Servicing

Freddie Mac acquired $91.22 billion in home mortgages during December, yet another record month for the secondary market giant.For the year, Freddie bought a record $642.3 billion in product, a 35% increase from the level recorded in 2001. Freddie's chief competitor, Fannie Mae, bought $1.09 trillion in mortgages in 2002, also a record. (Fannie's 2002 "business volume," a different way of measuring purchases, was $848 billion.) Freddie's purchase commitments were $26 billion in December, down from $29 billion in November, which means January's purchase volume will likely be weaker than in the previous month. Together, Fannie and Freddie bought about $1.7 trillion in product, which means the two gobbled up 65% of all loans originated in 2002. The market share number is based on an estimated $2.6 trillion in mortgage production. (The estimate comes from National Mortgage News.)

Freddie Mac has reported record unaudited net income of $5.76 billion ($7.95 per share) for 2002, up 39% from $4.15 billion ($5.64 per share) the year before, but the results are preliminary and will be restated.The results are expected to be revised upward after PricewaterhouseCoopers finishes auditing the government-sponsored enterprise's books for 2002 and re-auditing its financial statements for 2001 and possibly 2000, Freddie Mac said. Unaudited net income totaled $1.70 billion ($2.38 per share) for the fourth quarter, up 25% from $1.36 billion ($1.87 per share) a year earlier. "We fully support the re-audit, and we are confident it will have no adverse impact on the company's fundamental strength," said Leland C. Brendsel, chairman and chief executive officer of the GSE. "Last week, all three major rating agencies affirmed our high ratings." Financial highlights cited by the GSE include: total mortgage portfolio growth of $173 billion, or 15%; retained portfolio growth of $76 billion, or 15%; and credit losses representing only 0.7 basis points of its average total mortgage portfolio. Freddie Mac can be found online at http://www.freddiemac.com.

Two classes of GE Home Equity 1997-HE 1 mortgage pass-through certificates have been downgraded by Fitch Ratings.Class M was downgraded from AA to A and removed from Rating Watch Negative, and class B-1 was downgraded from CCC to D. (The ratings on classes A-4 and A-4 were affirmed.) The rating agency attributed the actions to loss levels and high delinquencies in relation to applicable credit support levels.

The Federal Agricultural Mortgage Corp., Washington, has reported net income of $21.3 million ($1.77 per share) for 2002, and said the figure was reduced by $2.5 million by the impact of Financial Accounting Standard 133.Farmer Mac's net income for the prior year was $16.3 million, the company said. However, fourth-quarter net income available to common stockholders declined from $5.5 million in the fourth quarter of 2001 to $2.8 million in the fourth quarter of 2002, reflecting in part the impact of accounting-related charges. Excluding extraordinary gains and losses, net income was $4.4 million in the fourth quarter. New business volume grew by $2 billion, a 38% increase over the previous year, Farmer Mac said.

Countrywide Credit Industries Inc., Calabasas, Calif., has reported record unaudited earnings of $841.8 million ($6.49 per share) for 2002, up 57% from $537.5 million ($4.34 per share) in the comparable fiscal 12-month period, which ended Nov. 30, 2001.(Countrywide adopted a calendar-year reporting schedule in January 2002.) Pretax earnings by the company's core mortgage banking operations totaled $968 million in 2002, up 45% from $667 million, while pretax earnings from diversified businesses nearly doubled to $375 million, representing 28% of total earnings, the company said. In the fourth quarter, earnings totaled $254.9 million ($1.94 per share), up 58% from $161.0 million ($1.27 per share) in the fiscal quarter ended Nov. 30, 2001. "Remarkable quarterly and annual operational milestones were established, while setting earnings records in mortgage banking," said Angelo R. Mozilo, Countrywide's chairman and chief executive officer. "Record fundings of $102 billion in the fourth quarter far exceeded prepayments by $50 billion. Annual fundings exceeded prepayments by $123 billion, driving the uninterrupted growth in the servicing portfolio to $452 billion at Dec. 31, 2002." The company can be found online at http://www.countrywide.com.

The American Bankers Association and Freddie Mac have announced the formation of an alliance that offers ABA member banks greater access to the secondary market and a range of products and services.The agreement offers preferred access to the tools and services on Freddie Mac's loanprospector.com website and a private-label subservicing option through Dovenmuehle Mortgage Inc., among other features. "This is an end-to-end business solution for banks," said Dave Stevens, senior vice president for single family lending at Freddie Mac. "The agreement is designed to meet the needs of ABA members and includes components that improve the front-end origination process, enhance back-end servicing solutions, and energize mortgage portfolio management and investment strategies of participating banks." The ABA can be found online at http://www.aba.com, and Freddie Mac can be found at http://www.freddiemac.com.

Irwin Mortgage Corp., Columbus, Ind., has announced the selection of Minneapolis-based U.S. Bank as document custodian for its mortgage files.As custodian of the files, U.S. Bank will be responsible for file certification and storage and for compliance with standards set by Ginnie Mae, Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System, Irwin Mortgage said. Eric Knapp, vice president of Irwin Mortgage, said U.S. Bank's Internet reporting capabilities were "a deciding factor" in Irwin's choice of the bank. Irwin Mortgage is a subsidiary of Irwin Union Bank, and its ultimate parent company is Irwin Financial Corp. Irwin Financial can be found on the Web at http://www.irwinfinancial.com, and U.S. Bank can be found at http://www.usbank.com.

A survey of major private-label issuers indicates that they expect the volume of new jumbo residential mortgage-backed securities to fall 10%-20% this year from last year's record high, Moody's Investors Service has reported.The rating agency projects that private-label securitizations will decline less than the overall mortgage market, which it estimates will decrease by 15%-25%. Moody's said $228 billion in jumbo RMBS were originated in 2002. Moody's can be found online at http://www.moodys.com.

The Federal Home Loan Bank of Chicago has reported that the Mortgage Partnership Finance program ended last year with $41.7 billion of loans outstanding, a 68% increase from 2001.Noting that the amount of mortgage debt outstanding grew an estimated 11% last year, the Chicago FHLB said the program is gaining market share, and that most of the growth has come from member institutions using the MPF as an outlet for conventional loans, as opposed to government-backed loans. During 2002, $27.9 billion of MPF loans were funded through the participating FHLBanks. As of Dec. 31, 437 FHLBank member commercial banks, thrifts, credit unions, and insurance companies were participating in the MPF program.

The Bond Market Association has reported that it has facilitated the development of a new file format for monthly reporting of payment data for private-label collateralized mortgage obligations and asset-backed securities.The association said the new format addresses "the problem of post-payment adjustments … where DTCC has to revise the payment made to CMO and ABS bondholders after the payment has already gone out." The new format, which is being phased in this year, is "designed to decrease the number of such revisions," the association said. The association can be found online at http://www.bondmarkets.com.