Servicing

Friedman, Billings, Ramsey Group lost $270 million in the fourth quarter and is blaming its performance partly on the bankruptcy of its subprime division, First NLC Financial Services of Florida. For the year, the publicly traded real estate investment trust -- once a major player in the subprime sector -- lost $660 million. On Wednesday, FBRG's affiliate, FBR Capital Markets Corp., posted a $27.8 million loss for the quarter. FBRG is traded on the New York Stock Exchange, FBR Capital on the Nasdaq. (FBRG owns 52% of the affiliate.) In a statement, company president Rock Tonkel said the firm has "eliminated" most of its subprime whole-loan mortgages and on-balance-sheet residuals. Its exposure in this asset category is roughly $30 million. The REIT is putting its available cash into agency-quality mortgage-backed securities. It had $1.1 billion invested in MBS at the end of December.

Thirty-seven tranches from six mortgage-backed securities deals issued by RAMP in 2005 and 2006 have been placed under review for possible downgrade by Moody's Investors Service. The actions were attributed to projected reductions in available credit enhancement. The collateral consists primarily of first-lien residential mortgage loans with high loan-to-value ratios. Moody's can be found on the Web at http://www.moodys.com.

Seventy-four additional classes of first-lien subprime mortgage pass-through certificates were downgraded by Fitch Ratings on Feb. 19 as a result of changes to its subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of more than $1.4 billion. The securities affected by the latest downgrades were: 44 classes from four Residential Funding Co. Residential Asset Securities Corp. deals; 15 classes from one ResMae deal; and 15 classes from one People's Choice deal. The rating actions were attributed to changes to Fitch's subprime loss forecasting assumptions that "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness." Fitch can be found online at http://www.fitchratings.com.

National Real Estate Information Services, a privately held vendor management company based in Pittsburgh, has announced the formation with Howard Hanna Real Estate Services of a comprehensive platform for managing and selling real estate owned. The new company, National Real Estate Asset Management, is aimed at leveraging Howard Hanna's real estate marketing experience and NREIS's expertise in vendor management and property preservation to form the first partnership of its kind, NREIS said. The partnership will enable customers holding foreclosed properties to work with one entity that handles every aspect of property dissolution, from eviction to sale. The two parent companies can be found online at http://www.nreis.com and http://www.howardhanna.com.

Investment banker FBR Capital Markets Corp., which recently threw its subprime division into bankruptcy, lost $27.8 million in the fourth quarter. In a statement, FBR blamed the performance on impairment charges tied to its investment portfolio and merchant banking business as well as severance costs. Last month FBR's First NLC Financial Services unit filed for Chapter 11 bankruptcy protection. At one time, First NLC was a top-20-ranked subprime lender. Between 2002 and 2005, FBR took several subprime mortgage firms public, converting them to a REIT ownership structure.

The Maryland Department of Labor, Licensing and Regulation is examining the servicing practices of Ocwen Loan Servicing, West Palm Beach, Fla., one of the largest subprime servicers in the United States. A spokeswoman for the agency told MortgageWire that "We don't randomly conduct exams," adding that "we saw some flags." She did not elaborate. Ocwen was singled out by Maryland Gov. Martin O'Malley at a news conference on Tuesday. Bill Rinehart, vice president and chief credit officer for the publicly traded Ocwen, said, "We received an examination request in the ordinary course of business. That's as much as we know. If they find something in the exam, we'll address it." Ocwen services $53.5 billion in loans. At year's end, its foreclosure rate was 6.47%, compared with 3.21% a year earlier. Mr. Rinehart noted that less than 1% of Ocwen's foreclosure cures result from "short sales" or "deeds in lieu."

To deal with so-called underwater mortgages, the Office of Thrift Supervision wants to develop a refinancing program that provides lender/servicers with certificates for writing down the principal amount of a mortgage to enable them to possibly recoup "some or all" of the immediate loss when the property is sold or refinanced again. OTS Director John Reich said he is trying to find a way to assist homeowners who cannot refinance to lower their mortgage costs and have negative equity in the homes. "We are concerned this reality is encouraging an increasing number of people to walk away from their homes," Mr. Reich told reporters. The OTS is looking at the Federal Housing Administration Secure program as a refinancing vehicle now that the FHA can insure mortgages above the $417,000 conforming loan limit. The OTS director said there is a potential for the certificates to be sold, like warrants, to investors and traded. OTS officials are promoting and developing the concept and say they hope to get other regulators, the FHA, and the American Securitization Forum on board in a few weeks.

Oxford Funding Corp., Houston, has announced an agreement by its hedge fund to purchase its first pool of mortgages. The hedge fund, Oxford Opportunistic Mortgage Fund, remains open and has not been fully subscribed, but it will purchase a mortgage pool with a principal balance of approximately $5.3 million, Oxford Funding said. The company said the hedge fund will invest in mortgages bought at "substantial discounts" in the secondary market. The company can be found on the Web at http://www.oxfordfunding.com.

More than 200 additional classes of subprime mortgage pass-through certificates were downgraded by Fitch Ratings on Feb. 15 as a result of changes to its subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of more than $2.6 billion. The securities affected by the latest downgrades were: 138 classes from 13 Securitized Asset Backed Receivables LLC deals; 37 classes from three IXIS deals; 20 classes from two Wells Fargo Home Equity Trust deals; and 12 classes from one Centex deal. All were first-lien subprime transactions. The rating actions were attributed to changes to Fitch's subprime loss forecasting assumptions that "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness." Fitch can be found online at http://www.fitchratings.com.

Federal Home Loan Banks are reporting that their advance business grew by 20%-50% in 2007, but member borrowing eased off in the fourth quarter. The Boston FHLBank reported that advances grew last year by nearly 50% to $55.7 billion, up from $37.5 billion at year-end 2006. But all of that growth occurred in the third quarter, when advances jumped 56% to $56.3 billion. The San Francisco FHLBank reported a 37% increase year over year to $251.0 billion, but outstanding advances rose by only $14.8 billion in the fourth quarter. Members of the San Francisco FHLBank borrowed $53 billion in advances during July and August when the secondary market for nonagency mortgage-backed securities dried up and competition for deposits heated up. Overall, FHLBank member banks and thrifts borrowed $110 billion in advances in August. The Cincinnati FHLBank said its advances grew by 26% in 2007 to end the year at $53.0 billion, after registering no growth in advances during the fourth quarter.