Servicing

Mortgage employment broke yet another record in July as the industry added 3,800 full-time jobs to the previous month's total.According to figures compiled by the Bureau of Labor Statistics, the mortgage banking/brokerage sectors employed 292,100 full-timers in July compared with 288,300 in June. A year ago the industry employed 252,400. Over the past 12 months industry employment has increased by a startling 15.7%. Mortgage lenders are beginning to have trouble finding enough qualified loan processors and underwriters. Residential lenders are on track to produce a record-breaking $1.2 trillion in loans this year. Some lenders expect demand to decline in the fall and winter months when homebuying traffic typically slows. The BLS website address is http://stats.bls.gov.

Municipal Mortgage & Equity LLC, Baltimore, has completed a $6.25 million tax-exempt mortgage revenue bond transaction.The 7.09% 15-year bond, issued by the Weymouth Housing Authority, is secured by the Queen Anne IV Apartments, a 110-unit multistory apartment and townhouse community in Weymouth, Mass., southeast of Boston. MuniMae -- which originates, invests in, and services tax-exempt multifamily housing bonds -- earned a 1.0% origination fee on the transaction and will retain the mortgage servicing rights.

Headlands Mortgage Co., Larkspur, Calif., has reported pro forma net income of $7.1 million ($0.35 per share) for the second quarter, up from $3.3 million ($0.22 per share) a year ago.The results were reported on a pro forma basis, "assuming the conversion from an S corporation and as if the company had been fully subject to federal and state taxes as a C corporation" for the reported periods, Headlands said. (The company's S corporation status ended in the first quarter with an initial public offering of 9.2 million shares.) Total loan production in the second quarter was nearly $2.1 billion, compared with $825 million a year earlier. Of that total, $1.3 billion were non-agency loans (including $1.0 billion of alternative-A loans), $499.7 million were agency loans, and $234.8 million were home equity loans, the company said. Headlands' servicing portfolio totaled $4.8 billion with a weighted average coupon of 8.31% as of June 30, compared with $3.9 billion and a weighted average coupon of 8.39% a year earlier, the company said.

Robert E. Woods, managing director and head of loan syndications for the Americas at Societe Generale, has been named to the board of directors of Criimi Mae Inc., Rockville, Md. He replaces Larry H. Dale, who is stepping down because his company, Newman & Associates, has been acquired by a Criimi Mae competitor.Before joining Societe Generale, Mr. Woods was managing director and head of real estate capital markets and mortgage-backed securities at Citicorp. He is considered a pioneer in the modern loan syndication business.

Federal banking and thrift regulators have finalized a rule that raises the Tier I capital limit on mortgage servicing rights from 50% to 100%.The effective date of the final rule is Oct. 1. However, banks can elect to use the higher capital limit once the rule is published in the Federal Register. A few institutions have bumped up against the 50% capital limit, and an early effective date will provide relief from having to deduct mortgage service assets from Tier I capital. The final rule maintains the current practice of requiring institutions to take a 10% haircut when valuing mortgage servicing assets for capital purposes. However, regulatory relief bills moving through Congress would repeal the 10% haircut requirement that was first enacted in 1988 as part of the savings and loan bailout legislation.

First Mortgage Corp., Diamond Bar, Calif., has reported net income of $1.16 million ($0.20 per share) for its fiscal first quarter ended June 30, up 338% from $264,000 ($0.05 per share) a year earlier.Loan originations totaled $223.1 million for the quarter, up 157% from $86.8 million a year earlier, the company said. Loan servicing income rose 3.7% to $1.92 million. As of June 30, First Mortgage serviced $1.66 billion in loans, down from $1.70 billion a year earlier. The company attributed the decline to increased prepayments.

Prepayment speeds for Freddie Mac mortgage-backed securities were virtually unchanged in the July reporting period, but "there are treacherous currents just below the surface," according to the Bear Stearns Prepayment Commentary.Analysts Dale Westhoff and Bruce Kramer said changes in conditional prepayment rates were generally in the 1-2 CPR range. The report "is remarkable because all sectors did nearly the same thing, albeit for different reasons," they said. Discounts "continue to be helped by the strong housing market," while declining speeds for higher coupons were "tempered this month by turnover demand, which continues to support speeds in all coupons," the Bear Stearns analysts said. They warned that it would be unwise for investors to feel complacent about prepayments. "Mortgage rates will not stay range-bound indefinitely," the analysts said. "If they do break out on the down side, there is a massive amount of product that is eminently refinanceable, and that still has high collateral factors."

The ratings on the senior classes of six Western Federal Savings and Loan Association securitizations have been downgraded as a result of servicing-related cash flow misallocations, Moody's Investors Service has announced.In addition, the ratings of certificates from 15 other Western Fed mortgage-backed deals were placed under review for possible downgrade, the rating agency said. The downgraded securities were the Class A-1 and the interest-only Class A-2 certificates from Western Fed's Series 1990-1, 1990-2, 1990-3, 1990-4, and 1990-5 deals and the Class A certificates from its Series 1991-4 securitization. The actions stemmed from servicing and administrative problems that resulted in significant misallocations of cash flow and losses, one involving more than $900,000, Moody's said. Most pertained to delinquent property taxes and related penalties and fees that were unpaid as a result of the servicer's failure to pursue collection, according to the rating agency. Moody's said the Federal Deposit Insurance Corp., as master servicer of the deals, has indicated that it will cover losses attributable to servicing problems. "However, it remains unclear from the trustee reports whether the full extent of misallocated cash flow and losses has been identified and whether future misallocations will occur and be spotted," the rating agency said. The affected deals used GEMICO pool policies as their primary credit enhancement, but GEMICO rejected some claims because its policies do not cover losses due to weak servicing or special-hazard claims, Moody's said. The Moody's website address is http://www.moodys.com.

First Alliance Corp., Irvine, Calif., has reported earnings of $0.8 million ($0.04 per share) for the second quarter, compared with $7.9 million ($0.36 per share) a year ago.The company attributed the sharp falloff in earnings to a prepayment-related writedown, a reduction in net origination fees, and the postponement of the planned securitization of loans originated in the United Kingdom. The writedown of approximately $4.5 million in the value of First Alliance's residual interests -- as well as an $0.8 million increase in accelerated amortization on mortgage servicing rights -- stemmed mainly from "significant increases" in prepayments on adjustable-rate loans, the company said. The approximately 20% reduction in net origination fees resulted from lower-than-expected retail loan production, although it totaled $100 million, up 8% from $92 million a year earlier, First Alliance said.

The Clayton Companies, Shelton, Conn., have acquired Prudential Asset Recovery, a third-party manager of real estate owned.Prudential Asset Recovery, formed in 1992, is currently a subsidiary of Prudential Real Estate and Relocation. The company has handled the management, marketing, and resolution of over 17,000 properties on behalf of mortgage lenders. Terms of the transactions were not disclosed. The Clayton Companies provide due diligence, advisory, and default management services for residential and commercial real estate loan portfolios.