Servicing

More than 600 classes of securities backed by subprime residential mortgages have been placed on CreditWatch with negative implications by Standard & Poor's Ratings Services, and S&P said a majority are expected to be downgraded.The rating agency reported that the 612 affected classes total approximately $12.08 billion in residential mortgage-backed securities, representing 2.13% of the $565.3 billion in U.S. RMBS rated by S&P from the fourth quarter of 2005 through the fourth quarter of 2006. The negative rating actions were attributed to "poor collateral performance, our expectation of increasing losses on the underlying collateral pools, the consequent reduction of credit support, and changes that will be implemented with respect to the methodology for rating new transactions." Among the changes in rating methodology are an increase in the "severity of the surveillance assumptions" (from 33% to 40%) used to evaluate creditworthiness and a greater likelihood that senior classes will be downgraded in transactions containing subordinate classes that have been downgraded, S&P said. The rating agency can be found online at http://www.standardandpoors.com.

Huntington Bancshares Inc., Columbus, Ohio, has announced that it expects to report higher loan-loss provisions and market-related losses involving real estate credits and mortgage servicing rights for the second quarter.Huntington said it expects to report a $60 million loan-loss provision, including $25 million related to two East Michigan real estate credits and one Northeast Ohio commercial loan that were downgraded to nonperforming status. "The commercial developer and residential real estate homebuilder markets in East Michigan deteriorated during the quarter, reflecting a significant downturn in home sales activity and the inability of homebuilders to sustain sufficient sales activity," Huntington said. The bank holding company also reported a $3 million pretax charge of net market-related losses based on "a combination of hedging ineffectiveness for mortgage servicing rights and investment securities impairment." The company can be found online at http://www.huntington.com.

Three of every 1,000 homeowners in the United States lost their homes to foreclosure in the first half, a 41% increase from the level recorded in the first half of 2006, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm.That translated into 247,907 residential properties that wound up in the hands of banks or lenders, the company said. "Hundreds of thousands more homeowners won't be able to escape foreclosure for most of the rest of the year, either, unless stagnating housing prices and markets pick up and the nation's economy rebounds, too," said Alexis McGee, president of the firm. The company can be found online at http://www.foreclosures.com.

WMC Mortgage, Irvine, Calif., recently auctioned off $3 billion in subprime loans but offered few details on the sale.In a statement, the General Electric-owned company said only that the mortgages included a mix of performing and "seasoned" loans. It did not disclose price or the identity of the buyer(s). Like many subprime lenders, WMC has been forced to repurchase delinquent subprime mortgages from investors in the secondary market. The company, so far, has declined to quantify its buyback problems. After the auction, WMC now has $1.5 billion in loans on its balance sheet. According to the Quarterly Data Report, it ranked 10th among subprime lenders in the first quarter, originating $3.4 billion in loans, a 50% decline from the total for the same period a year earlier.

Class B-2 of Nomura Asset Securities Corp.'s commercial mortgage pass-through certificates, series 2006-HE1, has been placed on Rating Watch Negative by Fitch Ratings.In addition, the ratings on 29 classes in two Nomura transactions have been affirmed. Fitch said the negative rating action was due to a deterioration in the relationship between credit enhancement and loss expectations. The mortgage pools consist of first- and second-lien, adjustable- and fixed-rate residential mortgages. The rating agency can be found online at http://www.fitchratings.com.

The Securities and Exchange Commission has initiated a formal investigation of New Century Financial Corp., according to the subprime mortgage company, which is in bankruptcy.Previously known as one of the nation's largest subprime lenders, New Century disclosed the existence of the SEC investigation in a July 5 securities filing and said it is cooperating with the commission. An internal investigation by the Irvine, Calif.-based company earlier this year discovered accounting errors relating to its loan repurchase losses and residual interests in securitizations. New Century has warned that its financial statements for 2005 and 2006 should not be relied on. New Century also disclosed in the SEC filing that it completed the sale of its servicing assets and servicing platform to Carrington Capital LLC for $177.4 million, including $5 million that is being held in escrow to indemnify Carrington for any possible claims. The company can be found on the Web at http://www.ncen.com.

Mortgage companies shaved 4,900 full-time employees off their payrolls in May after cutting 9,200 in April, according to the latest government report.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banking/broker sector fell from 472,000 in April to 467,100 in May. The report indicates that 5,400 mortgage brokers exited the business in May -- the first significant decline since January. The employment numbers for other mortgage professionals stabilized in May after 17,400 job cuts since January. The BLS can be found online at http://stats.bls.gov.

Two classes of Harborview Mortgage Loan Trust Inc. series 2006-6 have been downgraded by Fitch Ratings and two have been placed on Rating Watch Negative.Class B-4 was downgraded from BB to BB-minus and placed on Rating Watch Negative, and class B-5 was downgraded from B to CCC/DR2. Class B3 was placed on Rating Watch Negative. In addition, Fitch affirmed the ratings on three other classes in the transaction. The rating agency attributed the negative rating actions to a deterioration in the relationship between credit enhancement and loss expectations. The deal is backed by hybrid and adjustable-rate mortgage loans secured by residential first liens.

Eight classes of New Century Home Equity Loan Trust series 2006-S1 have been downgraded by Fitch Ratings, four of which have also been placed on Rating Watch Negative.The downgrades were as follows: class M-1, from AA to A-minus; class M-2, from A-plus to BBB; class M-3, from A to BB; class M-4, from A-minus to B; class M-5, from BBB-plus to C/DR5; class M-6, from BBB to C/DR5; class M-7, from BB to C/DR6; and class M-8, from BB-minus to C/DR6. Fitch also placed classes M-1 through M-4, as well as classes A-1, A-2a, and A-2b, on Rating Watch Negative, and removed class M-6 from Rating Watch Negative. The negative rating actions were attributed to the fact that credit enhancement levels may be too low to maintain current rating levels in view of projected losses. The transaction is backed by subprime second-lien loans. Fitch can be found online at http://www.fitchratings.com.

New York Mortgage Trust Inc., a New York-based real estate investment trust, has reported that no dividend will be paid on its common stock for the second quarter.The decision of the REIT's board to omit a dividend "reflects the company's focus on eliminating operating losses through the sale of its mortgage lending business and conserving capital to build future earnings from its mortgage portfolio operations," the company said. NYMT, which invests in and manages residential adjustable-rate mortgages and mortgage-backed securities, can be found online at http://www.nymtrust.com.