Servicing

Nomura Holdings Inc., Tokyo, has officially closed the remainder of its U.S. residential mortgage-backed securities business, an area that has seen heavy cuts, noting that it is taking an RMBS-related loss of about 73 billion yen (approximately $621 million) for its fiscal second quarter.Nomura, the corporate parent of a New York-based Wall Street firm, said the closure is part of a larger U.S. reorganization that involves cutting its regional headcount from 1,300 to 900 at the end of March. Nomura said restructuring costs, in combination with the RMBS-related loss, are expected to result in a consolidated pretax loss for Nomura in the fiscal second quarter of around 40 billion-60 billion yen (approximately $340 million-$511 million). "Nomura has faced challenges in the U.S. residential mortgage-backed securities market which have led to these disappointing results," said Nobuyuki Koga, president and chief executive officer. "However, we have moved decisively to deal with the issue and have avoided further and protracted losses by taking firm and immediate action."

Standard & Poor's Ratings Services has announced downgrades on 402 classes of U.S. RMBS backed by first-lien subprime mortgage loans issued in the first three quarters of 2005.The classes, from 138 residential mortgage-backed securities deals, total approximately $4.6 billion of original par amount. S&P said that represents 1.45% of the $320 billion original par amount of such subprime RMBS that it rated from the first to the third quarter of 2005. S&P also affirmed the ratings on securities from the same period that represent $252.4 billion original par value of first-lien subprime U.S. RMBS. The rating agency attributed the downgrades to expectations of further losses, the resulting reduction in credit support, and continued declines in home values. In addition, the transactions allow the release of credit support on certain "step-down" dates, and therefore "we believe these securities will be more vulnerable to losses going forward, as there may not be enough credit support to withstand future losses," S&P said. The rating agency can be found online at http://www.standardandpoors.com.

Wells Fargo & Co., San Francisco, has reported that a $1.2 billion mark-to-market gain on financial instruments used to hedge its mortgage servicing rights more than offset a $638 million decline in the value of its MSRs during the third quarter, helping the company's mortgage business generate double-digit earnings growth despite lower origination volume.Wells Fargo valued its MSR asset at 1.35 basis points of the outstanding dollar volume of loans serviced for others, the lowest valuation ratio the company has recorded in eight quarters. Mortgage origination volume totaled $68 billion in the third quarter, down by $9 billion from the prior-year quarter. Wells Fargo owned the servicing rights on $1.48 trillion of home loans, up 11% from one year earlier. Overall, the company earned $2.28 billion in the third quarter, up 4% from the third quarter of 2006. The company can be found online at http://www.wellsfargo.com.

Thirty states reported that real-estate-owned filings dropped from August to September, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm.Among states with high foreclosure numbers that recorded a decline in September were California (down 14.2%), Colorado (down 58.0%), Florida (down 14.2%), Michigan (down 21.1%), and Ohio (down 29.2%), the company reported. "Despite what some other data aggregators are saying, the big news is that many states, including some typically hit hard by rising foreclosures, actually saw a drop in the number of people who lost their homes to foreclosures last month," said Alexis McGee, president of ForeclosureS.com. The company can be found online at http://www.foreclosures.com.

Ginnie Mae has finally decided that the new Federal Housing Administration Secure mortgages should be placed into new multiple-issuer pools under the Ginnie Mae II mortgage-backed securities program.These special Ginnie II pools will consist of mortgages that are available to delinquent homeowners who want to refinance into a fixed-rate FHA loan. It will also include FHASecure loans in which a conventional borrower refinances into an FHA mortgage and the lender takes out a "silent" second mortgage to cover closing costs or reduce the principal amount to meet FHA requirements. Ginnie Mae officials have been wrestling with the issue of how to deal with new mortgages since President Bush announced the FHASecure program just before Labor Day. Bond traders opposed placing FHASecure mortgages in Ginnie I MBS or even putting them into a standard Ginnie Mae II pool and limiting them to 5% or 10% of the pool. Ginnie Mae said in a notice to MBS issuers that it would start guaranteeing FHASecure pools Dec. 1.

Treasury Secretary Henry Paulson is tasking mortgage servicers that are part of the new "Hope Now" alliance with finding a way to measure their success in loan modifications.In a speech Tuesday, he said servicers could be more effective in seeking out struggling homeowners who need help and counseling. "I expect to see results," the Treasury secretary said. He asked alliance members -- who currently service about 60% of all U.S. mortgages -- to quickly develop "standardized metrics" for measuring results and evaluating the performance of servicers. "The current process is not working very well," Secretary Paulson said. He expects members of the recently formed Hope Now to be more effective by taking an aggressive approach to loan modifications. "I expect Hope Now to develop and begin reporting these metrics to investors, policymakers, and homeowners," Mr. Paulson said. "It is important that we all be able to measure results."

Even though home values are sinking in many housing markets, the Office of Federal Housing Enterprise Oversight said Tuesday that "under no circumstance" will it decrease the Fannie Mae/Freddie Mac loan limit in 2008.Currently, the loan limit for the government-sponsored enterprises is $417,000. Politicians and lenders alike have been asking for an emergency increase in the limit as a way to improve liquidity in the secondary market. OFHEO also said it is seeking additional public comment on how it calculates and implements the conforming loan limit each year. (In the past, the loan limit was based on the sales price of homes across the United States. Historically, home prices rise each year, causing the cap to increase. However, in 2007 there was no increase in the GSE loan limit.)

Three classes of Merrill Lynch Mortgage Investors Inc.'s commercial mortgage pass-through certificates series 1999-C1 have been downgraded by Fitch Ratings.The downgrades were as follows: class F, from A-plus to BBB; class G, from B-minus/DR1 to CC/DR3; and class H, from C/DR5 to C/DR6. The rating agency also affirmed the ratings on six other classes in the deal. Fitch attributed the downgrades to "the increase in expected losses and the length of time that the assets have been in special servicing." Fitch can be found online at http://www.fitchratings.com.

Many homeowners facing foreclosure in 10 hard-hit states will be able to get legal assistance thanks to the Center of Responsible Lending and a $15 million grant from a hedge fund.Paulson & Co. Inc., New York, is providing the funds for the CRL's new Institute for Foreclosure Legal Assistance, which will support legal aid groups and law school clinics that provide legal services to subprime borrowers in danger of losing their homes. "By providing funding and other support for attorneys who can review loan documents and negotiate with loan servicers, we believe that many more homeowners will be able to stay in their homes," CRL chief executive Martin Eakes said. The National Association of Consumer Advocates is managing the legal assistance project. "We hope to be able to provide legal representation to at least 5,000 families with these funds," NACA executive director Ira Rheingold said.

Associated Software Consultants Inc., Middleburg Heights, Ohio, has announced the launch of PowerSeller GPS, a system designed to help small to mid-tier mortgage bankers and brokers increase profits in their secondary-marketing operation.PowerSeller GPS provides tools for managing pipeline and investor commitments and allows originators to capture key data elements to verify that loans are properly priced and ensure that investors are funding loans correctly. The system offers special features to enable mortgage brokers to monitor best-effort marketing activities by gathering information needed to determine the costs and benefits of switching a product line from a best-effort commitment approach to a mandatory trading model, the company said. By offering several features available in the company's comprehensive PowerSeller system, PowerSeller GPS allows small to mid-tier bankers and brokers to take advantage of numerous benefits without having to purchase an upfront license, the company said. Associated Software Consultants can be found online at http://www.asconline.com.