Servicing

Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., has revealed that he is working on a comprehensive predatory-lending bill that would prohibit lenders from steering borrowers into subprime loans and impose a fiduciary duty on mortgage brokers.The bill also holds lenders who pay brokers a yield-spread premium responsible for the brokers' actions. "Predatory lending needs to be stopped, which is why I intend to introduce legislation that will put an end to the practices that have forced thousands of Americans into foreclosure," said Sen. Dodd, who is seeking the Democratic presidential nomination. The Dodd bill would include YSPs in the points-and-fees test for determining whether a loan is a "high-cost loan" under the Home Ownership and Equity Protection Act. It would also prohibit prepayment penalties on subprime loans and require escrow accounts. The senator's bill also addresses servicing abuses.

The delinquency rate for single-family home loans jumped by 28 basis points to 5.12% in the second quarter of this year, and the number of loans entering the foreclosure process reached a record high, according to the Mortgage Bankers Association.The rate of loans entering the foreclosure process reached a record level of 0.65%, up 7 basis points from that of the previous quarter. The percentage of loans at some stage of the foreclosure process, at 1.40%, also was up substantially, though the foreclosure inventory was not a record. MBA chief economist Doug Duncan told reporters that delinquency and foreclosure rates were up substantially for subprime adjustable-rate mortgages. He also said that seven states -- Arizona, California, Florida, Indiana, Michigan, Nevada, and Ohio -- accounted for most of the deterioration in loan performance. The MBA can be found online at http://www.mortgagebankers.org.

Countrywide Financial Corp., Calabasas, Calif., said late Wednesday that it had laid off 900 workers across the United States, most of whom worked in production-related jobs.Earlier this week MortgageWire reported that the company was contemplating layoffs of between 7,000 and 10,000. Last month Countrywide, the nation's largest lender, cut 500 workers in its subprime division. The company has exited that business for now, concentrating instead on government-sponsored enterprise mortgages and loans insured by Ginnie Mae. Meanwhile, the publicly traded lender has rescheduled its annual Investor Forum from Sept. 5 and 6 to Nov. 12.

Zacks Equity Research, Chicago, announced Sept. 5 that Post Properties, an Atlanta-based multifamily real estate investment trust, had been designated its "Bear of the Day."The Bear of the Day is a stock Zacks expects to underperform the markets over the next three to six months. Zacks said the REIT is "trying to push rents, which has resulted in lost occupancy. We expect this trend to continue, or the company will be forced to lower rents. Either way, it is very likely that Post will miss estimates for the remainder of the year." Zacks can be found online at http://www.zacks.com, and Post can be found at http://www.postproperties.com.

Thornburg Mortgage Inc., Santa Fe, N.M., has announced the completion of a collateralized mortgage debt transaction collateralized by $1.44 billion of its prime hybrid adjustable-rate mortgage loans.The proceeds of the transaction, Thornburg Mortgage Securities Trust 2007-4, were used to reduce the company's borrowings under its ARM loan warehouse lines by approximately $1.37 billion, Thornburg said. The company said it recently resumed funding loans in its pipeline and that the warehouse capacity created by the transaction will enable it to increase the pace of its mortgage funding. Thornburg said it expects to increase the use of collateralized mortgage debt financings and reduce its reliance on reverse repurchase financing. The company can be found online at http://www.thornburg.com.

Recent turmoil in the credit markets prompted banks and thrifts to increase their borrowings from the Federal Home Loan Banks by $110 billion in August.The FHLBank System Office of Finance reported that advances jumped 16.4% in August, to $769 billion. The Atlanta FHLBank reported that it made $29.1 billion in advances in July and August. (During the first six months of the year, its advances grew by only $2.7 billion.) The FHLBank of San Francisco reported preliminary data indicating that its advances rose by a total of $53 billion over July and August. Meanwhile, members of the New York FHLBank increased their borrowings by 11%, or $6.5 billion, during August. Astoria FS&L president and chief executive George Engelke Jr. said he suspects that most of the demand for FHLBank borrowings came from banks and thrifts that engage in mortgage banking, as opposed to portfolio lenders like Astoria. He reported that Astoria has seen a "huge pick-up" in mortgage applications in the last three to four weeks. However, it will take another 30-45 days before the loans are closed -- so there is no immediate need for funding, he said.

Two classes of notes issued by Commodore CDO II Ltd., a collateralized debt obligation, have been downgraded by Fitch Ratings.The class C notes were downgraded from AA to A, and the class C notes were downgraded from BBB to BBB-minus and removed from Rating Watch Negative. In addition, the ratings on three other classes in the deal were affirmed. Fitch said the transaction consists of residential mortgage-backed securities, asset-backed securities, commercial MBS, and other CDOs. The rating agency attributed the downgrade to "negative credit migration" and revisions to its methodology for rating CDOs.

Fifty-two classes from nine issues of SACO mortgage pass-through certificates totaling nearly $518 million 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 approximately $739 million. 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 on the Web at http://www.fitchratings.com.

Federal and state regulators are urging mortgage servicers to be "proactive" and assist homeowners who are facing a jump in their monthly payments due to an approaching reset of their adjustable-rate mortgage.Servicers should assess the full extent of their authority under pooling and servicing contracts to see if they have the flexibility to contact borrowers in advance of loan resets, according to a joint Statement of Loss Mitigation Strategies for Servicers issued by the regulators. "With declines in housing prices in some areas and tighter credit for subprime loans, it is vital that mortgage servicers work proactively with borrowers facing much higher payments as their interest rates reset," FDIC Chairman Sheila Bair said. "Our work with leading accountants, attorneys, trade groups and market participants has confirmed that servicers of securitized mortgages have the authority under the accounting and tax rules, as well as securitization documents, to proactively help deserving borrowers."

The Markets & Banking business of New York-based Citigroup has purchased the wholesale mortgage origination business and mortgage servicing assets of ACC Capital Holdings, Orange, Calif.Citi acquired an option to buy those businesses in February as part of an agreement to provide working capital to ACH. The wholesale business operated under the name Argent Mortgage. The transaction was announced Aug. 31 and closed the next day. "Exercising our option to acquire the assets from ACH's wholesale origination and servicing business allows Citi to secure valuable and scalable platforms in a market undergoing significant change," said Jeffrey A. Perlowitz, head of global securitized markets in Citi's Fixed Income, Currencies and Commodities unit. "Through this acquisition, we gain important operational and pricing efficiencies and the ability to extend the high lending standards of our existing residential mortgage business from point of origination through securitization and servicing." Citi received $45 million in servicing rights from ACH in the transaction.