Servicing

Citing exposure to subprime mortgages, Fitch Ratings has placed the long-term issuer rating of Security Capital Assurance Ltd. and the insurer financial strength ratings of XL Capital Assurance Inc. and SCA's other financial guaranty insurance subsidiaries on Rating Watch Negative.Fitch said the actions were based on an updated assessment of SCA's exposure to structured finance collateralized debt obligations backed by subprime mortgage collateral. The review indicated that SCA's capital adequacy under Fitch's model falls below the guidelines for a triple-A IFS rating, the rating agency said. As a result of the action regarding XL Capital Assurance, Fitch said it has placed 3,375 municipal bond issues insured by the company on Rating Watch Negative because of its exposure to structured finance CDOs backed by subprime mortgage collateral. Fitch can be found online at http://www.fitchratings.com.

Federal Realty Investment Trust, a constituent of the Standard & Poor's REIT Composite Index, will replace Lyondell Chemical Co. in the S&P MidCap 400 Index after the close of trading Dec. 20, S&P has announced.The reason for the change is that Lyondell is being acquired. Federal Realty, based in Rockville, Md., is a real estate investment trust that owns, manages, and redevelops shopping centers.

Washington Mutual Inc., Seattle, has priced a public offering of 3 million shares of 7.75% series R noncumulative perpetual convertible preferred stock with a liquidation preference of $1,000 per share.WaMu said it expects the offering to generate net proceeds of $2.9 billion, of which up to $1 billion will initially be contributed to Washington Mutual Bank, its principal subsidiary, as additional capital. Each share of the series R preferred stock will be convertible at any time, at the option of the holder, into 47.0535 shares of WaMu common stock, representing an initial conversion price of approximately $21.25 per share, WaMu said. The joint book-running managers of the offering are Lehman Brothers Inc., Morgan Stanley & Co., Credit Suisse Securities (USA) LLC, and Goldman, Sachs & Co. WaMu can be found online at http://www.wamu.com.

Wolters Kluwer Financial Services is offering to help mortgage servicers modify the loans of distressed subprime borrowers who face onerous rate resets.WKFS, a provider of compliance, content, and technology systems to the industry, says it can help servicers modify loans rapidly with a standard but customizable set of documents and packages that let servicers freeze the interest rate of their borrowers' existing adjustable-rate mortgages for a specified period or convert those ARMs to fixed-rate or interest-only loans. The company said it can provide secure electronic delivery of completed document packages to borrowers and all other parties, including electronic signature capabilities for the borrower's acceptance.

Over a million homes entered the foreclosure process nationwide in the first 11 months of the year, a 93% increase from the level recorded in the comparable period of last year, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm. In addition, nearly 527,000 homes were repossessed by lenders during the period, up 41% from the comparable level a year earlier, the company reported. However, not all the foreclosure news is gloomy, the company said. "Our newest ForeclosureS.com report shows pockets of actual drops in the number of foreclosure and pre-foreclosure filings from a year ago," said Alexis McGee, president of ForeclosureS.com. "That's positive, and that's the real news despite overall numbers that generally are up for the year and from 2006." The company can be found online at http://www.foreclosures.com.

Lehman Brothers took a $3.5 billion writedown related to residential and commercial assets in its fourth fiscal quarter but was able to offset it with about $2 billion in hedging gains, the company's global head of risk management said in a Dec. 13 conference call.Considering that the global credit crunch made November the "single worst month on record" for securitized assets, Lehman's 12% decline in year-to-year quarterly income, to $886 million, was a sign that the company did a relatively good job of managing its risk even though it did not emerge from the quarter unscathed, Chris O'Meara said. The residential-related portion of the writedown totaled $2.2 billion, Mr. O'Meara said.

The House Judiciary Committee approved a narrowly targeted bankruptcy bill by a 17-15 vote Dec. 12 that would give subprime and nontraditional mortgage borrowers facing foreclosure one last chance to get their mortgage restructured so they can stay in their homes.Only homeowners who have received a foreclosure notice could seek a Chapter 13 restructuring under a compromise worked out between committee Democrats and Rep. Steve Chabot, R-Ohio. Under the bill, bankruptcy judges could waive prepayment penalties and reduce the mortgage amount to the fair market value and reduce the interest rate to a conventional rate plus a risk premium. These restructurings would be limited to subprime and nontraditional mortgages originated from 2000 through the date of enactment of the legislation. The Mortgage Bankers Association and the American Bankers Association oppose the bill.

Countrywide Financial Corp. chairman and chief executive Angelo Mozilo said Thursday that his company cannot pass on all additional guarantee fee charges to the lender's customers.In a brief interview with MortgageWire, Mr. Mozilo said, "You have to try and pass on those costs, but it's tough in this market. You cannot pass on the entire cost." Countrywide sells its conventional production to both Fannie Mae and Freddie Mac, which in recent months have hiked their "g-fees" to as high as 25 basis points. (Individual seller/servicers do not disclose their g-fee deals. In years past some lenders were paying as little as 12 bps, sources said.) Meanwhile, Countrywide released its November production numbers, reporting that loan production totaled $23 billion, a 40% decline from that of November 2006. Retail production fell 29%, wholesale 55%, and correspondent 46%. The company can be found online at http;//www.countrywide.com.

Evest Capital LLC and EvestMAC LLC, both based in Stamford, Conn., have announced the closing of equity and financing transactions for a recently launched finance subsidiary that invests in distressed and subperforming mortgage assets.The subsidiary, EvestMAC Funding II LLC, received an equity infusion and a total of $46 million from two financing facilities with a national bank and a group of private investors, Evest said. The company said it plans to apply EvestMAC's proprietary enhanced asset recovery model and investment methodology to "a superior asset refinance platform." Evest can be found online at http://www.evestcapital.com.

National Bank of Kansas City, Overland Park, Kan., has announced the introduction of a Mortgage Recovery program by its mortgage division to help borrowers hurt by the turmoil in the subprime mortgage market.Under the program, the bank will review a loan's terms, including prepayment penalties, adjustment dates, and variable rates, and counsel the borrower about the loan and the available options. "With so many stories in the media regarding subprime loans, refinancing, [Federal Housing Administration] loans, rate freezes, and foreclosures, consumers are confused about their options," said Todd Geiman, executive vice president of the Kansas bank's mortgage division. "We were taken aback by the misinformation given to many of the people we've spoken with. Many homeowners don't even realize they fall in the subprime category."