Servicing

Wolters Kluwer Financial Services, Minneapolis, and Fidelity National Information Services, Jacksonville, Fla., have announced plans to integrate certain Wolters Kluwer loan-modification systems and compliance content into the loss mitigation module of FNIS's servicing platform. The companies said the integration of Wolters Kluwer's Desert Document Services repository of standardized documents into the Desktop workflow, document, and expense management system of FNIS will enable servicers "to automatically generate federal- and state-compliant documents on a nationwide basis" and to customize loan modification documents and packages as needed. The Desktop loss mitigation module is available to all servicers and is integrated with FNIS's Mortgage Servicing Package platform and other servicing platforms, the companies said. The companies can be found online at http://www.wolterskluwerfs.com and http://www.fidelityinfoservices.com.

The Office of Federal Housing Enterprise Oversight wants to ensure that Fannie Mae's and Freddie Mac's application of fair-value accounting promotes transparency and consistency in financial reporting and will take corrective actions if the practice "distorts earnings or capital," according to newly issued examiner guidance. "It is important that Fannie Mae and Freddie Mac apply fair value in a sound and consistent manner," OFHEO Director James Lockhart said. OFHEO says it expects the government-sponsored enterprises to document their decisions for applying fair value to selected financial assets and liabilities and provide the regulator with a full fair-value balance sheet each quarter. "If OFHEO detects patterns of use of the fair value option that impair transparency or distort earnings or capital, OFHEO will evaluate whether such application of the FVO is unsafe and unsound," the examiner guidance says.

Five tranches from Basic Asset Backed Securities Trust 2006-1 have been downgraded by Moody's Investors Service. The downgrades were as follows: class M-2, from Baa2 to B2 (and placed under review for further possible downgrade); class M-3, from Ba3 to B3 (and placed under review for further possible downgrade); class M-4, from B3 to Caa2; class M-5, from B3 to Caa2; and class M-6, from Ca to C. The rating agency said the downgrades were based, in general, on higher-than-expected rates of delinquency, foreclosure, and real estate owned in the underlying collateral relative to credit enhancement levels. The collateral consists primarily of first-lien subprime residential mortgage loans.

Nine tranches from Meritage Mortgage Loan Trust 2005-3, a subprime residential mortgage-backed securities deal, have been downgraded by Moody's Investors Service. One downgraded tranche remains on review for possible further downgrade. The ratings were downgraded, in general, 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 subprime residential mortgage loans. Moody's can be found online at http://www.moodys.com.

Thirty-seven classes of subprime mortgage pass-through certificates issued by Asset Back Funding Corp. have been downgraded by Fitch Ratings as a result of changes to the rating agency's subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of $1.4 billion. The rating actions were attributed to changes in Fitch's subprime loss forecasting assumptions that "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness." Fitch can be found online at http://www.fitchratings.com.

Standard & Poor's Ratings Services has placed on CreditWatch negative 331 classes from 79 U.S. cash flow and hybrid collateralized debt obligations of asset-backed securities. S&P attributed the negative rating actions to "stress in the U.S. residential mortgage market and credit deterioration of U.S. RMBS." The rating agency said 51 of the 79 affected CDO transactions are mezzanine structured finance CDOs of ABS collateralized substantially by mezzanine tranches of U.S. subprime RMBS. The remaining 28 are high-grade structured finance CDOs of ABS backed largely by senior tranches of subprime and other types of RMBS, as well as by senior tranches of CDOs of ABS, the rating agency said. The actions followed the April 15 placement on CreditWatch negative of 559 classes from 103 U.S. residential mortgage-backed securities supported by first-lien subprime mortgage collateral rated from January to June 2007. S&P can be found online at http://www.standardandpoors.com.

Citing predictions that over 20 million homeowners will be "upside down" -- owing more than their house is worth -- in 2008, Glendale, Ariz.-based WalkAwayPlan has introduced a service that it says will take stress off the homeowner. The crisis management company said it has assembled a team that includes real estate, mortgage, legal, and investment professionals with decades of negotiating experience. They offer "immediate insight" and information on the market and new trends, WalkAwayPlan said. "In all cases, we'll have a fully customized response to your situation within seven days." said Paul Helbert, a manager with the company. The company can be found online at http://www.walkawayplan.com.

An attorney in Tucson, Ariz., is touting a recently patented financing method that he says can provide relief to homeowners on the brink of foreclosure without government assistance. Stephen M. Weeks, a founding partner of Weeks & Laird PLLC, says he developed the system, called Term Ownership, while representing homeowners harmed by predatory subprime loans. When refinancing under the system, the owner pays 30% of a home's fair market value (fully amortized over five years), while an investor or financial institution pays 70% plus closing costs. The owner continues to have the tax advantages of ownership and can obtain equity if the home's price rebounds, the law firm said. "For the financial institution, instead of facing an average $60,000 foreclosure loss, it turns an unprofitable situation into a profitable one and gains [Community Reinvestment Act] credit and public goodwill," the firm said.

The issuance of Ginnie Mae mortgage-backed securities rose to nearly $15 billion in March, the highest rate since November 2003, according to the agency. Theodore B. Foster, senior vice president for mortgage-backed securities at Ginnie Mae, said issuance has been increasing steadily since October. As the subprime mortgage and private-label MBS markets collapsed, "investors began moving toward the safety and stability of Ginnie Mae MBS," he said. Ginnie Mae's share of the MBS market declined to a low of 4% in 2005. Now, the private-label MBS market -- backed primarily by subprime loans -- represents just 7% of the total MBS market, compared with 57% two years ago, Ginnie Mae reported. "Currently, agency and government MBS are the primary sources of mortgage credit available for home financing," Mr. Foster said. "There is strong evidence that this trend will continue. Our issuers have indicated that as much as 30% or 40% of their business may be securitized through Ginnie Mae this year. We expect Ginnie Mae to issue between $175 and $200 billion in MBS in calendar year 2008." Ginnie Mae, a government-owned corporation within the Department of Housing and Urban Development, can be found online at http://www.ginniemae.gov.

The chief economist for the New York Stock Exchange says rising commodity prices coupled with the housing downturn's drag on the economy is fostering the possibility of "stagflation," a mixture of inflation and economic weakness last seen in the 1970s. Speaking at SourceMedia's second annual mortgage servicing conference in Dallas, former New York Federal Reserve economist Paul Bennett said he does not see "much sign of a bottom" in housing conditions, given the continuing declines in residential construction activity. He said home prices, already down about 10% to 15% nationally last year, may fall by a similar amount this year. Competition for oil and other scarce resources from rapidly growing economies such as China is driving up prices for many commodities, he said. That is adding to inflationary pressure despite the economic weakness in the United States. Still, he expects the Federal Reserve Board to continue reducing interest rates in the near term to help stabilize the U.S. housing sector and offset the risk that rate resets will drive up foreclosures.