Servicing

Southern Pacific Funding Corp., Lake Oswego, Ore., which last month announced it was taking a charge of over $60 million due to higher-than-anticipated prepayments and credit losses in its subprime mortgage servicing portfolio, has announced a shake-up in its senior management.The board of the company appointed E. James Hedemark as CEO, replacing Robert Howard. Timothy Breedlove has been appointed executive vice president and chief financial officer, and Kevin Patrick has joined the company as executive vice president, capital financing. H. Wayne Snavely, chairman of the board, said the board thought the changes were necessary as the company attempts to restructure its capital base, funding sources, and origination strategy. Both Mr. Howard and Peter Makowiecki, formerly executive vice president and chief financial officer, have resigned. But the company said that Messrs. Howard and Makowiecki will continue as consultants to assist the company "in exploration of strategic alternatives."

The share price of FirstPlus Financial, Dallas, fell almost 15% Tuesday morning after a 34% decline on Monday.The Monday selloff was sparked, in part, by a report in National Mortgage News that General Electric Capital Corp., Stamford, Conn., had looked at and passed on buying FirstPlus, the nation's largest high-LTV originator/servicer. At noon Tuesday FirstPlus (symbol: FP) was trading at $12.89, down $2.18, and down 79% from its 52-week high. A FirstPlus spokesman declined to comment about its share price or potential bidders. After it became known that GECC was no longer interested in FP, Merrill Lynch downgraded FirstPlus to "neutral." It is well known that GECC looks at many potential acquisitions and often passes. Most recently it looked at United Companies, Baton Rogue, another publicly traded subprime lender, and passed on that acquisition as well, sources said. The steep decline in FirstPlus's share price has decimated investors in the company.

Amresco has issued a $1 billion home equity securitization with a Freddie Mac guaranty on the $275 million fixed-rate portion of the offering.The fixed-rate classes of the series 1998-3 security, A-1 through A-6, are backed by mortgage loans that conform to Freddie Mac's subprime standards, Amresco said. "As ABS spreads have widened significantly in the last couple of weeks, this unique Amresco transaction has received significant economic benefits from the Freddie Mac wrap, in addition to deepening the investor base," said Scott J. Reading, president of Amresco Home Equity Lending, Ontario, Calif. Credit enhancement for the approximately $725 million floating-rate portion of the deal was provided through a senior/subordinate structure. The collateral consists mainly of first lien home equity loans originated or acquired by Amresco. The company said it was the first Amresco transaction to include a special servicer role that is controlled by the residual holder. Amresco Residential Mortgage Corp. will be the servicer and contractual special servicer for the deal. Amresco's website address is http://www.amresco.com.

House and Senate appropriation staffers are working on language that would permit the Department of Housing and Urban Development once again to sell single-family loans that have gone into default.HUD officials are admitting that the Federal Housing Administration loss mitigation program has not worked very well and that it would save more money if lenders assigned defaulted FHA loans to HUD so that the loans could be sold in bulk. Provisions to protect designated revitalization neighborhoods are expected to be included in the VA-HUD appropriations bill that would require loan pool buyers to meet certain performance standards, such as sales to owner-occupants and house repairs. House and Senate appropriation committee members plan to meet the week of Sept. 28 to complete work on the final bill, which includes the FHA loan-limit increase.

Countrywide Credit Industries Inc., Calabasas, Calif., has reported record unaudited earnings of $95.1 million for the fiscal second quarter ended Aug. 31, up 27% from $74.7 million (from ongoing operations) a year earlier.Earnings per share were $0.81, up from $0.67 (from ongoing operations) a year before, Countrywide said. Angelo M. Mozilo, Countrywide's CEO, said the highlight among many production records set during the quarter was record fundings of $22.9 billion, up 117% from a year before. "While this is predominantly a refinance market, purchase mortgage fundings also reached an all-time high of $11.5 billion during the quarter," Mr. Mozilo said. "This is especially significant since demand for purchase mortgages is less sensitive than refinance volume to interest rates." Subprime and home equity loans accounted for 14% of the production sector's pretax profits, he said. Countrywide's servicing portfolio was $195 billion at the end of the quarter with a weighted average coupon of 7.7%, and prepayments and servicing hedge performance "were in line with expectations based on the current rate environment," Mr. Mozilo said. Countrywide's website address is http://www.countrywide.com.

The triple-A rating on Frederick City, Md.'s FHA-insured mortgage lien bonds, Series 1993A has been placed on CreditWatch with negative implications by Standard & Poor's.The action stemmed from a payment default on the mortgage note under the trust estate. The rating agency said it has been notified that "certain funds that were held by the servicer for the payment of mortgage insurance and taxes are no longer available to the trustee, as the servicer has filed for bankruptcy." After the bankruptcy filing the borrower had been making mortgage payments directly to the trustee, but "there are approximately $57,000 in funds that were misallocated by the servicer" prior to the filing, S&P said. In a typical default, the trustee may file for insurance if the mortgage payment is not received, but "in this case, HUD has claimed that since the payment was made by the borrower (although not received by the trustee) this is not an insurable event," the rating agency said. The trustee, which is pursuing legal remedies under the trust estate, says there are sufficient funds to pay debt service for the next two payment dates, S&P said. S&P's website address is http://www.ratings.standardpoor.com.

Standard & Poor's has placed its ratings on the Southern Pacific CMN Trust Series 1998-H1 home loan asset-backed notes on CreditWatch with negative implications.S&P said the action was based on the financial difficulties of Southern Pacific Funding Corp., which recently announced that it will take a one-time charge of $60-70 million in the third quarter as a result of changes in residual asset valuations and increased credit loss expectations. Following that announcement, S&P lowered SPFC's long- and short-term counterparty credit and senior unsecured debt ratings. SPFC, the servicer for the Southern Pacific CMN Trust transaction, has been removed from S&P's list of approved servicers. S&P's website address is http://www.ratings.standardpoor.com.

Freddie Mac has agreed to acquire Cendant Asset Services, a subsidiary of Cendant Mobility Services that specializes in management and sale of real estate owned.The Dallas-based Cendant provides REO services to lenders and servicers nationwide. It will become part of Freddie Mac's HomeSteps real estate sales unit, also based in Dallas. The combined unit will be called HomeSteps Asset Services and will market and sell an estimated 25,000 REO properties a year. Freddie Mac said the company will benefit from improved economies of scale, reducing the cost of marketing and selling REO. Freddie Mac's website address is http://www.freddiemac.com.

Senior unsecured notes of Southern Pacific Funding Corp., Lake Oswego, Ore., have been downgraded by Fitch IBCA Inc. The rating on $100 million of 11.5% senior unsecured notes due 2004 was lowered from B-plus to B-minus, the rating agency said.The action followed SPFC's announcement that it will take a one-time charge of $60-70 million in the third quarter as a result of changes in the valuation of its residual assets, increased credit loss expectations, and current conditions in the asset-backed, debt, and equity markets. "The rating action reflects SPFC's constrained liquidity over the long term, the ability to execute a committed whole loan sale strategy to improve cash flow, and an overall decline in capitalization, which will be exacerbated by the expected revaluation of the company's interest-only strip for the quarter ended Sept. 30, 1998," Fitch IBCA said. As previously reported, Standard and Poor's has lowered SPFC's long-term and short-term counterparty credit ratings and its senior unsecured debt rating. Fitch IBCA's website address is http://www.fitchibca.com.

Alltel Information Corp., Jacksonville, Fla., may be talking to Dovenmuehle Mortgage, Schaumburg, Ill., the nation's largest subservicer, about a possible purchase of the company, sources have told MortgageWire.Alltel operates the largest service bureau for residential servicers. A Dovenmuehle spokesman would not comment on the matter, and Alltel officials did not return telephone calls. At the end of June Dovenmuehle subserviced $26.41 billion in loans, according to the Database Products Group, a MortgageWire affiliate. (Dovenmuehle has owned servicing of just $338 million.) Last year EDS, a technology firm, bought Wendover Funding, Greensboro, N.C., another large subservicer.