Servicing

Seller-funded downpayment assistance on Federal Housing Administration loans could get a second life under a bill introduced by Rep. Al Green, D-Texas, that also authorizes the FHA to charge risk-based premiums. The Green bill would repeal sections of the recently passed housing bill that bans seller-funded downpayment assistance and institutes a 12-month moratorium on risk-based pricing starting Oct 1. The bill (H.R. 6694) would require the FHA to charge higher mortgage insurance premiums for homebuyers with credit scores below 680 that receive seller-funded downpayment assistance from nonprofit groups, such as Nehemiah Corporation of America and AmeriDream. Borrowers with credit scores below 620 would be charged risk-based premiums. "I have introduced this bipartisan bill to revive this critical program under new standards that will effectively balance the risk of potential foreclosures with the goal of increasing homeownership," Rep. Green said. The Texas congressman introduced the bill on July 30 just before the House adjourned for the August recess.

The sole class of notes issued by Brit Alliance ABSpoke 2005-X, a collateralized debt obligation referencing residential mortgage-backed securities and other assets, has been downgraded from BB to CC by Fitch Ratings and removed from Rating Watch Negative. The downgrade of the class A notes resulted from "significant collateral deterioration" in the reference portfolio, specifically subprime and alternative-A RMBS, the rating agency said. The transaction is an unfunded managed synthetic CDO.

Five classes of variable-rate notes issued by Magnolia Finance II PLC, a collateralized debt obligation that references chiefly mortgage-backed security assets, have been downgraded and removed from Rating Watch Negative by Fitch Ratings. The affected notes were from the following asset-backed securities portfolios: series 2006-5A, series 2006-5B, series 2006-5CU, series 2006-5CE, and series 2006-5CG. Fitch said the downgrades reflect "significant collateral deterioration" in the reference portfolio, especially subprime residential MBS, alternative-A RMBS, and structured finance CDOs with underlying exposure to subprime RMBS. Magnolia II is a static, synthetic, structured finance CDO.

Six classes from GS Mortgage Securities Corporation II series 2006-RR2 have been downgraded by Moody's Investors Service. The downgrades were as follows: class L, from Ba1 to Ba2; class M, from Ba2 to Ba3; class N, from Ba3 to B1; class O, from B1 to B3; class P, from B2 to Caa1; and class Q, from B3 to Caa2. In addition, classes E, F, G, H, J, and K were placed on review for possible downgrade. Moody's also affirmed the ratings on five other classes in the transaction. The negative rating actions were attributed to "the overall deteriorating pool performance." Moody's can be found on the Web at http://www.moodys.com.

Deutsche Bank AG took 2.3 billion euros ($3.6 billion) in residential mortgage-backed securities writedowns during the second quarter but generated a net profit of 645 million euros ($1 billion). Despite the profit, an analyst at Standard & Poor's lowered S&P's long-term counterparty credit ratings on the company, citing the addition of the most recent writedown to others and the company's performance relative to that of its peers. "The downgrade reflects that we no longer consider Deutsche Bank's performance to be materially stronger than that of the leading peers in the currently difficult operating environment," said S&P credit analyst Bernd Ackermann. "Although the bank's performance is still reasonably sound, its earnings for the past 12 months have been affected by 7.1 billion euros [$11.0 billion] in major markdowns, impairments, and credit-valuation adjustments."

The personal financial services division of HSBC's U.S. operation booked $6.8 billion in loan impairment and credit risk charges in the first half, according to a new report issued by the company. The London-based bank also reported that its subprime portfolio (housed in "mortgage services") fell 13%, to $31 billion. It said 60% of the decline was due to loan repayments. The bank's personal finance division lost $2.2 billion in the first half. "The U.S. remains a difficult market, with rising unemployment and falling house prices," it said in a statement. HSBC still originates subprime loans, but only through the retail branches of the old Household Finance network.

By the end of next year, financial institutions will be looking at $2 trillion in writedowns due to the current credit crisis, according to an economics professor at New York University. Speaking on CNBC Monday morning, Nouriel Roubini of NYU's Stern School of Business said the $2 trillion price tag includes not only subprime loans, but "A paper" mortgages, credit cards, auto loans, municipal bonds, and other asset categories. "The consumer is on the ropes," said Professor Roubini. "Banks have barely started [taking writedowns]," he said. To date, Wall Street firms, banks, and other financial institutions have suffered mortgage-related asset writedowns of more than $300 billion. He predicted that the Federal Deposit Insurance Corp. will have to "bail out hundreds of banks."

WMD Capital Markets, Santa Barbara, Calif., has announced the purchase by an investment affiliate of approximately $65 million of single-family mortgage loans secured by properties in Massachusetts. The purchase by the affiliate, GI-XXVI, was made as part of an affordable loan modification and foreclosure prevention agreement with Massachusetts Attorney General Martha Coakley. WMD Capital said GI-XXVI will offer borrowers the option of adjusting their monthly mortgage payment to an affordable level or receiving a payment that can be used for relocation costs. The company can be found online at http://www.wmdcapital.com.

The California commercial loan delinquency ratio tripled in the second quarter, but the rate remained at a near-record low of 0.06%, according to the California Mortgage Bankers Association. The Quarterly Commercial Loan Delinquency Survey found that only seven loans were more than 30 days delinquent, representing $53.9 million of a $96.1 billion servicing portfolio. This represents a delinquency ratio of 0.06%, compared with 0.03% a year ago. Fifteen of the 17 commercial mortgage banking firms reported no loans more than 30 days delinquent. For survey purposes, a loan is considered delinquent if it is two or more payments past due, although loans in foreclosure are included regardless of the number of payments past due. The CMBA, based in Sacramento, can be found online at http://www.cmba.com.

Origen Financial Inc., a real estate investment trust that had been a major lender and servicer in the manufactured housing sector, has reported a net loss of $4.8 million ($0.19 per share) for the second quarter, compared with net income of $2.8 million ($0.11 per share) a year earlier. The company said that on July 31 it completed the sale of "certain assets of our origination and insurance business" to an affiliate of ManageAmerica, a provider of services to the manufactured housing industry. This followed the July 1 sale by Origen of its servicing operations and platform to Green Tree Servicing LLC. The company took in proceeds of $36.7 million from that transaction. Origen said its business model is now focused on managing residual interests in securitized manufactured housing loan portfolios. Origen can be found online at http://www.origenfinancial.com.