Servicing

Standard & Poor's has placed more than 1,000 U.S. conduit and fusion commercial mortgage-backed securities deals on "watch negative." S&P says the move does not represent a change in the expected performance of pools but rather a change in its CMBS criteria. The main change is a revision of credit enhancement levels in line with an effort to establish ones that enable securities carrying top investment-grade ratings of AAA to "withstand market conditions commensurate with an extreme economic downturn without defaulting." S&P said its analysis has resulted in a AAA credit enhancement figure of 19% for the "archetypical" pool. "We determined the higher enhancement level based on a number of factors, but primarily on our assessment of potential commercial property value declines in the range of 40% to 50% under conditions of extreme stress, such as during the Great Depression," the rating agency said. "This represents a major recalibration of our CMBS criteria and is intended to make U.S. CMBS ratings more comparable with ratings in other sectors." S&P also said, "While the new criteria represents a major change in our opinion of what might happen under highly stressful conditions, it does not represent a change in our view of the expected performance of commercial pools under current conditions."

RealtyBid.com and ValCom Inc. have teamed up through a joint partnership to give away a house in a different state every month through their new promotion, "The House Game." Anyone participating in "The House Game" online trivia game on RealtyBid.com will be eligible to win the selected property of the month. The first home that will be given away by ValCom and RealtyBid.com is a two-bedroom home located in sunny Florida. Through this partnership, ValCom will be handling the ongoing production, promotion, and implementation of distressed real estate inventory to be sold via RealtyBid.com's online auction platform. "Each month through RealtyBid.com, ValCom will be auctioning dozens of post-foreclosure homes at unbelievable prices to home buyers and investors around the country," said RealtyBid.com CEO/President Tony Isbell. "These will be absolute, no-reserve auctions; all properties with bids will be sold." Anyone is able to play and can become eligible to win a house by answering a few online trivia questions. Entrants do not have to answer the questions correctly in order to be eligible or win. "Click A Mouse, Win A House" is our slogan for this promotion, and it really is that easy," Mr. Isebell said. The seven-day auctions include post-foreclosure and no-reserve properties. Participants can register, watch the auction online and bid real-time against other bidders from anywhere in the world through http://www.realtybid.com.

There is a disconnect between how the market prices residential mortgage-backed securities and their intrinsic value, according to a recent study by Fitch Solutions to gauge the factors driving the valuations of RMBS tranches. The case study, entitled, "What Moves RMBS Tranche Values? A Case Study," compared observed valuations of RMBS bonds in the market with internally derived discounted cash flow valuations based on a range of default and loss assumptions. One goal of the study was to find the loss assumptions that would cause the modeled price to converge with the market price. According to the report, the market expectation regarding future losses is on average 32%, which can be decomposed into a pool default rate of 40%, with 80% loss severity. Vintage and performance are key determinants. "With structural features clearly having an impact on price sensitivity, it is now more important than ever to understand slight nuances from deal-to deal through in-depth cash flow modeling," said Richard Hrvatin, Fitch managing director and author of the report.

The Senate Banking Committee has approved the nomination of David Stevens to be the new Federal Housing Administration commissioner, clearing the way for his confirmation by the full Senate. Mr. Stevens' nomination had been held up for several months due to alleged Real Estate Settlement Procedures Act violations by his former employer, Long & Foster — a mid-Atlantic real estate brokerage firm. The RESPA complaints did not name Mr. Stevens and HUD secretary Shaun Donovan continued to support him, claiming his experience as an executive at Freddie Mac and Wells Fargo Home Loans is needed at FHA. The committee approved Mr. Steven's nomination by a voice vote late Thursday afternoon. The Senate adjourned a few hours later so his confirmation will be pending when the senators return from their 4th of July recess on July 6.

UBS has greatly mitigated its exposure to problem mortgage assets through an arrangement with the Swiss National Bank and said its second quarter will look better than its first, but it still is anticipating a loss for the period. "The operating result for the quarter is expected to represent an improvement compared with the first quarter of 2009, largely attributable to better market conditions affecting the investment bank and a reduction in losses and writedowns on legacy risk positions," UBS said. However it also noted that, "Based upon preliminary results for April and May and estimated results for June, UBS expects to incur a net loss for its second quarter 2009." The company said the majority of the expected loss "is attributable to own credit and the restructuring charges that have already been announced."

Freddie Mac said loan delinquencies on its portfolio and guarantee book of business rose to 2.01% in May, an 8% uptick from the previous month, but a 229% increase from the same period last year. The increase in delinquencies is not surprising given the deteriorating condition of home values and the rising unemployment rate. Meanwhile, Freddie Mac said it bought $50.2 billion in mortgages during May, a 13% decline from the previous month, and a 23% drop from May 2008. However, purchases are much improved from January and February of this year. In May it issued $43.7 billion in MBS (participation certificates) compared to $51 billion in April. A year ago in May it issued $47.3 billion in PCs.

The Senate Banking Committee has approved the nomination of David Stevens to be the new Federal Housing Administration commissioner, clearing the way for his confirmation by the full Senate. Mr. Stevens' nomination has been held up for several months due to alleged Real Estate Settlement Procedures Act violations by his former employer, Long & Foster — a mid-Atlantic real estate brokerage firm. The RESPA complaints did not name Mr. Stevens and HUD secretary Shaun Donovan continued to support him, claiming his experience as an executive at Freddie Mac and Wells Fargo Home Loan is really needed at FHA. The committee approved Mr. Steven's nomination by a voice vote late Thursday afternoon. The Senate adjourned a few hours later so his confirmation will be pending when the senators return from their 4th of July recess on July 6.

Doing its part to help promote the aims of the Homeowner Affordability and Stability Plan, Radian Guaranty Inc., Philadelphia, has created a program which helps qualify borrowers for traditional refinances on loans not currently serviced by their present lender, even with today's declining home process and tighter lending standards. The new program enables Radian to transfer a homeowner's existing mortgage insurance policy to any new loan that meets the policy's more flexible eligibility criteria, making it easier for homeowners to refinance their existing mortgage into a more predictable loan type and/or take advantage of today's lower interest rates to lower their monthly payment. This, in turn, helps more borrowers avoid default and/or foreclosure and remain in their homes.

An Ohio man has been charged with mail fraud in connection with a scheme to fraudulently obtain mortgage loans. According to William J. Edwards, U.S. attorney for the Northern District of Ohio, from August 2003 through January 2005, Paul R. Tomko of Middleburg Heights, among others, allegedly executed a scheme to defraud lenders in connection with 12 mortgage loans totaling nearly $1.2 million on properties located in the Cleveland area. Mr. Tomko, who could not be reached for comment, also allegedly caused fraudulent loan applications to be processed through mortgage brokers. He's also alleged to have used straw buyers to purchase properties and to obtain financing in their names and cause fraudulent appraisals to be prepared that artificially inflated the properties' true values. The loan application packages that were submitted to the lenders allegedly included false and fraudulent documentation and information. It is further alleged that the lenders sustained significant losses as these mortgage loans went into default and the properties were sold through foreclosure.

PMI Mortgage Insurance Co., Walnut Creek, Calif. has expanded its refinance-to-modification program so it can be used with all loans it insures, not just Home Affordable Refinance Program eligible loans owned or guaranteed by either Fannie Mae or Freddie Mac. With this program, the coverage percentage and premium rate remain the same and the existing insurance certificate is modified to cover the new refinanced loan. To minimize borrower expenses, PMI is also not charging fees to modify the existing insurance certificate for either the New Lender/Servicer or Same Lender/Servicers Programs. PMI's modification of the existing insurance allows coverage to be extended to the new refinanced loan, even though the property value may be lower than when the original loan was insured and may not be eligible for mortgage insurance coverage today. To be eligible, the borrower must be current on their existing loan and the new loan should improve the borrower's financial position by reducing the payment, interest rate or principal balance; extending the fixed-payment period on an adjustable rate mortgage; an extension of the loan or amortization term; or by giving the borrower a more stable payment product. Additional requirements may apply depending on whether the existing or new lender/servicer is requesting the coverage modification.