Servicing

Freddie Mac has extended its foreclosure moratorium for three months in the areas devastated by hurricanes Katrina and Rita, and it has given its servicers the leeway to suspend mortgage payments for certain borrowers for up to 12 months."We strongly encourage borrowers now benefiting from the mandatory forbearance that expired [Dec. 1] to contact their mortgage servicers as soon as possible to discuss next steps," Freddie vice president Patricia Chen said. Fannie Mae's forbearance policy allows for the suspension of mortgage payments for up to 18 months. Fannie also expects its servicers to "discontinue any foreclosure or collection activities until they can review any effect the disaster may have had on the condition of the property or the borrower's employment or income status." Nearly 100,000 homes in New Orleans and 500,000 homes in the Gulf Coast region are uninhabitable, according to numbers compiled by Consumers Union. Lenders and servicers also are having problems getting in touch with borrowers displaced by the hurricanes. "For those borrowers ready and able to resume payments, that will mean repayment plans and loan modifications; for other borrowers, particularly those whose homes remain uninhabitable and are not sure of their plans, forbearance can be extended," Fannie spokesman Brian Faith said. The government-sponsored enterprises can be found online at http://www.freddiemac.com and http://www.fanniemae.com.

Fannie Mae reported late Wednesday that it had misclassified $10.3 billion in loan purchases over the past two years, counting single-family acquisitions as multifamily and vice versa.The company, which is working its way through an $11 billion accounting scandal, said the misclassification will not affect earnings. A company spokeswoman told MortgageWire that the problem was caused by a "coding" mistake. She also said the government-sponsored enterprise will no longer specify its loan purchases as single-family or multifamily on a monthly basis, offering that information only quarterly. It will continue to publicize its total purchases each month under the data point called "business volume."

Class BF-1 of Saxon Asset Securities Trust series 2000-1 has been placed under review for possible downgrade by Moody's Investors Service.The certificates are secured by fixed- and adjustable-rate home equity loans. The underlying collateral "appears to be performing worse than Moody's original expectations," the rating agency said. Moody's added that the severity of loss on the liquidated loans may increase due to a higher concentration of manufactured housing loans. The rating agency can be found on the Web at http://www.moodys.com.

Fitch Ratings has downgraded NetBank's residential mortgage primary servicer rating from RPS3-plus to RBS3 for prime-quality loans.Fitch attributed the downgrade to recent profitability pressure and management's "delayed response in correcting repeat audit findings and customer service call center delays." The rating agency said NetBank's operating results have been hurt by the poor performance of the company's mortgage lending business. Specifically, Fitch cited concern about what it termed weaknesses in management's ability to promptly address audit findings relating to claims processing, delays in foreclosure referral, the timeliness of policy and procedural updates, and insufficient outbound calling campaigns in the area of default management. Fitch also cited concern about customer service hold times and abandonment rates in the call center, which "rose significantly above industry averages." Fitch said the weaknesses cited in the audit have either been corrected or are subject to an action plan to correct them. Fitch's servicer ratings are based on a scale of one to five, with one being the highest rating. The rating agency can be found online at http://www.fitchratings.com.

A county jury in Galveston, Texas, has awarded a Texas woman $11.5 million in damages and attorneys' fees, finding that Ocwen Federal Bank engaged in "unfair, unlawful, and deceptive" loan servicing practices, according to attorneys for the plaintiff.According to the complaint, 64 year-old Sealy Davis took out a home equity loan secured by her Texas residence in 2002, and Ocwen serviced the loan. The complaint alleges that after Ms. Davis missed a payment due to illness, Ocwen failed to credit her for money that had been paid and began to foreclose upon her home while assuring her that she was on a repayment plan. In reaching the civil verdict, the jury voted 10 to 2 in favor of the plaintiff and against Ocwen, the defendant in the case. Ms. Davis's lead attorney was Robert Hilliard, who says he has an additional 100 clients with similar predatory-servicing complaints against Ocwen. Ocwen was preparing a response to the jury award that was not yet available by MortgageWire's deadline.

Mortgage stocks as a group are undervalued, according to a new research report issued by Morgan Stanley.Morgan analyst Ken Posner says he envisions a healthy rebound in profit margins for residential originators "once the industry has cut capacity," but adds that he is uncertain on the timing. Mr. Posner writes that the industry's "shake-out" is just beginning and that, if the housing market turns bearish, the correction he foresees could last into 2007. National Mortgage News recently reported that mortgage bankers funded $925 billion in loans in the third quarter, the industry's best quarter in two years. Lenders and analysts alike are predicting production declines in the quarters ahead. In his new report, Mr. Posner upgraded his rating on Fannie Mae from "equal-weight" to "overweight."

Two home equity loan pass-through certificates from a deal issued by Long Beach Mortgage Co. in 2000 have been placed under review for possible downgrade by Moody's Investors Service.The affected securities are classes M2V and BV of Asset Backed Securities Corp., Long Beach Home Equity Loan Trust 2000-LB1. The transaction is backed by primarily first-lien adjustable- and fixed-rate subprime mortgages originated by Long Beach. Two subordinate classes from the adjustable-rate group were placed on review for possible downgrade because credit enhancement levels may be low given the projected losses on the underlying pools, Moody's said. The transaction has taken significant losses, causing gradual erosion of the overcollateralization, the rating agency reported.

Two classes from two mortgage-backed deals issued by Credit Suisse First Boston Mortgage Securities Corp. have been downgraded by Moody's Investors Service.Class B-3 of series 2001-2 was downgraded from Baa2 to Ba1, and class VII-M-2 of series 2002-AR31 was downgraded from Baa2 to Ba2. The downgrades were based on the fact that the bonds' credit enhancement levels, including excess spread where applicable, may be low in view of projected losses, the rating agency said. Moody's can be found online at http://www.moodys.com.

Slowing price appreciation in several California housing markets has produced growing defaults in the state, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm.Alexis McGee, president of ForeclosureS.com, said notices of default totaled 10,247 in major Southern California counties in the third quarter, but only 3,150 in eight of the nine San Francisco Bay Area counties. "Defaults in California's southland are moving off the historic baseline because the housing markets there are finally cooling down," she said. Defaults are still low in the Bay Area because their price correction "had just barely begun," the company said. ForeclosureS.com can be found on the Web at http://www.foreclosures.com.

RealtyTrac, an online foreclosure marketplace based in Irvine, Calif., has reported that the number of new properties in some stage of foreclosure increased 18.6% nationwide in October to a new monthly high for the year.The company's Monthly U.S. Foreclosure Market Report indicates that 81,382 new foreclosure properties were added to the rolls in October. "Some of the increase can be attributed to foreclosure activity ramping up again in Louisiana and Mississippi after being disrupted by the recent hurricanes," said James J. Saccacio, RealtyTrac's chief executive officer. "But it's possible that increasing interest rates and other economic factors are beginning to move foreclosures closer to their historic levels." The company said Texas reported the highest number of new foreclosures of any state in October, with 16,386, an increase of 68%. RealtyTrac can be found online at http://www.realtytrac.com.