Servicing

Three subordinate certificates from Amresco Residential Securities Corp. Mortgage Loan Trust, series 1997-3, have been placed under review for possible downgrade by Moody's Investors Service.The affected certificates are classes M-2F, B-1F, and B-2F. The certificates are backed by 30-year fixed-rate and adjustable-rate home equity loans. The three most subordinate classes of the fixed-rate certificates have been placed on the watchlist because credit enhancement levels may not be sufficient to support the current ratings, Moody's said. "The B-2F certificates are almost completely written down, and future pipeline losses are still significant," the rating agency said.

LoanPerformance, a San Francisco-based provider of residential mortgage data and analytics, has announced the release of version 3.1 of its RiskModel forecasting tool for mortgage defaults, losses, prepayments, and delinquencies.RiskModel 3.1 features new statistical models for alternative-A and prime loans and delivers "dramatic improvement" in performance based on back-tests of over 4 million loans and over 1,700 securities, the company declared. Among the enhancements to the tool are: the addition of 12-month loan payment history as an optional input; the addition of a new payment shock variable for adjustable-rate mortgages; and explicit modeling of teaser rates and of the impact of housing price appreciation on prepayments. "Our goal is to predict the future rather than match or 'over-fit' the past," said Ralph DeFranco, the product manager of RiskModel. The company can be found online at http://www.loanperformance.com.

Class M-2 of Origen Financial Inc. manufactured housing contracts, series 2001-A, has been downgraded from CCC to C by Fitch Ratings.Fitch also affirmed the ratings on five other classes in the transaction. The downgrade was attributed to higher-than-expected losses and declining credit enhancement for the subordinate tranches. Overcollateralization was depleted in January 2004, and class B-1 has been absorbing collateral losses and is nearly fully written down, the rating agency said. "Once class B-1 is fully depleted, losses will be applied to class M-2," whose credit enhancement has dropped from 7.75% at closing to only 0.61%, Fitch said.

Class B-3 of Merit Securities Corp., series 11, has been downgraded from BBB to B by Fitch Ratings.Fitch also affirmed the ratings on four other classes in the deal. The downgrade reflects the poor performance of the collateral pool and higher-than-expected losses, the rating agency said. "A key to the poor performance of the collateral is the high percentage of manufactured housing loans remaining in the pool," Fitch said. "Manufactured housing loans typically experience a higher rate of default and higher loss severities on liquidated loans." The collateral consists of over 77% manufactured housing, 18% single-family detached units, and less than 1% planned unit developments, according to Fitch.

Twenty-four classes from 19 Oakwood Homes manufactured housing transactions have been downgraded by Fitch Ratings.In addition, the rating agency affirmed 40 other classes in the deals. Fitch attributed the downgrades to the poor performance of the manufactured housing pools. "High default or repo levels combined with elevated loss severities have typically exhausted once-available overcollateralization and, in many cases, have resulted in the significant or entire writedown of the most subordinate class of bond," Fitch said. "As a result, other junior and/or mezzanine classes are now threatened by, if not already experiencing, writedowns due to such losses." The rating agency can be found online at http://www.fitchratings.com.

The Teamsters Local 445 Freight Division Pension Fund has filed a lawsuit alleging fraud and securities violations by Dynex Capital Inc., a real estate investment trust based in Glen Allen, Va., according to the REIT.Also included as defendants are Merit Securities Corp., a Dynex subsidiary, and certain current and former Dynex and Merit executives, Dynex reported. The suit alleges securities law violations in connection with the issuance in 1999 of Merit Series 13 securitization financing bonds, which are collateralized by manufactured housing loans, the company said. The suit also alleges fraud and negligent misrepresentations in connection with the securitization. "The company is currently evaluating the allegations made in the lawsuit and intends to vigorously defend itself against them," Dynex said. The suit was filed in the U.S. District Court for the Southern District of New York. The company can be found online at http://www.dynexcapital.com.

Two classes from two Access Financial Manufactured Housing issues have been downgraded by Fitch Ratings. Class B-1 of series 1995-1 was downgraded from BBB-minus to CCC, and class B-1 of series 1996-1 was downgraded from BB-minus to CCC. In addition, the ratings on two classes from each transaction were affirmed. "Losses on series 1995-1 have reduced the collateral at a faster rate than payments on the related certificates and have consequently created an undercollateralized amount of $723,000," Fitch said. Cumulative losses now represent 23% of the original balance, the rating agency said. Series 1996-1 has also experienced higher losses than expected, and the certificates are undercollateralized by $6.5 million, Fitch said.

Two classes in Citigroup Mortgage Loan Trust, series 2003-1, have been downgraded by Fitch Ratings.Class WB-4 of group W was downgraded from BB to BB-minus, and class WB-5 was downgraded from B to CCC. In addition, Fitch affirmed the ratings on 10 other classes in the deal. The downgrades were attributed to poor collateral performance and the deterioration of asset quality beyond original expectations. As of the December distribution date, the approximately $63,000 in realized losses in group W were absorbed by the nonrated WB-6 class, Fitch reported. "While the WB-6 class currently has a balance of $221,498, the loans in foreclosure and bankruptcy total more than $2.3 million," the rating agency said. "Fitch is therefore concerned about the adequacy of protection against future losses available to classes WB-4 and WB-5." Fitch can be found online at http://www.fitchratings.com.

The Department of Housing and Urban Development has sent a rule that could inflict severe penalties on FHA servicers to the Office of Management and Budget for final clearance.The final rule sets the parameters for charging treble damages, or three times the loan amount, if a Federal Housing Administration servicer fails to take appropriate loss mitigation actions to help a delinquent borrower avoid foreclosure. On a $90,000 loan, servicers could face a $270,000 penalty for loss mitigation violations. HUD has been slow to implement the treble damages rule that was mandated by Congress in 1998 -- when the FHA's loss mitigation program was just getting started. The proposed rule, issued for comment in early 2004, limited treble damages to a handful of servicers with the lowest loss mitigation rating. However, lenders contend that treble damages are excessive and that levying such fines would make FHA servicing less attractive.

The Department of Veterans Affairs is proposing to revamp its servicing requirements and delegate more responsibilities to private servicers, particularly in the area of loss mitigation."The new regulations will change just about every aspect of our servicing operation," said Keith Pedigo, director of the VA loan guarantee program. VA personnel currently handle loss mitigation efforts after a veteran misses three monthly payments. Under a proposed rule, which is being issued for 60-day comment period, private servicers will handle loss mitigation. However, the VA will be monitoring the servicers' performance through a new electronic reporting system. And the VA will intervene if necessary, Mr. Pedigo told MortgageWire. "We want to make sure -- doubly sure -- that veterans are being given every possible opportunity to save their properties," he said. The proposed rule is expected to be published in the Federal Register by Feb. 18.