Servicing

Freddie Mac has announced that it will release its second-quarter 2007 financial results before the market opening of the New York Stock Exchange on Aug. 30.The government-sponsored enterprise said it will hold a conference call at 10 a.m. EDT on that date to discuss the company's results. Freddie Mac resumed quarterly reporting in June for the first time since 2002, citing a net loss of $211 million ($0.46 per share) that it attributed primarily to mark-to-market losses on its derivatives portfolio and to credit spread widening.

The Federal Home Loan Banks of Chicago and Dallas have announced discussions aimed at evaluating the feasibility and benefits of combining the business operations of the two institutions.Terry Smith, president and chief executive officer of the Dallas FHLBank, and Mike Thomas, president and CEO of the Chicago FHLBank, issued a joint statement on the talks. "Our focus is on identifying whether and how a combination would produce advantageous results and improved value for members of both organizations and the affordable-housing needs of their communities, while also supporting the ongoing strength of the Federal Home Loan Bank System," the statement said. The Dallas FHLBank reported that it had total assets of $53.3 billion as of March 31, with over 900 member institutions in Arkansas, Louisiana, Mississippi, New Mexico, and Texas. The Chicago FHLBank reported total assets of approximately $87 billion as of March 31 and over 850 member institutions in Illinois and Wisconsin. The Chicago bank can be found online at http://www.fhlbc.com, and the Dallas bank can be found at http://www.fhlb.com.

President Bush, at a news conference Wednesday afternoon, ruled out any type of taxpayer bailout for lenders threatened by the subprime crisis.According to news reports on the president's remarks, he also dismissed proposals to grant Fannie Mae and Freddie Mac greater leeway in increasing their balance sheets. Fannie has asked its regulator for permission to increase the cap on its on-balance-sheet portfolio, a move that could increase liquidity in the secondary market.

Eight classes of subprime residential mortgage pass-through certificates from four transactions issued by Residential Asset Securities Corp. have been downgraded by Fitch Ratings.The downgraded classes, which had outstanding balances totaling $68.5 million, were among the subprime residential mortgage-backed securities placed Under Analysis by Fitch on July 12. Fitch also affirmed the ratings on 33 classes from the RASC transactions. Fitch reported that as of the end of the day on Aug. 7, it had downgraded 499 classes (with an outstanding balance of $9 billion) from subprime RMBS deals placed Under Analysis on July 12, and affirmed the ratings on 896 classes with an outstanding balance of $76 billion. Fitch can be found online at http://www.fitchratings.com.

American Home Mortgage Servicing Inc.'s residential servicer ratings have been downgraded from RPS3-minus to RPS4 by Fitch Ratings and remain on Rating Watch Negative.Affected were American Home's residential primary servicer ratings for prime product, for alt-A product, and for home equity/home equity lines of credit. The actions reflect the announcement on Aug. 6 by American Home Mortgage Investment Corp., a real estate investment trust, that it had filed a petition for protection under Chapter 11 of the U.S. Bankruptcy Code. The company had announced closing its mortgage origination operations on Aug. 1, but said it would maintain both the thrift and servicing businesses. Fitch does not publicly rate AHMS's parent, but the company's financial condition is "an important component" of AHMS's servicer rating, Fitch said. The rating agency added that an RPS4 rated servicer "may not be acceptable for new residential mortgage-backed security transactions unless additional support or structural features are incorporated."

In the second quarter, 83% of the homeowners who refinanced their homes got a mortgage at least 5% larger than the original loan, unchanged from that of the previous quarter and down from 88% a year earlier, according to Freddie Mac.In the second quarter, an estimated 42% of all mortgage applications were for refinancings, down from 46% in the first quarter, the government-sponsored enterprise said in its quarterly refinance review. "We expect refinancing activity to slow further, [to] perhaps as low as one-third of new mortgage applications in the second half of 2007," said Frank Nothaft, Freddie Mac's chief economist. Freddie Mac can be found on the Web at http://www.freddiemac.com.

The Cerberus-owned Aegis Mortgage Corp., Houston, once a top-ranked subprime funder, revealed Tuesday that it will terminate a "substantial number of its employees" effective immediately.On Monday it stopped originating loans through its only remaining channel, wholesale. Aegis has lending operations in 50 states and offices in 24. No employee head count was available, but sources say it once employed 5,000. The nondepository said it is maintaining its servicing business. (A month ago National Mortgage News reported that Aegis was trying to sell its servicing business.) Cerberus -- which also controls GMAC Mortgage -- is in the process of buying subprime giant Option One Mortgage Corp., Irvine, Calif., but there is speculation that the hedge fund may seek to renegotiate that transaction. In a statement, Aegis chief executive Dan Gilbert said, "The change in market conditions, coupled with the rapid decline in the secondary mortgage market, has forced Aegis to take this action, despite the best efforts of our management team and hard-working employees."

The residential primary servicer rating for subprime product of Accredited Home Lenders Inc. has been placed on Rating Watch Negative by Fitch Ratings.The company's primary servicer rating is RPS3-minus. (Fitch rates residential servicers on a scale of 1 to 5, with 1 being the highest rating.) Fitch said the actions reflect "the continued pressure on [Accredited Home Lenders Holding Co.'s] liquidity position in the increasingly challenged subprime mortgage market." The rating agency noted that Accredited Home Lenders Holding Co., the parent company of Accredited Home Lenders Inc., has announced a merger agreement with Lone Star Fund V (U.S.) LP.

Class B of notes issued by Bristol CDO I Ltd. have been downgraded from B/DR2 to CCC/DR2 by Fitch Ratings and removed from Rating Watch Negative.In addition, the ratings on classes A-1 and A-2 in the deal were affirmed. The collateralized debt obligation is secured by a static pool of asset-backed securities, of which 18.4% are manufactured housing residential mortgage-backed securities and 17.1% are subprime RMBS issued in 2002 and 2001, Fitch said. The rating agency attributed the downgrade to a deterioration in collateral, reporting that the overcollateralization ratio of class C remains below its minimum threshold of 104.5%, despite an improvement in the deal's collateral quality tests. "The class B notes will not receive any principal proceeds until the class A-1 and A-2 notes have been paid in full," Fitch said.

Standard & Poor's Ratings Services has placed its BBB ratings on the series 2004-A and 2005-A subordinated notes issued by Broadhollow Funding LLC on CreditWatch with negative implications.Broadhollow is a single-seller warehouse asset-backed commercial paper conduit that issues extendible notes to finance mortgage loans originated by American Home Mortgage Corp. The rating actions followed a bankruptcy filing by American Home Mortgage Investment Corp., which is a "termination event" under the Broadhollow transaction documents, S&P said. Broadhollow is no longer permitted to buy additional mortgage loans, and all collections and sales proceeds will be held to pay off Broadhollow's secured liquidity notes as they mature. S&P said the rating actions reflect its uncertainty about the bankruptcy filing and the extent to which AHM's recent announcements and reduced operating structure will affect its servicing operations. "Further aging of delinquent loans, in combination with the current market environment for pricing those nonperforming loans, has increased the risk of unprecedented market value declines," the rating agency said.