Servicing

Mortgage companies dropped 9,100 full-time employees from their payrolls in November, and over 100,000 mortgage-related jobs have been lost in the wake of the subprime meltdown.The U.S. Bureau of Labor Statistics reported Jan. 4 that employment in the mortgage banker/broker sector declined from 401,000 in October to 391,900 in November. Nearly 110,000 loan officers and other mortgage workers have lost their jobs or left the industry since November 2006. Over the same period, 200,000 construction workers have lost their jobs. Meanwhile, President Bush is considering new initiatives to stimulate the economy and stabilize the housing market. And Friday's dismal jobs report, which indicates that the unemployment rate jumped from 4.7% to 5.0% in one month, is going to put more pressure on White House officials to come up with a stimulus package to reverse a slowing economy. The BLS can be found online at http://stats.bls.gov.

Seven classes of asset-backed certificates from Meritage Mortgage Corp. series 2004-1 have been downgraded by Fitch Ratings.The downgrades were as follows: class M-1, from AA to A-minus; class M-2, from A-plus to BB-plus; class M-3, from A to B; class M-4, from BB-plus to B; classes M-5 and M-6, from B to CCC/DR1; and class M-7, from CC/DR2 to C/DR5. The downgrades were attributed to deterioration in the relationship between credit enhancement and expected losses. The mortgage pool consists of first- and second-lien residential mortgages. The rating agency can be found online at http://www.fitchratings.com.

WGNB Corp., Carrollton, Ga., has announced increases in its nonperforming assets and loan loss provision for the fourth quarter due to deteriorating conditions in the residential real estate market.The company said it expects to report a loan loss provision of approximately $2.3 million for the quarter, compared with $750,000 in the third quarter, and nonperforming assets of $42.0 million, compared with $23.5 million in the third quarter. "In response to market conditions, management has been actively reviewing our loan portfolio with a particular emphasis on our residential real estate exposure," said H.B. "Rocky" Lipham III, WGNB's chief executive officer. "We have spent the last three months evaluating credit, analyzing valuations, and aggressively collecting on problem residential real estate loans." The company can be found on the Web at http://www.wgnb.com.

As Bush administration officials look for more ways to shore up the housing market, a conservative scholar is suggesting that policymakers take a look at a Depression-era agency that purchased defaulted mortgages to prevent foreclosures.American Enterprise Institute resident fellow Alex Pollock stresses in a Dec. 31 paper that the Home Owners' Loan Corp. refinanced more than 1 million loans from 1933 and 1937 and was later liquidated at a profit to the government. "The fundamental idea was that the HOLC would acquire defaulted mortgages from lenders and investors, giving its bonds in exchange, and then refinancing the mortgages on more favorable and more sustainable terms," Mr. Pollock says in the paper entitled "Crisis Intervention in Housing Finance." However, the lender would take a loss on the principal of the mortgage due to a new appraisal and lower property value. The HOLC was liquidated after 18 years and the government's initial $200 million investment produced a modest return of $14 million. "As the housing and mortgage bust of 2007 continues into 2008, the lessons of the HOLC again are relevant and well worth studying," Mr. Pollock says.

The delinquency rate on home equity loan products surged in the third quarter, according to the American Bankers Association.The ABA's consumer delinquency bulletin showed that the overdue rate on closed-end home equity loans rose 29 basis points to 2.28% in the third quarter, the highest delinquency rate posted in two years. The overdue rate on home equity lines of credit climbed 7 basis points to 0.84%, though home equity lines of credit remained the consumer credit category with the lowest delinquency rate at banks. The delinquency rate on property improvement loans rose 16 basis points to 1.60% in the third quarter. Deterioration in housing-related loans drove the ABA's consumer composite delinquency ratio up during the quarter, despite improvement in credit card performance. James Chessen, chief economist of the ABA, said he expects to find that delinquency rates on home equity loan products continued to rise in the fourth quarter, "reflecting continued weakness in the housing sector." The ABA can be found on the Web at http://www.aba.com.

Horizon Bancorp, Michigan City, Ind., has announced an increase in its provision for losses in the fourth quarter related to its wholesale mortgage and indirect auto loan portfolios.Horizon said it raised the provision for losses by $1.4 million in December to account for credit deterioration in the two business segments. The provision expense is expected to total $1.77 million in the fourth quarter, compared with $550,000 in the third quarter. The company said its wholesale mortgage portfolio, the residual of a line of business that was closed in June, totaled $8.9 million as of Dec. 28. "This portfolio consists primarily of residential, second mortgage, home equity lines of credit and term loans with high loan-to-value ratios," Horizon said.

PHH Corp. -- which controls the nation's 11th-largest residential servicer -- has called off its sale to General Electric, which had planned to flip the mortgage and fleet lender to The Blackstone Group, an investment banking firm.Back in September, Blackstone first admitted that it was having trouble securing enough debt financing to complete the deal. The publicly traded PHH Corp. owns PHH Mortgage, Mt. Laurel, N.J., a nondepository that has a bank affiliate. In a Jan. 2 filing with the Securities and Exchange Commission, PHH said it had called off the sale because GE could not complete the transaction by year's end. PHH is now seeking a $50 million termination fee from Blackstone. PHH can be found online at http://www.phh.com.

Three classes of Terwin Mortgage Trust asset-backed certificates have been downgraded by Fitch Ratings.The downgrades in Terwin 2003-6HE were as follows: class M-3, from BBB-minus to BB; class M-4, from BB to B; and class M-5, from B to C/DR5. The downgrades were attributed to deterioration in the relationship between credit enhancement and expected losses. The collateral backing the deal consists of first- and second-lien mortgage loans.

Four classes of Asset Backed Funding Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: series 2004-FF1, class M-4, from BB-plus to B, class M-5, from BB to CC/DR4, and class M-6, from BB-minus to C/DR4; and series 2004-OPT1, class M-6, from BBB to B. Fitch also affirmed the ratings on eight other classes in the two transactions. The downgrades were attributed to deterioration in the relationship between credit enhancement and expected losses. The collateral backing the deals consists of first- and second-lien subprime mortgage loans.

Thirty-eight classes of mortgage-backed securities from two issuers were downgraded by Fitch Ratings on Dec. 28 as a result of changes to its subprime loss forecasting assumptions.Fitch also affirmed the ratings on classes with outstanding balances of approximately $600 million. The securities affected by the latest downgrades were 27 classes of SASCO mortgage pass-through certificates and 11 classes of Securitized Asset Backed Receivables mortgage pass-throughs. The rating actions were attributed to changes in 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." The rating agency can be found online at http://www.fitchratings.com.