Servicing

Mortgage fraud has been a significant factor in the "persistently high level" of foreclosure activity in the Chicago metropolitan area, according to Foreclosures.com, a distressed property investment advisory firm based in Fair Oaks, Calif.Filings to begin foreclosure proceedings in the Chicago area totaled 1,696 in December and 1,486 in January, down from over 2,500 in November but still high in view of strong demand for homes and a continuing economic recovery, the firm reported. Alexis McGee, president of Foreclosures.com, cited a report by Robert Kowalski, a Chicago FBI special agent supervisor, that mortgage fraud is "a growing trend" in the Chicago area. "Property flipping through inflated appraisals and phony loan documents leads to people winding up owing much more than their homes are worth," Ms. McGee said. "At the first sign of financial trouble, they just walk away, and the lender forecloses and takes a loss." Foreclosures.com can be found on the Web at http://www.foreclosures.com.

The Bond Market Association has formed a committee to advise Ginnie Mae on ways in which it can become more competitive in the mortgage marketplace while also improving the credit performance and investor interest in its mortgage-backed securities."The committee will continue the dialogue started late last year when the association responded to Ginnie Mae's request for suggestions on how it could improve its MBS and multiclass securities programs," said Rishi Chadda, vice president of MBS trading at Goldman Sachs & Co. and chairman of the new committee. "Our first priority is to identify ways for Ginnie Mae to improve disclosure and provide more information on the mortgages backing its pools of loans, as higher levels of disclosure will help investors feel more comfortable investing in its MBS program and in turn improve pricing and liquidity." The association can be found online at http://www.bondmarkets.com.

Royal Bank of Canada, Toronto, is looking to exit the U.S. mortgage market and has hired an investment banking firm to advise it on its options, industry sources have told MortgageWire.A spokeswoman for RBC in Toronto declined to comment. In the fourth quarter, RBC Mortgage originated $3.9 billion in residential loans, ranking 27th nationwide. It services about $4 billion in product. (See the Feb. 28 issue of National Mortgage News for more details.)

Aames Investment Corp., Los Angeles, has closed a securitization and related offering by Aames Mortgage Investment Trust 2005-1 of approximately $1.18 billion of notes backed by nonconforming mortgage loans.The securitization consists of 17 classes of certificates paying interest rates linked to the London interbank offered rate. The lead managers of the securitization were Bear, Stearns & Co. and RBS Greenwich Capital. Aames can be found online at http://www.aames.net.

Many servicers in the nonprime sector are taking a more active role in communicating with the borrower, according to Standard & Poor's Ratings Services.At a session on servicing nonprime loans during the MBA's recent National Mortgage Servicing Conference, panelists discussed the growing importance of making contact with borrowers, S&P reported. "We continue to take a close look at call center metrics, such as average speed to answer, abandonment, and hold and blockage rates, that measure the effectiveness of the customer service function," said S&P credit analyst Michael Gutierrez, head of the Servicer Evaluations group. New regulations have spurred some servicers to invest in call center technology as a way to monitor regulatory compliance, said credit analyst Richard Koch, a director in S&P's Servicer Evaluations group. "For instance, independent call monitoring groups, often physically situated away from the call center, vigorously monitor and grade employee performance," Mr. Koch said. Such practices can identify training issues as well as noncompliance with corporate policies and state and federal regulations, the rating agency said. S&P can be found online at http://www.standardandpoors.com.

ITLA Capital Corp., La Jolla, Calif., has announced that its wholly owned banking subsidiary, Imperial Capital Bank, has signed a loan purchase and servicing agreement with Fannie Mae.Under the agreement, the bank will originate small, fixed-rate multifamily loans with 5-, 7-, 10-, and 15-year terms for sale to Fannie Mae as a Fannie Mae-approved M-Flex Lender. ICB will originate these loans, along with its existing multifamily and commercial real estate loans, through its national network of loan production offices, ITLA said. "The small multifamily fixed-rate loans, to be originated by the bank and sold to Fannie Mae, will give the bank's customers a competitive financing alternative, in addition to our longstanding and successful adjustable-rate multifamily and commercial real estate loan products," said ITLA's president and chief executive officer, George W. Haligowski.

Citing excellent compliance with its high-cost loan criteria, Fitch Ratings has announced that it will no longer require third-party reports for rated transactions at the time of closing for loans originated in New Jersey, New Mexico, Kentucky, Massachusetts, and Indiana.The rating agency said compliance systems have become a critical component of the underwriting and quality control process, and the revisions to its residential mortgage-backed securities guidelines recognize the industry's progress in managing compliance with anti-predatory-lending laws and regulations. Kevin Cuff, president of the Massachusetts Mortgage Bankers Association, said the industry is still waiting to see how the new Massachusetts law will affect the market, since it has only been in place for two months. "Fitch is recognizing how we all feel in the state," Mr. Cuff said. "We're in a wait-and-see period to see how compliance will go -- to see if it's effective and to make sure there's consumer protection while continuing to provide adequate access to credit for consumers. No one is throwing their arms up and saying people are leaving the state." Fitch had previously said the laws in the five states might expose RMBS issuers to unlimited assignee liability for damages resulting from high-cost loans.

The risk of a general decline in home prices over the next two years has declined in recent months, according to the winter 2005 PMI Risk Index, which fell 25 points from its autumn 2004 level.The average value of the index for the 50 largest metropolitan statistical areas stood at 161 as of January, said PMI Mortgage Insurance Co., the Walnut Creek, Calif.-based mortgage insurer that created the index. The index value means that these cities have on average a 16.1% probability of experiencing a home price decline in the next two years. PMI said its analysts attribute the decline in the index to improving nationwide economic conditions indicated by generally lower regional unemployment rates. The MSAs topping the index were Boston-Cambridge-Quincy (Mass. and N.H.), at 533; San Jose-Sunnyvale-Santa Clara (Calif.), at 530; and San Francisco-Oakland-Fremont (Calif.), at 479.

NovaStar Financial Inc., Kansas City, Mo., has announced that its subsidiary NovaStar Mortgage has completed its first securitization of 2005, a deal with a face value of approximately $2.07 billion.The transaction, NovaStar Mortgage Funding Trust, series 2005-1, was underwritten by lead managers RBS Greenwich Capital, Wachovia Securities, and Deutsche Bank Securities, along with co-manager Morgan Stanley. NovaStar Mortgage can be found on the Web at http://www.novastarmortgage.com.

Countrywide Financial Corp.'s revision of the timing of the gain on sale from certain mortgage-backed securitizations appears to be an isolated financial reporting concern, company chairman and chief executive officer Angelo Mozilo said in a Tuesday afternoon conference call."We have not been provided any information from our auditors that there are any other issues," Mr. Mozilo said. Conference call participants expressed some concern that the development might have broader implications based on a report Countrywide said it planned to file with the Securities and Exchange Commission indicating that the development was "a material weakness in internal controls over financial reporting." But Mr. Mozilo said it did not reflect any other concerns at the company. He said only small portions of a few, primarily subprime, transactions (equal to 0.1% to 2.2% of the principal balance of the related loans that were sold after the end of the quarter) were involved in the revision. At the heart of the accounting concerns in these deals were embedded derivatives with little value and their compliance with Statement of Financial Accounting Standards 140 on when they should be reported, he said.