Servicing

MountainView Capital Holdings LLC, Denver, has announced the initial closing of the MountainView Mortgage Opportunities Fund LP, which is slated to invest primarily in alternative-A and subprime first-lien residential mortgage loans in the secondary market. The company said the fund had raised approximately $80 million, primarily from qualified institutional investors, as of the initial closing. The loans acquired by the fund will be serviced "with a view toward mitigating risk of default and maximizing the value of the loans," MountainView Capital said.

Freddie Mac has announced that it is doubling the amount of money it pays mortgage servicers for each workout that keeps a delinquent borrower with a Freddie Mac-owned mortgage out of foreclosure. Freddie also said it will reimburse servicers for the cost of door-to-door outreach programs, give servicers more time to negotiate workouts in Washington, D.C., and 20 states with fast foreclosure processes, and make administrative changes to streamline the workout process. The government-sponsored enterprise said compensation for repayment plans will rise from $250 to $500 on Aug. 1, while loan modification compensation will increase from $400 to $800. For short sales or preforeclosure sales, where Freddie agrees to accept less than the full amount owed on a borrower's loan, compensation will go from $1,100 to $2,200. Freddie Mac also said that, through March 31, 2009, it will reimburse the cost of leaving a door hanger up to $15 per mortgage, and up to $50 per mortgage for a door knocking that results in contact between the borrower and the servicer. Freddie will also reimburse servicers up to $200 for additional fees paid to vendors for door knocking that results in successful alternatives to foreclosure.

Five classes of notes issued by Vertical ABS CDO 2006-1 Ltd./Corp., a collateralized debt obligation consisting largely of subprime mortgage-backed securities, have been downgraded and removed from Rating Watch Negative by Fitch Ratings. The downgrades were as follows: class A-S1VF, from BBB-plus to CCC; class A-1, from BBB to CC; class A-2, from BB-plus to CC; class A-3, from B-plus to C; and class B, from CCC to C. The downgrades were attributed to collateral deterioration involving subprime residential MBS, alternative-A RMBS, and structured finance CDOs with underlying exposure to subprime RMBS. Vertical 2006-1 is a hybrid cash flow and synthetic structured finance CDO.

Fannie Mae bought $63.8 billion worth of mortgages in June, a 7% decline from the previous month's level but flat compared with that of the same month a year ago. The government-sponsored enterprise, which will have a new, tougher regulator in a few months, saw its on-balance-sheet portfolio increase to $749.6 billion, a 4% gain compared with that of June 30, 2007. The annualized compounded rate of growth on the portfolio was 22.8%. Fannie had a total book of business (portfolio plus guarantees) of $3.039 trillion at month's end. The delinquency rate on its portfolio was 1.30%, compared with 0.62% 12 months earlier.

The Federal Reserve has authorized the Federal Reserve Bank of New York to extend through Jan. 30 its term securities lending facility, including the TSLF 2 that allows primary dealers to collateralize draws with certain mortgage-related securities. Collateral for the TSLF 2 includes mortgage-backed securities issued or guaranteed by federal agencies, federal agency debt securities, triple-A rated private-label residential MBS, commercial MBS, and asset-backed securities. The move is one of a series of steps the Fed has taken to provide a wider range of liquidity facilities. Some related actions have also been taken by the European Central Bank and the Swiss National Bank.

The Securities and Exchange Commission has extended its emergency order designed "to enhance protections against naked short selling in the securities of Fannie Mae, Freddie Mac and primary dealers at commercial and investment banks" until Aug. 12. The SEC said it would not extend the order beyond that date. "The order is designed to protect legitimate short-selling in these securities, but helps prevent illegitimate, naked short-selling and potential 'distort and short' manipulation," said SEC Chairman Christopher Cox. "In addition to continuing the existing order against naked short-selling, the commission will continue to explore other remedies for the broader marketplace to further protect investors from 'distort and short' artists." Under the emergency order "anyone effecting a short sale" in the securities specified must "arrange beforehand to borrow the securities and deliver them at settlement."

Hope Now servicers completed nearly 522,000 loan workouts in the second quarter, up 8% from the level recorded in the first quarter, as loan modifications jumped 30%. Loan modifications for subprime loans jumped from 122,100 in the first quarter to 164,200 in the second quarter, while loan-mods for prime mortgages rose from 48,100 to 55,100 over the same period. Meanwhile, 301,900 troubled borrowers ended up in repayment plans. Workouts involving loan modifications and repayment plans are "far greater than the actual foreclosures taking place in the market," Hope Now executive director Faith Schwartz told reporters. Servicers closely monitor loans that start the foreclosure process, and "we work aggressively to avoid those foreclosures," she said. Hope Now data show that sales of foreclosed properties have jumped dramatically since the fourth quarter and totaled nearly 245,700 in the second quarter. Sales of foreclosed properties resulting from subprime defaults totaled 138,000 in the second quarter, up 34% since the fourth quarter. Sales of foreclosed prime loan properties totaled 107,700, up 45% from the fourth-quarter level.

Twenty-seven classes of notes issued by five collateralized debt obligations linked to subprime residential mortgage-backed securities have been downgraded by Fitch Ratings. The affected securities include six classes from Jupiter High-Grade CDO II Ltd./Inc., a cash CDO; six classes of notes from ACA ABS 2003-1 Ltd. and six from ACA ABS 2003-2 Ltd., both cash flow structured finance CDOs; and five classes of notes from GSC ABS CDO 2005-1 Ltd. and four from GSC ABS CDO 2006-1c Ltd., both hybrid CDOs. The downgrades were attributed to "significant collateral deterioration" in the portfolios' subprime RMBS as well as (in the Jupiter and GSC ABS 2005-1 CDOs) structured finance CDOs with underlying exposure to subprime RMBS and (in the Jupiter CDO) alternative-A RMBS with underlying exposure to subprime RMBS. Fitch can be found online at http://www.fitchratings.com.

Fannie Mae purchased $18.2 billion in apartment loans during the first half, a 30% increase from the purchase volume in the same period of last year. The loans were originated by multifamily lenders that are part of its Delegated Underwriting and Servicing program. The government-sponsored enterprise adds liquidity to the market through its seller/servicers and by purchasing multifamily bonds. Its DUS program is celebrating its 20th anniversary this year. Fannie Mae can be found on the Web at http://www.fanniemae.com.

American Processing Co., Minneapolis, has agreed to purchase National Default Exchange, a provider of mortgage default processing services based in Addison, Texas, according to Dolan Media Co., which owns a majority of APC's stock. The terms of the agreement were not disclosed. Dolan said NDEx provides default processing services in Texas, California, and Georgia, three of the top 10 states in default-related activity, while APC offers similar services in Michigan, Indiana, and Minnesota. The closing of the acquisition is contingent upon several factors, including NDEx's entry into a long-term exclusive services agreement with Barrett Daffin Frappier Turner & Engel LLP, a Texas law firm. James P. Dolan, president and chief executive officer of Dolan Media, said the acquisition "will broaden our new market focus beyond acquisitions by providing us with the resources and knowledge to launch operations in new states." Dolan can be found on the Web at http://www.dolanmedia.com.