Servicing

Countrywide Financial Corp., Calabasas, Calif., will be replaced by AK Steel in the S&P 500 Index after the close of trading on June 30, Standard & Poor's has announced. S&P said the reason for the change is Countrywide's pending acquisition by Bank of America, a constituent of the S&P 500, in a deal expected to close on or about that date. S&P can be found online at http://www.standardandpoors.com.

As senators go home for the Fourth of July recess, supporters of a housing reform and foreclosure rescue bill remain optimistic that the Senate will pass the measure shortly after they return and that a final bill will land on the president's desk before August. "All signs indicate that they will finish the housing legislation before the August recess," said Mike House, executive director of FM Policy Focus. Republicans succeeded in blocking a final vote on the housing bill before the recess, which starts June 28. But test votes show that at least 80 of the 100 senators support the landmark housing bill that would authorize the Federal Housing Administration to refinance 400,000 at-risk homeowners to prevent foreclosures and strengthen regulation of the housing government-sponsored enterprises. The House has passed a similar bill, and observers expect that the House and Senate banking committee leaders will be able to resolve any differences relatively quickly. Meanwhile, President Bush is moving away from previous veto threats. Now he is calling on lawmakers to complete their work on the housing bill when they return to Washington on July 7. "The Congress needs to come together and pass responsible housing legislation to help more Americans keep their homes," Mr. Bush said.

Bank of America, Charlotte, N.C., says it anticipates cutting 7,500 jobs as part of the acquisition of Countrywide Financial Corp., Calabasas, Calif. Final decisions on what groups and locations will be affected have not been made, but the bank said the reductions will take place over the next two years and will affect positions throughout the country. The companies can be found online at http://www.bankofamerica.com and http://www.countrywide.com.

Nine classes of mezzanine/subordinate bonds from two alternative-A Chase Flex Trust mortgage-backed securities deals have been downgraded by Fitch Ratings. The downgrades were based on expected defaults and losses from delinquent loans and projected losses from the currently performing pool, the rating agency said. Fitch said the first phase of its review of 2005-2007 alt-A transactions, focused on mezzanine and subordinate bonds, is nearing completion. "The second phase, which will begin shortly, will be a review of all the senior bonds that, in many instances, require additional cash flow analysis to evaluate the risk of the various individual classes within the senior tranche," Fitch said. The rating agency can be found on the Web at http://www.fitchratings.com.

Nineteen tranches from four "scratch-and-dent" transactions issued by GSRPM Mortgage Loan Trust have been downgraded by Moody's Investors Service. The actions 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. Moody's said many scratch-and-dent pools originated since 2004 are exhibiting higher-than-expected rates of delinquency, foreclosure, and real estate owned. Moody's can be found online at http://www.moodys.com.

TierOne Corp., Lincoln, Neb., has announced the sale by TierOne Bank of a $63.8 million portfolio consisting primarily of delinquent residential construction loans in Florida. The more than 300 loans in the portfolio were originated primarily by TransLand Financial Services, a Florida-based mortgage brokerage, and chiefly involve single-family properties in the Cape Coral area of southwest Florida. TierOne said it does not expect to take "any material additional charge" as a result of the sale. The bank can be found on the Web at https://www.tieronebank.com.

The sales of existing single-family detached homes in California were up 18.1% in May from the level recorded a year earlier, surpassing 400,000 for the first time since early 2007, according to the California Association of Realtors. The seasonally adjusted annualized rate of closed-escrow resales totaled 423,700 in May, up from the revised 358,640-unit rate recorded in May 2007, CAR reported. The median price of an existing single-family detached home in California totaled $384,840 in May, down 35.3% from a revised $594,530 a year earlier, the association said. The statewide price decline was "a record for year-to-year percentage decreases in the median, reflecting the effect of large numbers of short sales and foreclosures in the market," said CAR vice president and chief economist Leslie Appleton-Young. CAR can be found online at http://www.car.org.

Stewart Information Services Corp., Houston, has announced the formation of Stewart Default Services to offer foreclosure services in California, Nevada, and Arizona. SDS will offer residential, commercial, and homeowners' association foreclosure services to banks, mortgage and loan servicing companies, credit unions, government agencies, and private investors in the three states, Stewart said. It will also extend the services to other parts of the country via its "comprehensive attorney network," the parent company said. Stewart said SDS will leverage the resources and knowledge of another Stewart subsidiary, Stewart Title Guaranty Co., by offering services that include loss mitigation, foreclosure processing, title and escrow services, online access to title products, bankruptcy/eviction referral and monitoring, vacant property insurance, and post-sale conveyance. The parent company can be found online at http://www.stewart.com.

A study by Clayton Holdings, an analytics and due diligence firm, has found that 70% of subprime adjustable-rate mortgages that are in default went into delinquency before borrowers faced rate resets on their monthly payments. The analysis of loans tracked by Clayton suggests that, despite all the attention to rate resets, deeper "systemic market failures" are primarily responsible for the poor performance, the company said. Clayton's June early performance snapshot of residential mortgage-backed securities also found that loans originated in 2006 remain the poorest-performing recent vintage. Regionally, the South and West now have the highest rate of delinquent subprime ARMs rolling into foreclosure, Clayton said. The company, based in Shelton, Conn., can be found online at http://www.clayton.com.

Banks and thrifts holding fairly conservative one- to four-family mortgages would see their risk-based capital requirement jump from a 35% to a 100% risk weighting if the borrower missed three monthly payments under an RBC proposal federal banking regulators call the Basel II "standardized approach." Riskier residential mortgages with higher loan-to-value ratios or stand-alone home equity loans that become 90 days or more past due could end up with a 150% risk weighting, according to Federal Deposit Insurance Corp. officials. The FDIC board has approved the issuance of the proposed standardized approach for a 90-day comment period. The Federal Reserve Board was slated to meet June 26 to consider the notice of proposed rulemaking. The regulators have decided to scrap a Basel Ia RBC rule and move toward the standardized approach that could be adopted by most FDIC-insured institutions. The 11 largest U.S. banking organizations are required to implement the more advanced Basel II approach. The standardized approach incorporates the more risk-sensitive risk weightings for mortgage loans in Basel Ia and adds a surcharge for operational risk based on 15% of net interest income. It also imposes a capital surcharge on nontraditional mortgages to address risks associated with negative amortization. Restructured single-family loans would generally fall into a 100% risk weighting.