Servicing

The master servicer rating of The Bank of New York Mellon has been upgraded from RMS2-plus to RMS1-minus by Fitch Ratings. Fitch attributed the action to BNYM's "strong oversight and monitoring of its primary servicers, its continued investment in enhancing its technology, and its increasing use of automation." The company's master servicing operation is based in New Albany, Ohio. Fitch rates residential servicers on a scale of 1 to 5, with 1 being the highest rating. The rating agency can be found online at http://www.fitchratings.com.

Nominal home prices were down 10.9% nationally in July from the level recorded a year earlier, according to the latest LoanPerformance Home Price Index. Los Angeles-Long Beach-Glendale topped the index's list of statistical areas experiencing 12-month home price declines, recording a 27.95% decrease. Oakland-Fremont-Hayward (Calif.) ranked second with a 27.28% decline, and Riverside-San Bernardino-Ontario (Calif.) finished third at 26.93%. "The recent price trend is similar to the Massachusetts and Texas house price declines in the 1980s and 1990s that took approximately two years to bottom out," said Mark Fleming, chief economist of First American CoreLogic, the Santa Ana, Calif.-based company that compiles the index. "In both cases there was stabilization in the rate of decline before the lengthy recovery in price levels." The LoanPerformance HPI provides monthly home price indices and median sales prices covering 7,575 ZIP codes and 676 counties in all 50 states and the District of Columbia, the company said. First American CoreLogic can be found online at http://www.facorelogic.com.

In a battle that has national implications, a Miami Beach city commissioner is taking on condominium lenders in Florida who don't pay what he says is their fair share of condo assessments. Jerry Libbin has formed a coalition of unit owners to lobby state legislators to force banks to pay the full assessment on units that have been taken back from borrowers. Under current law, lenders need pay only 1% of the normal fee once they foreclose on a unit. But Mr. Libbin says some banks don't even do that, and many associations have to sue lenders to recover their unpaid assessments and late fees. Worse, the Miami Beach commissioner maintains, other owners are forced to pay more than they otherwise would so they can maintain their buildings. "Banks are taking unfair advantage of condo owners who have done absolutely nothing wrong," he said. "We must stop this vicious cycle." With 23,631 associations governing a total of 1.4 million units, according to the state's business department, Florida has perhaps the greatest concentration of condos in the country. In Miami-Dade County alone, there are 4,045 buildings with 242,352 units.

In the long term, the proposed RTC-like government entity slated to buy illiquid assets appears likely to produce fundamentals that may boost mortgage-backed securities prices dramatically, according to a group that has managed investments in distressed residential MBS since late last year. The management group of Team Nation Investment Group LLC, Irvine, Calif., said they do not expect to see a significant change in MBS pricing in the short term. But even before official plans were made for the Resolution Trust Corp.-like entity, they said they were able to produce an average 31.6% return on investment on their distressed RMBS holdings since November 2007. Several market participants have shown concern about the integrity of MBS in the wake of greater-than-expected losses that have shaken the confidence of the financial markets at large. But Team Nation Investment Group fund manager Craig Chang said he believes that "with the recent government action, it further justifies that MBS are an instrument that the government believes is as important to our economy as the U.S. dollar -- it is a part of our lives."

Five classes from two series of BCF LLC mortgage pass-through certificates have been downgraded by Fitch Ratings. The downgrades were as follows: series 1997-R1, class B-1, from AA to BBB, class B-2, from BB-plus to B, and class B-3, from CC/DR3 to C/DR6; and series 1997-R3, from AA to BB, and class B-2, from BB to C/DR6. All but class B-2 of series 1997-R3 were placed on Rating Watch Negative, as were classes A-4 and WAC in series 1997-R1. The collateral for the transactions consists primarily of mortgage loans purchased from the Department of Housing and Urban Development. "The mortgage loans are secured by first liens on one- to four-family residential real estate properties and had been contractually delinquent at origination," Fitch said.

Thirty-eight tranches of synthetic residential mortgage-backed securities certificates from 12 transactions issued by RESI, EASI, SASI, and RESIX have been downgraded by Moody's Investors Service. The certificates are protected by subordination, including a nonamortizing unrated tranche. In a synthetic transaction, credit protection is provided to the owner of a pool of jumbo mortgages (the protected party) similar to that provided by subordination in conventional RMBS transactions, Moody's said. The reference portfolio includes prime fixed-rate mortgages from various originators. Under an agreement with the issuer, the protected party pays a fee for the transfer of a portion of the portfolio risk, the rating agency said.

Citigroup Inc. is set to announce that it will provide $1 million of "planning grants" to help nonprofits apply for federal funding to acquire, renovate, and sell vacant real-estate-owned properties. The Housing and Economic Recovery Act, enacted July 30, set aside $3.9 billion for such activities. Eric Eve, a senior vice president of global community relations at Citi, said its grants will enable nonprofits to "better understand the REO space." Nonprofits can apply to Citi for grants of $50,000 to $100,000 in 12 cities: Oakland, Calif.; Atlanta; Chicago; Boston; Detroit; Charlotte, N.C.; Rochester, N.Y.; New York; Cleveland; Columbus, Ohio; Pittsburgh; and Houston.

Lehman Brothers has begun to reopen for business under the ownership of Barclays Capital, and more than 10,000 Lehman employees have been offered jobs in the new entity, according to Barclays PLC. The actions followed the recent approval by the Bankruptcy Court for the Southern District of New York of Barclays' agreement to acquire Lehman Brothers' investment banking and fixed-income and equity sales, trading, and research businesses, among others. Lehman's banking and advisory functions are now open for business, and its capital markets and trading businesses will resume full operations shortly, Barclays said. Employment offers have been made to all employees of the Lehman businesses acquired by Barclays. The combined firm will use the Barclays Capital name. Barclays said it has purchased the rights to use the Lehman Brothers name and will consider opportunities to do so.

Amy Brandt, who was the chief executive officer of WMC Mortgage Co. during that alternative-A lender's salad days, has returned to the industry by buying two servicers and an Internet originator. Vantium Capital Inc., her private-equity firm, was planning to announce that it has acquired the assets of Strategic Recovery Group LLC, a Plano, Texas-based company that collects on defaulted and charged-off debts; its Acqura Loan Services LLC, which manages subprime portfolios; and Strategic Recovery's online-only lending business, which uses the brand name Go Financial Solutions. Vantium, a New York company, would not make executives available for interviews. In a press release, Ms. Brandt said, "We will use these companies as a platform to develop, or acquire, new businesses that will serve the financial and investment markets." The firm did not say how much it paid for any of the assets. It has financial backing from Leon Black's Apollo Global Management LLC, the New York private-equity firm that sold WMC Mortgage to General Electric Co. in 2004. Acqura is to service assets bought by a Vantium fund managed by Michael Commaroto, the former head of private-label mortgage-backed securities at Deutsche Bank AG, Vantium said.

The Federal Housing Administration is warning its lenders not to finance "buy-and-bail" transactions in which the borrowers are planning to default on their old mortgage as soon as they move into their new home. These borrowers generally tell lenders that they are planning to rent their current home after they move into a less expensive house. To stop this "unscrupulous practice," the FHA says it is temporarily changing its underwriting guidance to ensure that the borrower can make payments on both mortgages without relying on rental income. The underwriting analysis "may not consider any rental income from the property," the FHA says in a mortgagee letter, unless the borrower has a loan-to-value ratio of 75% or less. Fannie Mae has instituted a similar buy-and-bail policy.