Servicing

Citizens Republic Bancorp, Flint, Mich., has announced that it will use PHH Mortgage, Mt. Laurel, N.J., for certain outsourced functions in the mortgage originations process.PHH will provide Citizens Republic with mortgage loan processing, servicing of new mortgage originations, certain secondary-market functions, and other mortgage-related loan origination services. The arrangement allows for Citizens Republic loan officers to use Web-based software while PHH does all the processing work under the bank's name. PHH will also take applications directly through a call center and website. In a Securities and Exchange Commission filing, Citizens Republic said it would reduce its work force by 60 employees as a result. It will record $1.1 million to $1.3 million in severance-related costs in the fourth quarter. It also announced plans for "better utilization of part-time employees" that would add an additional $900,000 to $1.2 million of severance-related costs. "Our new mortgage loan operating model increases our ability to originate loans through more channels with quicker loan decisions and closings," said William R. Hartman, president and chief executive of Citizens Republic. PHH Mortgage, a subsidiary of PHH Corp., can be found on the Web at http://www.phh.com.

Over 25% of Fannie Mae's credit losses in the third quarter came from its book of guaranteed alternative-A mortgages, according to the company's president and chief executive officer, Daniel Mudd.The giant secondary-market agency has guarantees on $324.7 billion in alt-A mortgage-backed securities, which had a serious delinquency rate of 1.36% as of Sept. 30. "Alt-A drove about 28% of Fannie Mae's total credit losses in the most recent period," Mr. Mudd told a Goldman Sachs investor conference. "So this book gets an awful lot of attention." Only 40% of its guaranteed alt-A loans have credit enhancements, which suggests many are piggy-backed with second liens. The weighted average credit score is 719. Fannie took $1.2 billion in credit-related expenses in the third quarter, including a $670 provision for credit losses on delinquent loans it purchased out of Fannie-guaranteed MBS. The government-sponsored enterprise can be found online at http://www.fanniemae.com.

The Federal Reserve Board will meet Dec. 18 to issue long-awaited revisions to its Home Ownership and Equity Protection Act regulations that address abuses associated with subprime loans.The proposed HOEPA rule will address prepayment penalties, failure to escrow taxes and insurance, stated-income and low-documentation lending, and ability-to-repay standards. In a letter to the Fed, 17 Democrats on the Senate Banking Committee urged the Fed to act "forcefully" to protect consumers. "We appreciate the fact that the Board is moving forward with a rulemaking under HOEPA, and expect the Board to meet the duty Congress entrusted to it to end the abusive practices … that have undermined confidence in the subprime mortgage market and the economy as a whole," the Dec. 7 letter says.

As MortgageWire's deadline approached, the House Judiciary Committee was on track to approve a narrowly targeted bankruptcy bill that would give subprime and nontraditional mortgage borrowers facing foreclosure one last chance to get their mortgage restructured.Only homeowners who have received a foreclosure notice could seek Chapter 13 bankruptcy relief under a compromise worked out by committee Democrats and Rep. Steve Chabot, R-Ohio, who is the only Republican on the committee expected to vote for the bill (H.R. 3609). The Ohio congressman said, however, that he expects more Republicans to support the bill when it comes up for a vote on the House floor next year. 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 2007 and up to the date of enactment of the legislation. Rep. Brad Sherman, D-Ohio, said the bill exempts prime loans and that he may offer an amendment to exempt prime interest-only mortgages. The Mortgage Bankers Association and American Bankers Association continue to oppose the bill.

The class P notes of Westways Funding XI Ltd., a mortgage market value collateralized debt obligation, have been downgraded from AA-plus to AA by Fitch Ratings.Fitch said the rating of the notes is directly linked to the rating of Citigroup Inc., which was recently downgraded from AA-plus to AA.

Three classes from Ace Securities Corp. mortgage pass-through certificates series 2003-NC1 have been downgraded by Fitch Ratings.The downgrades were as follows: class M-4, from BBB-minus to BB, class M-5, from BB to CC/DR3, and class M-6, from BB-minus to C/DR5. Fitch also affirmed the ratings on four other classes in the deal. The downgrades were attributed to a deterioration in the relationship between credit enhancement and expected losses. The collateral for the deals consists of fixed- and adjustable-rate, first- and second-lien subprime mortgage loans.

Five classes of mortgage pass-through certificates issued by Ace Securities Corp. have been downgraded by Fitch Ratings as a result of changes in the rating agency's subprime loss forecasting assumptions.The downgrades were as follows: Ace 2005-HE2, class B-1, from BB to C/DR3, and class B-2, from BB-minus to C/DR5; and Ace 2005-HE3, class M-9, from BB to BB-minus, class B-1, from BB-minus to B, and class B-2, from B-plus to C/DR5. Fitch also placed three classes from three Ace transactions on Rating Watch Negative and affirmed the ratings on 28 other classes.

Eight classes from two issues of CitiMortgage Alternative Loan Trust mortgage pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: series 2006-A5 and 2006-A7, B2 classes, from A to A-minus; B3 classes, from BBB to BB-plus; B4 classes, from BB to B; and B5 classes, from B to CCC/DR2. Fitch also affirmed the ratings on four classes from the two transactions. The downgrades reflect deterioration in the relationship between credit enhancement and expected losses, the rating agency said. The collateral for the deals consists of fixed-rate alternative-A mortgage loans.

Ten classes of notes from Duke Funding High Grade II-S/EGAM I Ltd., which is linked to residential mortgage-backed securities, have been downgraded by Fitch Ratings as a result of reported events of default.Fitch said the proceeds of the notes were used to acquire a diversified portfolio of primarily floating-rate RMBS. The issuer provided notices of the following events of default: inability to make payments as required under a hedge agreement to an interest rate hedge counterparty; and failure to pay interest due on various classes of the notes. "The events of default have resulted from declines in the market value of the portfolio which have left the issuer unable to meet margin calls from repurchase counterparties," Fitch reported.

Eleven classes of Wells Fargo Asset Securities Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings, and 30 classes have been placed on Rating Watch Negative.Fitch also affirmed the ratings on 324 classes from 54 Wells Fargo transactions. The negative rating actions reflect deterioration in the relationship between credit enhancement and expected losses, Fitch said. The collateral for the deals consists of fixed- and adjustable-rate prime mortgage loans. Fitch can be found on the Web at http://www.fitchratings.com.