Servicing

Democrats on the House Judiciary Committee plan to try Nov. 7 to mark up a bill that allows bankruptcy judges to restructure mortgages, and they are hoping to get some Republican support.Committee Chairman John Conyers, D-Mich., acknowledged at a Nov. 1 hearing that it will be "very tough" to get the bankruptcy bill through the House and the Senate without Republican support. But it appears that the Democrats will be lucky to get support for the bankruptcy bill (H.R. 3609) from Rep. Steve Chabot, R-Ohio, who has introduced his own bankruptcy restructuring bill. Mortgage industry lobbyists are fairly confident that opposition from Republicans and a group of conservative Democrats will make it difficult to bring H.R. 3609 to the House floor for a vote. Separately, the House Financial Services Committee is planning to start the mark-up of a predatory lending bill (H.R. 3915) on Nov. 6, which could take several days to complete.

Fannie Mae and Freddie Mac have the existing capability to buy or securitize over $125 billion in subprime rescue mortgages without congressional legislation temporarily increasing the caps on their investment portfolios, according to the director of the Office of Federal Housing Enterprise Oversight."In my view, the legislation is unnecessary, unsafe and unsound, and could have the unfortunate effect to set a target for subprime purchases that the enterprises may not be able to meet safely," OFHEO Director James Lockhart says in a letter to Rep. Paul Kanjorski, D-Pa. Sen. Charles E. Schumer, D-N.Y., and Rep. Barney Frank, D-Mass., have introduced a bill to lift the cap for six months -- provided that 85% of the GSEs' purchases involve subprime loans that have been refinanced. OFHEO recently provided the two government-sponsored enterprises with additional cap flexibility. However, Fannie and Freddie responded by reducing the size of their portfolios in September. Rep. Kanjorski said he agrees with the OFHEO director's "informed assessment."

Employment in the mortgage industry plummeted by 25,100 full-time positions in September, following a 26,800 drop in August, as the mortgage shops of major lenders and securities firms continue to reduce their payrolls.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector fell from 428,700 in August to 403,600 in September. The latest numbers show that 100,000 jobs -- 20% of the mortgage industry work force -- have been lost since October 2006. At the same time, "construction employment has fallen by 124,000 since its peak in September 2006, driven by losses in residential construction," BLS acting Commissioner Philip Rones said. The BLS can be found online at http://stats.bls.gov.

Eight classes from three J.P. Morgan Alternative Loan Trust securitizations have been downgraded by Fitch Ratings.The downgrades were as follows: series 2006-A2 pools 2-5, class C-B-3, from BBB to BBB-minus, class C-B-4, from BB to B, and class C-B-5, from B to C/DR5; series 2006-A3 pools 2-3 (aggregate pool A), class C-B-4, from BB to B-plus, and class C-B-5, from B to C/DR5; and series 2006-S1 pools 1-2, class B-3, from BBB to BBB-minus, class B-4, from BB to B-plus, and class B-5, from B to CCC/DR2. Fitch also affirmed the ratings on 20 classes from five J.P. Morgan Alternative Loan Trust deals. The downgrades were attributed to a deterioration in the relationship between credit enhancement and loss expectations. The collateral for the deals consists primarily of first-lien alternative-A mortgage loans.

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-A4, class B-2, from A to A-minus, class B-3, from BBB to BB-plus, class B-4, from BB to B, and class B-5, from B to C/DR5; and series 2006-A6, class B-2, from A to A-minus, class B-3, from BBB to BB-plus, class B-4, from BB to B-plus, and class B-5, from B to C/DR4. Fitch also affirmed the ratings on four classes in the two transactions. The downgrades were attributed to "current trends in the relationship between serious delinquency and credit enhancement." The collateral in the deals consists of fixed-rate alternative-A mortgage loans.

Twenty-two classes from six issues of Citigroup Mortgage Loan Trust mortgage pass-through certificates have been downgraded by Fitch Ratings.Fitch also placed two classes on Rating Watch Negative and affirmed the ratings on 52 classes of CMLT securities. The downgrades reflect deterioration in the relationship between credit enhancement and expected losses, the rating agency said. The loans consist generally of fixed- and adjustable-rate alternative-A mortgages. Fitch can be found on the Web at http://www.fitchratings.com.

Members of the Hope Now alliance have agreed to do a mass mailing to reach 200,000 troubled borrowers and develop methods for quickly determining whether a loan modification or refinancing would prevent foreclosure, according to Treasury Secretary Henry Paulson."Members of the alliance told me they are developing methods, criteria, and metrics that any industry participant can use to systematically evaluate a borrower's ability to pay a resetting adjustable mortgage," Secretary Paulson said. This approach will allow servicers to fast-track borrowers who are current on their ARM into a loan modification or refinancing and provide others with different options. Treasury Under Secretary Robert Steel, Iowa Attorney General Tom Miller, Sandor Samuels, executive managing director of Countrywide Financial Corp., and others will be testifying at a House Financial Services Committee hearing Nov. 2 on the Hope Now efforts to prevent foreclosures and encourage loan modifications.

Residential properties that are in some state of foreclosure rose 30% in the third quarter and doubled on a year-over-year basis, to 446,726 units, according to new figures released by RealtyTrac, Irvine, Calif.Nevada had the highest foreclosure rate in the nation, with one filing for every 61 households, according to RealtyTrac, a mortgage information company. After Nevada, California (one for every 88 households) and Florida (one for every 95) had the highest incidence of foreclosures. California, though, saw its foreclosure filings quadruple to 148,147 incidences from those of a year earlier. Other states ranking among the top 10 in foreclosures include Michigan, Ohio, Colorado, Arizona, Georgia, Indiana, and Texas. RealtyTrac can be found online at http://www.realtytrac.com.

Fifty-nine classes from 13 Countrywide residential mortgage-backed securities deals issued in 2005 and 2006 have been downgraded by Fitch Ratings.Fitch also affirmed the ratings on 32 classes from the CWALT transactions. The downgrades were attributed to a deterioration in the relationship between credit enhancement and loss expectations. The collateral for the transactions consists primarily of 30- and 15-year fixed-rate mortgage loans to alternative-A borrowers. Fitch can be found on the Web at http://www.fitchratings.com.

Mortgage Assistance Center Corp., Dallas, has announced the signing of a $50 million funding agreement with an unnamed Dallas-based investment fund.The funding will be used to acquire pools of distressed residential real estate and residential mortgages through joint ventures formed with the investment fund, MACC said. The company said it has agreed to grant the investment fund a warrant to purchase up to one-third of MACC's common stock. MACC can be found online at http://www.mac-tx.com.