With loan origination at an ebb, Countrywide has raised revenue by securitizing the "excess servicing" on a $30 billion portfolio of home loans.

Excess servicing is servicing fees less servicing costs.

In this case Countrywide securitized the excess on 242,000 loans it sold to Fannie Mae but is still servicing. The securities were brought to market by Bear Stearns & Co. as collateralized mortgage obligations with a Fannie Mae guarantee.

The loans backing the deal are divided into five rate categories - 6.5% to 6.99%, 7% to 7.49%, 7.50% to 7.99%, 8% to 8.49%, and 8.50% to 8.99% - said Dale Westhoff, senior managing director for mortgage research at Bear Stearns "It's the first time that it's been done this way," he said.

Each pool was then segmented into numerous tranches of fixed, interest-only bonds.

That means investors are less exposed to prepayment risk than with other interest-only, or IO, securities, which typically have a 190 basis point loan-rate dispersion. The smaller rate range in each tranche of the Countrywide deal gives investors the ability to "know exactly when these loans are going to be in the money," or refinanced, Mr. Westhoff said.

Bear Stearns was able to provide data to investors on each loan in the servicing portfolio. Fannie and Freddie provide only aggregated data on the loans backing their securities.

Analysts said other mortgage banks with slumping originations are considering similar transactions.

Mr. Westhoff said the climate is right for interest-only deals like this.

In low-interest-rate environments, high-rate loans are refinanced, or are prepaid, faster than lower-rate loans. Refinancing this year is significantly lower than in 1998. For the week that ended Nov. 12, refinancings accounted for about 22% of total applications, according to the Mortgage Bankers Association application survey.

"A lot of mortgage investors have seen their mortgage portfolios extend in duration, because rates and higher and prepayments have slowed down," he said. "All the securities are longer, so they're looking for assets that can shorten duration and still add yield - and that's what an IO does."

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