Servicing

With the resurgence in government-backed mortgage lending, Ginnie Mae is on course to issue some $200 billion in securities in fiscal year 2008, and might even surpass its previous record of $216 billion, according to Michael Frenz, Ginnie's executive vice president. In the first eight months of fiscal 2008, the agency has issued $112 billion in securities, including $21.5 billion worth in May alone, the Ginnie Mae official told the Mortgage Bankers Association's Government Housing and Loan Production Conference in Washington. This compares with $7.7 billion in May 2007, and a total of $85.1 billion in securities in all of fiscal 2007. The agency can be found on the Web at http://www.ginniemae.gov.

The Federal Housing Administration has added mortgage subsidiaries and outside vendors to its list of entities that are exempt from its 90-day "anti-flipping" rule. The FHA will not insure a mortgage on any property that was owned by the seller for fewer than 90 days before transferring it to a new owner. A waiver exempts properties owned by the FHA, Fannie Mae, Freddie Mac, and state- and federally chartered financial institutions. But to satisfy the anti-flipping rule, many third-party vendors are forced to leave foreclosed properties vacant for 90 days. "This harms neighborhoods, frustrates homebuyers, and delays recovery," FHA Commissioner Brian Montgomery said at the Mortgage Bankers Association's Government Housing and Loan Production Conference in Washington. The exemption allowed for vendors will last for one year, at which time "recovery should be under way," Mr. Montgomery said. The FHA can be found online at http://www.fha.gov.

The new head of the Department of Housing and Urban Development says the short seven months he will have on the job is enough time to "make a profound, powerful difference" in what has become the "American nightmare." In his first public appearance since being sworn in, HUD Secretary Steve Preston told the Mortgage Bankers Association's Government Housing and Loan Production Conference in Washington that "where there's urgency and commitment, there is terrific opportunity." What lawmakers, the administration, and the mortgage business do now to address the rising tide of defaults and foreclosures "can set the market on a firm foundation for future growth," said the former head of the Small Business Administration, who had been on the job at HUD for only four days. Calling on Congress to modernize the Federal Housing Administration and improve oversight of the housing government-sponsored enterprises, he said the "situation demands action now." And noting that the default situation will get worse before it gets better, Secretary Preston asked the industry to "continue to be aggressive" in reaching out to troubled borrowers.

Five classes of subprime mortgage pass-through certificates from two GSAMP Trust transactions have been downgraded by Fitch Ratings. The downgrades were as follows: GSAMP Trust 2002-HE2, classes A-1 and A-2, from AAA to AA; and GSAMP Trust 2002-NC1, class M-1, from AA to A, class M-2, from A to BB, and class B-1, from BBB to C/DR6. Fitch also affirmed the ratings on seven classes from three GSAMP subprime transactions.

Twenty-eight classes from four alternative-A mortgage-backed securities deals have been downgraded by Fitch Ratings. The downgraded securities included the following: 11 classes from Credit Suisse Mortgage Corp. Trust 2007-5, group I; seven classes from CSAB Mortgage-Backed Trust 2007-1, group 2; five classes from Bear Stearns ALT-A Trust 2006-7, group II; and five classes from GMAC Mortgage Trust 2005-AF1. The rating agency attributed the downgrades to expected defaults and losses from delinquent loans and projected losses from the currently performing pools.

A TransUnion analysis of consumer loan data finds that residential home loan delinquencies have risen for five straight quarters, with 3.23% of borrowers being at least 60 days behind on their mortgage payments in the first quarter. This was up 62% from the level recorded in the first quarter of last year, TransUnion said. States with the highest 60-day delinquency rates in the TransUnion data were Nevada and Florida. On the bright side, Keith Carson, a senior consultant in TransUnion's financial services group, said the quarter-to-quarter increase was smaller than that of the fourth quarter.

A new loss mitigation assistance company aimed at helping homeowners prevent foreclosures has been formed in Coeur d'Alene, Idaho. The new company, Apply 2 Save.com, said it offers homeowners information on foreclosure laws around the country as well as on how the company can help them get the best workout plan for their situation. Loss mitigation specialists can help homeowners keep their properties by negotiating with their lenders to accept workout plans ranging from "accepting a simple repayment plan, to modifying payment terms, to performing what is called a 'short sale'," the company said. Apply 2 Save.com can be found on the Web at http://www.apply2save.com.

The Office of Federal Housing Enterprise Oversight has corrected its risk-based capital rules so that Fannie Mae and Freddie Mac are no longer rewarded for loans that go into foreclosure. Under current rules, the loss-severity equations result in profits, not losses, for the government-sponsored enterprises on foreclosed properties. OFHEO identified this anomaly a few years ago and issued a proposed rule last December to fix it. Fannie presented evidence showing that the company has realized gains on 20% of mortgages with loan-to-value ratios of 60% or less and on 6% of loans with private mortgage insurance in certain markets with declining house prices. But OFHEO said it was unlikely that those gains would offset the losses on the 80% of the loans with low LTV ratios and the 94% with private MI. Freddie Mac and the Mortgage Insurance Companies of America "commented in favor" of the changes to the RBC rules, OFHEO said.

The Securities and Exchange Commission wants the credit rating agencies to publicly disclose the information they use in rating mortgage-backed securities (including information about the underlying mortgages) to provide more transparency for investors and other rating agencies. "That would permit broad market scrutiny, as well as competitive analysis by other rating agencies that are not paid by the issuer," SEC Chairman Christopher Cox said. The proposal approved by the commissioners for public comment would prohibit credit rating agencies from assisting MBS issuers in structuring their deals to get a certain rating. However, it would be acceptable to tell the issuer how much overcollateralization is needed to achieve a triple-A rating, an SEC staffer said. The rating agencies would also have to maintain a history of their rating actions, including default statistics for the initial rating and defaults that occur after a rating is withdrawn. The wide-ranging proposal addresses conflicts of interest, disclosures, internal practices, and business practices of the rating agencies and is designed to prevent another "subprime mess," Mr. Cox said.

Eight classes of subprime mortgage pass-through certificates from two issuers were downgraded by Fitch Ratings on June 9. The affected securities were as follows: seven classes from two Option One deals, and one class from a Long Beach deal. Fitch also affirmed the ratings on over 60 classes from 29 subprime transactions.