Servicing

RealtyTrac, an online foreclosure marketplace, and Reliance Network LLC, a developer of Web-based real estate applications, have announced a strategic partnership that will allow Reliance Network's clients to have real-time access to RealtyTrac's nationwide foreclosure database. Several clients of the Holland, Pa.-based Reliance Network will start receiving the data immediately, the companies said. "This new search application will pull real-time data directly from RealtyTrac's nationwide foreclosure database, providing users of Reliance Network-powered websites with a method to access distressed properties, including properties in pre-foreclosure, auction or bank-owned properties," said Rick Sharga, vice president of marketing at the Irvine, Calif.-based RealtyTrac. "That in turn will help drive more traffic and leads to the agent websites." The companies can be found online at http://www.realtytrac.com and http://www.reliancenetwork.com.

Five classes from the Credit Based Asset Servicing and Securitization LLC series 2004-CB8 transaction have been downgraded by Fitch Ratings. The downgrades were as follows: class M-3, from A to A-minus; class B-1, from A-minus to BBB-plus; class B-2, from BBB-plus to BBB-minus; class B-3, from BBB to BB; and class B-4, from BB to B (and removed from Rating Watch Negative). The downgrades were based on deterioration in the relationship between credit enhancement and loss expectations, Fitch said. The collateral consists primarily of first-lien subprime mortgages.

Seventy-eight additional classes of subprime mortgage pass-through certificates were downgraded by Fitch Ratings on April 9 as a result of changes to its subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of more than $1.1 billion. The pass-through securities affected by the latest downgrades were: 47 classes from six issues by C-BASS; 20 classes from three issues by Fieldstone; and 11 classes from three issues by Terwin Mortgage Trust. The rating actions were attributed to changes to 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."

Moody's Investors Service has downgraded more than 500 tranches in over 50 subprime residential mortgage-backed securities transactions from four issuers. Of the downgraded tranches, 146 remain on review for possible further downgrade. The negative rating actions affected the following securities: 268 tranches from 27 subprime RMBS deals issued by Bear Stearns; 104 tranches from 11 subprime deals issued by Argent; 92 tranches from nine subprime deals issued by INABS; and 63 tranches from seven deals issued by Ixis. 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 subprime residential mortgage loans. The rating agency can be found online at http://www.moodys.com.

The exposure of U.S. property-and-casualty insurance companies to subprime mortgage-related collateral is "manageable," according to Fitch Ratings. In a special report on the subject, Fitch analyzed 2007 financial results for publicly traded U.S. property-and-casualty insurers and found "manageable impact on stockholders' equity" from writedowns and realized and unrealized losses related to residential mortgage-backed securities, asset-backed securities, and collateralized debt obligations. Fitch noted that it has taken "very limited" negative rating actions in the P&C sector due to subprime exposure, but said it expects "poor collateral performance in subprime-related investments to continue in 2008, and has growing concerns in the [alternative-A] sector." The rating agency added that "highly illiquid, volatile market conditions have spread somewhat to other asset classes which could impact insurers' broader investment portfolio performance." Fitch can be found online at http://www.fitchratings.com.

The risk of home price declines in the nation's 50 largest housing markets is still rising in states where price growth has far exceeded historical norms, but has begun to decline elsewhere, according to PMI Mortgage Insurance Co., Walnut Creek, Calif. According to the PMI U.S. Market Risk Index, there are now 13 markets with a greater than 60% chance of price declines over the next two years. Risk is largely concentrated in various MSAs in California and Florida as well as in Las Vegas and Phoenix, PMI reported. "Excess supply is responsible for much of the risk we're seeing in the market," said David W. Berson, chief economist and strategist for The PMI Group. "The excess supply of housing in the United States is 9.2 months for existing homes (the 20-year average has been 6.0) and 9.8 months for new homes (the 20-year average has been 5.5), which will continue to depress prices for MSAs in risk ranks 1 and 2." PMI can be found online at http://www.pmigroup.com.

Standard & Poor's Ratings Services has placed the Federal Home Loan Bank of Chicago's counterparty credit rating (AA-plus/A-1-plus) on CreditWatch with negative implications following the recent termination of its merger discussions with the Dallas FHLBank. "The development heightens our concerns regarding the strategic direction and financial condition" of the FHLBank, which is projecting a net loss for 2008, S&P said. As part of its review, S&P said it will consider the FHLBank's "need to name a new president and chart a new course under leadership of a new executive." S&P said the bank's deteriorating profitability has been attributed to hedging losses related to mortgage assets in its Mortgage Partnership Finance program and other hedging adjustments that will hurt future earnings. S&P also recently announced the affirmation of its AAA long-term counterparty credit rating on the FHLBank of Des Moines, and the revision of its outlook from negative to stable. S&P can be found online at http://www.standardandpoors.com.

All the Federal Home Loan Banks could use affordable housing grants to help refinance or restructure nontraditional and subprime mortgages under a proposed rule issued by the Federal Housing Finance Board. The proposal is modeled after a $10 million pilot program initiated by the San Francisco FHLBank to provide matching grants of up to $25,000 to member banks and thrifts that want to refinance troubled mortgages that are "under water" due to negative amortization or declining property values. The Finance Board approved the San Francisco pilot on Jan. 15, and now it is issuing a proposal that would allow the other FHLBanks to develop similar affordable housing programs. "The proposed rule would temporarily add authority for the banks to use the AHP direct set-aside subsidy to refinance or restructure low- and moderate-income households' subprime or nontraditional mortgages held by bank members or their affiliates," the Finance Board said. The proposed rule is being issued for a 60-day comment period.

The House Ways and Means Committee has approved a housing tax bill by a 35-5 vote that provides a $7,500 tax credit for first-time homebuyers, expands the use of revenue bonds to refinance subprime loans, and streamlines the low-income housing tax credit program. The tax bill also clears the way for Federal Home Loan Banks to guarantee general tax-exempt municipal bonds, not just bonds that are used to finance housing programs. Committee Chairman Charles B. Rangel, D-N.Y., said the vote shows there is "strong bipartisan support for this housing tax package designed to help families cope with the housing crisis." Like a tax provision in a Senate foreclosure prevention bill, the Rangel bill allows homeowners that take the standard deduction to deduct their properties taxes. However, the House bill does not include a controversial net-operating-loss carry-back provision for homebuilders and other companies suffering losses in 2008 and 2009, which is contained in the Senate bill. House leaders plan to combine the Rangel tax bill with a bill the House Financial Services Committee is expected to approve soon to refinance 1 million distressed homeowners into Federal Housing Administration loans.

The Bush administration is demanding that Congress produce a stand-alone Federal Housing Administration modernization bill that authorizes the mortgage insurance agency to charge risk-based premiums -- which is deliberately absent from the House-passed and Senate-passed versions. The Senate has placed its FHA bill in larger foreclosure prevention legislation that the White House is trying to derail. The Senate bill contains a 12-month moratorium on risk-based pricing. The House FHA bill places restrictions on RBP. "Any bill must give the FHA the tools needed to price for additional risk," FHA Commissioner Brian Montgomery told a House panel. Congress needs to make the FHA bill a "priority over other housing legislation," Mr. Montgomery testified. "As a first order of business, a good FHA modernization bill must be sent to the president." The FHA commissioner also explained that the White House opposes funding for cities and states to purchase foreclosed properties because it would benefit lenders who own a lot of vacant and foreclosed properties. "In addition, it may have the unintended consequence of making foreclosure a more attractive option for lenders," he said.