Servicing

MortgageHub, an Orlando, Fla.-based provider of mortgage and Web-based systems, has joined with USFN, a network of mortgage banking attorneys, to launch the Home Retention Alliance.MortgageHub said the alliance aims to offer "innovative alternatives to foreclosure" and bring lenders, borrowers, attorneys, and partners under one umbrella to help servicers respond to the surge in defaults and foreclosures, which increases the workload and costs associated with loan workouts. All loans will be serviced out of a service center in Orlando. "The industry is in dire need of accelerating resolution decisions for the overwhelming number of borrowers trying to keep their homes," said Ron Morgan, president of MortgageHub's Strategic Default Solutions group. ".... In teaming up with USFN, we are attempting to educate the industry of the fact that nearly 80% of loans approaching foreclosure can be rescued with the right combination of loss mitigation services." MortgageHub can be found online at http://www.mortgagehub.com, and USFN (formerly known as the U.S. Foreclosure Network) can be found at http://www.usfn.org.

Nearly 244,000 foreclosure filings were reported nationwide in August, up 36% from the level recorded in July and up 115% from that of a year earlier, according to RealtyTrac, an online foreclosure marketplace based in Irvine, Calif.The nation's foreclosure rate stood at one foreclosure filing for every 510 households, the company said in its August 2007 U.S. Foreclosure Market Report. (Foreclosure filings include default notices, auction sale notices, and bank repossessions.) "The jump in foreclosure filings this month might be the beginning of the next wave of increased foreclosure activity, as a large number of subprime adjustable-rate loans are beginning to reset now," said James J. Saccacio, chief executive officer of RealtyTrac. "Another significant factor in the increased level of foreclosure activity is that the number of REO filings (bank repossessions) is increasing dramatically, which means that a greater percentage of homes entering foreclosure are going back to the banks." The company said Nevada, California, and Florida recorded the highest foreclosure rates in August. The company can be found online at http://www.realtytrac.com.

Lehman Brothers Holdings Inc. has announced that its year-over-year net income fell 3% to $887 million in the fiscal quarter ended Aug. 31, citing "very substantial valuation reductions" for mortgages and other assets hurt by the current liquidity crunch.The Wall Street firm said the valuation concerns were most significant "on leveraged loan commitments and residential mortgage-related positions." Lehman has been partially offsetting these valuation declines with hedging and gains in other areas such as investment management, investment banking, equities, and non-U.S. revenues, as well as previously disclosed cost-cutting in the mortgage area. The company can be found online at http://www.lehman.com.

EverBank Financial Corp., Jacksonville, Fla., has reported the termination of its previously announced agreement to acquire the consumer deposit accounts, business finance division, and other assets of Atlanta-based NetBank (formerly the parent company of Meritage Mortgage).The agreement was announced May 21 along with the acquisition of NetBank's mortgage servicing portfolio, which was completed on July 1, EverBank said. The cancellation of the agreement to purchase the other assets came about "after it became clear that NetBank would not be able to complete certain conditions required to close and receive regulatory approval," EverBank said. EverBank chairman Robert Clements said the company's earnings grew 11% in the first half and that EverBank "remains in a strong position to take advantage of many other growth and acquisition opportunities that exist in this market." The companies can be found on the Web at http://www.everbank.com and http://www.netbank.com.

Downey Financial Corp., a savings and loan engaged in mortgage banking activities, has reported that its nonperforming assets jumped to 1.96% at the end of August, compared with 1.30% three months earlier.On a percentage basis, its NPA ratio spiked 50% over the time period. Based in Newport Beach, Calif., the publicly traded Downey services $5.74 billion in mortgages for others. In August it funded $171 million in residential loans for its investment portfolio. The previous month it funded just $94 million. Downey can be found online at http://www.downeysavings.com.

Continued "challenging" mortgage-related credit market conditions have caused Merrill Lynch to make "fair value adjustments" to exposed securities and businesses that it says will affect its third-quarter results.Merrill disclosed the concern in a Sept. 14 Securities and Exchange Commission filing, which it says it made "in anticipation of the closing" of its acquisition of First Republic Bank, set for Sept. 21. The company also reiterated past statements in which it noted that it is a "major player" in the areas exposed to the risk, namely the "subprime mortgage market, including certain collateralized debt obligations (CDOs), as well as other structured credit products and components of the leveraged finance origination market." Merrill Lynch can be found online at http://www.merrilllynch.com.

Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., has scheduled a mark-up of a Federal Housing Administration reform bill on Sept. 19, and the House is expected to vote on passage of an FHA bill this week.The FHA reform bill "can be an important component in addressing the tidal wave of foreclosures" and provide troubled homeowners with "safe, affordable home loans," Sen. Dodd said. When the House takes up the FHA bill (H.R. 1852), Financial Services Committee Chairman Barney Frank, D-Mass., will offer a manager's amendment that specifically authorizes the FHA to refinance homeowners who are in default and have mortgages with "adverse terms or rates." Rep. Frank also plans to offer an amendment that boosts FHA loan limits to 125% of the median house price or $730,000 (175% of the conforming loan limit), whichever is lower. The Senate FHA reform bill is expected to raise the FHA loan limit to the $417,000 conforming loan limit in high-cost areas.

PHH Corp. -- which controls the nation's 11th-largest residential servicer -- says its sale to General Electric is in doubt because investment bankers arranging the acquisition believe there will be a significant shortfall in the amount of debt financing needed.In a statement, the Mt. Laurel, N.J.-based PHH said it was informed by J.P. Morgan and Lehman Brothers that there could be a $750 million "shortfall" in debt financing. In March, General Electric Capital Corp. agreed to buy PHH in its entirety for $1.9 billion. GECC then planned to flip PHH's mortgage business (the company's biggest asset) to The Blackstone Group. Blackstone arranged to buy PHH Mortgage through a limited liability corporation called Pearl Mortgage Acquisition. In a letter sent to PHH by Pearl, Pearl said it is looking at alternative financing but is not optimistic that the sale will be completed. On Monday afternoon, PHH's shares traded down 17% to $23.74, reaching a new 52-week low. Its high is $31.52.

Eighteen additional classes of subprime mortgage- and asset-backed securities have been downgraded by Fitch Ratings as a result of changes to its subprime loss forecasting assumptions.Fitch also affirmed the ratings on classes with outstanding balances of nearly $1.7 billion. The securities affected by the latest downgrades were: 12 classes from three Residential Asset Mortgage Products Inc. issues; and six classes from one Soundview Home Equity Loan Trust issue. The rating actions were attributed to 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.

Standard & Poor's Ratings Services has lowered its ratings on 46 tranches from nine U.S. trust preferred collateralized debt obligations backed in part by trust preferred securities issued by mortgage real estate investment trusts.S&P also removed from CreditWatch with negative implications 39 CDO ratings. In addition, it affirmed the ratings on five tranches from two trust preferred CDOs and removed them from CreditWatch negative. The downgrades primarily reflect the weakening credit quality of the mortgage REIT assets in the CDO collateral pools, the rating agency said, noting that many REITs and other mortgage originators and purchasers have recently had trouble getting funding to finance their operations because of mortgage market conditions. Including the latest downgrades, S&P said it had downgraded 121 tranches from 27 cash flow and hybrid CDOs with exposure to U.S. residential mortgage-backed securities (and other securities) that have been hit with negative rating actions since July. In addition, the ratings of 117 tranches from 40 cash flow and hybrid CDO transactions are still on CreditWatch with negative implications. S&P can be found online at http://www.standardandpoors.com.