Servicing

The RPS1-minus residential servicer ratings of PHH Mortgage Corp., Mt. Laurel, N.J., have been placed on Rating Watch Negative by Fitch Ratings.Affected are the company's primary servicer ratings for prime, alternative-A, and home equity/home equity line of credit products. The rating actions reflect the uncertainty of market conditions and the sales of PHH Mortgage and its parent company, PHH Corp., Fitch said. The rating agency can be found on the Web at http://www.fitchratings.com.

Banks and thrifts borrowed $53 billion in advances from their Federal Home Loan Banks in September, down from $110 billion in August at the height of the credit crunch.Members of the Boston FHLBank borrowed $13.3 billion in advances last month. The New York FHLBank reported that its advances were up $8 billion, and the Cincinnati FHLBank experienced a $1.8 billion increase in advances. The heaviest borrowing activity is expected to be at the San Francisco FHLBank, which made $53 billion in advances during July and August. However, a spokeswoman for the bank said it does not plan to disclose the September advances until it reports third-quarter results. As of Sept. 30, the 12 FHLBanks held $822 billion in advances, up 28.4% from the level recorded as of June 30. Demand for advances was relatively flat during the first six months of the year.

Dalton Investments LLC, a Los Angeles-based investment management firm, has announced that it is offering a new distressed-mortgage strategy under which defaulted loans are bought at significant discounts from mortgage servicing companies and restructured.The strategy will provide affordable monthly payments for homeowners and a residential mortgage- and real estate-backed investment vehicle for Dalton's investors, the firm said. The new strategy, a joint venture with Beach Front Property Management Inc., Long Beach, Calif., will be managed by Steven D. Persky, Dalton's co-founder and chief executive officer, and Kyle Kazan, president of Beach Front Property. "This new strategy will combine Dalton's expertise in distressed debt and Beach Front Property Management's experience in buying and restructuring troubled real estate assets," Mr. Persky said. "The subprime market is just beginning to unwind, and we expect defaults and foreclosures to skyrocket over the next six to 12 months." Dalton can be found online at http://www.daltoninvestments.com.

Federally chartered mortgage giant Fannie Mae said it is not pursuing an acquisition of C-BASS LLC and its "scratch-and-dent" servicing affiliate, Litton Loan Servicing.When asked by MortgageWire whether Fannie Mae, in the past, had been pursuing the companies, the spokesman declined to comment. A source told MW that Fannie, during the summer, was exploring the possibility of buying C-BASS and Litton. It was well known in the marketplace that their owners, MGIC Investment Corp. and Radian Corp. -- two publicly traded mortgage insurers -- were exploring a sale. Goldman Sachs has been mentioned as a bidder for the pair. (Goldman declined to comment.) C-BASS, which is based in New York, was hit by margin calls in July, forcing its two mortgage insurance company owners to write down its value by more than $1 billion. According to the Quarterly Data Report, Litton ranks 12th among subprime servicers, with $46 billion in receivables. Fannie Mae can be found online at http://www.fanniemae.com.

Countrywide Financial Corp. could take a $4 billion hit on its loan inventory in the third quarter, according to a new research report issued by Morgan Stanley & Co.Morgan analyst Ken Posner is predicting that the Calabasas, Calif.-based mortgage banker could post a net loss as large as $2.4 billion in the third quarter. Countrywide's capital markets group held $56 billion in assets at the end of the second quarter. Morgan says up to 60% of those assets might be considered "risky" and that mark-to-market writedowns could range from just under $1 billion to $4 billion. Mr. Posner has an "equal-weight" rating on the stock and says he believes it has "enough cash and cash flow to operate and repay financial obligations through 2008." Countrywide can be found online at http://www.countrywide.com.

House and Senate Democratic leaders are urging the Bush administration to act more forcefully in addressing the "foreclosure crisis," and they are threatening to pass a measure to temporarily raise the caps on Fannie Mae's and Freddie Mac's portfolios if the administration does not take such action quickly.Fannie and Freddie could provide more liquidity to the mortgage market and help subprime borrowers refinance to save their homes, said Sen. Charles E. Schumer, D-N.Y., adding that he is prepared to press the Senate to pass a bill that would remove the caps on the government-sponsored enterprises for one year. House Financial Services Committee Chairman Barney Frank, D-Mass., said he would support the Schumer bill if it clears the Senate. Democratic leaders are also calling on the administration to appoint a czar to oversee its response to the foreclosure crisis and to press servicers and lenders to modify loans for distressed homeowners.

Four certificates from RAMP series 2004-KR1 Trust have been placed under review for possible downgrade by Moody's Investors Service.The affected securities are classes M-I-4, M-I-5, M-I-6, and M-II-3. The actions were based on an analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to the expected loss, the rating agency said. The mortgage pool includes various types of residential mortgage loans that were not eligible for inclusion in Residential Funding Corp.'s regular securitizations because they did not meet the underwriting guidelines of any of the company's conduit loan programs. Specifically, the loans were fall-outs from the prime jumbo A, alternative-A, Home Solution, and subprime programs, Moody's said.

Six certificates from two deals backed by WMC subprime loans have been placed on review for possible downgrade by Moody's Investors Service.The affected securities were as follows: MASTR Asset Backed Securities Trust 2003-WMC2, classes M-5 and M-6; and Morgan Stanley ABS Capital I Inc. Trust 2004-WMC3, classes M-6, B-1, B-2, and B-3. In addition, Moody's placed one certificate from another deal backed by WMC subprime loans, Soundview Home Loan Trust 2004-WMC1, on review for possible upgrade. The actions are based on the analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to the expected loss, Moody's said.

Thirty-four certificates from eight deals issued by CDC Mortgage Capital Trust in 2001, 2002, and 2003 and two deals issued by IXIS Real Estate Capital Trust in 2005 have been placed on review for possible downgrade by Moody's Investors Service.The affected transactions were as follows: CDC Mortgage Capital Trust series 2001-HE1, 2002-HE1, 2002-HE2, 2002-HE3, 2003-HE1, 2003-HE2, 2003-HE3, and 2003-HE4; and IXIS Real Estate Capital Trust series 2005-HE1 and 2005-HE2. The negative rating actions on the eight CDC Mortgage deals were attributed to "very low" pool factors. "The stepping down and continuous losses have left them with thin credit enhancement levels and made them more vulnerable to pool deterioration in the tail end of a deal's life," Moody's said. The actions on the IXIS deals were based on insufficient credit enhancement in view of "the high pipelines for both deals," the rating agency said. All the transactions are backed by first- and second-lien fixed- and adjustable-rate subprime mortgage loans. Moody's can be found online at http://www.moodys.com.

Fannie Mae has priced 15 million shares of series Q noncumulative, perpetual fixed-rate preferred stock with a stated value of $25 per share at an annual dividend rate of 6.75%.The government-sponsored enterprise said it has agreed to sell to "qualified institutional buyers" (as defined in Rule 144A under the U.S. Securities Act of 1933) a total of $375 million of the series Q preferred stock (CUSIP: 313586778). Fannie said it will have the option to redeem all or part of the stock on or after Sept. 30, 2010. Goldman, Sachs & Co. and Merrill Lynch & Co. acted as the placement agents for the transaction. Fannie can be found online at http://www.fanniemae.com.