Servicing

Eighty-seven classes of residential mortgage-backed securities guaranteed by MBIA have been placed on Rating Watch Negative by Fitch Ratings. Fitch recently placed MBIA's triple-A insurer financial strength rating on Rating Watch Negative after an announcement that Fitch will be updating certain modeling assumptions in its analysis of the financial guaranty industry. "With the possibility that modeled losses for structured finance collateralized debt obligations may increase materially as a result of these updated projections, Fitch believes that loss projections will be most sensitive to loss given default assumptions used for SF CDOs that reference subprime RMBS collateral," the rating agency said. Fitch can be found on the Web at http://www.fitchratings.com.

ACA Financial Guaranty Corp., a subsidiary of ACA Capital Holdings, has announced the signing of a letter of intent with FSI Capital to sell ACA's U.S. asset-backed securities and corporate credit CDO asset management business. The terms of the proposed deal were not disclosed. FSI Capital, through its affiliates and subsidiaries, manages 17 collateralized debt obligations totaling about $7.5 billion. ACA also announced its entry into a letter of intent with Resource Financial Fund Management Inc. to sell its U.S. collateralized loan obligation asset management business.

Countrywide Financial Corp., Calabasas, Calif., and a consumer advocacy group, the Association of Community Organizations for Reform Now, have reached a deal to help delinquent subprime borrowers retain their homes and avoid foreclosure. Countrywide and ACORN are formalizing workout programs for all types of subprime loans, not just hybrid adjustable-rate mortgages. The agreement also extends to borrowers in all stages of delinquency, reaching borrowers not covered by Countrywide's previous $16 billion home retention initiative or by the Hope Now alliance program. "Countrywide is eager to work with borrowers, whether they are facing rate resets or some other type of financial difficulty," said Michael Gross, managing director of loan administration for Countrywide. The company can be found online at http://www.countrywide.com.

A report from the Conference of State Bank Supervisors claims that seven out of ten seriously delinquent home mortgage borrowers "are not on track for any loss mitigation option." The CSBS's state foreclosure prevention working group, convened last summer by Iowa attorney general Tom Miller, has met with the nation's 20 largest servicers of subprime mortgage loans in an effort to increase communication between servicers and troubled borrowers. The task force found that servicers have increased their use of loan modifications and other home retention options. For those delinquent borrowers who are in communication with their servicer, almost half are working toward a loan modification, the CSBS said. In a conference call with reporters, Mr. Miller said servicers have been receptive to using "enlightened self-interest" to redouble efforts to pursue foreclosure alternatives and streamline the process of creating loan modifications. "Without a blink of an eye they signed onto this proposition."

HOPE NOW, an alliance created by mortgage lenders to aid troubled borrowers, says that approximately 869,000 mortgage borrowers were helped in the second half of 2007, an increase from the group's earlier estimate. "HOPE Now servicers are working hard to help more and more homeowners who are in difficulty, but we know there is much more to be done," said Faith Schwartz, executive director of HOPE NOW. 14 servicers, which manage more than 33 million home loans, or about 62% of the total servicing market, provided the data used for the estimate. In addition to 545,000 subprime borrowers who were helped with repayment plans or loan modifications, the organization says that 324,000 prime borrowers received assistance.

Wachovia Securities, Charlotte, N.C., with $407.9 billion in U.S. master and primary servicing, heads up the list of commercial and multifamily mortgage servicers at the end of 2007, the Mortgage Bankers Association reports. Wachovia is followed by Midland Loan Services/PNC Real Estate Finance, Pittsburgh, with $268.5 billion; Capmark Financial Group, Inc., Horsham, Penn., with $258.1 billion; and Wells Fargo, San Francisco, with $175.6 billion. Wachovia, Capmark, Midland/PNC and Wells Fargo are the largest master and primary servicers of commercial and multifamily loans that went into U.S. commercial mortgage and asset-backed securitizations, the Washington-based MBA reports. GEMSA Loan Services, Houston; Prudential Asset Resources, Newark, N.J.; Midland Loan Services/PNC Real Estate Finance and NorthMarq Capital are the largest servicers for life companies. Midland/PNC, Wachovia, Deutsche Bank, and Capmark are the largest Fannie Mae and Freddie Mac servicers. Wachovia also tops the list of master and primary servicers of commercial bank and savings institution loans; Capmark is the top servicer of FHA and Ginnie Mae-related loans.

Over 70% of commercial banks expect the performance of their single-family loan portfolios will deteriorate in 2008, but most don't expect the streamlined loan modification plan endorsed by the Hope Now Alliance will have a significant impact on their loan mitigation efforts. The vast majority of banks expect to take a "case-by-case" approach to loan modifications, according to a Federal Reserve Board survey of senior loan officers. Only six of the 45 banks surveyed in January said streamlined modifications endorsed by the Hope Now alliance would play a "very significant" role in their attempts to prevent foreclosures. A large number of respondents indicated they expect to refinance subprime borrowers into Federal Housing Administration or conventional loans. More than 65% of respondents also anticipate using short sales or deed-in-lieu of foreclosure as a significant loss mitigation strategy, the Fed said.

Mortgage Assistance Center Corp., Dallas, has hired Dennis D. Downey as executive vice president and chief operating officer. He was the founder and chairman of Downey Capital Corp., where he handled the marketing, structuring and closing of commercial real estate financing transactions using a broad range of funding programs. In the late 1980s into the early 1990s, Mr. Downey was the southwest regional director of servicing and real estate owned activities for Freddie Mac. Mr. Downey also currently serves on the board of Lanier Capital REIT Inc.

The Financial Accounting Standards Board has rejected a request by the Mortgage Bankers Association for relief from having to treat all loan modifications as troubled debt restructurings. As the secondary market seized up in last year, many mortgage bankers got caught with mortgages on their books that they couldn't sell. MBA claimed these lenders do not have the computer systems to project discounted cash flows on principal and interest, as required by FAS 114, to calculate loan impairment or losses. MBA suggested an alternative standard, FAS 5, which measures impairment based on the amount a principal the lender does not expect to recover. At a Jan. 30 meeting, FASB members noted that FAS 114 was designed to prevent lenders from avoiding losses on restructurings and they unanimously rejected MBA's request. "We are disappointed by the decision. But our members have accepted the decision and they are now working to enhance their computer systems to apply FAS 114 as necessary," MBA's accounting expert Alison Utermohlen said.

Over 70% of commercial banks expect the performance of their single-family loan portfolios will deteriorate in 2008, but most don't expect the streamlined loan modification plan endorsed by the Hope Now Alliance will have a significant impact on their loan mitigation efforts. The vast majority of banks expect to take a "case-by-case" approach to loan modifications, according to a Federal Reserve Board survey of senior loan officers. Only six of the 45 banks surveyed in January said streamlined modifications endorsed by the Hope Now alliance would play a "very significant" role in their attempts to prevent foreclosures. A large number of respondents indicated they expect to refinance subprime borrowers into Federal Housing Administration or conventional loans. More than 65% of respondents also anticipate using short sales or deed-in-lieu of foreclosure as a significant loss mitigation strategy, the Fed said.