Servicing

House Financial Services Committee Chairman Barney Frank, D-Mass., says it is "entirely possible" that Congress will send President Bush a legislative package by the Fourth of July that is responsive to the current housing crisis, reduces foreclosures, and increases confidence in the secondary-market agencies. The package would include two Federal Housing Administration bills and a GSE bill to strengthen regulation of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, the chairman told a Washington conference sponsored by the Independent Community Bankers of America. On Wednesday, Rep Frank expects to complete a committee mark-up of his FHA bill to refinance struggling homeowners with "underwater" mortgages. (The Senate Banking Committee is scheduled to mark up a government-sponsored enterprise bill on May 6.) The House has already passed a GSE regulatory reform bill. In addition, the House and Senate are close to an agreement on an FHA modernization bill that will make the FHA a safer alternative to subprime loans. "The crisis has generated some pressure" to act, Rep Frank told reporters. "We should have it done in June."

Nearly 650,000 foreclosure filings were reported nationwide in the first quarter, up 23% from those of the previous quarter and 112% from a year earlier, according to RealtyTrac, an online foreclosure marketplace based in Irvine, Calif. The nation's quarterly foreclosure rate was one filing for every 194 households, the company said in its Q1 2008 U.S. Foreclosure Market Report. (Foreclosure filings include default notices, auction sale notices, and bank repossessions.) "Foreclosure activity in the first quarter increased on a year-over-year basis in 46 out of the 50 states and in 90% of the nation's 100 largest metro areas, demonstrating that most regions of the country are seeing more foreclosures," said James J. Saccacio, chief executive officer of RealtyTrac. "In some areas there are also some unusual, nonmarket factors impacting the foreclosure numbers. For example, the city of Philadelphia in late March issued a temporary moratorium on all foreclosure auctions for April, and the city has since adopted a program that will delay foreclosure proceedings on owner-occupied properties until the owners have met face-to-face with lenders to attempt a loan workout plan that would prevent foreclosure." The company can be found online at http://www.realtytrac.com.

Countrywide Financial Corp., Calabasas, Calif., has reported a net loss of $893 million ($1.60 per share) in the first quarter, citing $3 billion of credit-related charges that weighed down results. The credit costs hit both Countrywide's mortgage banking unit, which lost $552 million in the quarter, and its bank, which lost $960 million. Countrywide posted small profits from its capital market and insurance units. The company produced $73 billion of loans in the first quarter, down from $117 billion in the first quarter of 2007. It serviced $1.484 trillion of home loans as of March 31, up from $1.352 trillion a year earlier. The $3 billion of credit-related charges included a $456 million provision for representation and warranty claims, a more than tenfold increase from the reps-and-warranties provision during the first quarter of 2007.

Class M9 of Soundview Home Loan Trust 2004-1 has been downgraded from BBB-minus to BB-plus by Fitch Ratings. Fitch also affirmed the ratings on eight other classes in the deal and six classes in another Soundview transaction. The collateral consists primarily of subprime mortgages.

Fifteen classes from three subprime mortgage-backed securities issued by New Century Home Equity Loan Trust have been downgraded by Fitch Ratings. Fitch also affirmed the ratings on classes with outstanding balances of $501 million.

Twenty-two classes from seven subprime mortgage-backed securities issued by Aegis Mortgage Corp. Asset Backed Securities Trust have been downgraded by Fitch Ratings. Fitch also affirmed the ratings on classes with outstanding balances of $556 million. Fitch can be found online at http://www.fitchratings.com.

Bank of America, Charlotte, N.C., has announced plans to modify or work out at least $40 billion in troubled mortgages over the next two years and to expand its 10-year community development goal to $1.5 trillion. Both goals assume the successful completion of BoA's proposed merger with Countrywide Financial Corp., slated for the third quarter. BoA also said it will locate the companies' combined national mortgage operations under the BoA name in Countrywide's Calabasas, Calif. headquarters. "We believe the financial strength, security, and stability of the combined company will allow us to enable people to buy homes and stay in homes, and to assist many of those affected by the current mortgage troubles," said Liam McGee, BoA's president of global consumer and small business banking, in testimony at a Federal Reserve Board hearing in Los Angeles on the merger. The $1.5 trillion community development goal will focus on affordable housing, economic development, and consumer and small-business lending. BoA can be found on the Web at http://www.bankofamerica.com.

Over 9% of securitized subprime loans were 90 days or more past due in February, 11% were in foreclosure, and over 6% were real estate owned, according to a Friedman Billings Ramsey Investment Management report. Overall the default rate on subprime loans stood at 26.6% in February, up from 25.2% in the previous month. Only 60% of subprime borrowers are current on their loans. The default rate on private-label securitized alternative-A mortgages jumped to 9.3% in February, up 103 basis points from the previous month's level. Of these alt-A mortgages, 3% were 90 days or more past due and 4.35% were in foreclosure. "We continue to expect default rates ... to rise persistently in 2008," said FBRIM managing director Michael Youngblood. Mr. Youngblood said he expects the default rate on securitized subprime loans to hit 30.3% by year's end. (The default rate includes loans 90 days or more past due, in foreclosure, and REO.)

Servicers provided nearly 503,000 loan workouts for homeowners in the first quarter, bringing to nearly 1.4 million the total number of workouts since the Hope Now alliance was created last July. Of the 502,500 prime and subprime loan workouts that servicers provided to homeowners during the first quarter, about 323,000 were repayment plans and 179,500 were loan modifications. The Hope Now alliance said that among subprime mortgage loans, loan modifications accounted for 44% of workouts in the first quarter, double the 2007 rate. Some consumer advocates say that modifications, in which loan terms are changed, are a better long-term solution than repayment plans that attempt to bring a borrower current over a shorter-term period.

The Census Bureau has reported that the inventory of vacant homes listed for sale rose to 2.3 million in first quarter, up 4.6% from that of the previous quarter, and that the homeownership rate was unchanged. Listings of vacant homes rose dramatically in 2006 to 2.1 million, and this overhang on the real estate market continues to exert downward pressure on house prices. Since 2006 it has remained above the 2 million mark, and over the past two quarters there has been an uptick in listings -- probably reflecting bank sales of more foreclosed properties. The Census Bureau report also indicates that the homeownership rate held steady at 67.8% in the first quarter. However, the rate is down from 68.4% in the first quarter of 2007. The homeownership rate for blacks fell from 47.7% in the fourth quarter to 47.1% in the first quarter, while the rate for Hispanics rose from 48.5% to 48.9%.