Servicing

The Federal Reserve Board is soliciting public input on Bank of America's acquisition of the nation's largest mortgage lender and servicer, Countrywide Financial Corp., and plans to hold two public hearings in April. The hearings are scheduled for April 22 in Chicago and April 28-29 in Los Angeles. In weighing the public benefits of a bank merger, the Fed normally considers competitive issues as well as the institutions' Community Reinvestment Act ratings. Based in Calabasas, Calif., Countrywide originated $408.3 billion in mortgages in 2007, and it serviced $1.48 trillion in mortgages as of Feb. 28.

Response to the Federal Reserve's first auction designed to address liquidity concerns via financings that allow a greater range of collateral seems to indicate that liquidity concerns have dissipated somewhat. The response to the Fed auction Thursday suggests that "financing needs are less dire than expected," according to Noah Estrin, mortgage-backed securities trading strategist at RBS Greenwich Capital. Also suggesting that the "flight to quality" in the market has diminished is the increase in the benchmark 10-year Treasury yield to around 3.5%, according to Yahoo Finance. During the latest round of liquidity concerns, the benchmark yield was closer to 3.3%.

Three tranches of mortgage-backed securities from Sequoia Alternative Loan Trust 2006-1 have been downgraded by Moody's Investors Service. The downgrades were as follows: class B-1, from Aa3 to B2 (and placed under review for possible further downgrade); class B-2, from B1 to Ca; and class B-3, from Caa2 to Ca. In addition, class A-2 was placed on review for possible downgrade. The negative rating actions were generally 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, adjustable-rate, alternative-A mortgage loans.

Three tranches of mortgage-backed securities from Luminent Mortgage Trust 2005-1 have been downgraded by Moody's Investors Service. The downgrades were as follows: class M-1, from Aa1 to Aa3; class M-2, from Aa2 to A3; and class B-1, from Aa3 to Baa1. The downgrades were generally 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, adjustable-rate, alternative-A mortgage loans.

Eleven tranches from two transactions issued by GSC Capital in 2006 have been downgraded by Moody's Investors Service. Six downgraded tranches remain on review for possible further downgrade, and four other tranches were placed on review for possible downgrade. The negative rating actions were generally 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, adjustable-rate, alternative-A mortgage loans.

Twenty-two tranches from four subprime deals issued by Structured Asset Investment Loan Trust in 2004 and 2005 have been downgraded by Moody's Investors Service. The downgrades were based on an "analysis of the credit enhancement provided by subordination, overcollateralization and excess spread relative to expected losses," Moody's said. The transactions are backed primarily by first-lien, fixed- and adjustable-rate subprime mortgage loans.

Thirty-eight tranches from four transactions issued by Opteum Mortgage Acceptance Corp. have been downgraded by Moody's Investors Service. Ten downgraded tranches remain on review for possible further downgrade, and six other tranches were placed on review for possible downgrade. The negative rating actions were generally 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, fixed- and adjustable-rate, alternative-A mortgage loans.

Sixty-three tranches from 17 mortgage-backed securities deals issued by Bear Stearns have been downgraded by Moody's Investors Service. One tranche was placed on review for possible further downgrade. The downgrades were attributed to "an increasing proportion" of severely delinquent loans. "The timing of losses coupled with the passing of stepdown triggers for most of the transactions has caused the protection available to the subordinated bonds to be diminished," Moody's said. The collateral consists primarily of first-lien subprime mortgage loans, the rating agency said.

Moody's Investors Service is seeking market comment on five proposed enhancements to the securitization process for U.S. residential mortgage-backed securities. The specific enhancements are stronger representations and warranties, independent third-party pre-securitization review of underlying mortgages, standardized post-securitization forensic review, expanded loan-level data reporting of initial mortgage pool and ongoing loan performance, and more-comprehensive originator assessments. "Based on Moody's assessment of factors that have lead to recent underperformance of subprime and alt-A mortgage securitizations, Moody's believes that implementation of these enhancements will materially improve performance of future mortgage securitizations," the rating agency said. Moody's said the deadline for comments on the move is April 11. The rating agency can be found online at http://www.moodys.com.

Noting the housing downturn's disproportionate impact on minorities, groups of Hispanic, Asian, and African-American real estate professionals have put forth a "five-part plan of action" to protect ownership for people of color. Among other things, the plan calls for a national foreclosure prevention fund to help troubled borrowers. The plan, which was issued at the National Association of Hispanic Real Estate Professionals' annual legislative conference in Washington, recommends that the foreclosure prevention fund offer "realistic" loan modifications and workouts, including the use of "soft seconds." It also proposes that lenders be blocked from pursuing foreclosure until they have fully documented that all reasonable steps were taken to contact borrowers and provide them with a full spectrum of options. "Our communities are at great risk," said NAHREP chair Rebecca Gallardo-Serrano. The NAHREP was joined in recommending the plan by the Asian Real Estate Association of America and the National Association of Real Estate Brokers. Together, the three groups have 70,000 members.