Servicing

Thrift originations of one- to four-family loans hit a record $67.7 billion in the second quarter, according to the Office of Thrift Supervision, as thrifts took advantage of the summer refinancing activity and strong sales of new and existing homes."Thrift institutions fully participated in this vibrant housing market," OTS Director Ellen Seidman said Wednesday morning. The previous record of $57 billion in originations was set in the fourth quarter of the 1993 refinancing boom. In 1993, thrifts originated a total of $189 billion in single-family loans for the entire year. In the first half of this year, 1,181 thrifts have originated $127 billion in product. The OTS also noted that thrifts have essentially turned into mortgage banks because of the high demand for fixed-rate loans. And thrifts sold $66.3 billion of their production into the secondary market during the second quarter. Thrift servicing portfolios increased in the second quarter by $19.7 billion to $517 billion as a result of this mortgage banking activity.

WMF Capital Corp., Vienna, Va., has sold $691 million in commercial mortgage loans to Merrill Lynch Mortgage Capital Inc. and closed related hedges.The sale, which was on a servicing-retained basis, resulted in a pretax loss of approximately $30 million, according to WMF Capital's parent, WMF Group Ltd. WMF Group said it had intended to sell the loans in a September securitization led by Merrill Lynch, "but opted to sell the loans at this time due to continuing adverse securitization market conditions." The sale was made in conjunction with the WMF Group's decision to "adjust its business strategy to limit interest rate and spread risks that have developed as a result of global market instability," the company said. WMF Group also announced that it has received a $20 million subordinated loan commitment from Commercial Mortgage Investment Trust Inc., in which it has a minority interest. WMF Group's website address is http://www.wmfg.com.

The long-term counterparty credit rating and the senior unsecured debt rating of ContiFinancial Corp. have been lowered to BB from BB-plus by Standard & Poor's and removed from CreditWatch.S&P said the action followed Conti's announcement of a writedown in its excess-spread receivable. "The downgrade reflects an increasingly difficult operating environment in which a flood of mortgage refinancings have negatively impacted the value of ContiFinancial's and most other subprime mortgage securitizers' excess-spread assets," S&P said. The rating agency said ContiFinancial "remains a benchmark for the industry. Management's skill in maximizing cash out of its securitizations while minimizing associated cash expenses have contributed to a near neutral operating cashflow -- an achievement in an industry characterized by an inability to cover cash expenses out of operations." Noting the "substantial risk" involved in the industry's reliance on securitization and gain-on-sale accounting, S&P said "no management is capable of effectively controlling these risks without compromising the basic economics of the business model." The risk is now large enough that subprime mortgage lenders that follow the model "represent, on a stand-alone basis, a credit risk that is no longer consistent" with a BB-plus rating, S&P said. S&P's website address is http://www.ratings.standardpoor.com.

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.