Servicing

The Independent Community Bankers of America has renewed and enhanced its five-year-old partnership with Fannie Mae, as the mortgage giant agreed to provide enhanced delivery services for bulk sales and reduce its Desktop Underwriter licensing and transaction fees."The ICBA-Fannie Mae partnership offers expanded services to ICBA member banks, increases the value of their membership, and helps them maintain relationships with their customers," said Dave Petro, president of the ICBA's mortgage program. Most ICBA members retain the servicing when they sell to Fannie. ICBA also has an "alliance" with Freddie Mac. Separately, Taylor Bean & Whitaker, Ocala, Fla., has purchased $3.76 billion in mortgages (servicing released) from ICBA members since February, when the Ocala wholesaler entered into a partnership with the banking trade group. The ICBA can be found online at http://www.icba.org.

Prepayments on subprime mortgage-backed securities slowed in September, and it could be a sign that house price declines are preventing borrowers from taking advantage of low interest rates and refinancing into fixed-rate mortgages, according to a report by Friedman, Billings, Ramsey & Co.Nearly 75% of subprime borrowers current in July had a "compelling financial incentive" to refinance, but prepayment rates declined and defaults rose. This situation "strongly suggests that subprime borrowers are progressively less able to refinance," FBR managing director Michael Youngblood says in the report. House prices fell 1.3% from the first quarter to the second quarter in 140 metropolitan statistical areas, representing 44.3% of the U.S. housing stock. "House prices may have fallen in these areas in the third quarter sufficiently to deter subprime borrowers, especially those with second or higher liens, from refinancing," the FBR report says. The FBR report also indicates that subprime MBS issuance declined to $13.1 billion in September from $48.7 billion in September 2006. FBR can be found online at http://www.fbr.com.

Lack of income documentation on securitized subprime mortgages would allow borrowers to rescind the loan and recover transaction costs under a predatory-lending bill introduced by House Democrats that comes down hard on stated-income loans.The bill, co-sponsored by North Carolina Congressmen Brad Miller and Mel Watt, creates a minimum national standard for mortgage originations that applies to all lenders and mortgage brokers. Securitizers would be required to conduct due diligence and sampling to detect possible lending violations. The bill also creates a safe-harbor provision and allows securitizers 90 days to cure a mortgage to avoid penalties. To qualify for the safe harbor, the loans must meet four basic standards -- ability to repay, income documentation, a debt-to-income ratio not exceeding 50%, and disclosure of costs for insurance and taxes. House Financial Services Committee Chairman Barney Frank, D-Mass, stressed that the assignee liability provision only applies to securitizers, not investors. Democrats plan to mark up the bill in the next few weeks. "The securitizers don't have to guess what kinds of loans" would get them into trouble, Rep. Frank told reporters. "It is well spelled out in the bill."

Seven certificates issued by Nomura Asset Acceptance Corp. Alternative Loan Trust in 2004 have been placed under review for possible downgrade by Moody's Investors Service.The affected securities are as follows: series 2004-AP2, class M-3; series 2004-AR1, class V-M-2; series 2004-AR2, classes M-2, M-3, and M-4; series 2004-AR3, class M-4; and series 2004-AR4, class M-5. Moody's also placed two Nomura classes under review for possible upgrade. The negative rating actions were attributed to levels of credit enhancement (provided by subordination, overcollateralization, and excess spread) that are low in view of the projected pipeline losses of the underlying pool. The transactions are backed by first-lien fixed- and adjustable-rate alternative-A mortgage loans.

Two certificates from GSR Mortgage Loan Trust 2005-HEL1 have been downgraded by Moody's Investors Service and four have been placed on review for possible downgrade.Class B-1 was downgraded from Ba1 to C, and class B-2 was downgraded from Ba2 to C. Classes M-3, M-4, M-5, and M-6 were placed on review for possible downgrade. The transaction, backed by home equity line-of-credit loans, has seen recent losses that have "far exceeded" the excess spread available, the rating agency said. "In the last two months, writeoffs have exceeded $15 million, thereby completely depleting the overcollateralization," Moody's reported. "This is due to a recent change in servicing practice by Greenpoint Mortgage Funding Inc."

Three certificates from MASTR Second Lien Trust series 2005-1 have been downgraded by Moody's Investors Service.The downgrades were as follows: class M-5, from Baa2 to B1; class M-6, from Ba2 to B3; and class M-7, from B2 to Ca. The downgrades were attributed to credit enhancement levels, including excess spread, that may be too low in view of the projected losses. "The projected pipeline loss has increased over the past few months and is likely to affect the credit support for these certificates," Moody's said. "Furthermore, many underlying first-lien loans are likely to have pending interest rate resets, which may cause an increase in delinquencies and defaults on the second-lien loans in the pool." The transaction is backed by subprime second-lien loans.

Five certificates from two deals issued by SACO I Trust in 2006 have been downgraded by Moody's Investors Service, and one of the downgraded classes and three other classes have been placed on review for possible downgrade.The downgrades were as follows: series 2006-1, class M-3, from Baa2 to B3 (and placed on review for possible further downgrade), and class M-4, from Baa3 to C; and series 2006-12, class I-M-2, from A2 to B3, class I-M-3, from Baa2 to Ca, and class I-M-4, from Ba1 to C. Classes M-1 and M-2 of series 2006-1 and class I-M-1 of series 2006-12 were placed on review for possible downgrade. The rating actions were taken because the transactions, backed by home equity line-of-credit loans, have seen recent losses that have surpassed the excess spread available, thereby depleting the overcollateralization, Moody's said. The rating agency can be found online at http://www.moodys.com.

Eleven classes of GS Mortgage Securities Corp. certificates from two GSAMP transactions have been downgraded by Fitch Ratings.Fitch also affirmed the ratings on seven other classes in the two transactions, series 2004-AR2 and series 2004-OPT. The downgrades were attributed to a deterioration in the relationship between credit enhancement and expected losses. The deals consist of closed-end fixed-rate mortgage loans secured by second liens on residential properties. Fitch can be found online at http://www.fitchratings.com.

The New York office of DBRS, a Toronto-based rating agency, has downgraded 298 classes from 63 residential mortgage-backed securitizations, citing serious delinquencies and losses in the collateral.First-lien collateral represents the primary backing for 227 of the downgraded classes and second-lien collateral is the primary support for the remaining 71 classes. In the classes backed primarily by second-lien collateral, "overcollateralization has been depleted in many transactions and excess spread continues to diminish," DBRS said. "Additionally in many cases subordinate classes have already been impaired, further weakening the available credit support for the remaining senior and mezzanine classes." Meanwhile, the classes backed primarily by first-lien collateral face the "potential for significant future losses" that are expected to erode excess spread to the point that wouldn't cover anticipated losses, the rating agency said.

Counselors at the Homeowners' HOPE Hotline fielded nearly 60,000 calls in the third quarter, double the call volume in the previous quarter and more than a tenfold increase from that of a year earlier, according to the Minneapolis-based Homeownership Preservation Foundation.The hotline, which is dedicated to helping homeowners avoid foreclosure, offers personalized assistance with mortgage payment concerns. "Troubled homeowners are more aware of our services because of the intense media coverage surrounding the foreclosure crisis," said Colleen Hernandez, president and executive director of the foundation. The organization can be found online at http://www.995hope.org.