Servicing

Early chargeoffs and serious delinquencies on home equity mortgage pools fell significantly after the first quarter, according to Moody's Investors Service, and the rating agency attributes the improvement to high issuance volume and improved subprime performance.In the latest update of the Moody's home equity index, analyst Henry Engelken said high issuance volume tends to "push down aggregate chargeoff and delinquency rates because newly securitized mortgage pools suffer few losses and serious delinquencies early in their lives." Because of refinancing and heavy issuance this year and last, subprime mortgage pools securitized in 2001 and 2002 now constitute more than half of the mortgages included in the Moody's Home Equity Index. Through August 2002, some $80.5 billion of subprime mortgage-backed securities had been issued this year. Moreover, this year's loans have "significantly outperformed previous vintage pools with the same seasoning," Moody's said. Pools securitized in the first quarter of 2002 have a serious delinquency rate that is only half the rate experienced on pools issued in the prior three quarters at a similar point in their life cycle. Moody's can be found online at http://www.moodys.com.

Delinquencies on home equity loans, home equity lines of credit, and mobile home loans all stayed flat or fell in the third quarter, according to the American Bankers Association.Mobile home loan delinquencies dropped to 5.38% from 5.81% in the second quarter. Delinquencies on home equity loans remained unchanged at 1.38% in the third quarter, while the delinquency rate on HELOCs fell to 0.58% from 0.64% the previous quarter, the ABA said. Overall, the ABA reported that the delinquency rate on a composite of all consumer loan types, including credit cards, declined in the third quarter, even as the dollar volume of delinquent accounts rose. The ABA can be found on the Web at http://www.aba.com.

Two classes of manufactured housing contract securitizations have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are class B of FirstFed Corp. manufactured housing contracts, series 1997-2, and class B of Signal Securitization Corp. manufactured housing contracts, series 1997-3. The ratings on five other classes in three FirstFed deals and three other classes in three Signal deals were affirmed. The actions followed a review of FirstFed's and Signal's manufactured housing transactions. Fitch can be found on the Web at http://www.fitchratings.com.

The default risk on newly originated nonprime mortgage loans "remains at elevated levels," according to a quarterly report from University Financial Associates.The risk has risen by over 30% since 1998 as a result of a slowing economy, according to UFA's quarterly report. "The risk is rising because the accommodating interest rate policy of the Fed is not sufficient to offset the eroding prospects for both the consumer and the underlying housing collateral," said Dennis Capozza, professor of finance at the University of Michigan and a principal in UFA. The report analyzes the risk of future default for loans that are being originated today.

Fitch Ratings has upgraded Option One's special servicer rating to RSS1, its top rating.Kathleen Tillwitz, a senior director at Fitch, said Option One's expansion and portfolio growth initiatives have been accompanied by the recruitment of industry veterans, including chief servicing officer John Vella, to oversee loan administration and default management. Fitch also affirmed Option One's RPS1 rating for primary servicing of subprime loans. Option One services more than $27 billion of home loans. It employs more than 800 associates at its servicing facilities in Irvine, Calif., and Jacksonville, Fla.

Hanover Capital Mortgage Holdings, Edison, N.J., has announced the recent repurchase of 34,975 shares of its common stock from Thomas P. Kaplan, a managing director of the company.Mr. Kaplan used the proceeds to repay in full a loan that had been extended to him by Hanover. Hanover Capital, a mortgage real estate investment trust, can be found online at http://www.hanovertrade.com.

Class B3 of Salomon Brothers Mortgage Securities VII Inc.'s mortgage pass-through certificates, 1997 HUD-2, has been downgraded from BBB to BBB-minus by Fitch Ratings.The rating agency attributed the actions to high losses and delinquency levels relative to applicable credit support. Fitch can be found online at http://www.fitchratings.com.

Two classes of the BCF LLC 1997-R3 residential mortgage-backed securities deal have been downgraded by Fitch Ratings, and one of them has been removed from Rating Watch Negative.Class B2 was downgraded from A-minus to BBB and removed from Rating Watch Negative, and class B3 was downgraded from C to D (default). The ratings on two other classes in the deal were affirmed. Fitch said the actions were based on loss levels and high delinquencies relative to applicable credit support as of the November distribution.

The Bond Market Association says it will monitor the potential New York transit strike closely, but so far anticipates that mortgage-backed security traders and other members will be able to operate during normal trading hours even if it occurs.The association said it has determined by surveying its New York-based membership that they will most likely be able to operate "in a normal or nearly normal manner" in the event the strike becomes a reality. However, the association said it would "modify its trading recommendation accordingly" if the strike turned out to have more of an impact on the bond market than expected. The association can be found online at http://www.bondmarkets.com.

The B classes of ContiMortgage Home Equity Loan Trust's series 1999-1 and 1999-2 have been downgraded by Standard & Poor's Ratings Services, while the ratings on 101 other classes from 21 ContiMortgage deals were affirmed.Class B of series 1999-1 was downgraded from BBB-minus to B and class B of 1999-2 was downgraded from BBB-minus to BB. The downgrades reflect a decline in credit support for the subordinate classes due to an erosion of overcollateralization stemming from the fact that net losses have consistently exceeded excess interest, S&P said. The rating agency projected that overcollateralization will be depleted for the downgraded classes within 12 months. S&P can be found on the Web at http://www.standardandpoors.com.