Servicing

First Horizon National Corp., Memphis, has reported that its mortgage business lost $263 million (pretax) in the fourth quarter, reflecting reductions to its servicing assets and impairment charges. Overall, the bank lost $399 million in the quarter. Like many banks heavily involved in residential finance, First Horizon has been stung by the nation's mortgage crisis and housing downturn. It has moved to cut staff and close production channels. In the fall, First Horizon announced job cuts of 1,500 mortgage workers and the closure of 50 offices. First Horizon can be found online at http://www.firsthorizon.com.

Raising the Fannie Mae and Freddie Mac loan limit to $625,000 as part of a stimulus package could help 140,000 to 210,000 families escape foreclosure, increase home sales, and boost economic activity by $42 billion, according to the National Association of Realtors. "We believe that any stimulus package must address housing issues and increasing the conforming loan limits for these two government-sponsored enterprises," NAR president Dick Gaylord said. Congress and the Bush administration are trying to put together a $100-150 billion stimulus package that features mainly tax rebates for consumers and accelerated writeoffs for businesses. President Bush called for quick passage of a Federal Housing Administration reform bill on Friday in discussing his approach to a stimulus package. But he did not mention the GSEs. The Realtors want the GSE loan limit raised from $417,000 to $625,000 to address the lack of liquidity and the high interest rates in the jumbo mortgage market. "This is the quickest way to help the hurting housing market," Mr. Gaylord said.

Moody's Investors Services has downgraded certain ratings from several option ARM deals, citing in each case a combination of methodology updates and performance concerns. Issuers with some ratings affected by delinquencies or the effect of the methodology update on nondelinquent portions of the transactions include American Home, CWALT Inc. (Countrywide), GreenPoint Mortgage Funding Trust, Lehman XS Trust, and Residential Accredit Loans Inc. Moody's can be found online at http://www.moodys.com.

Ninety classes from 19 issues of Residential Accredited Loans Inc. mortgage-backed securities have been downgraded by Fitch Ratings. In addition, Fitch placed four classes on Rating Watch Negative, removed nine classes from Rating Watch Negative, and affirmed the ratings on 26 other classes in the transactions. The negative rating actions were attributed to deterioration in the relationship between credit enhancement and loss expectations. The collateral consists chiefly of first-lien, alternative-A mortgage loans.

MFA Mortgage Investments Inc., New York, has announced the pricing of 25 million shares of MFA stock at $9.25 per share. Net proceeds are expected to total approximately $220 million. The company said it has granted the underwriters an option to buy up to 3.75 million additional shares to cover any overallotments. UBS Investment Bank, Bear Stearns & Co., Deutsche Bank Securities, and Morgan Stanley are the joint book-running managers of the offering. MFA, a real estate investment trust that invests in hybrid and adjustable-rate mortgage-backed securities, can be found online at http://www.mfa-reit.com.

Deerfield Capital Corp., Chicago, has announced that it will take a noncash charge of $75.5 million in the fourth quarter related to approximately $3.4 billion of residential mortgage-backed securities, and a $14.6 million charge linked to its asset-backed securities. Deerfield, a real estate investment trust, also reported sales of approximately $1.5 billion of available-for-sale RMBS in the fourth quarter to reduce leverage and maintain adequate liquidity. The company said it plans to carry its entire RMBS portfolio at fair value in 2008.

Provident Bankshares Corp., Baltimore, has reported a net loss of $15.5 million ($0.49 per share) for the fourth quarter, chiefly as a result of a writedown of its REIT trust preferred securities. Provident recorded net income of $11.3 million ($0.34 per share) a year earlier. The company said the loss stemmed from the writedown of "a significant portion" of its $95 million portfolio of real estate investment trust securities and an increase in the provision for loan losses "to reflect the inherent risk in its real estate loan portfolios," among other things. "We took these prudent steps with our investment portfolio even though the securities that are being written down are performing," said Gary N. Geisel, Provident's chairman and chief executive officer. "Given their lack of market liquidity and recent credit rating decline, this was a prudent decision based on a rational analysis of the national housing and residential mortgage industries." The company can be found online at http://www.provbank.com.

Huntington Bancshares Inc., Columbus, Ohio, has reported a net loss of $239.3 million ($0.65 per share) for the fourth quarter, due largely to credit losses linked to Franklin Credit Management Corp., a specialist in servicing and resolving residential mortgage loans. A year earlier, Huntington reported earnings of $87.7 million ($0.37 per share). Huntington said it made a $405.8 million provision for credit losses in the fourth quarter related to the restructuring of loans to Franklin, along with $106.2 million for non-Franklin-related losses, much of which was attributed to continued weakness in commercial real estate markets. Thomas E. Hoaglin, chairman, president, and chief executive officer of Huntington, said the company "firmly" believes that the "reserves we have established and the positive cash flow coverage resulting from the restructuring address fully the current and anticipated financial performance issues associated with this relationship." The company can be found online at http://www.huntington.com.

The mortgage industry modified an estimated 54,000 home loans and established formal repayment plans involving another 183,000 borrowers during the third quarter, according to an analysis by the Mortgage Bankers Association. The MBA also estimates that foreclosure actions were started on 384,000 loans in the third quarter, though the MBA said that 63% of the foreclosure starts involved non-owner-occupied homes, borrowers who failed to respond to servicers' efforts to contact them, or borrowers who failed to perform on a repayment plan or loan modification that was already in place. Jay Brinkman, the MBA's vice president of research, said the number of loan modifications and repayment plans is likely to grow because of the industry's efforts to reach out to borrowers with subprime adjustable-rate mortgage loans. The MBA estimates are based on responses from servicers covering about 33 million home loans, or 62% of the total market. The MBA can be found online at http://www.mortgagebankers.org.

Subprime servicers are starting to provide data on their loan modification efforts to a working group of state attorneys general and banking regulators, according to New York Banking Superintendent Richard Neiman. The multistate working group, headed by Iowa Attorney General Tom Miller, began working with subprime servicers last summer to make sure distressed homeowners are getting the assistance they need to avoid foreclosure. However, Mr. Miller's group has been shut out of the loan modification efforts led by Treasury Secretary Henry Paulson and the Hope Now alliance of servicers. "I found it curious and disappointing that the Treasury's Hope Now alliance did not include a state government representative," Mr. Neiman told the Exchequer Club. "This omission could undermine the group's effectiveness, because it is missing the perspective from an important regulatory partner, which is the sole supervisor for a significant portion of the mortgage industry."