pools," said ABA senior counsel Joseph Pigg. The FHLBanks will pay ABA's Corporation for American Banking for insuring a portion of the credit risk associated with small, geographically concentrated pools of residential mortgage loans. This credit enhancement will enable FHLBanks to pay participating community banks up to 14% more fee income over the life of the loan. But the actual pricing of the loans will remain the same, a Chicago FHLBank official said. In addition to servicing fees, banks and thrifts receive fee income for retaining a portion of the credit risk on MPF loans. To participate in the ABA/MPF alliance, a community bank has to be a member of an FHLBank that offers the MPF program. "You do not have to be an ABA member to participate," Mr. Pigg said. The ABA can be found online at http://www.aba.com.

The board of the Federal Agricultural Mortgage Corp., Washington, has declared a dividend of $0.80 per share on the corporation's 6.40% cumulative preferred stock, series A.The dividend, for the period Jan. 1, 2003 to March 31, 2003, will be payable March 31 to stockholders of record as of March 20, Farmer Mac said. The government-sponsored enterprise can be found on the Web at http://www.farmermac.com.

Radian Group Inc., Philadelphia, has announced that it plans to sell $250 million of senior unsecured notes.The company said it plans to use approximately $75 million of the net proceeds of the sale to repay debt and the remainder for general corporate purposes. Radian, the parent company of mortgage insurer Radian Guaranty Inc., can be found online at http://www.radianmi.com.