Servicing

IndyMac Bancorp Inc., Pasadena, Calif., has reported net earnings of $44.6 million ($0.60 per share) for the second quarter, down 57% from $104.7 million ($1.49 per share) a year earlier.IndyMac's mortgage loan production totaled $22.5 billion in the second quarter, down 12% from that of the first quarter, the company said. Michael Perry, the company's chairman and chief executive officer, said IndyMac's 8.6% return on equity was below its 10% forecast because the forecast had included a gain from the sale/leaseback of a commercial property housing one of its mortgage loan centers. The sale resulted in a $60 million pretax gain, but $24 million will be recorded in the third quarter and the remainder will be deferred, he said. "While our ROE for the quarter is below our historical performance, it must be considered solid given current conditions in the mortgage and housing markets," Mr. Perry said. "Once again, the balance provided by our hybrid thrift/mortgage banking model protected us in this environment. Our mortgage production business, while down slightly from last quarter, had earnings of $38 million and a solid 21% ROE, despite a high level of costs, which had been anticipated." IndyMac can be found online at http://www.indymacbank.com.

The two mortgage insurance firms that control C-BASS have written down the value of their investment in the New York-based specialty servicer by more than $1 billion combined, according to company statements.Meanwhile, in trading on Tuesday the share price of the two MIs -- MGIC Investment Corp., Milwaukee, and Radian Group, Philadelphia -- had fallen by 9% and 10%, respectively. MGIC and Radian, which are merging, control C-BASS, which in turn owns Houston-based Litton Loan Servicing, a $48 billion servicer of subprime loans. MGIC had valued its share of C-BASS at $516 million, Radian, $518 million. In separate statements, MGIC said its investment in C-BASS "could be" fully impaired, while Radian said its investment is "materially impaired." On Monday night the two MIs said C-BASS has been the subject of "unprecedented" margin calls. The mortgage insurers can be found online at http://www.mgic.com and http://www.radianmi.com.

New York-based C-BASS LLC, which controls the nation's 10th-largest subprime servicer, has been hit by what its parent companies are calling an "unprecedented amount" of margin calls.According to the Quarterly Data Report, the C-BASS-owned Litton Loan Servicing, Houston, owns the right to service $48 billion in mostly subprime loans. C-BASS is controlled by two publicly traded mortgage insurance firms: MGIC Investment Corp. and Radian Group Inc., which are in the process of merging. (See related story below.) In a statement issued July 31, the two MIs said C-BASS "remains confident in the overall credit quality of its portfolio and the performance of its highly rated servicing subsidiary Litton Loan Servicing." Citing a "tumultuous time" in the subprime market, the two MIs said C-BASS was asked to meet $290 million worth of margin calls during the first half. (At the beginning of the year it had $302 million in liquidity.) C-BASS -- Credit-Based Asset Servicing and Securitization LLC -- can be found online at http://www.c-bass.com.

Class B4 of Nomura Asset Acceptance Corp. Alternative Loan Trust mortgage pass-through certificates, series 2003-A1, has been placed on Rating Watch Negative by Fitch Ratings.Fitch also affirmed the ratings on 11 classes in two Nomura deals. The downgrade was attributed to a deterioration in the relationship between loss expectations and credit support. As of June, approximately 4.2% of the pool was more than 60 days delinquent, the rating agency reported. Fitch can be found on the Web at http://www.fitchratings.com.

Four certificates from Renaissance Home Equity Loan Trust deals issued in 2002 and 2003 and consisting primarily of subprime first-lien loans have been downgraded by Moody's Investors Service.The downgrades were as follows: series 2002-1, class M-2, from A2 to Baa2, and class B, from Ba2 to Caa2; series 2002-4, class B, from Baa2 to Ba2; and series 2003-2, class M-4, from Baa2 to Ba2. Moody's also upgraded nine classes from five Renaissance transactions. The downgrades were attributed to credit enhancement levels that are low given the projected losses on the underlying pools. "The pool of mortgages has seen losses in recent months, and future loss could cause a more significant erosion of the overcollateralization," the rating agency said. Moody's can be found online at http://www.moodys.com.

NovaStar Financial Inc., Kansas City, Mo., has announced a one-for-four reverse stock split of its outstanding common stock.Immediately after the reverse split, NovaStar had approximately 9.47 million shares of stock outstanding, the company reported. The stock began trading July 30 under a new CUSIP number: 669947889. NovaStar can be found on the Web at http://www.novastarmortgage.com.

Foreclosure filings totaled 925,986 in the first half, up more than 30% from the total recorded in the previous six months and up more than 55% from that of the first half of 2006, according to RealtyTrac, an online foreclosure marketplace based in Irvine, Calif.In its Midyear 2007 U.S. Foreclosure Market Report, RealtyTrac indicates that the foreclosure filings -- default notices, auction sale notices, and bank repossessions -- were reported on 573,397 properties nationwide in the first half. The report also shows a foreclosure rate of one foreclosure filing for every 134 U.S. households. RealtyTrac can be found on the Web at http://www.realtytrac.com.

The default rate on subprime mortgage loans hit 12.4% in May, up 41 basis points from the rate recorded in April, and the foreclosure rate climbed to 5%, according to a Friedman Billings Ramsey report.FBR managing director Michael Youngblood said he expects the subprime default rate to continue to drift upward to 14.45% by April 2008. The default rate on subprime loans stood at 5.7% in May 2006 and the foreclosure rate was 2.73%. The report by the Alexandria, Va.-based investment banking firm also shows that the default rate on alternative-A loans rose to 2.69% in May, up 21 bps from that of the previous month. (The default rate includes loans 90 days or more past due, in foreclosure, and real estate owned.) FBR can be found online at http://www.fbr.com.

HSBC Holdings, in a new earnings statement, says its U.S. mortgage business suffered writedowns of $760 million in the first half.But the bank -- which earlier this year exited the subprime correspondent market -- said the $760 million in mortgage-related writedowns is not significant because it had already booked reserves of $715 million. "As a result, our impairment allowances remained largely unchanged at $2.1 billion," it said. The London-based bank is the parent of HSBC Finance, Prospect Heights, Ill., the nation's second-largest subprime lender. HSBC said it has modified 5,000 loans as part of a "contact" program geared toward 19,000 troubled borrowers.

Fannie Mae issued $53.1 billion of mortgage-backed securities in June, the highest level since it issued $61 billion in September 2005, according to the government-sponsored enterprise.Fannie's monthly summary also reported that $47.2 billion of the $122.8 billion of nonagency mortgage securities in its portfolio as of the end of June were backed by subprime loans. Of the $47.2 billion, approximately $46.9 billion was rated triple-A (or the equivalent) by at least two nationally recognized rating agencies, and none of the subprime-backed MBS had been downgraded, Fannie Mae said. The GSE's gross mortgage portfolio grew to $722.5 billion in June, up from $718.3 billion in May but down from $730.9 billion a year earlier. Fannie Mae can be found online at http://www.fanniemae.com.