Servicing

FirstFed Financial Corp., Santa Monica, Calif., has announced that it expects to make a $20-23 million provision for loan losses for the fourth quarter, more than quadrupling the $4.5 million provision recorded in the third quarter, as a result of rising single-family loan delinquencies. The company said single-family loans 30-90 days delinquent rose to approximately $237 million by Dec. 31, up from $72 million as of Sept. 30. "Adjustable-rate mortgages that have reached their maximum allowable negative amortization, which now require an increased payment, are a contributing factor in the higher level of delinquent loans," the company said.

The Federal Deposit Insurance Corp. has hired First Financial Network Inc. to market and sell $40 million in residential mortgage loans from the failed Miami Valley Bank. The Lakeview, Ohio, bank had $86.6 million in assets when the FDIC closed it in October, transferred all the insured deposits to a local bank, and retained all the assets. FFN president and chief executive Bliss Morris said she expects due diligence to begin in February, and the bid date will be in early March. "We are pleased to assist FDIC with this assignment," Ms. Morris said. "We have proven our ability to transact sales of this nature on behalf of FDIC and look forward to another successful portfolio offering." Based in Oklahoma City, FFN has an online loan trading platform that provides qualified investors with immediate access to due-diligence information.

Fourteen tranches from 3 deals issued by MASTR Adjustable Rate Mortgages Trust in 2007 have been downgraded by Moody's Investors Service, and seven tranches have been placed under review for possible downgrade. The negative rating actions were based on higher-than-expected rates of delinquency, foreclosure, and real estate owned in the underlying collateral relative to credit enhancement levels. The collateral consists primarily of first-lien, fixed- and adjustable-rate alternative-A mortgage loans.

Sixteen tranches from four deals issued by Bank of America in 2007 have been downgraded by Moody's Investors Service, and 14 tranches have been placed under review for possible downgrade. Moody's said the negative rating actions were based on higher-than-expected rates of delinquency, foreclosure, and real estate owned in the underlying collateral relative to credit enhancement levels. The collateral consists primarily of first-lien, fixed- and adjustable-rate alternative-A mortgage loans.

Thirty-seven certificates from 14 mortgage-backed securitizations issued by AMSI and ARSI have been downgraded by Moody's Investors Service. Moody's also placed 12 certificates from the deals on review for possible downgrade. The negative rating actions were based on an analysis of the credit enhancement levels provided by excess spread, overcollateralization, and subordinate classes relative to stressed estimates of future losses, Moody's said. The AMSI and ARSI transactions were backed by loans originated by Ameriquest Mortgage Co. and Argent Mortgage Co., respectively. The rating agency can be found online at http://www.moodys.com.

Thornburg Mortgage Inc., Santa Fe, N.M., has announced the pricing of concurrent public offerings of 7 million shares of common stock and 8 million shares of an existing series of preferred stock. The common stock was priced at $8.00 per share, and the 10% series F cumulative convertible redeemable preferred stock was priced at $19.50 per share. Aggregate net proceeds from the offerings totaled $200.8 million. Thornburg said it intends to use the majority of the net proceeds to finance the acquisition or origination of adjustable-rate mortgage assets, with the remainder to be used for liquidity needs and working capital. The company has granted underwriters two options to cover any overallotments: a 30-day option to buy up to 1.05 million additional shares of common stock, and a 10-day option to buy up to 1.20 million additional shares of the preferred stock. The joint book-running managers for the offerings are UBS Investment Bank and Friedman, Billings, Ramsey. The company can be found online at http://www.thornburgmortgage.com.

The California Reinvestment Coalition, San Francisco, has announced a new initiative aimed at increasing the number of mortgage counselors working to keep Californians in their homes. Under the California Home Ownership Preservation Initiative, mortgage counseling agencies will receive $4.6 million to build their capacity over the next two years, the coalition said. The announcement came from the coalition, the San Francisco Foundation, the California Community Foundation, and eight financial institutions: Merrill Lynch, HSBC-North America, Wachovia Bank, Comerica Bank, Wells Fargo Bank, Countrywide Financial Corp., Citi, and Bank of America. The California Reinvestment Coalition can be found on the Web at http://www.calreinvest.org.

Western Alliance Bancorporation, Las Vegas, has announced plans to write down its subprime mortgage-backed securities from $9.5 million to $4.9 million for the fourth quarter, but said the charge is expected to be offset. The offset will come from mark-to-market valuation benefits under Statement of Financial Accounting Standards No. 159, the company said. Western Alliance also announced that its earnings per share are expected to decline from $0.35 in the third quarter to $0.09 in the fourth quarter, primarily as a result of an increase in its loan loss provision to $13.9 million. The company can be found online at http://www.westernalliancebancorp.com.

Downey Financial Corp., Newport Beach, Calif., has announced an increase in previously reported levels of nonperforming adjustable-rate mortgage assets. The estimated level of nonperforming assets as a percentage of total assets was increased to 7.8% as of year's end. Downey said it had launched a borrower retention program in the third quarter aimed at enabling qualified borrowers to switch from a payment-option ARM to a less costly alternative. The modifications were not deemed troubled debt restructurings, and Downey's independent auditor did not object, the company said. But after further review, the auditing firm, KPMG LLP, advised Downey that they should be classified as troubled debt restructurings, and Downey agreed. "This conclusion was reached because in the current interpretation of [generally accepted accounting principles]," Downey said, "especially in the current housing market, there is a rebuttable presumption that if the interest rate is lowered in a loan modification, the modification is deemed to be a troubled debt restructuring unless the modified loan can be proved to be at a market rate of interest based upon new underwriting, including an updated property valuation, credit report, and income analysis." The company can be found online at http://www.downeysavings.com.

One million securitized subprime mortgage loans were 90 days or more past due, in foreclosure, or real estate owned as of Oct. 31, according to the latest credit performance report by Friedman Billings Ramsey Investment Management. Subprime defaults have jumped from 9.1% in October 2006 to 19.4% in the space of 12 months -- raising the number of subprime foreclosures to 417,800. The foreclosure rate was 7.8% in October. FBRIM managing director Michael Youngblood said he expects the default rate to go higher as resets on adjustable-rate subprime mortgages kick in this year. So far, defaults have been driven by lax underwriting standards and, more recently, by declining house prices and weakening labor markets. FBRIM researchers used a database of 5.18 million subprime loans in compiling the October credit performance report on nonagency securitized mortgages.