Servicing

The ratings on United Companies Financial Corp., Baton Rouge, La., have been placed under review by Standard & Poor's and Duff & Phelps Credit Rating Co. in the wake of the subprime lender's announcement that it has retained Salomon Smith Barney to "seek a potential strategic partnership."S&P placed UCFC's ratings on Credit Watch with developing implications, which means the ratings could be raised, lowered, or affirmed depending on the outcome of the review. Duff & Phelps placed its UCFC ratings on Rating Watch--Uncertain. S&P said its action reflects concerns about UCFC's announcement that second-quarter earnings will be about $10 million lower than expected as a result of charges related to a writedown in its interest-only strip, and about "heightened competition in the subprime home equity markets as well as the declining trend in the company's profitability and asset quality measures in selective pools." Duff & Phelps also cited "the fundamentals of the subprime home equity lending business," higher prepayment levels in relation to prepayment assumptions, and "pressure on capital measures" stemming from declining profitability.

The subordinate classes from all of Green Tree Financial Corp.'s 1994 manufactured housing deals and from 13 Green Tree home improvement loan deals have been downgraded by Moody's Investors Service.The actions stemmed from the recent confirmation at Baa3 (with a negative outlook) of the rating on Green Tree's long-term senior-debt securities, Moody's said. The subordinated classes are supported by a 100% guarantee from Green Tree. "Given the relatively low absolute levels of excess spread, limited seasoning, and limited spread to cover expected future losses, the ratings on these subordinated classes rely primarily on Green Tree's corporate guarantee for credit support," the rating agency said of the downgrades on the manufactured housing deals. Similar factors were cited in home improvement loan deal downgrades. In addition to the downgrades, Moody's confirmed the ratings on 34 classes of manufactured housing deals and one class of home improvement loan deal.

Amresco Inc., Dallas, has agreed to purchase Mortgage Investors Corp. of St. Petersburg, Fla. for an upfront price of $70 million.MIC is the nation's 15th largest originator of FHA/VA loans, specializing in VA streamlined refinance loans (also known as interest rate reduction refinance loans). For the first six months of this year, MIC's production volume totaled $1.3 billion. To originate loans, MIC has a network of 30 retail branches. MIC sells all of its VA originations on a servicing-released basis. In addition to the $70 million payment (of which 82% will be in Amresco common stock), Amresco will pay the former owners of privately held MIC an earnout premium over a three-year period not to exceed $105 million. When the deal is completed, MIC will be Amresco's fifth line of business and will be called Residential Mortgage Banking. The existing residential business at Amresco will be renamed Home Equity Lending.

Links Securities Inc., a New York-based broker/dealer specializing in mortgage-backed securities and structured finance, has announced the appointment of three new managing directors.David Brindley and Jonathan Davis will be responsible for developing residential mortgage whole loan business, including origination, securitization, and settlement. Cameron A. Lochhead will be responsible for sales and general business development. Mr. Brindley was previously a senior vice president at Donaldson, Lufkin & Jenrette Securities Corp., specializing in mortgage and mortgage derivative products, servicing hedge strategies, and subprime mortgage originations. Mr. Davis was also a senior vice president at DLJ, where he was responsible for the structuring and settlement of new-issue whole loan collateralized mortgage obligations. Mr. Lochhead was formerly senior vice president for worldwide sales and marketing at Internet Securities, Boston.

Two classes of IndyMac Inc. mortgage-backed securities have been downgraded by Fitch IBCA Inc. The rating on IndyMac Inc.(CWMBS) Series 1994-L, Class B3 was lowered from BBB to BB and remains on RatingAlert with negative implications. The rating on Class B5 of the same series was lowered from CCC to D. Class B4 was downgraded to CCC on June 2. The actions stemmed from loss levels and high delinquencies in relation to available credit support, Fitch IBCA said. As of June 25, 1.10% of the pool was more than 90 days past due, and losses totaled $915,543, 0.46% of the initial 1994-L pool. Classes B3 and B4 have 0.75% and 0.01% of credit support, respectively, the rating agency said. Fitch IBCA's website address is http://www.fitchibca.com.

Amresco Inc., Dallas, has announced that it does not expect to make writedowns in the value of its retained interests from securitizations in the foreseeable future.Citing its "conservative" valuation and accounting practices, Amresco "reiterated its confidence" in the value of its retained interests despite increased prepayments in its securitized residential pools in the second quarter. A similar pre-earnings statement on prepayments has been issued by Southern Pacific Funding Corp., Oswego, Ore.

New Century Mortgage Corp., Irvine, Calif., has completed a $474 million securitization, its largest to date.New Century Fixed-Rate Certificates, Series 1998-NC3, consisted of nine classes with pass-through rates ranging from 6.00% to 6.93%, according to the company's parent, New Century Financial Corp. Mortgage properties are located in 46 states, with the heaviest concentrations in California, Texas, and Florida. The deal was underwritten by Salomon Smith Barney. New Century Mortgage will act as master servicer, with Comerica Mortgage Corp. as subservicer.

Southern Pacific Funding Corp., Lake Oswego, Ore., has reported that loan prepayments in the second quarter were "in line with management expectations."SPFC, which also reported "strong growth" in loan originations, said it made the unusual pre-earnings announcement in view of industry concerns about prepayments. "Management does not anticipate any significant adjustments to assets relative to recent loan prepayment experience," the company said. SPFC also announced the signing of a $50 million subordinate and residual financing facility with Nomura Asset Capital Corp. and Nomura Securities (Bermuda) Ltd. SPFC's website address is http://www.sp-funding.com.

Community First Bancshares Inc., Fargo, N.D., has agreed to sell the operating assets of its subprime mortgage lending subsidiary, Equity Lending Inc., to FirstPlus Financial Group Inc., Dallas.The terms of the cash transaction, and another involving the sale of the assets of the company's subprime auto lending subsidiary, were not disclosed. Community First said it will retain approximately $50 million in loans originated by Equity Lending as well as the servicing rights on another $100 million of Equity Lending loans that have been sold. Equity Lending was acquired via Community First's merger with Mountain Parks Financial Corp. in December 1996 and had been classified as a discontinued operation on the company's 1997 financial statements.

Meanwhile, prepayment rates for Fannie Mae non-discount MBS showed little change in the July reporting period, including those for 7%-8% coupons, according to the Bear Stearns Prepayment Commentary.[Click here to see the table.] The Bear Stearns analysts termed the Fannie Mae speeds "extremely muted" in comparison to Ginnie Mae's, increasing only 1.4% for 30-year 7.5s and a mere 0.4% for 30-year 8.0s. "Why the tepid response in these cuspy coupons?" the analysts asked. "Most likely, this is largely noise, a result of minor reporting differences between the agencies." They added, however, that the Fannie Mae 7.5 is "somewhat less burned out" than the Ginnie Mae 7.5. Prepayment rates for discount Fannie Mae MBS showed "solid gains," rising about 20% for 30-year 6.5s. The analysts warned that the calm in the latest Fannie Mae report "masks the potential for higher speeds, particularly in the cusp coupons, and we expect more pressure on conventional 7.5% speeds next month."