Servicing

Global Insight, an economic forecasting and analysis firm, has reported that home values fell in 84% of the nation's housing markets during the first quarter. The company said home values declined nationally for the third consecutive quarter, dropping at a 6.7% annualized rate. Of the 330 markets covered by Global Insight's housing analysis, 262 saw values decline in the first quarter. Markets in California, Florida, and Michigan saw the steepest losses in the analysis. The company said a slowdown in the sale of expensive homes, the sale of a large number of foreclosed homes at a discount, and tighter mortgage underwriting standards have all contributed to the national price decline. On the bright side, Global Insight's James Diffley, a group managing director, said that fewer markets are now overvalued. "The large price adjustments we have seen are precisely what was required before we could begin to talk of recovery," he said. The company can be found online at http://www.globalinsight.com.

In response to the crisis gripping the mortgage industry, LenderLive Network Inc., a single-family mortgage business process outsourcing and technology provider, has appointed Richard Sauerwein to manage its newly formed specialty origination business channel and supervise agents in its EarlyAction counseling call centers in Michigan and Colorado. The specialty origination area provides manpower resources and technology to better equip lender/servicer clients to establish contact with their customers on a proactive basis, in their name, said president Rick Seehausen.

HOPE NOW has reported that mortgage servicers provided loan workouts to approximately 183,000 homeowners in April 2008, the highest monthly amount since the program was begun in July 2007. This is an increase of 23,000 from the number of workouts in March 2008. Since July 2007, the industry has helped almost 1.6 million homeowners avoid foreclosure through workouts which include loan modifications and repayment plans. The April report from HOPE NOW said approximately 106,000 of the prime and subprime loan workouts conducted by mortgage servicers in April were repayment plans, while approximately 77,000 were loan modifications. HOPE NOW also said a separate survey of subprime adjustable rates mortgages determined that approximately 603,000 subprime loans were scheduled to reset between January and April 2008. 5.0% of these loans have already been modified. Nearly 63% of these modifications are for 5 years or longer. 45% of the subprime adjustable rate loans that were current at reset were paid in full when the homeowner refinanced the loan or sold the property. A limited amount - 0.3% - of the loans that were current at their date of reset have started the foreclosure process.

Mission Capital Advisors, a commercial, residential and consumer loan and asset sale advisor, has brokered the sale of two residential mortgage loan portfolios with a balance of $195 million. The first deal consisted of $157 million of home loans, 73 of which are performing and 437 of which were subperforming or nonperforming first and junior liens. The deal also included 78 real estate-owned assets. The second deal consisted of a $37 million portfolio of 99 performing and 68 subperforming or nonperforming first and second liens. That deal included 105 ARM loans and 62 fixed-rate loans. Joseph Runk Jr., principal of Mission Capital Advisors, said that despite a "constrictive environment," there are still "a significant number of buyers entering the market who are seeking to add to their portfolios."

Fitch Ratings has downgraded Residential Capital LLC's residential mortgage servicer ratings, citing its "weakening financial condition." The rating agency said the move reflects "ResCap's liquidity position and financial flexibility and the potential impact on the company's servicing operations." The primary servicer rating downgrades are as follows: for prime product and alt-A product, from RPS2+ to RPS3; and for subprime, high loan-to-value and home equity/home equity line of credit product, from RPS2 to RPS3-. Also downgraded are the ResCap's primary specialty-subservicer rating (from RPS2+ to RPS3), its special servicer rating (from RSS2+ to RSS3-) and its master servicer rating (from RMS2+ to RMS3-).

Legislators in California are considering a bill that will make servicers jump through more hoops before they can foreclose. According to a report in The Orange County Register, the state Assembly is considering a bill passed last month by the Senate that would do two key things. On residential mortgages funded between Jan. 1, 2003, and Dec. 31, 2007, a servicer would have to try at least three times to contact a borrower in person or by telephone 30 days before sending out a notice of default. For firms with real estate owned (REO), they would be required to maintain vacant homes that come into their possession after foreclosure.

Revenue raising provisions, such as removing a cap on FHA reverse mortgages and raising the FHA loan limits, should be used to cover the cost of a Federal Housing Administration foreclosure rescue program, according to House Financial Services Committee chairman Barney Frank, D-Mass. "We will find other sources," Rep. Frank told attendees at the American Bar Association affordable housing conference. The House FHA bill is expected to refinance 500,000 struggling homeowners at a cost of $1.7 billion over four years. Removing the cap on the FHA reverse mortgage program would provide $300 million per year. There is a disagreement between the House and Senate on how high to raise the loan limits, but Rep. Frank said it could raise tens of millions of dollars. Meanwhile, the Senate Banking Committee has approved a GSE regulatory reform bill that taps Fannie Mae and Freddie Mac to contribute to a new affordable housing fund. During the first three years, the Senate wants to use the AH funds to pay for the FHA refinancing program. In 2006 and 2007, the House passed GSE regulatory reform bills that directs the affordable housing funds to the Gulf Coast states for rebuilding housing destroyed in Hurricane Katrina. Rep Frank maintains it is unfair to divert that assistance away from Katrina victims.

Five classes from two Nomura Home Equity Loan Net Interest Margin notes have been downgraded by Fitch Ratings. The downgrades were as follows: Nomura Home Equity Loan NIM 2006-FM2, class N-1, from BBB to C/DR6, and class N-2, from B to C/DR6 (and removed from Rating Watch Negative); and Nomura Home Equity Loan NIM 2006-HE3, class N-1, from BBB to C/DR6, and classes N-2 and N-3, from B to C/DR6. Fitch also lowered the Distressed Recovery rating of class N-3 in series 2006-FM2 from DR5 to DR6. "The rating actions reflect actual pay-down performance of the NIM securities to date compared to initial projections, as well as changes that Fitch previously made to its subprime loss forecasting assumptions for the underlying transactions," the rating agency said.

Forty-three classes from 10 alternative-A mortgage-backed securities deals have been downgraded by Fitch Ratings. The affected securities included the following: 18 classes from five Washington Mutual Mortgage deals; 14 classes from two GSC Capital Corp. Mortgage Trust deals; and 11 classes from three GSAA Home Equity Trust deals. Fitch also affirmed 30 classes in the alt-A transactions. The rating agency attributed the downgrades to expected defaults and losses from delinquent loans and projected losses from the currently performing pools. Fitch said it is nearing the completion of the first phase of a two-phase review of alt-A transactions issued in 2005, 2006, and 2007.

Fitch Ratings has placed certain notes in 59 collateralized debt obligations backed partly by trust preferred securities or real-estate-related debt on Rating Watch Negative. The rating actions, affecting mainly junior classes of notes rated in the BB, BBB, and A categories, stem from "a significant increase" in TruPS defaults and deferrals as well as deterioration in the credit quality of issuing banks. "Observed deferrals continue to be driven by ... residential construction loan exposure, residential mortgage production, and lack of a core deposit franchise," Fitch said.