Servicing

FirstPlus Financial Corp., Dallas, the nation's largest originator and servicer of high-LTV loans, has put itself up for sale.Investment bankers told MortgageWire Tuesday morning that the likely buyer could be a commercial bank or even a credit card company. Last fall National Mortgage News reported that Residential Funding Corp., which is ultimately owned by General Motors, was interested in the company. RFC is a major warehouse lender to FirstPlus. At deadline time, it could not be determined whether RFC still might be interested. (Sources say RFC owns warrants in Master Financial, another top high-LTV lender, and that it might also still own warrants in FirstPlus.) FirstPlus officials could not be reached for comment. At noon Tuesday its stock was trading at almost $26 a share, up 14%. However, FirstPlus (symbol: FP) is way down from its 52-week high of $61.87, making many a shareholder unhappy. The company has retained Bear Stearns as its advisor. FirstPlus's website address is http://www.firstplus.com.

Consolidation will continue in the mortgage banking industry, and low profit margins, high leverage, and growing subprime originations will weaken a "relatively stable" credit profile overall for conventional mortgage bankers, according to Moody's Investors Service.In a new industry outlook report, the rating agency said it does not expect near-term downgrades in the industry "primarily due to improved risk management techniques and strong efforts to sustain healthy liquidity." Moody's said the "overwhelming influence" of Fannie Mae and Freddie Mac is "likely to intensify" as their automated technologies become standard and they expand their presence in the alternative-A and subprime markets. The report noted that much of the consolidation in the past two years has been incidental to commercial banking mergers, but said Moody's believes it will continue "irrespective of what happens" in the commercial banking industry. "Greater competition among mortgage originators, the costs of new technologies, and scale economies in servicing and securitization, make it increasingly difficult for smaller mortgage banks to survive as independent entities," Moody's said. The Moody's website address is http://www.moodys.com.

CFI Mortgage Inc., West Palm Beach, Fla., has agreed to sell its conforming retail originations subsidiary, Bankers Direct Mortgage Corp., to Inverrary Trace Inc. for book value plus a premium of $1 million.Inverrary Trace will pay $1.5 million in cash and the rest in a note. It has already made a good faith cash deposit of $150,000. CFI will now focus strictly on the subprime business through its Direct Mortgage Partners subsidiary. DMP is developing a subprime servicing platform and an Internet loan application delivery system.

The Office of Thrift Supervision is proposing to charge institutions with large servicing operations an additional assessment next year.The OTS wants to bring thrift assessments in line with the actual costs of examination and regulation. And institutions with complex off-balance-sheet activities, such as servicing and trust activities, would have to pay more. As proposed, thrifts with more than $1 billion in loans serviced for others would pay an additional assessment of 0.0015% on their servicing portfolio -- pushing up their costs. America's Community Bankers estimates that 40 thrifts would be affected by the proposal. Assessments on thrifts engaged in traditional thrift activities would see their assessments decline, however. "While there are many positive aspects to the proposal, we will have to see if institutions with very high amounts of these complex categories, particularly loan servicing, are inordinately burdened by this proposal," said ACB regulatory specialist Gary Gilbert. The comment period on the proposal ends Oct. 13.

Two classes of CWMBS (IndyMac) Inc.'s mortgage pass-through certificates have been downgraded by Fitch IBCA Inc. Class B4 of Series 1994-X, with approximately $1.5 million outstanding, was downgraded from BB to B, and Class B5 of that series, with approximately $460,000 outstanding, was downgraded from B to D, the rating agency said.Class B3 of the series was placed on RatingAlert Negative. Fitch IBCA attributed the rating actions to loss levels and high delinquencies relative to available credit support. As of the July 25 distribution, 15.64% of the pool was more than 90 days past due, and losses totaled about $2.6 million, 1.65% of the initial pool. Class B3 had 4.10% of credit support remaining, and class B4 had 0.96%. Fitch IBCA's website address is http://www.fitchibca.com.

Bingham Financial Services Corp., Farmington Hills, Mich., has terminated negotiations with two companies that had been potential acquisition targets, Bingham has announced.On July 8, Bingham announced it had entered into nonbinding letters of intent to acquire an originator and servicer of commercial loans and to purchase an unnamed Midwest-based conventional and subprime residential mortgage lender. The two deals had a combined $71 million purchase price. Jeffrey Jorrisen, chief executive of Bingham, said in a statement that "we continue to review a number of excellent acquisition opportunities." Bingham's primary businesses are the origination of installment contracts to manufactured home purchasers and the origination and servicing of commercial real estate loans.

Long Beach Financial Corp., Orange, Calif., has made a $1 billion forward sale of its mortgage production for the rest of this year and into the first quarter of 1999 to an unnamed Wall Street investment banking firm.The company is making the sale on a servicing-retained basis. By keeping the servicing rights, Long Beach said it is looking to "significantly enhance and jump-start the development of the company's new servicing platform." This is the first sale between Long Beach and the investment bank involved, said M. Jack Mayesh, chairman and chief executive of the subprime originator. "We are doubly pleased that our strategy of forward sales for cash minimizes our need for dilutive capital-raising, and delivers what we believe are superior returns to our shareholders," he added.

Richard Gillen, president and CEO of one of the nation's largest residential mortgage originators, FirstCity Financial Mortgage Corp., has resigned.No reason was given for Mr. Gillen's sudden departure. However, he will continue to serve on the company's board of directors. Rick Hagelstein, currently executive vice president and director of subsidiary operations, has been named as Mr. Gillen's replacement. Previously, Mr. Gillen served as president and CEO of Harbor Financial, Houston, which he helped found in 1983. Harbor merged with FCFM in July 1997. Shortly after the merger, Mr. Gillen rose to the position of president and CEO of FirstCity and held the position until his recent retirement announcement. Data compiled in the 1999 Mortgage Industry Directory show that FirstCity Financial originated $3.5 billion in single-family, residential product last year, ranking 50th overall in the nation. The Houston-based lender was servicing $4.3 billion in residential mortgages at year-end 1997, according to the MID. FirstCity is also one of the nation's top subservicers. The company's subservicing volume totaled $707 million as of Dec. 31. In addition, FirstCity owns Hamilton Carter, Beverly Hills, Calif., a servicing brokerage firm.

Paul Bognanno, president and chief executive of Principal Residential Mortgage, Des Moines, Iowa, has been promoted to senior vice president of its parent company, The Principal Financial Group, also based in Des Moines.J. Barry Griswell, president of Principal Financial, pointed to the growing significance of the mortgage banking unit when he announced Mr. Bognanno's promotion. Mr. Bognanno will continue to run Principal Residential Mortgage, which will have a servicing portfolio of nearly $40 billion with the addition of the portfolio of ReliaStar Mortgage, Des Moines.

The rating on CWMBS Inc.'s mortgage pass-through certificates Series 1995-M, Class B5 has been lowered from B to CCC by Standard & Poor's.The rating agency attributed the action to "the continuing erosion of subordinated loss protection," which it said increases the likelihood of principal losses in the class. S&P cited a July 25 trustee remittance statement indicating that credit support for the class had declined to approximately 42 basis points, 28 bp less than S&P's original requirement of 70 bp for a B rating. S&P said its projections suggest that the loss protection for Class B5 could drop to 15 bp once foreclosure properties and real estate owned have been liquidated. If that occurs, the rating could be lowered again, the rating agency said. S&P's website address is http://www.ratings.standardpoor.com.