Servicing

Freddie Mac has announced a change in its policy regarding the purchase of delinquent mortgage loans from pools underlying Mortgage Participation Certificates.Freddie said it will now generally purchase mortgages that are 120 days or more delinquent when they have been modified, the subject of a foreclosure sale, or delinquent for 24 months, or when the cost of guarantee payments to securityholders exceeds the cost of holding the nonperforming loans in its mortgage portfolio. "Freddie Mac believes that the historical practice of purchasing loans from PC pools at 120 days does not reflect the pattern of recovery for most delinquent loans, which more often cure or prepay rather than result in foreclosure," the company said. "Allowing the loans to remain in PC pools will provide a presentation of its financial results that better reflects Freddie Mac's expectations for future credit losses." Freddie can be found online at http://www.freddiemac.com.

The National Association of Home Builders is urging Fannie Mae to roll back a planned 25-basis-point surcharge that lenders would pay when they deliver loans to the giant secondary market agency."This is no time for Fannie Mae's business interests to take precedence over its mission responsibility," said Jerry Howard, the NAHB's executive vice president and chief executive. The builders are one of Fannie's strongest allies, and they have consistently opposed government efforts to impose "user fees" on Fannie and Freddie Mac, which the association terms a tax on homebuyers. In this case, the user fee is being imposed by Fannie Mae, Mr. Howard said. "We oppose it, and urge Fannie to reconsider." The 25-bps delivery fee is slated to go into effect March 1. The NAHB can be found on the Web at http://www.nahb.com.

The default rate on subprime mortgage loans jumped nearly 160 basis points in September to a new record high of 17.73%, and the foreclosure rate jumped 47 bps to 7.24%, according to a Friedman Billings Ramsey Investment Management report.Defaults on securitized subprime mortgages had doubled over the previous 12 months. For the first time since the 2001 recession, "the majority of metropolitan statistical areas are experiencing year over year increases in default rates in each of prime, Alt-A and subprime loans," Michael Youngblood, FBRIM's managing director of fixed-income research, says in the report. The researcher points out that default rates in 52 MSAs, representing 46% of all subprime loans, had increased by 200% or more in September 2007 from the levels of a year earlier. The 52 MSAs are concentrated in Arizona, California, Florida, Nevada, Oregon, and the District of Columbia. The default rate on alternative-A loans moved up from 3.96% in August to 4.61% in September. FBRIM is a subsidiary of Friedman Billings Ramsey, which can be found online at http://www.fbr.com.

United Bank of Switzerland -- once a huge provider of warehouse credit to subprime firms -- says it will take a $10 billion writedown on collateralized debt obligations that are triple-A rated even though these investments are "senior" to similarly rated tranches of the same bond issue.UBS -- which released the news at 1 a.m. Monday -- blamed the writedown on America's subprime crisis, homeowner delinquencies, and "worsening market expectations of future developments." In tandem with the writedown announcement, UBS said two foreign investors have committed to invest $11.5 billion in the company to help shore up its capital position. UBS is based in Zurich. One of the investors in the Swiss bank is the Government of Singapore Investment Corp., or GIC.

Class M of American Business Financial Services mortgage pass-through certificates series 2003-2 has been downgraded from AA to A-plus and removed from Rating Watch Negative by Fitch Ratings.Fitch also affirmed the triple A rating of class A in the deal. The downgrade was attributed to the recent downgrade of Radian Asset Assurance Inc.'s insurer financial strength rating to A-plus. The rating of class M is based on a guarantee from Radian Asset Assurance. The collateral for the transaction generally consists of first- and second-lien home equity loans.

Two classes of mortgage pass-through certificates in Mortgage Asset Securitization Transactions Specialized Loan Trust deals have been downgraded by Fitch Ratings.Class M-5 of series 2005-3 was downgraded from BBB-minus to BB, and class M-6 was downgraded from BB to B. Fitch also placed classes M-3 and M-4 of series 2005-3 and classes M-4 and B of series 2005-1 on Rating Watch Negative and affirmed the ratings on 15 classes in three MASTR securitizations. The rating agency attributed the downgrades to deterioration in the relationship between credit enhancement and loss expectations. Fitch said the collateral backing the transactions consists primarily of first- and second-lien fixed- and adjustable-rate mortgage loans.

Residential Capital LLC, the Minneapolis-based holding company for GMAC's residential lending affiliates, has extended the early tender time for its previously announced cash tender offer for up to $750 million in aggregate principal amount of debt securities.ResCap said the new early tender time is 5 p.m. EST on Dec. 12 (unless further extended by ResCap). Holders must validly tender their notes prior to the early tender time in order to be eligible for the early tender premium of $30 per $1,000 principal amount of notes. The tender offer will expire at midnight Eastern time on Dec. 19. ResCap can be found on the Web at http://www.rescapholdings.com.

Fannie Mae has priced a $7 billion offering of 8.25% noncumulative, perpetual, fixed-to-floating-rate preferred stock.The 280 million shares of Series S stock (CUSIP 313586752) have a stated value of $25 per share, the government-sponsored enterprise said. The stock will have a fixed annual dividend rate of 8.25% from the issuance date to Dec. 31, 2010. Thereafter, the dividend rate will reset quarterly, with dividends accruing at 7.75% or the three-month London interbank offered rate plus 4.23%, whichever is greater. Fannie Mae will have the option to redeem all or part of the Series S preferred stock on Dec. 31, 2010, and on each fifth anniversary thereafter, at the redemption price of $25 per share plus accrued dividends. "We saw exceptional investor demand for this preferred offering," said David C. Benson, senior vice president and treasurer. The issuance "completes our previously announced capital raising program," he said. Lehman Brothers and Merrill Lynch & Co. are the joint lead underwriters of this issue. Fannie Mae can be found online at http://www.fanniemae.com.

Linda Remsberg, president and chief executive officer of NoteWorld LLC, Tacoma, Wash., has acquired the company from Credit-Based Asset Servicing and Securitization LLC, according to NoteWorld, a servicer of seller finance loans.The terms of the transaction were not disclosed. C-BASS acquired NoteWorld in 1998. "While we have been grateful for the years of ownership by C-BASS, the recent turmoil in the market and the opportunity for growth in seller finance has opened up the opportunity for an individual to own the organization," Ms. Remsberg said. Ms. Remsberg founded her own company in 1983, which developed and sold software to title and escrow companies. NoteWorld, which also services personal debt escrows and buys retail seller finance notes, can be found on the Web at http://www.noteworld.com.

Meanwhile, Fitch Ratings responded favorably to the securitization industry's loan modification plan backed by the Bush administration, declaring that it can help reduce the risk of principal loss on subprime residential mortgage-backed securities.Under the voluntary program, mortgage servicers can identify loans that are "good candidates for refinancing" as well as loans that "might be eligible for a 'streamlined' modification process" consisting of a five-year rate freeze, Fitch noted. "Fitch Ratings believes that on balance, by mitigating the impact of [adjustable-rate mortgage] resets on borrower default rates, the framework can help to reduce the risk of principal loss on senior subprime RMBS," the rating agency said. "Increased refinancing opportunities via [the Federal Housing Administration] and other programs are also important to stabilizing default rates. The implications for subordinated RMBS classes are unclear, as they may be exposed to a complex interaction of variables that can be difficult to analyze." Fitch can be found online at http://www.fitchratings.com.