SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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For the fiscal year ended December 31, 2003 |
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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For the transition period from to |
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Commission file number 1-31795 |
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THE WASHTENAW GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
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MICHIGAN |
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20-0126218 |
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(State or Other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
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3767 Ranchero Drive, Ann Arbor, Michigan |
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48108 |
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(Address of Principal Executive Offices) |
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(Zip Code) |
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(734) 662-9733 |
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(Registrant’s Telephone Number, Including Area Code) |
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Securities registered pursuant to Section 12(b) of the Act: |
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Title of Each Class |
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Name of Each Exchange on Which Registered |
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Common Stock, par value $0.01 per share |
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American Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o No ý
The issuer’s voting stock trades on the American Stock Exchange under the symbol “TWH.” The aggregate market value of the voting stock held by non-affiliates of the registrant, based on the closing sale price of the registrant’s common stock on December 31, 2003, was $31,418,357 ($7.00 per share based on 4,488,351 shares of common stock outstanding).
As of March 15, 2004, there were issued and outstanding 4,488,351shares of the registrant’s common stock.
DOCUMENTS INCORPORATED BY REFERENCE:
1. Portions of the Definitive Proxy Statement in connection with the Annual Meeting of Stockholders for the Fiscal Year Ended December 31, 2003 (Part II).
TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this Form 10-K, including some statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” are forward-looking statements about what may happen in the future. They include statements regarding our current beliefs, goals, and expectations about matters such as our expected financial position and operating results, our business strategy, and our financing plans. These statements can sometimes be identified by our use of forward-looking words such as “anticipate,” “estimate,” “expect,” “intend,” “may,” “will,” and similar expressions. We cannot guarantee that our forward-looking statements will turn out to be correct or that our beliefs and goals will not change. Our actual results could be very different from and worse than our expectations for various reasons. You are urged to carefully consider these factors, as well as other information contained in this Form 10-K.
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INTRODUCTION
Item 1. Business
General
The Washtenaw Group, Inc. was incorporated in Michigan on August 22, 2003 to own and control all of the outstanding capital stock of Washtenaw Mortgage Company. Washtenaw is engaged primarily in the mortgage banking business. The Washtenaw Group has no employees other than executive officers who do not receive compensation from The Washtenaw Group for serving in this capacity. See “Management - Director and Executive Officer Compensation.” The Washtenaw Group engages in no other operations other than the management of its investments in Washtenaw Mortgage Company.
Our internet address is www.TheWashtenawGroup.com. We make available free of charge on www.TheWashtenawGroup.com our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our recently adopted Code of Business Conduct and Ethics is also available on our website.
In addition, we will provide, at no cost, paper or electronic copies of our reports and other filings made with the SEC. Requests should be directed to:
Howard Nathan
The Washtenaw Group, Inc.
3767 Ranchero Drive
Ann Arbor, Michigan 48108
The information on the website listed above is not and should not be considered part of this annual report on Form 10-K and is not incorporated by reference in this document. The website is and is only intended to be an inactive textual reference.
The Washtenaw Group currently operates in one segment, mortgage banking, through its wholly-owned subsidiary. At December 31, 2003, total assets of The Washtenaw Group were $131.2 million. For the year ended December 31, 2003, net income was $9.5 million
Market Area
Washtenaw’s mortgage banking office is located in Ann Arbor, Michigan. From this office, Washtenaw operates its national wholesale lending and its retail mortgage origination businesses. Washtenaw does business with approximately 2,000 mortgage brokers and correspondent lenders in approximately 40 states. For the year ended December 31, 2003, the top five states in terms of number of loan purchases were Michigan (28%), Ohio (12%), California (11%), Illinois (11%), and Pennsylvania (4%).
Lending Activities
General. Washtenaw originates or acquires loans primarily through the wholesale, correspondent, and retail loan production of its mortgage banking operations. Loans are held available for sale in the secondary market. Wholesale mortgage loan production involves the origination of loans by a nationwide network of independent mortgage brokers with funding provided directly by Washtenaw, which is known as “table funding,” and the transfer of these loans to Washtenaw upon closing. Correspondent mortgage loan production occurs through the purchase of loans by Washtenaw from independent mortgage lenders,
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commercial banks, savings and loan associations, and other financial intermediaries that originate loans in their own name using their own sources of funds. Retail mortgage loan production for mortgage banking operations occurs through Washtenaw’s retail loan origination office in Ann Arbor, Michigan.
For the year ended December 31, 2003, Washtenaw’s combined wholesale and correspondent loan production totaled $3.6 billion and its retail loan production totaled $113.6 million. For the year ended December 31, 2002, the corresponding amounts were $2.8 billion and $77.6 million, respectively. For the year ended December 31, 2001, the corresponding amounts were $3.1 billion and $35.7 million, respectively.
In its wholesale and correspondent lending, Washtenaw competes nationwide by offering a wide variety of mortgage products designed to respond to consumer needs and tailored to address market competition. Washtenaw primarily originates conforming, fixed rate 30-year mortgage loans, which collectively represented 54% of its total loan production for the year ended December 31, 2003, 53% for the year ended December 31, 2002, and 64% for the year ended December 31, 2001. The remainder of its total loan production was comprised of other products, such as adjustable-rate, 5-year and 7-year balloons, jumbo mortgages, closed end second mortgages as well as loans under various Federal Housing Administration programs.
During the years ended December 31, 2003, 2002 and 2001, approximately 86%, 85% and 84%, respectively, of the single-family mortgage loans were refinancings of outstanding mortgage loans.
Mortgage Banking Operations. Washtenaw actively participates in the mortgage banking market on a national basis. Mortgage banking generally involves the origination or purchase of single-family mortgage loans for sale in the secondary mortgage market. The secondary mortgage market and its evolution has been significantly influenced by two government-sponsored enterprises—Federal National Mortgage Association (commonly referred to as Fannie Mae) and Federal Home Loan Mortgage Corporation (commonly referred to as Freddie Mac)— and one government agency— Government National Mortgage Association (commonly referred to as Ginnie Mae). Through these entities, the United States government provides support and liquidity to the market for residential mortgage debt.
Mortgage originators sell their loans directly to Fannie Mae and Freddie Mac either as whole loans or, more typically, as pools of loans used to collateralize mortgage-backed securities issued or guaranteed by these entities. Similarly, the originators can issue mortgage-backed securities collateralized by pools of loans that are guaranteed by Ginnie Mae. In order to arrange these sales or obtain these guarantees, the originator must underwrite its loans to conform to standards established by Fannie Mae and Freddie Mac or by the Federal Housing Administration in the case of Ginnie Mae. All loans other than Federal Housing Administration loans are considered conventional loans. Loans with principal balances exceeding agency guidelines, currently those in excess of $333,700 for single-family mortgage loans, which are referred to as “jumbo” or “nonconforming” loans, are sold to private investors.
Washtenaw pursues its loan production strategy as part of its mortgage banking operations through Washtenaw’s wholesale and correspondent loan production outlets and, to a limited extent, through direct solicitation of commercial banks, savings associations and credit unions, and through direct retail loan production.
Wholesale Loan Production. Under its wholesale operations, Washtenaw funds mortgage loans originated by a network of approximately 2,000 independent mortgage brokers nationwide. Approximately 40% of these brokers originate mortgage loans for Washtenaw on a monthly basis and the remainder originate mortgage loans for Washtenaw on a quarterly basis. This network is maintained by Washtenaw’s approximately 35 business consultants, who are compensated through a salary and commission package. Many of the larger brokers are provided with loan data entry software by Washtenaw for the entry of loan applicant data in a format familiar to that used by Washtenaw’s underwriters and for transmission to
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Washtenaw’s automated underwriting systems for review. All loans originated through brokers are underwritten according to Washtenaw’s standards.
Washtenaw’s underwriters or contract representatives review the loan data provided by the loan applicant, including the review of appropriate loan documentation, and request additional information as necessary from the broker. Loans originated by these brokers are typically funded directly by Washtenaw through table funding arrangements. In a majority of cases, the loan is closed in the broker’s name and thereafter transferred to Washtenaw together with related mortgage servicing rights for which Washtenaw generally pays a servicing release premium that is included in the loan price paid to the broker by Washtenaw. However, in certain states, the broker is required to close the loan in Washtenaw’s name. Broker participants in this program are prequalified on the basis of creditworthiness, mortgage lending experience, and reputation. Each broker undergoes annual and ongoing reviews by Washtenaw.
Correspondent Loan Production. In addition, Washtenaw acquires mortgage loans from mortgage lenders, commercial banks, savings and loan associations, and other financial intermediaries. Washtenaw’s selection of correspondents is subject to a separate approval process with higher net worth requirements than wholesale brokers, as correspondents must use their own sources of funds to close loans. The prices of these loan acquisitions are separately negotiated. Warehouse lines of credit, typically obtained from third parties, may be used by the mortgage lenders to finance their respective mortgage loan originations. Washtenaw does not provide warehouse lines of credit for its correspondents. All loans acquired from correspondents are expected to satisfy Washtenaw’s underwriting standards and may be repurchased by the correspondent if there is a default of the loan due to fraud or misrepresentation in the origination process and for certain other reasons, including the failure to satisfy underwriting requirements imposed by Washtenaw.
Retail Loan Production. The retail loan activities of Washtenaw primarily involves the origination of single-family mortgage loans. These retail loan originations generally provide Washtenaw with a source of loan production at a lower cost per loan than loans acquired through brokers or correspondents because the cost of generating these loans is more than offset by cost savings through Washtenaw’s ability to avoid payment of the servicing release premium for the related mortgage servicing rights.
Secondary Market Activities
Washtenaw sells substantially all of the mortgage loans that it originates or purchases through its mortgage banking operations while retaining the servicing rights to the loans. During the year ended December 31, 2003, 2002, and 2001, Washtenaw originated or purchased $3.7 billion, $2.8 billion, $3.1 billion, in total mortgage loans, respectively, and sold $3.8 billion, $2.9 billion, and $3.0 billion of mortgage loans, respectively, in the secondary market. Mortgage loans are aggregated into pools and sold, or are sold as individual mortgage loans, to investors principally at prices established at the time of sale or pursuant to forward sales commitments. Conforming conventional mortgage loans are generally pooled and exchanged pursuant to the purchase and guarantee programs sponsored by Fannie Mae, Freddie Mac, and Ginnie Mae or for Fannie Mae, Freddie Mac, or Ginnie Mae mortgage-backed securities, and are generally sold to investment banking firms. For the year ended December 31, 2003, 2002, and 2001, a significant portion of these loans were exchanged for Fannie Mae and Freddie Mac mortgage-backed securities, which securities were then sold to investment banking firms. The remainder were sold to other institutional and non-institutional investors.
Washtenaw exchanges and sells mortgage loans on a non-recourse basis. In connection with Washtenaw’s loan exchanges and sales, Washtenaw makes representations and warranties customary in the industry relating to, among other things, compliance with laws, regulations and program standards, and to accuracy of information. If there is a breach of the representations and warranties by Washtenaw, Washtenaw typically corrects these flaws. If the flaws cannot be corrected, Washtenaw may be required to repurchase these loans. In cases where loans are acquired from a broker or correspondent and there have
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been material misrepresentations made to Washtenaw, Washtenaw may have the right to resell the flawed loan back to the broker or correspondent pursuant to the agreement between Washtenaw and the broker or correspondent. Otherwise, Washtenaw may be indemnified against loss on these flawed loans by the broker. In addition, Washtenaw relies upon contract underwriters for a portion of its loan production, and these underwriters must indemnify Washtenaw against losses for loans that are eventually determined to have been flawed by “blatant fraud” upon origination. Contract underwriters typically work for large private mortgage insurance companies. The insurance companies make these underwriters available, at a cost, in hopes of obtaining additional business from Washtenaw.
Washtenaw assesses the interest rate risk associated with outstanding commitments that it has extended to fund loans and hedges the interest rate risk of these commitments based upon a number of factors, including the remaining term of the commitment, the interest rate at which the commitment was provided, current interest rates and interest rate volatility. These factors are monitored on a daily basis, and Washtenaw adjusts its hedging on a daily basis as needed. Washtenaw hedges its “available for sale” mortgage loan portfolio and its interest rate risk inherent in its unfunded mortgage commitments primarily through the use of forward sale commitments. Pursuant to these commitments, Washtenaw enters into commitments with terms of not more than 90 days to sell these loans to Freddie Mac, Fannie Mae, and Ginnie Mae.
Asset Quality
Washtenaw is exposed to certain credit risks related to the value of the collateral that secures loans it originates and the ability of borrowers to repay their loans during the term thereof. Washtenaw’s senior officers closely monitor the loan production on a continuing basis and report to the Board of Directors of Washtenaw at regularly scheduled meetings. Washtenaw has a quality control department, the function of which is to provide the Board of Directors of Washtenaw with an independent ongoing review and evaluation of the quality of the process by which lending assets are generated.
Real estate acquired by Washtenaw as a result of foreclosure is classified as “other real estate owned” until the time it is sold. Washtenaw generally tries to sell the property at a price no less than its net book value, but will consider discounts where appropriate to expedite the return of the funds to an earning status. When the property is acquired, it is recorded at its fair value less estimated costs of sale.
Washtenaw relies upon its underwriting department to ascertain compliance with individual investor standards prior to sale of the loans in the secondary market, and it relies upon its quality control department to test sold loans on a sample basis for compliance. During the year ended December 31, 2003, Washtenaw sold approximately $3.8 billion in single-family mortgage loans into the secondary market. During that same time period, 89 loans totaling $7.4 million were repurchased, representing less than one percent of the 27,912 loans originated during 2003. Furthermore, Washtenaw has approximately 80 additional loans where the repurchase of the loans is pending resolution of the company’s rebuttal. Typically, these loans are non-performing. Washtenaw views loan repurchases as an inherent risk of originating and purchasing loans for ultimate resale in the secondary market notwithstanding the ongoing reviews by its quality control department. All of the loans repurchased during 2003 were nonperforming. Losses arising from repurchases depend upon whether repurchased loans are or become nonperforming and, if so, whether Washtenaw is able to recover all of the loan principal and interest otherwise due.
Washtenaw originates or acquires the majority of its loans through wholesale and correspondent loan production. As a result, Washtenaw does not have direct contact with the borrower until after the loan is closed and Washtenaw begins servicing the loan. It is typical in the industry for loans acquired in this way to include a higher percentage of nonperforming loans. This is often the result of misrepresentation of certain loan information within the loan file. The misrepresented information that produces the highest likelihood the loan will need to be repurchased occurs when the appraisal does not support the actual property value. This can occur either by “inflating” the value of the home to allow for a larger loan than
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the property value supports or by “property flipping”. Property flipping occurs when a home is purchased and sold a short time later for a much higher amount with no significant upgrades to the home or the surrounding areas.
Though in Washtenaw’s business loan repurchases are an inherent risk that cannot be eliminated, Washtenaw has implemented several controls to reduce the risk of repurchases. These include a stricter approval process for new brokers trying to do business with Washtenaw. Washtenaw obtains a report from a national vendor that gathers information related to problems the broker experienced with other wholesalers. Many of Washtenaw’s largest competitors provide information to this database. Washtenaw also reviews a two year chain of title on all mortgage loans related to purchases to ensure that the property has not been sold recently for significantly lower amounts. Management is also in the process of subscribing to a national vendor to obtain property values on all originations as a way of substantiating the appraisals that are received.
It has been Washtenaw’s experience that repurchased loans do not necessarily, but may, result in an ultimate loss to Washtenaw. In addition, Washtenaw may also have the right to sell the repurchased loan back to the broker or correspondent that originated it, or to seek indemnity from the applicable mortgage insurance company in the case of loans which are underwritten on a contract basis for Washtenaw by these insurers. It is management’s policy to provide a liability for losses related to repurchases on sold loans based on historical losses incurred by Washtenaw. As a repurchased loan progresses through the foreclosure process and becomes other real estate owned, Washtenaw evaluates the underlying collateral for salability and determines at that time whether additional reserves against other real estate owned is necessary.
Underwriting
Washtenaw’s mortgage loans are underwritten either in accordance with applicable Fannie Mae, Freddie Mac or Federal Housing Administration guidelines or with requirements set by other investors. Although Washtenaw is qualified to underwrite Veteran’s Administration loans, Washtenaw does not make these loans.
All mortgage loans originated or acquired by Washtenaw must satisfy Washtenaw’s underwriting standards. Washtenaw permits a few originating correspondent lenders operating pursuant to Washtenaw’s delegated underwriting program to perform initial underwriting reviews. Washtenaw employs an automated underwriting process on most loans that is based upon data provided through Washtenaw’s initial loan data entry software and is available from Fannie Mae through its Desktop Underwriter™ software or Freddie Mac through its Loan Prospector software. This process incorporates credit scoring, which in turn employs rules-based and statistical technologies to evaluate the borrower, the property, and the sale of the loan in the secondary market. This process is intended to reduce processing and underwriting time, to improve overall loan approval productivity, to improve credit quality, and to reduce potential investor repurchase requests. Approximately 5% of loans underwritten by Washtenaw are initially underwritten on a contractual basis by mortgage insurance companies, in their capacity as contract underwriters. The contract underwriter may be required to repurchase loans that are determined not to be in compliance with these underwriting criteria.
A complete review of all information is conducted on loans underwritten directly by Washtenaw, including the loans underwritten by contract underwriters, prior to loan approval. This process involves the transfer of loan data to Washtenaw by brokers or correspondents using loan data entry software provided by Washtenaw plus certain other physical documentation or through the physical transfer of loan files to Washtenaw.
To a limited extent, Washtenaw delegates underwriting authority to select correspondent lenders who meet financial strength, delinquency, underwriting, and quality control standards. The lenders may be required to agree to repurchase loans that later become delinquent or to indemnify Washtenaw from loss.
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Quality Control
Washtenaw maintains a quality control department that, among other things reviews compliance and quality assurance issues relating to loan production and underwriting. For its production compliance process, in addition to investor requirement described below, the quality control department conducts special audits based on loan quality concerns identified in the underwriting process. This may focus on a specific customer or loan officer sending loans to Washtenaw. Also, the work of new underwriting staff of Washtenaw also has his or her work audited post funding until such new staff has shown that he or she is capable of underwriting loans to the standards of Washtenaw on a consistent basis.
Additionally, Washtenaw randomly selects a statistical sample of at least 10% of all loans closed each month. This review includes a new credit report review and re-underwriting the loan; reverifying funds, employment, and other information in the loan application; and reviewing the data integrity of the information entered into Washtenaw’s automated underwriting system. Washtenaw also orders a second appraisal on 10% of the statistical sample (1% of all loans closed each month). Washtenaw uses Desktop Underwriter™ software developed by Fannie Mae and Loan Prospector software developed by Freddie Mac to automate the underwriting process and provides some brokers and correspondents with Desktop Originator™ software, a similar product for use by brokers and correspondents of companies. In completing an audit, a documentation review is performed to ensure regulatory compliance.
Washtenaw also monitors the performance of delegated underwriters through quality assurance reports prepared by its quality control department, Federal Housing Administration reports and audits, reviews and audits by regulatory agencies, investor reports, and mortgage insurance company audits. Deficiencies in loans are generally corrected; otherwise Washtenaw may exercise its right to require that the loan be repurchased by the originating broker or correspondent, or Washtenaw may insist that the broker who originated the loan indemnify Washtenaw against any loss.
Mortgage Loan Servicing Activities
Washtenaw derives a portion of its revenues from the servicing of mortgage loans for others. For the years ended December 31, 2003, 2002 and 2001, Washtenaw realized servicing fee income, net of amortization, from its mortgage loan servicing operations of, $1.2 million, $1.6 million, and $649,000, respectively, which represented 2.4%, 4.9%, and 2.1% of Washtenaw’s non-interest income for the respective periods. Servicing arises in connection with mortgage loans sold in the secondary market with mortgage servicing rights retained. The only loans Washtenaw subservices for others are loans for which the servicing has been sold but not yet delivered and loans owned by Pelican National Bank, a company with common ownership.
Mortgage loan servicing includes collecting payments of principal and interest from borrowers, remitting aggregate mortgage loan payments to investors, accounting for principal and interest payments, holding escrow funds for payment of mortgage-related expenses such as taxes and insurance, making advances to cover delinquent payments, inspecting the mortgaged premises as required, contacting delinquent mortgagors, supervising foreclosures and property dispositions if there are unremedied defaults, and other miscellaneous duties related to loan administration. Washtenaw collects servicing fees from monthly mortgage payments generally ranging from 0.25% (25 basis points) to 0.75% (75 basis points) of the declining principal balances of the loans per annum. At December 31, 2003, 2002 and 2001, the weighted average servicing fee on the servicing for others’ portfolio was 0.30%, 0.29% and 0.31%, respectively. Washtenaw utilizes lock box and debit services of a major bank to expedite the collection and processing of the monthly mortgage payments. Approximately 85% of the payments were processed through this service at December 31, 2003.
Washtenaw services mortgage loans nationwide. The geographic distribution of Washtenaw’s servicing portfolio reflects the national scope of Washtenaw’s loan originations and acquisitions. Washtenaw actively monitors the geographic distribution of its servicing portfolio to maintain a mix that it
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deems appropriate to balance its risks and makes adjustments as it deems necessary. At December 31, 2003, 2002 and 2001, Washtenaw’s servicing portfolio consisted of $2.9 billion, $2.3 billion and $1.6 billion of conventional servicing, respectively. These amounts include loans serviced by Washtenaw that were recorded on its books as held for sale.
There is prepayment risk related to the value of Washtenaw’s mortgage servicing rights if declining interest rates provide borrowers with refinancing opportunities. At December 31, 2003, 2002 and 2001 the total amount of the mortgage servicing rights recorded by Washtenaw was $24.6 million, $13.7 million and $14.8 million, respectively. For further information, see Note 4 of the Notes to Consolidated Financial Statements. During 2003, Washtenaw was operating under an agreement with a large national purchaser of mortgage servicing rights. Under the agreement, servicing sales occurred concurrently with the formation of the mortgage-backed securities being serviced. Washtenaw was selling approximately 50% of its servicing rights under this arrangement while retaining the remainder. The purchaser of the servicing rights has placed a limit of $60 million in mortgage servicing rights per month that Washtenaw can sell to them and as a result, Washtenaw is in the process of negotiating with another purchaser.
Gains on the sale of mortgage servicing rights are affected by changes in interest rates as well as the amount of mortgage servicing rights capitalized at the time of the loan sale or acquisition of the mortgage servicing rights. Purchasers of mortgage servicing rights analyze a variety of factors, including prepayment sensitivity, to assess the purchase price they are willing to pay. Lower market interest rates prompt an increase in prepayments as consumers refinance their mortgages at lower rates of interest. As prepayments increase, the life of the servicing portfolio is reduced, decreasing the servicing fee revenue that will be earned over the life of that portfolio and the price third party purchasers are willing to pay. The fair value of servicing is also influenced by the supply and demand of servicing available for purchase at any point in time. Conversely, as interest rates rise, prepayments generally decrease, resulting in an increase in the value of the servicing portfolio.
Washtenaw originates and purchases mortgage servicing rights nationwide. The geographic distribution of Washtenaw’s mortgage servicing portfolio reflects the national scope of Washtenaw’s mortgage loan originations and acquisitions. The five states with the largest servicing volume accounted for approximately 61% of the total number of mortgage loans serviced and approximately 59% of the dollar value of the mortgage loans serviced at December 31, 2003, while the largest volume by state was Michigan with approximately 26% mortgage loans serviced by number and value.
Washtenaw’s mortgage servicing portfolio includes servicing for adjustable rate, balloon payment, and fixed rate fully amortizing loans. At December 31, 2003, 9.69% of the mortgage servicing rights related to adjustable rate loans, which had a weighted average coupon rate of 4.45%; 0.78% related to fixed rate balloon payment loans, which had a weighted average coupon rate of 5.01%; and the remaining 89.52% related to fixed rate fully amortizing loans, which had a weighted average coupon rate of 5.59%.
The following table contains information, as of December 31, 2003, on the percentage of fixed-rate, single-family mortgage loans being serviced for others by Washtenaw, by interest rate category.
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Coupon Range |
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Percentage of Portfolio |
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Less than 6.00% |
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15.5 |
% |
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5.01—6.00% |
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46.5 |
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6.01—7.00% |
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30.5 |
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7.01—8.00% |
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6.6 |
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8.01% & above |
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0.9 |
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Total |
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100.0 |
% |
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The following table contains information regarding the mortgage loan servicing portfolio, broken down by state.
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At December 31, 2003 |
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Number of |
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Percentage
of |
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Total
Mortgage |
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Percentage
of |
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(Dollars in thousands) |
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Michigan |
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6,481 |
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25.6 |
% |
$ |
757,772,574 |
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26.3 |
% |
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Ohio |
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4,825 |
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19.0 |
% |
462,615,667 |
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16.1 |
% |
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Pennsylvania |
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1,403 |
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5.5 |
% |
142,760,734 |
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5.0 |
% |
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Illinois |
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1,392 |
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5.5 |
% |
208,268,157 |
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7.2 |
% |
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Indiana |
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1,296 |
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5.1 |
% |
116,657,678 |
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4.0 |
% |
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Florida |
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1,211 |
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4.8 |
% |
123,659,104 |
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4.3 |
% |
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California |
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1,097 |
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4.3 |
% |
211,741,624 |
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7.4 |
% |
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North Carolina |
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796 |
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3.1 |
% |
78,653,098 |
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2.7 |
% |
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Georgia |
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730 |
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2.9 |
% |
74,054,709 |
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2.6 |
% |
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Utah |
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535 |
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2.1 |
% |
72,458,060 |
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2.5 |
% |
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Kentucky |
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