Servicing

Class B-5 of Mellon Residential Funding Corp. series 1998-A mortgage-backed securities has been downgraded from CCC to C by Fitch Ratings.Fitch also upgraded five classes and affirmed the ratings on 25 other classes in six Mellon deals. The downgrade resulted from higher-than-expected collateral losses that have exhausted credit support to that class, the rating agency said. The pool had incurred cumulative losses of 0.89% as of the August 2005 distribution, and approximately 4.14% of the remaining pool balance was more than 90 days delinquent. The collateral consists of alternative-A, 30-year, fixed-rate mortgage loans secured by first liens on one- to four-family residential properties. Fitch can be found on the Web at http://www.fitchratings.com.

Community Capital Bancshares Inc., Albany, Ga., has announced the filing of an application to form a savings bank in Charleston, S.C., that would be named Atlantic Bank & Trust and would operate a recently acquired Charleston mortgage company as its mortgage banking division.In June, CCB opened a loan production office of its lead bank, Albany Bank & Trust, in Charleston, and that office would become the home office of Atlantic Bank, the company said. Albany Bank recently purchased East Bay Capital Mortgage, Charleston, which would become the mortgage banking division of the new bank. The new bank is being proposed by three Charleston-area bankers: Hal Cobb, previously of RBC Centura; Dean Lang, previously of SouthTrust Wachovia; and Chris Landers, previously of East Bay Capital Mortgage. Mr. Cobb would be president of Atlantic Bank, Mr. Lang would be its chief lending officer, and Mr. Landers would be its chief mortgage officer, according to CCB. The application was filed with the Office of Thrift Supervision.

Many nonprime lenders are suspending mortgage payments, waiving late payment fees, and ensuring that late payments will not damage credit ratings in order to provide short-term relief for hurricane victims, according to the National Home Equity Mortgage Association.NHEMA president Jeffrey Zeltzer said members are also working with secondary-market purchasers, insurers, government officials, and others to develop longer-term relief programs. Many have also made corporate donations, and "thousands of their employees" have done so as well, he said. The association urged borrowers to contact their mortgage lenders and other creditors as soon as possible to discuss their situation, and to contact the Federal Emergency Management Agency about applying for long-term housing if their home has been destroyed. Other advice offered by NHEMA includes warnings against rushing to sell property, borrow money (especially from contractors), or declare bankruptcy, and a reminder to beware of scam artists. The association can be found online at http://www.nhema.com.

Class B-3 of Bear Stearns Mortgage Securities Inc., series 1997-6, has been downgraded from BBB to BBB-minus by Fitch Ratings.In addition, the ratings on five other classes in the fixed- and adjustable-rate mortgage pools were affirmed. The downgrade of class B-3, part of the fixed-rate pool, reflects a decrease in credit enhancement relative to loss expectations, Fitch said. The high delinquency rate, especially in foreclosure and real estate owned, "puts this class at a greater risk of future losses," the rating agency said.

NovaStar Financial Inc., Kansas City, Mo., has announced the completion of a $2.43 billion securitization by its subsidiary NovaStar Mortgage.NovaStar Mortgage retained the M-11, M-12, and class C certificates of the transaction, NovaStar Mortgage Funding Trust, series 2005-3. Class C has a notional amount of $2.5 billion and entitles NovaStar to excess and prepayment penalty fee cash flow from the underlying loan collateral and serves as overcollateralization, the company said. The lead managers of the transaction are RBS Greenwich Capital, Wachovia Securities, and Deutsche Bank Securities. NovaStar Mortgage can be found on the Web at http://www.novastarmortgage.com.

Two Illinois law firms specializing in mortgage creditor's rights have announced that they will merge as of Oct. 1.Shapiro & Kreisman LLC and Fisher and Fisher, Attorneys at Law, PC said the new firm will operate as Fisher and Shapiro LLC and maintain its principal office in Northbrook, Ill., as well as an office in Chicago. Elizabeth Kaplan Meyers will be the managing attorney for the combined operation. Gerald Shapiro, a partner in the new venture, said the merger is "a natural move for both of our firms, as the legal needs of our clients continue to require increased investment in technology as well as the retention of highly experienced attorneys and staff."

New mortgage products in the U.S. housing market may hold greater risk for borrowers and for financial institutions holding more of the new products on their balance sheets, according to Fitch Ratings.Alternative products such as interest-only, option adjustable-rate, and alternative-A mortgages are still low-risk assets, but they carry higher credit risk than traditional mortgages and could bring greater credit losses for banks and finance companies, Fitch said. "With higher-yielding assets gradually being replaced by lower [-yielding] ones, financial institutions have struggled to maximize net interest margin in the current low-rate environment," said Marc Yaklofsky, a director in Fitch's financial institutions group. "As a result, banks and consumer finance companies have retained a greater proportion of mortgage loans, especially alternative mortgages, on their balance sheets, particularly as commercial and industrial lending has been challenged." Increased credit risk from retained alternative mortgages will probably not have "a debilitating effect" on the stability of financial institutions, the rating agency said, adding that it will nevertheless look to capital levels and earnings diversification as "possible mitigating ratings factors." Fitch can be found online at http://www.fitchratings.com.

Subprime giant New Century Financial Corp., Irvine, Calif., trimmed its earnings forecast for the year on Friday, its share price falling at least 7% to a new 52-week low.New Century, the nation's second-largest subprime lender, revised downward its earnings-per-share guidance from a range of $8.25-$9.00 to $7.25-$7.75. The company cited continued margin compression in its subprime residential business as the chief reason for the lower earnings projections. It also said the revised guidance does not reflect the impact of potential weather-related losses in the Gulf Coast region, which it said "could be significant." A few weeks ago, New Century closed its commercial mortgage business without explanation.

The Federal Home Loan Bank of Dallas has established a $5 million Disaster Relief Grant Program to assist recovery efforts in the wake of Hurricane Katrina.Although the program is aimed chiefly at addressing the housing and community investment needs of devastated communities in Louisiana and Mississippi, the FHLBank said the grants may also be used to support hurricane-displaced residents in other locations in its five-state district. The grants, which will be awarded through the bank's member institutions, can be used for rehabilitation, construction, working capital, and infrastructure development as well as principal reduction and downpayment and closing cost assistance for single-family homebuyers. The FHLBank said it will also donate $100,000 to disaster relief on behalf of its members and $45,000 raised through an employee and director matching contribution program.

Hurricane Katrina was the hot topic Wednesday at the opening general session of the 18th Annual New England Mortgage Banking Conference in Providence, R.I.Lawrence K. Fish, president and chief executive officer of Citizens Financial Group Inc., said Congress is expected to appropriate $250 billion toward the disaster in 2006, which would be a huge stimulant for the economy. Regarding the existence of a housing bubble, Mr. Fish said Katrina is "manageable" and that there is no major short-term collapse in sight. "This stimulant will mean higher long-term interest rates -- I'm sorry to tell you that," he told the conference, which is sponsored by the Massachusetts Mortgage Bankers Association. "I'm surprised it didn't happen sooner. I expect there will be a gradual slowing of the real estate market."