Servicing

Mortgage bankers lost an average of $50 on every loan they produced in 2006, compared with profits of $258 per loan in 2005, according to the Mortgage Bankers Association's annual cost study."Production profits began to slip in 2004, and we see a continuation of this trend in 2006," said Marina Walsh, a senior director in MBA's research and economics department. "Despite some companies' best efforts to boost production revenues through the origination of higher-yielding mortgage products, several factors worked against the industry as a whole -- the negative yield curve which increased the cost of funds, lower sales productivity and higher per-loan sales and fulfillment costs, particularly personnel-related costs. Servicing profits in 2006 partially offset production losses, but even these profits declined from 2005 levels due to mortgage servicing hedge losses." Production revenues increased, but so did production operating expenses, which were up 17%. The net cost to originate increased to $2,476 per loan in 2006, compared with $2,049 per loan in 2005. On the servicing side, per-loan financial profits averaged $58 in 2006, down from $104 in 2005.

Over 50 additional classes of net interest margin notes from five issuers have been downgraded by Fitch Ratings as a result of the performance of the NIM securities and changes to the rating agency's subprime loss forecasting assumptions.Fitch also affirmed the ratings on more than 20 NIM classes, and placed 11 classes on Rating Watch Negative. Among the NIM securities affected by the latest downgrades are 27 classes from 10 Greenwich Capital Soundview deals and 19 classes from eight First Franklin deals. The rating actions were attributed to the pay-down performance of the NIM securities compared with initial projections, as well as changes to Fitch's subprime loss forecasting assumptions that "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness."

New York Mortgage Trust Inc., New York, has reported that a previously announced 1-for-5 reverse split of its common stock has prompted a change in its stock symbol from NMTG to NMTR on the OTC Bulletin Board.The company said its transfer agent is sending shareholders instructions on how to exchange their current common shares for new shares. New York Mortgage Trust is a real estate investment trust that invests in and manages residential adjustable-rate mortgage loans and mortgage-backed securities.

R&G Financial Corp., San Juan, Puerto Rico, has announced that its status as an approved lender for the Department of Housing and Urban Development has been reinstated.R&G also reported the execution of an agreement with the investors from the company's 2006 financing transaction that will permit it to repurchase certain outstanding warrants for a nominal consideration upon the sale of R-G Crown Bank, R&G's wholly owned Florida thrift subsidiary. Regarding R&G's approved-lender status, the company said HUD's chief administrative law judge had recently ordered the department to reinstate R&G pending the outcome of an appeal, citing HUD's failure to follow its regulations in withdrawing R&G Mortgage Corp.'s approved-lender status. R&G can be found on the Web at http://www.rgonline.com.

First American LoanPerformance, a San Francisco-based provider of residential mortgage data and analytics, has announced major enhancements to TrueStandings Securities, a Web-based business intelligence platform that provides loan-level access to the company's mortgage securities database.The company said the enhancements include a new in-progress period reporting function offering the earliest view of performance and prepayment information on 80% of active pools up to 12 business days earlier than previously possible. Improvements also include a bulk export capability enabling faster and more detailed analysis of up to two gigabytes of loan-level data, and a lookup tool for finding securities that match a specific CUSIP number. First American LoanPerformance said its database contains over $2 trillion worth of mortgage transactions representing 85% of active nonagency securitized mortgages. The company can be found online at http://www.loanperformance.com.

Mortgage lender Sovereign Bancorp, Philadelphia, says it expects to take $70 million worth of charges on home equity loans and warehouse lines of credit when it reports third-quarter earnings next week.In a statement, the company said it will take a $50 million charge tied to its remaining correspondent home equity portfolio. The thrift exited the correspondent home equity business in early 2006. In the first quarter of this year it sold $3.3 billion in correspondent home equity loans, but kept certain mortgages that it could not sell. Sovereign said it would take a $20 million charge on warehouse lines of credit made to now-defunct subprime lenders. Sovereign ranked 51st among all mortgage lenders in the second quarter, funding $950 million in loans, according to the Quarterly Data Report, a MortgageWire affiliate. It is scheduled to release third-quarter earnings on Oct. 17. Sovereign can be found online at http://www.sovereignbank.com.

The default rate on subprime mortgage loans hit a record high of 14.65% in July, up from the record 13.44% in the previous month, as foreclosures also set a record, according to a Friedman Billings Ramsey report.The subprime foreclosure rate rose 40 basis points in July to 5.77%. During the last major upheaval in the subprime market, the default rate hit a high of 13.42% in August 1997 and foreclosures hit a high of 5.19% that same month. The default rate on alternative-A loans also moved up in July to 3.34% from 3.0% in June. "The default rates on alt-A and subprime loans deteriorated sharply in July from June, as they did in June from May, ending six months of gradual erosion," FBR managing director Michael Youngblood said. FBR can be found online at http://www.fbr.com.

Jumbo lender Thornburg Mortgage, Santa Fe, N.M., says its loss on asset sales will total $1.1 billion in the third quarter, or $236 million more than it originally anticipated.The publicly traded real estate investment trust -- which is slated to report earnings on Oct. 16 -- said it has sold $22 billion worth of what it calls "high-quality" adjustable-rate mortgages since Aug. 10. Even though its delinquency ratio is among the lowest in the mortgage industry, it has been selling assets as a way to bolster its liquidity. At the end of September its seriously delinquent ratio was just 0.27%. Commenting on the revised loss estimate, company president Larry Goldstone noted that, "The global dislocation of the mortgage finance and credit markets this past summer has had a greater impact on our balance sheet than we initially estimated. However, we have begun to see a modest improvement in financing conditions since August. Despite the greater-than-previously-reported losses, we believe we have adequate liquidity to support our current borrowings portfolio and excess capital to continue to fund new loans." Thornburg can be found online at http://www.thornburg.com.

Three classes of notes from Triaxx Funding High Grade I Ltd., which invests in residential mortgage-backed securities, have been downgraded by Fitch Ratings.The downgrades were as follows: class B-2 mezzanine floating-rate notes, from AAA to AA; class C, mezzanine floating-rate deferrable-interest notes, from A to BB; and class D, mezzanine floating-rate deferrable-interest notes, from BBB to B. Class B-2 was placed on Rating Watch Negative, and the other two classes remain there. Classes C and D were downgraded due to a reduction in credit enhancement caused by losses and a drop in the market value of the underlying assets, Fitch said, while the class B-2 notes have low risk, but a continued decline in prices "has increased the vulnerability of these notes if the transaction is forced to liquidate." Triaxx invests in triple-A rated RMBS assets using proceeds raised by issuing notes and equity and using repo funding, Fitch said.

Over 140 classes of net interest margin notes from more than 20 issuers have been downgraded by Fitch Ratings as a result of the performance of the NIM securities and, in the vast majority of cases, of changes to its subprime loss forecasting assumptions.Fitch also affirmed the ratings on more than 70 NIM classes. Among the NIM securities affected by the latest downgrades are: 26 classes from 13 Structured Asset Investment Loan Trust deals; 17 classes from 17 Structured Asset Backed Receivables deals; 10 classes from four Park Place deals; eight classes from three J.P. Morgan deals; and seven classes from six Structured Asset Securities Corp. deals. The rating actions were attributed to actual pay-down performance of the NIM securities to date compared with initial projections, as well as changes to Fitch's subprime loss forecasting assumptions that "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness." Fitch can be found online at http://www.fitchratings.com.