Servicing

Bank of America, Charlotte, the fifth-largest seller of loans to Freddie Mac, has ended its strategic alliance with the government-sponsored enterprise.BofA's decision to sell some of its conforming production to Fannie Mae (as well as continuing to sell to Freddie) is just the latest example of a trend toward the fraying of such alliances. For instance, Countrywide Home Loans, Calabasas, Calif., which has an alliance agreement with Fannie Mae, is now actively selling some of its production to Freddie. Jeff Lebowitz, who runs the Mortech study, called the strategic alliances "meaningless." A former executive at Fannie Mae, Mr. Lebowitz said: "It's just a venture in price cutting." A spokeswoman for BofA said the company "will continue to work closely with Freddie Mac. But at this point we are going to return to a competitive open market." BofA originated $84 billion in mortgages last year, $64 billion of which were conforming. A Freddie Mac spokesman declined to comment on BofA's action. (See the Feb. 3 issue of National Mortgage News for full details.) The companies can be found online at http://www.bankofamerica.com and http://www.freddiemac.com.

Success Financial Services Group Inc., a mortgage banking company based in Round Rock, Texas, has announced a management change and a reverse stock split.James S. Renaldo has been named chief executive officer of the company, and Robert L. Leonetti will remain president of Success Investments Inc., the company said. Success Financial's board of directors approved a resolution Jan. 24 to reverse-split the company's outstanding stock on a 1-for-100 basis. The company can be found on the Web at http://www.successfinancialservices.com.

Class B-5 of Bear Stearns Mortgage Securities Inc. series 1997-6 has been downgraded from B to D by Fitch Ratings and removed from Rating Watch Negative.In addition, class B-4 of the transaction has been placed on Rating Watch Negative. The rating agency said the actions were based on a review of loss and delinquency levels in the deal. Fitch can be found online at http://www.fitchratings.com.

Hanover Capital Partners Ltd., a subsidiary of Hanover Capital Mortgage Holdings Inc. based in Edison, N.J., has announced an alliance with DMS Advisors Inc. under which DMS will market Hanover's consulting services.The products and services to be marketed include due diligence, agency securitization, document rectification, assignment processing, servicing audits, mortgage operations process reviews, and temporary staffing placements. Hanover said two DMS principals are "veteran mortgage industry experts." Dianne Johnson was formerly vice president of capital markets and correspondent lending at Wells Fargo Home Mortgage, and Beverly Sheehy was most recently vice president of national accounts at Triad Guaranty Insurance. Hanover Capital Mortgage Holdings is a mortgage real estate investment trust.

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.