Servicing

Lender Processing Services Inc., Jacksonville, Fla., has announced the acquisition of McDash Analytics, providing access to what LPS called the industry's largest loan-level database of mortgage assets. LPS said it now offers loan-level data for more than 39 million active first- and second-mortgage loans, representing approximately two-thirds of the mortgage market. "McDash's solutions complement our existing analytic forecasting capabilities and will enable us to serve our clients on a more comprehensive level," said Greg Whitworth, president of LPS's applied analytics division. ".... LPS has been successful in bringing together the loan and property-level data and analytics needed to provide mortgage originators, servicers, and investors with a more complete, accurate picture pf their portfolios." LPS can be found online at http://www.lpsvcs.com.

Office of Thrift Supervision Director John Reich is urging thrifts to prepare for rising defaults and foreclosures on payment-option adjustable-rate mortgages. "As home values continue to drop and ARMs (particularly option ARMs) continue to adjust upward, management should establish loss mitigation strategies, which might include increasing servicing staff levels; designating loan modification and short-sale criteria; and appropriate ongoing accounting for troubled debt restructurings and REO," Mr. Reich told an industry group. Bank of America just reported that Countrywide Financial Corp. held $26.4 billion in option ARMs on its books as of June 30, and 12.7% are nonperforming. BoA completed its acquisition of Countrywide and its federally chartered thrift on July 1. "Delinquencies and foreclosures continue to rise and borrowers with option ARMs face headwinds from loan recasts due to negative amortization triggers," the OTS director told the American Bankers Association summer meeting in Orlando.

Thirty-one tranches from seven "scratch-and-dent" transactions issued by Ameriquest/Quest Trust X have been downgraded by Moody's Investors Service. Moody's said the downgrades are part of a wider review of all residential mortgage-backed securities "in light of the deteriorating housing market and rising delinquencies and foreclosures." The rating agency said many scratch-and-dent pools originated since 2004 are experiencing higher-than-expected rates of delinquency, foreclosure, and real estate owned.

Foreclosure filings in Massachusetts totaled only 351 in June, a temporary lull produced by new foreclosure regulations that took effect May 1, according to ForeclosuresMass.com, a provider of foreclosure data based in Framingham, Mass. The company noted that 3,414 foreclosure filings had been recorded in April, a record high. "Massachusetts foreclosures are in a holding pattern, but the low numbers of filings we've seen over the past two months will end within the next four to six weeks," said Jeremy Shapiro, president and co-founder of ForeclosuresMass.com. "Massachusetts homeowners continue to face a wide range of economic pressures, and will soon return to the record foreclosure levels being seen nationwide." The company can be found online at http://www.foreclosuresmass.com.

Freddie Mac has been designated the "Bear of the Day" for July 21 by Zacks Equity Research, Chicago. The Bear of the Day is a stock expected to underperform the markets over the next three to six months. "As the housing situation continues to worsen, we anticipate higher losses and writeoffs in the coming quarters," Zacks said. The research firm said Freddie will need to raise more capital, "which is becoming increasingly difficult and expensive," and predicted that the government-sponsored enterprise will suspend or cut its dividend. "Recent measures announced by the Treasury affirm our belief that both the GSEs [Freddie Mac and Fannie Mae] are too big and important to fail, but any investment by the Treasury will further dilute the existing shareholders," Zacks said, adding that it is maintaining its Sell recommendation on Freddie's shares and reducing its six-month target price to $4.50 per share. Zacks can be found online at http://www.zacks.com, and Freddie Mac can be found at http://www.freddiemac.com.

Freddie Mac has reaffirmed its commitment to raise $5.5 billion in new capital, and the publicly traded company said it has finally become a Securities and Exchange Commission registrant. "Becoming an SEC registrant marks an important milestone for the company and demonstrates our commitment to enhanced transparency and financial reporting," Freddie Mac chairman and chief executive Richard Syron said. The government-sponsored enterprise was expected to register its stock in 2003, but a $5 billion accounting scandal forced Freddie to concentrate on repairing its accounting systems and internal controls. Back in May, Freddie and Fannie Mae pledged to issue stock to raise additional capital. Fannie has issued $7.4 billion in common and preferred stock, but so far Freddie has not followed through. In the past two weeks, both GSEs have seen the value of their stock plummet. And the Federal Reserve Board granted Fannie and Freddie access to its lending window to head off any short-term funding problems. Freddie Mac has not set a date for its offering of common and preferred stock. The company said the date will depend on a "variety of factors, including prevailing market conditions."

Bank of America confirmed Monday that it is committed to maintaining the wholesale and correspondent platforms of Countrywide Financial Corp., which it purchased on July 1. According to the Quarterly Data Report, the Calabasas, Calif.-based Countrywide was the nation's largest correspondent lender and second-largest wholesaler in the first quarter, with production volumes of $31 billion and $9 billion, respectively. In a presentation released along with its second-quarter earnings, the Charlotte, N.C.-based BoA noted that the Countrywide mortgage franchise would discontinue the origination of certain types of nonconforming loans, including payment-option adjustable-rate mortgages. It reported that Countrywide will "significantly curtail" its use of low-documentation loans. Countrywide is no longer funding subprime loans of any type. In the first quarter, Countrywide's subprime servicing portfolio had a delinquency rate of 33%.

Despite taking numerous hits related to real estate lending, Bank of America beat Wall Street earnings estimates for the second quarter. The Charlotte, N.C.-based BoA earned $3.41 billion ($0.72 per share), down 44% from the level recorded a year earlier. The company recorded $3.62 billion of net chargeoffs and added $2.21 billion to its allowance for loan losses, saying most of the additional credit costs are "directly tied to housing," including home equity, residential mortgage, and homebuilder loans. Reporting Countrywide Financial Corp. results separately, Bank of America said the recently acquired company had a $2.33 billion net loss in the second quarter, including $4 billion in credit-related losses. The company can be found on the Web at http://www.bankofamerica.com.

Eight classes of notes issued by Abacus 2005-CB1 Ltd., a synthetic collateralized debt obligation based primarily on subprime residential mortgage-backed securities, have been downgraded and removed from Rating Watch Negative by Fitch Ratings. The downgrades were as follows: class A-1, from A-minus to CCC; class A-2, from BBB-plus to CCC; class B, from BBB to CC; class C, from BBB-minus to CC; class D, from BBB-minus to CC; class E-1, from BB-plus to CC; class E-2, from BB to CC; and class F, from BB-minus to CC. The downgrades were attributed to "significant" collateral deterioration of subprime RMBS in the portfolio. Fitch said the synthetic CDO was created to enter into credit default swaps with Goldman Sachs Capital Markets. The rating agency can be found on the Web at http://www.fitchratings.com.

Moody's Investors Service has downgraded the ratings of 40 tranches from 10 alternative-A transactions issued by Countrywide in 2006. In addition, the ratings on 18 senior tranches of CWALT Inc. mortgage pass-through certificates were confirmed. The downgrades, in general, were based on higher-than-expected rates of delinquency, foreclosure, and real estate owned in the underlying collateral relative to credit enhancement levels, Moody's said. The collateral consists primarily of first-lien, adjustable-rate, alt-A mortgage loans. The rating agency can be found on the Web at http://www.moodys.com.