Servicing

Working with community activist groups such as ACORN to make contact with delinquent borrowers is a growing trend, according to speakers on a loss mitigation panel at the SourceMedia Mortgage Servicing Conference.Michael Gross, managing director at the loss mitigation operations of Countrywide Home Loans, said this partnership has been successful in cities throughout Ohio where foreclosures are high. "Our interests are aligned," he said. "We both want to stop foreclosures and keep families in their homes. ACORN brings us credibility and a presence in the community." Teji Singh, chief servicing offer at Option One Mortgage Corp., said Option One has six satellite offices in high-foreclosure states and plans to open 10 more. "Community leaders are the voice of these local offices," she said.

Servicers are creating offshore call centers and conducting heavy outsourcing in places like India and Mexico, according to panelists at the SourceMedia Mortgage Servicing Conference in Dallas.Option One Mortgage Corp., which has a call center in Guadalajara, Mexico, has employees who spend at least 60 minutes per call helping Spanish-speaking borrowers. Teji Singh, Option One's chief servicing officer, said domestic calls in the United States have an 86% success rate compared with 83%-84% for offshore calls. "There is no difference if you train them well," she said. "Seventy-eight percent of mortgage lenders will outsource. It takes tremendous effort and tenacity to put up a call center on the other side of the country." A very small percentage of calls are sent back to the United States because borrowers did not want to talk with non-U.S. agents, she added. Countrywide Home Loans, Calabasas, Calif., has also seen very positive results with offshore call centers, a panelist said. In India, their agents handle front-end collections, dealing with borrowers who are one or two payments late.

Three of American International Group Inc.'s subsidiaries plan to take steps to provide payment assistance to certain nonprime borrowers as part of an agreement with the Office of Thrift Supervision. Among the types of assistance that is slated to be provided by the three subsidiaries - AIG Federal Savings Bank, American General Finance Inc. and Wilmington Finance Inc. - is the provision of more affordable loans to certain borrowers with a high risk of foreclosure. Certain borrowers may receive a partial refund of loan fees instead. The agreement pertains to mortgages originated in the name of AIG FSB by Wilmington between July 2003 and May 2006. Separately, AIG plans to donate $15 million over a three-year period to certain nonprofits to support financial literacy and credit counseling. The company previously set aside a reserve of $128 million pre-tax for the expected cost of implementing such programs and has since estimated that it will need an additional reserve of up to $50 million, inclusive of the $15 million donation.

As the hurricane season begins in Florida, the pre-foreclosure storm is continuing to swirl, according to Default Research, Inc. in Mt. Pleasant, Pa."Even though foreclosures rates in Orange County had remained relatively stable, May showed an increase of approximately 27 percent," said Serdar Bankaci, president and CEO. "With an active hurricane season predicted, many homeowners are already at the brink of foreclosure and may not be able to weather the financial storm." Combine the rising energy costs with the subprime lending crisis and adjusting ARM loans and Mr. Bankaci said he is certain foreclosures are going to continue in the Sunshine State.

The Financial Accounting Standard Board has scheduled a closed-door meeting for June 22 to discuss restructurings of troubled subprime mortgages that are in mortgage-backed securities.Mortgage industry groups and federal banking regulators are urging FASB to give servicers the latitude under its accounting rules to conduct restructurings and loan workouts when a loan is in default or default is reasonably foreseeable. The Mortgage Bankers Association has asked FASB to review its position that a servicer can be pro-active and initiate contact with a borrower who is expected to get into trouble when their loan resets. "A decision to restructure would not be made until the borrower confirms they will be unable to make mortgage payments and they provide evidence to their assertion," according to the MBA position paper. Representatives from the federal banking agencies, Securities and Exchange Commission, Internal Revenue Service, big four accounting firms and mortgage industry are invited to the June 22 FASB meeting.

Lehman Brothers has contributed $1.25 million to the National Reinvestment Coalition to support the coalition's foreclosure prevention funds and homeownership initiatives.Lehman Brothers, which owns two nonprime mortgage companies, also agreed to abide by NCRC's best lending and servicing practices. "We are delighted to join forces with Lehman Brothers to expand and sustain homeownership for all Americans," NCRC president and chief executive Paul Taylor said. The investment banking firm owns subprime wholesaler BNC Mortgage Inc., Irvine, Calif., and alt-A wholesaler and correspondent lender Aurora (Colo.) Loan Services Inc. "Lehman is committed to making home financing available to consumers by originating and purchasing sound residential mortgage loans to creditworthy borrowers and by servicing such loans and engaging in collection activities in a fair and equal manner," a Lehman spokesman said.

Two certificates from a deal issued by Countrywide Home Loans Inc. in 2002 have been placed under review for possible downgrade by Moody's Investors Service.The affected securities are Classes M-1 and M-2 of CWABS Inc. Asset-Backed Certificates Series 2002-BC1. The rating actions were taken because credit enhancement levels may be low given the projected losses on the underlying pool, Moody's said. The transaction is backed by first-lien fixed-rate subprime mortgage loans.

The default rate on subprime mortgage loan rose 19 basis points in the month of March to 11.44%, the highest level in nearly 10 years, according to a Friedman Billings Ramsey report.Defaults on securitized subprime loans have risen from 6.52% in March 2006. In November, defaults surged by 101 bps to 10.1%. Since November, the default rate has risen by 136 bps. Researchers at the investment banking firm based in Arlington, Va., also reported that the default rate on alt-A loans rose to 2.26% in March from 0.90% in March of the previous year. The alt-A default rate is the highest since January 2004. (Default rates include loans that are 90 days or more past due, in foreclosure and real estate owned.)

Under the new Global Mortgage Alliance program, Credit Suisse is the warehouse lender and lead underwriter for securitizing single-family mortgages that Hillenbrand Partners plans to purchase from members of the Federal Home Loan Bank of Atlanta.Eric Hillenbrand, the founder of the Chicago investment management firm, told MortgageWire that he expects to start purchasing conventional conforming mortgages from community banks in the Atlanta district by the end of July. And he is in discussions with other FHLBanks to join the program. The GMA program's goal is to securitize $5 billion to $6 billion in mortgages over the next 12 months. The AAA-rated senior pieces will be sold to investors, and Hillenbrand Partners will hold all the subordinated pieces from AA down, Mr. Hillenbrand said in an interview. LaSalle Bank is GMA's master servicer. The Federal Housing Finance Board recently approved the Atlanta FHLBank's application to participate in the GMA affinity program.

Three classes of HSI Asset Securitization Corp. 2006-WMC1 mortgage pass-through certificates have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are classes M-8, M-9, and M-10. In addition, Fitch affirmed the ratings on eight other classes in the transaction. The negative rating actions were attributed to a deterioration in the relationship between credit enhancement and expected losses, and the fact that the overcollateralization amount is approximately 30% short of its target amount. Fitch can be found on the Web at http://www.fitchratings.com.