Servicing

The Department of Housing and Urban Development has determined that market conditions prevented Fannie Mae and Freddie Mac from reaching two affordable housing subgoals in 2007, and it will not require the two government-sponsored enterprises to take corrective action. The two home-purchase subgoals are supposed to measure the GSEs' efforts in financing low-and moderate-income homebuyers. Fannie and Freddie submitted market data to HUD showing that rising home prices reduced the availability of affordable housing. In addition, the subprime meltdown and tighter credit conditions made the barriers to achieving the subgoals "insurmountable," Freddie Mac said. In letters to the chief executives of the two mortgage companies, HUD Assistant Secretary Brian Montgomery reported that information provided by the GSEs is "consistent" with HUD's market research. HUD has determined that the achievement of the two subgoals was "not feasible," Mr. Montgomery says in the April 24 letters. He also notes that HUD also considered the "financial stability" of Fannie and Freddie in evaluating their affordable housing performance.

Thirteen classes of subprime mortgage pass-through certificates issued by UBS Mortgage Asset Securitization Transaction Asset Backed Securities Trust have been downgraded by Fitch Ratings. Fitch also removed one class from Rating Watch Negative and affirmed the ratings on classes with outstanding balances of $456 million. Fitch can be found online at http://www.fitchratings.com.

Standard & Poor's Ratings Services has lowered its ratings on 184 classes of residential mortgage-backed securities from 27 deals backed by closed-end second-lien mortgage collateral. Of the total, 166 classes were removed from CreditWatch negative, S&P reported. The rating agency said the actions stem from its belief that losses on U.S. RMBS backed by closed-end second-lien collateral issued in 2007 "will significantly exceed historical precedent and because recent performance data indicates that performance is likely to be worse than previously anticipated." S&P can be found online at http://www.standardandpoors.com.

Helios AMC LLC, San Francisco, has been assigned a special servicer rating of CSS3 for commercial mortgage-backed securities by Fitch Ratings. The rating reflects "the extensive workout experience of the company's veteran management team, its thorough policies and procedures, and the development of its robust special servicing system," Fitch said. Fitch rates commercial mortgage servicers on a scale of 1 to 5, with 1 being the highest rating.

The American Bankers Association and the Federal Agricultural Mortgage Corp. have announced an expansion of their alliance to include special pricing for Farmer Mac's Part-Time Farm program. The program involves loans secured by first liens on agricultural real estate in which a significant portion of the property's value comes from a rural residence where agricultural production is under way or planned, Farmer Mac said. The program is designed to enable rural homeowners on agricultural properties to obtain more flexible terms on their loans. "This program will give our members a real advantage because it provides an outlet for the sale of qualified mortgages on properties where the land exceeds the value of the improvements," said William Kroll, president of ABA Total Business Solutions. The organizations can be found online at http://www.aba.com and http://www.farmermac.com.

Issuance of mortgage-backed securities by Fannie Mae fell to $50.1 billion in March, down 28% from the previous month's volume, while MBS issuance by Freddie rose slightly to $43.5 billion, according to the secondary-market agencies. Their monthly activity reports show little growth in their $720 billion mortgage investment portfolios. However, delinquencies continued to creep up in February (March delinquency data are not yet available) in their guaranteed book of single-family loans. Fannie reported that 3.04% of its loans with private mortgage insurance or other credit enhancements were behind by three or more monthly payments in February, up from 1.84% in February 2007. Including loans with no credit enhancements, Fannie's serious delinquency rate stood at 1.10%, up from 0.66% in February 2007. Freddie reported a 1.78% serious delinquency rate for February on loans with private MI and other credit enhancements, up from 1.18% in March 2007. Its overall serious delinquency rate is 0.74%, up from 0.40% in March of last year.

Fannie Mae has reported that its total book of business grew at an annualized rate of 6.6% in March, fueled mostly by higher guarantee volume. That was the lowest business volume growth rate in more than a year. One month earlier, Fannie posted a 19.5% annualized rate of business growth. Refinancing has pushed the company's liquidation rate up to its highest level since September 2007, offsetting new mortgage-backed securities and guarantee volume (see item below). The government-sponsored enterprise can be found on the Web at http://www.fanniemae.com.

Fidelity National Financial Inc., Jacksonville, Fla., has announced that it will be investigating strategic options for its specialty insurance business, including flood insurance. FNF said it has retained Bank of America Securities as a financial adviser on the matter. "We are focused on evaluating our noncore assets and investments as potential vehicles for creating meaningful liquidity, and we believe our flood and at-risk insurance businesses are an attractive acquisition opportunity for strategic buyers," said FNF chairman William P. Foley. "Our intent is to use that liquidity to continue to support our dual efforts of maintaining our $1.20 annual cash dividend and repurchasing a significant amount of our outstanding stock." The company can be found on the Web at http://www.fnf.com.

Countrywide Financial Corp. and New Vista Asset Management have joined together to find qualified borrowers for Countrywide's real-estate-owned properties. The companies said New Vista's network of real estate agents, who have "deep roots in minority communities," are assigned to help ensure that prepared homebuyers, especially first-time buyers and minority buyers, have the opportunity to buy REO homes. New Vista and Countrywide will be hosting several community seminars to educate first-time homebuyers about purchasing REO units and obtaining the best available financing. The seminars will begin in Los Angeles and Dallas. "Countrywide and New Vista Asset Management share the common mission of helping to make sure that homeownership is achievable and sustainable, and that neighborhoods are stabilized during this difficult time in the housing market," said Steve Bailey, senior managing director for loan administration for the Calabasas, Calif.-based Countrywide. The companies can be found online at http://www.countrywide.com and http://www.newvistareo.com.

Nine tranches from EquiFirst Loan Securitization Trust 2007-1 have been downgraded by Moody's Investors Service. Three of the downgraded tranches remain on review for possible further downgrade. The ratings were downgraded, in general, based on higher-than-expected rates of delinquency, foreclosure, and real estate owned in the underlying collateral relative to credit enhancement levels, Moody's said. The collateral consists primarily of first-lien subprime residential mortgage loans. Moody's can be found online at http://www.moodys.com.