Servicing

The impairment charge being taken by Thornburg Mortgage in its 2007 restatement has increased by $248.8 million from original estimates to a total of $676.6 million, according to the company's amended annual report filed with the Securities and Exchange Commission. The company said it has restated its earnings because margin calls that could be "material" might jeopardize its ability to hold certain of its securitized adjustable-rate mortgages to maturity. Thornburg can be found online at http://www.thornburgmortgage.com.

Five classes of subprime certificates issued by Structured Asset Investment Loan Trust in 2003 have been downgraded by Moody's Investors Service. The downgrades were as follows: series 2003-BC4, class M1, from Aaa to A1, class M2, from Aa2 to Baa1, and class M3, from Aa3 to Baa3; series 2003-BC5, class M1, from Aa1 to A1; and series 2003-BC9, class M1, from Aa2 to A1. "The stepping down has left the deals with thin credit enhancement levels and made them more vulnerable to pool deterioration in the tail end of the deals' lives," Moody's said. The rating agency said all three deals had pool factors below 10% as of February. The transactions are backed by first- and second-lien subprime mortgage loans.

Franklin Credit Management Corp., Jersey City, N.J., has reported the receipt of a notice from the NASDAQ Stock Market indicating that Franklin's stock will not be delisted if the company files its Form 10-Q for the third quarter of 2007 by March 31 and meets two other criteria. The notice said the publicly held shares of Franklin's stock must also show evidence of a $5 million market value by April 1 and maintain that value for at least 10 consecutive trading days, according to Franklin. The company said it expects to file its third-quarter 10-Q by March 31, but that if it doesn't, it plans to apply to transfer its listing from the NASDAQ Global Market to the NASDAQ Capital Market, which has a lower market value requirement. Franklin can be found online at http://www.franklincredit.com.

Nearly two-thirds of over 200 cities surveyed report that foreclosures have risen in the past year, and one-third say city revenues have fallen as a result, according to an online/e-mail poll conducted by the National League of Cities. "Mortgage foreclosures are causing havoc in many of our communities," said league president Cynthia McCollum. "Cities are already seeing reductions in their revenues at the same time that more services are needed to address the many related problems caused by the foreclosures." The organization said the ripple effects of the housing crisis on city finances were reflected in the fact that one-third of the surveyed cities reported a funding decline for various programs and projects in the past year. The poll also found that lenders in more than half the cities have not "reached out to local officials" to offer help in dealing with foreclosures and related housing finance problems.

MFA Mortgage Investments Inc., New York, has announced the sale of approximately $1 billion of mortgage-backed securities in connection with a change in its leverage strategy. The securities, consisting of approximately $950 million of agency MBS and $50 million of triple-A rated nonagency MBS, were sold at a realized loss of about $15 million, MFA said. The company said it has also terminated repurchase agreements at no cost and approximately $525 million of associated interest rate swap agreements at a cash cost of about $31 million. MFA said the strategy, to reduce its target debt-to-equity leverage to 7-9 times, stems from its view that "credit conditions are tightening, rapidly and indiscriminately." Despite the fact that other leveraged companies investing in high-quality MBS that have faced credit problems used "substantially higher" leverage than MFA, "our interpretation of their public disclosure and other information available to us increases the probability of increased margin requirements in the future for all repurchase agreement borrowers, including MFA," the company said. MFA can be found online at http://www.mfa-reit.com.

Thornburg Mortgage Inc.'s auditors have advised it to restate its 2006 and 2007 earnings due to deteriorating mortgage-related securities prices and partly unmet margin calls that may affect its ability to hold its purchased adjustable-rate mortgages to maturity. The company said it may have trouble holding the ARMs to maturity because the partly unmet calls "have raised substantial doubt about the company's ability to continue as a going concern." The restatement is slated to result in a $427.8 million charge for impairment on its purchased ARM assets as of Dec. 31, a move the company said it believes will not have a "material" effect on its book value. The company had gotten counterparties involved in the margin calls to agree to temporarily freeze additional calls on March 7 and said the freeze might be extended.

MBIA, one of the bond insurers that has been working to maintain ratings strained by mortgage-related exposures, has asked Fitch to withdraw its insurer financial strength ratings on its subsidiaries, citing reasons that include limited use of the rating agency by MBIA's issuers. MBIA chairman and chief executive Jay Brown gave extensive reasons for the move in a letter to owners after Fitch posted MBIA's request to withdraw ratings on the Fitch website. Mr. Brown also addressed what he said were press and Internet allegations that MBIA withdrew the ratings because of an impending Fitch downgrade, declaring that its limited knowledge of the rating agency's model makes it impossible for the company to estimate what Fitch's model "will produce in any given week, nor why the changes occur, nor when." A call to Fitch had not been returned as of midday Monday.

The Federal Reserve, in conjunction with several other central banks, has announced new measures to promote liquidity in financial markets. Under the new Term Securities Lending Facility, the Fed will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program) by a pledge of other securities, including federal agency debt, agency residential-mortgage-backed securities, and nonagency triple-A rated private-label residential MBS. Securities will be sold via weekly auctions, beginning March 27. In addition, the Federal Open Market Committee has authorized increases in its temporary reciprocal currency arrangements, or swap lines, with the European Central Bank and the Swiss National Bank. The latest actions supplement measures announced March 7 to boost the size of the Fed's Term Auction Facility to $100 billion, among other things. Sen. Christopher J. Dodd, D-Conn., chairman of the Senate Banking Committee, termed the Fed move "a significant step" to address the "liquidity lock-down" in U.S. credit markets, but he called for further steps to address "the foreclosure crisis." He said he is preparing legislation to do so.

Refinance.com has received government approval to refinance subprime borrowers that are a few months delinquent into Federal Housing Administration-insured loans once the mortgage insurer, investor, or servicer makes up the necessary payments to bring the loan current. The New York-based lender received FHA approval a few weeks ago. "We have told our servicers and mortgage insurance companies of its availability," Refinance.com chairman and chief executive Nicholas Bratsafolis told MortgageWire. Mr. Bratsafolis noted that a lot of refinances will face loan-to-value problems, and he is encouraging servicers to use a shared-equity mortgage to reduce the principal amount of the mortgage to an affordable level. His branded "Appreciating America Second Mortgage" does not trigger a writedown until it is paid off or the property appreciates by 15%. FHA officials have "confirmed it would be appropriate" to use a shared appreciation mortgage in FHA refinancing, the CEO said. The borrower does not have to make payments on the SAM and receives a 30% share of the appreciation plus reimbursement for improvements when it's paid off. The company, also known as Homebridge Corp., is launching a marketing campaign for the Appreciating America Second Mortgage in a few weeks.

Treasury Secretary Henry Paulson continues to dismiss calls for helping borrowers with "underwater" mortgages through principal reductions that are being advocated by some federal banking regulators. It's not the "government's job" to help borrowers who would walk away from their homes because the properties' values have dropped and they don't want to pay the mortgage, Secretary Paulson told the American Bankers Association. The Treasury secretary played an important role in getting mortgage servicers to join the Hope Now alliance, which is focused on helping struggling homeowners who want to stay in their homes but can't afford their mortgage payment because of a change in their ability to pay or the reset of an adjustable-rate mortgage. He stressed that it is important for the Hope Now servicers to publicly disclose the results of their workout efforts so that everyone can see whether the servicers are following through on the commitments. "I won't look kindly on free riders," Mr. Paulson said. Last week, Federal Reserve Board Chairman Ben S. Bernanke called on lenders to make permanent reductions in the principal amount of a mortgage to help troubled borrowers stay in their homes or refinance into a Federal Housing Administration-insured mortgage.