Servicing

Mortgage insurers have announced that they are working with lenders and investors to provide relief to insured borrowers who were victims of Hurricane Katrina.Genworth Financial, Richmond, Va., said it will support guidelines to allow the reduction or suspension of mortgage payments for a specified time or even create a longer payment schedule. "We want to help the people hit so hard by these storms and protect their credit ratings and financial interests," said Kevin Schneider, president of Genworth's U.S. mortgage insurance business. AIG United Guaranty, Greensboro, N.C., following Fannie Mae and Freddie Mac (as previously reported), said it will work with servicers whose borrowers have encountered hurricane damage, including those with no flood insurance. United Guaranty said it will agree to delays of foreclosure for up to six months, the capitalization of up to six mortgage payments, and modification and forbearance arrangements that allow a borrower up to 18 months to bring a mortgage current.

Three subordinate tranches from two subprime mortgage transactions issued by Metropolitan Asset Funding Inc. have been placed under review for possible downgrade by Moody's Investors Service.The affected classes are classes B-2 and B-3 of series 1999-B and class M-2 of series 2000-A. The rating actions were based on the weaker-than-expected performance of the mortgage pools and the resulting erosion of credit support, Moody's said. Overcollateralization in the 1999-B deal is "almost completely depleted" and the class B-3 certificates are likely to experience losses in the near future, the rating agency reported. In addition, overcollateralization in the 2000-A deal has been "fully exhausted," the class B-1 certificates have been fully written down, and the class M-2 certificates have realized losses. The pools are backed by first-lien fixed-rate subprime mortgage loans, including a "significant" amount of seller-financed loans and loans with small average balances, Moody's said. The rating agency can be found online at http://www.moodys.com.

Fidelity National Financial Inc., Jacksonville, Fla., has announced that its Fidelity National Property and Casualty Insurance Group Catastrophe Team has established a dedicated, around-the-clock hotline for reporting claims related to Hurricane Katrina.The company noted that prompt reporting of claims will enable the catastrophe team to assist policyholders in scheduling inspections of their property. The team consists of Fidelity National Insurance Co., Fidelity National Property & Casualty Insurance Co., and Fidelity National Indemnity Insurance Co. The hotline number for both agents and policyholders is 866-397-6347. FNF can be found on the Web at http://www.fnf.com.

Fannie Mae and Freddie Mac are providing mortgage relief for borrowers facing hardships related to the massive and widespread damage caused by Hurricane Katrina.Fannie Mae mortgage lenders are authorized to suspend mortgage payments for up to three months, reduce payments for up to 18 months, and, in more severe cases, create longer loan payback plans. Lenders will determine appropriate relief steps by considering any uninsured losses, extended unemployment, and extraordinary expenses related to Katrina that affect mortgage payments. Under Freddie Mac's policies, servicers may reduce or suspend mortgage payments for up to 12 months for borrowers in declared major-disaster areas. Freddie is also encouraging servicers to expedite the release of insurance proceeds, waive the assessment of penalties or late fees, and not report forbearance or delinquencies caused by the disaster to the nation's credit bureaus. Freddie also announced that it is donating $50,000 to the American Red Cross to support hurricane relief efforts, and that the Freddie Mac Foundation is matching Freddie Mac employee donations to relief efforts (and will double the match if donations support Habitat for Humanity's hurricane relief efforts).

Two classes of Salomon Brothers Mortgage Securities VII Inc. mortgage pass-through certificates, series 2000-UP1, have been downgraded by Fitch Ratings.Class B-4 was downgraded from BB to B, and class B-5 was downgraded from CC to C. In addition, Fitch affirmed the ratings on 21 classes of Salomon mortgage-backed certificates. The downgrades were attributed to poor collateral performance and the deterioration of asset quality beyond original expectations. The transaction is collateralized by prime 30-year fixed-rate mortgage loans. Fitch can be found online at http://www.fitchratings.com.

Fitch Ratings has placed the ratings of First Bancorp on Rating Watch Negative, citing an announcement by the Securities and Exchange Commission that it is conducting an informal inquiry of First Bancorp in connection with mortgage loan accounting.Fitch said the SEC inquiry is related to First Bancorp's disclosure Aug. 10 that it is reviewing its accounting for mortgage loans purchased from two other financial institutions from 2000 to 2004. First Bancorp is also "evaluating the impact of these issues on the company's internal controls and procedures, including its internal control over financial reporting," the rating agency said. Fitch said the company also announced that it won't be able to file its SEC Form 10-Q for the second quarter on a timely basis. "The untimely filing of financials by [First Bancorp] could trigger a covenant default in a few of the company's funding facilities, causing liquidity to be pressured," the rating agency said.

Taipan Group LLC, a Baltimore-based publisher of financial newsletters, is touting as "revolutionary" a new program that Taipan says enables homeowners to lock in the value of their homes during housing market declines.The House Hedge Program, developed by Taipan analyst Bryan Bottarelli, allows homeowners to own a piece of the top 21 real estate companies trading on major U.S. stock markets, ranging from residential homebuilders and commercial developers to mortgage companies and mortgage insurance companies. As the housing market declines, the companies' stock prices will fall, profiting those invested in the hedge program, Taipan explained. "But there's an additional benefit to the House Hedge Program: homeowners collect payouts," Mr. Bottarelli said. "How much depends on individual circumstances." The company can be found online at http://www.taipanonline.com.

Fannie Mae's retained portfolio dropped below the $800 billion mark in July, after the company shed nearly $20 billion in assets.Last summer the congressionally chartered mortgage giant held nearly $900 billion in mortgage assets on its books. In an effort to bolster cash reserves, Fannie has been actively selling loans out of its retained portfolio. However, the company -- which is undergoing a massive earnings restatement -- out-purchased its cross-town rival, Freddie Mac, for the second month in a row. In July, Fannie acquired $52.5 billion in mortgages to Freddie's $41.8 billion. In April and May Freddie out-purchased Fannie, something it had not done for years. Fannie Mae also reported that the ARM share of conventional mortgage applications fell by nearly 2% in July to 29.9%, the lowest monthly average share for adjustable-rate mortgages since March of 2004.

Astoria Financial Corp., Lake Success, N.Y., has announced an outsourcing agreement with Dovenmuehle Mortgage Inc., Schaumberg, Ill., under which Dovenmuehle will subservice on a private-label basis the loan portfolio of Astoria Federal Savings & Loan Association, a subsidiary of Astoria Financial.George L. Engelke Jr., Astoria's chairman, president, and chief executive officer, said the decision was "driven entirely by economics" and was not a reflection on the servicing staff of Astoria Federal, whose loan delinquencies "have never been lower." Operating efficiency is the key consideration, he said. "Today, despite the fact that our individual mortgage loan balances are larger, the number of loans we service has decreased over the past several years, thereby lowering operating efficiency," Mr. Engelke said. The agreement will result in a pretax charge of approximately $1 million in the third quarter, the company reported. The thrift can be found online at http://www.astoriafederal.com.

Seven classes from four Morgan Stanley Dean Witter Capital I Inc. mortgage-backed security transactions have been downgraded by Fitch Ratings.The downgrades were as follows: series 2001-AM1, class M-2, from AA to A-plus, and class B-1, from BBB-minus to BB-minus; series 2002-AM1, class M-2, from AA to A, and class B-1, from BBB-minus to BB; series 2002-AM2, class B-1, from BBB-minus to BB-plus, and class B-2, from BBB-minus to BB-plus; and series 2002-AM3, class B-2, from BBB-minus to BB-plus. In addition, Fitch affirmed the ratings on 10 other classes in the deals. The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations. The loans consist of fixed-rate and adjustable-rate mortgages extended to subprime borrowers and are secured by first and second liens, primarily on one- to four-family residential properties, Fitch said. The rating agency can be found online at http://www.fitchratings.com.