Servicing

Thornburg Mortgage Inc.'s auditors have advised it to restate its 2006 and 2007 earnings due to deteriorating mortgage-related securities prices and partly unmet margin calls that may affect its ability to hold its purchased adjustable-rate mortgages to maturity. The company said it may have trouble holding the ARMs to maturity because the partly unmet calls "have raised substantial doubt about the company's ability to continue as a going concern." The restatement is slated to result in a $427.8 million charge for impairment on its purchased ARM assets as of Dec. 31, a move the company said it believes will not have a "material" effect on its book value. The company had gotten counterparties involved in the margin calls to agree to temporarily freeze additional calls on March 7 and said the freeze might be extended.

MBIA, one of the bond insurers that has been working to maintain ratings strained by mortgage-related exposures, has asked Fitch to withdraw its insurer financial strength ratings on its subsidiaries, citing reasons that include limited use of the rating agency by MBIA's issuers. MBIA chairman and chief executive Jay Brown gave extensive reasons for the move in a letter to owners after Fitch posted MBIA's request to withdraw ratings on the Fitch website. Mr. Brown also addressed what he said were press and Internet allegations that MBIA withdrew the ratings because of an impending Fitch downgrade, declaring that its limited knowledge of the rating agency's model makes it impossible for the company to estimate what Fitch's model "will produce in any given week, nor why the changes occur, nor when." A call to Fitch had not been returned as of midday Monday.

The Federal Reserve, in conjunction with several other central banks, has announced new measures to promote liquidity in financial markets. Under the new Term Securities Lending Facility, the Fed will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program) by a pledge of other securities, including federal agency debt, agency residential-mortgage-backed securities, and nonagency triple-A rated private-label residential MBS. Securities will be sold via weekly auctions, beginning March 27. In addition, the Federal Open Market Committee has authorized increases in its temporary reciprocal currency arrangements, or swap lines, with the European Central Bank and the Swiss National Bank. The latest actions supplement measures announced March 7 to boost the size of the Fed's Term Auction Facility to $100 billion, among other things. Sen. Christopher J. Dodd, D-Conn., chairman of the Senate Banking Committee, termed the Fed move "a significant step" to address the "liquidity lock-down" in U.S. credit markets, but he called for further steps to address "the foreclosure crisis." He said he is preparing legislation to do so.

Refinance.com has received government approval to refinance subprime borrowers that are a few months delinquent into Federal Housing Administration-insured loans once the mortgage insurer, investor, or servicer makes up the necessary payments to bring the loan current. The New York-based lender received FHA approval a few weeks ago. "We have told our servicers and mortgage insurance companies of its availability," Refinance.com chairman and chief executive Nicholas Bratsafolis told MortgageWire. Mr. Bratsafolis noted that a lot of refinances will face loan-to-value problems, and he is encouraging servicers to use a shared-equity mortgage to reduce the principal amount of the mortgage to an affordable level. His branded "Appreciating America Second Mortgage" does not trigger a writedown until it is paid off or the property appreciates by 15%. FHA officials have "confirmed it would be appropriate" to use a shared appreciation mortgage in FHA refinancing, the CEO said. The borrower does not have to make payments on the SAM and receives a 30% share of the appreciation plus reimbursement for improvements when it's paid off. The company, also known as Homebridge Corp., is launching a marketing campaign for the Appreciating America Second Mortgage in a few weeks.

Treasury Secretary Henry Paulson continues to dismiss calls for helping borrowers with "underwater" mortgages through principal reductions that are being advocated by some federal banking regulators. It's not the "government's job" to help borrowers who would walk away from their homes because the properties' values have dropped and they don't want to pay the mortgage, Secretary Paulson told the American Bankers Association. The Treasury secretary played an important role in getting mortgage servicers to join the Hope Now alliance, which is focused on helping struggling homeowners who want to stay in their homes but can't afford their mortgage payment because of a change in their ability to pay or the reset of an adjustable-rate mortgage. He stressed that it is important for the Hope Now servicers to publicly disclose the results of their workout efforts so that everyone can see whether the servicers are following through on the commitments. "I won't look kindly on free riders," Mr. Paulson said. Last week, Federal Reserve Board Chairman Ben S. Bernanke called on lenders to make permanent reductions in the principal amount of a mortgage to help troubled borrowers stay in their homes or refinance into a Federal Housing Administration-insured mortgage.

The class A-1 floating-rate notes of Ballantyne Re PLC, which holds "significant" amounts of subprime residential asset- and mortgage-backed securities, has been downgraded from BB to B-plus and placed on Rating Watch Negative by Fitch Ratings. Fitch also placed the class B-1 subordinated notes and class B-2 subordinated floating-rate notes on Rating Watch Negative. The actions were attributed to "Fitch's heightened concern about subprime and alt-A ABS/RMBS."

Thirty tranches from five subprime mortgage deals issued by Structured Asset Investment Loan Trust in 2005 have been downgraded by Moody's Investors Service, and eight tranches have been placed under review for possible downgrade. The actions were based on the fact that the number of seriously delinquent loans in the pools continues to grow for all five transactions, Moody's said. "In addition, pending stepdown on some of the transactions may make certain securities more vulnerable to pool deterioration in the future," the rating agency said. The deals are backed by first- and second-lien subprime mortgage loans.

Moody's Investors Service has downgraded 163 tranches from 15 transactions issued by Bear Stearns ALT-A Trust. Seventy-eight downgraded tranches remain on review for possible further downgrade. Additionally, 155 tranches were placed on review for possible downgrade. 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, fixed- and adjustable-rate alternative-A mortgage loans. Moody's can be found on the Web at http://www.moodys.com.

Freddie Mac's board of directors has announced a dividend of $0.25 per share on the corporation's voting common stock for the first quarter. The board also declared the following preferred stock dividends per share: $0.53 on 1996 and 1998 variable-rate stock; $0.72625 on 1997, 2001, and 2002 5.81% stock; $0.625 on 5% stock; $0.6375 on 1998 and 1999 5.1% stock; $0.6625 on 5.3% stock; $0.72375 on 5.79% stock; $0.4475 on 1999 variable-rate stock; $0.585 on January 2001 variable-rate stock; $0.63194 on March 2001 variable-rate stock; $0.645 on May 2001 variable-rate stock; $0.66 on 2006 variable-rate stock; $0.75 on 6% stock; $0.7125 on 5.7% stock; $0.8025 on 6.42% stock; $0.36875 on 5.9% stock; $0.348125 on 5.57% stock; $0.35375 on 5.66% stock; $0.37625 on 6.02% stock; $0.409375 on 6.55% stock; and $0.67465 on 2007 fixed- to floating-rate stock. The dividends will be payable on March 31 to stockholders of record as of March 17. Freddie Mac can be found online at http://www.freddiemac.com.

InsideValuation, a real estate valuation company based in Reno, Nev., has announced a partnership with International Financing Engineering Group, Rockville, Md., that has created a ZIP code-level mortgage default projection. The two companies offer combined access to millions of recent loan histories and "a large quantity" of subprime loan default information, according to InsideValuation. "This product presently allows mortgage risk managers to determine the relative safety of loans based on econometric and demographic variables relating to property location, such as median home price, median household income, affordability, unemployment, and rent-versus-price ratios," the company said. InsideValuation can be found online at http://www.insidevaluation.com.