Servicing

Arch Bay Capital has issued a $57.4 million MBS backed by seasoned performing and delinquent subprime loans, garnering a AAA rating on the bond, a sign that the private-label market could come back but only if issuers are willing to make little money on their deals. The mortgage-backed security was rated by DBRS and the end investor is a bank, said one official familiar with the transaction. Quincy Tang, senior vice president of structured finance/RMBS for DBRS, told National Mortgage News that because of the credit enhancement put on the security by Arch Bay, the investor in the AAA bond will not suffer any losses unless delinquencies on the underlying loans exceed 75%, an astronomical number. The loans — originally funded a few years back by such subprime firms as Accredited Home Loans, NovaStar Mortgage and others — have a 30-day delinquency rate of 21%. The collateral for the bond are loans with a principal balance of $229 million. One NPL investor, requesting anonymity, said based on what he knows of the deal, Arch Bay doesn't stand to make much money, if any, on the transaction. The Irvine, Calif.-based hedge fund could not be reached for comment. Its profit will be determined by how much it paid for the NPLs — which it bought in the secondary market — and the cost of the credit enhancement on the bond. Roughly 19% of the loan pool has been modified, according to DBRS.

Fitch Ratings has downgraded 393 bonds in 254 residential mortgage-backed securities transactions it was reviewing to "D," indicating that the bonds have incurred principal writedowns. Eighty-five of the downgraded bonds were from transactions originally said to have alternative-A credit, 80 were from deals originally considered to be prime credit transactions and 77 were from transactions originally categorized as subprime credit. The remaining 12 bonds were said to come from "other" transaction types. All the downgraded bonds were previously rated "CC" or "C," which indicated defaults were expected.

Mortgage Industry Advisory Corp., a provider of FAS 157 fair market valuations, mortgage risk hedging and accounting solutions, has rolled out phase I of its new corporate website, which is designed to make it easier for mortgage market participants to find information. Valuation experts at MIAC have been publishing a wealth of information and posting it online for over a decade. The new site will make this material more accessible to the industry. Specifically, the new site separates content areas by business channel, making it easier for customers to navigate directly to the content they are interested in. For example, MIAC's Generic Servicing Assets are available for download into MIAC Analytics and viewable on the website.

AssetPlanUSA, a nationwide provider of foreclosure alternative solutions, and DepotPoint, a provider of default management workflow solutions, have joined forces to work with servicers and lenders to help expedite the short sale process. AssetPlanUSA plans to use DepotPoint's technology to help its clients and their borrowers effectively achieve short sales. Starting on April 5, 2010, the U.S. government will begin providing incentives to servicers who help borrowers facing foreclosure exit their homes gracefully outside the foreclosure process, thereby lessening the negative impact on the borrower's credit score compared to a foreclosure. The Home Affordable Foreclosure Alternatives Program provides relocation assistance for borrowers choosing foreclosure alternatives, allows borrowers to receive pre-approved short sale terms before listing their property, and pays servicers cash incentives to cover administration and processing costs. DepotPoint provides default management technology for the distressed property market. The company's TrackPoint Platform incorporates an enterprise-class, Web-based workflow engine and tracking system for managing default transactions, including short sales.

LoanMarket.net, an online auction website specializing in residential and commercial loans, has hired mortgage banking veteran David Akre as a managing director. Mr. Akre co-founded New York Mortgage Trust, a mortgage lending and investing REIT that went public back in 2004. During his career, he also worked in secondary marketing and sales at Thornburg Mortgage, Santa Fe. Based in Irvine, Calif., LoanMarket is privately held. The company has been selling performing, subperforming and delinquent notes for almost a year.

The Obama Administration is providing $1.5 billion to housing finance agencies to develop innovative programs that might prevent foreclosures in some of the most economically hard hit states. HFAs in Nevada, Arizona, Florida, Michigan and California are expected to come up with new programs to help unemployed mortgagors remain in their homes until they find a new job. For borrowers with underwater mortgages, "HFAs may experiment with programs that would assist borrowers to negotiate with lenders to write down mortgages," according to a White House press release. To apply for the funds, HFAs have to submit proposals to the Treasury Department.

Mortgage Contracting Services, a nationwide property preservation and inspection provider, has launched a 24-hour call center service specializing in emergency responses for tenant occupied properties. With inbound and outbound capabilities, the domestically operated call center will enable clients to meet required repair timeframes and perform emergency work orders and service requests at any hour. "With passage of the Protecting Tenants at Foreclosure Act last spring, servicers are now facing the added responsibility of 24-hour maintenance availability," said Caroline Reaves, chief executive of MCS. The company is based in Tampa, Fla.

Despite the dimming prospects for the creation of an independent Consumer Financial Protection Agency, TARP watchdog Elizabeth Warren isn't ready to consider alternatives. "Right now there is no Plan B," Ms. Warren, the chairman of the Troubled Asset Relief Program's Congressional Oversight Panel, said in response to a reporter's question on a conference call. "Right now all the chips are on the table with the Consumer Financial Protection Agency." If the CFPA becomes reality it would oversee mortgages, credit cards and other types of consumer debt, taking certain oversight functions away from federal banking regulators. The conference call was organized by the U.S. Public Interest Research Group ahead of a Monday compliance deadline for the Credit Card Accountability, Responsibility and Disclosure Act.

The benchmark 10-year Treasury yield rose above 3.8% Friday morning and stayed there into the early afternoon, suggesting possible upward pressure on mortgage rates. Late Thursday the Federal Reserve surprised the markets by raising the discount rate it charges its member banks, citing improvement in financial market conditions. However, the Fed said, "The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy, which remains about as it was." The 10-year has been as low as 3.6% this month but has been on average closer to 3.7% recently.

The delinquency rate on all residential loans fell slightly in the fourth quarter to 9.47% while "seriously delinquent" mortgages (90 days or more past due) continued to rise, according to new figures released by the Mortgage Bankers Association. The trade group tried to put a positive spin on the overall delinquency rate, its chief economist Jay Brinkmann declaring, "We are likely seeing the beginning of the end of the unprecedented wave of mortgage delinquencies and foreclosures that started with the subprime defaults in early 2007." Late payments by consumers fell 17 basis points in the fourth quarter (compared to the third), but were up 159 bps compared to the same period a year earlier. However, these figures are seasonally adjusted — and do not include foreclosures. (The seriously delinquent rate does include foreclosures.) The nonseasonally adjusted numbers show a bleaker picture: 10.44% of all home loans were late by 30 days or more compared to 9.94% in 3Q. Also, the numbers for Florida continue to be abysmal with 26% of all mortgages there late by one month or more.