Servicing

The Maryland Department of Labor, Licensing and Regulation is examining the servicing practices of Ocwen Loan Servicing, West Palm Beach, Fla., one of the largest subprime servicers in the United States. A spokeswoman for the agency told MortgageWire that "We don't randomly conduct exams," adding that "we saw some flags." She did not elaborate. Ocwen was singled out by Maryland Gov. Martin O'Malley at a news conference on Tuesday. Bill Rinehart, vice president and chief credit officer for the publicly traded Ocwen, said, "We received an examination request in the ordinary course of business. That's as much as we know. If they find something in the exam, we'll address it." Ocwen services $53.5 billion in loans. At year's end, its foreclosure rate was 6.47%, compared with 3.21% a year earlier. Mr. Rinehart noted that less than 1% of Ocwen's foreclosure cures result from "short sales" or "deeds in lieu."

To deal with so-called underwater mortgages, the Office of Thrift Supervision wants to develop a refinancing program that provides lender/servicers with certificates for writing down the principal amount of a mortgage to enable them to possibly recoup "some or all" of the immediate loss when the property is sold or refinanced again. OTS Director John Reich said he is trying to find a way to assist homeowners who cannot refinance to lower their mortgage costs and have negative equity in the homes. "We are concerned this reality is encouraging an increasing number of people to walk away from their homes," Mr. Reich told reporters. The OTS is looking at the Federal Housing Administration Secure program as a refinancing vehicle now that the FHA can insure mortgages above the $417,000 conforming loan limit. The OTS director said there is a potential for the certificates to be sold, like warrants, to investors and traded. OTS officials are promoting and developing the concept and say they hope to get other regulators, the FHA, and the American Securitization Forum on board in a few weeks.

Oxford Funding Corp., Houston, has announced an agreement by its hedge fund to purchase its first pool of mortgages. The hedge fund, Oxford Opportunistic Mortgage Fund, remains open and has not been fully subscribed, but it will purchase a mortgage pool with a principal balance of approximately $5.3 million, Oxford Funding said. The company said the hedge fund will invest in mortgages bought at "substantial discounts" in the secondary market. The company can be found on the Web at http://www.oxfordfunding.com.

More than 200 additional classes of subprime mortgage pass-through certificates were downgraded by Fitch Ratings on Feb. 15 as a result of changes to its subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of more than $2.6 billion. The securities affected by the latest downgrades were: 138 classes from 13 Securitized Asset Backed Receivables LLC deals; 37 classes from three IXIS deals; 20 classes from two Wells Fargo Home Equity Trust deals; and 12 classes from one Centex deal. All were first-lien subprime transactions. 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." Fitch can be found online at http://www.fitchratings.com.

Federal Home Loan Banks are reporting that their advance business grew by 20%-50% in 2007, but member borrowing eased off in the fourth quarter. The Boston FHLBank reported that advances grew last year by nearly 50% to $55.7 billion, up from $37.5 billion at year-end 2006. But all of that growth occurred in the third quarter, when advances jumped 56% to $56.3 billion. The San Francisco FHLBank reported a 37% increase year over year to $251.0 billion, but outstanding advances rose by only $14.8 billion in the fourth quarter. Members of the San Francisco FHLBank borrowed $53 billion in advances during July and August when the secondary market for nonagency mortgage-backed securities dried up and competition for deposits heated up. Overall, FHLBank member banks and thrifts borrowed $110 billion in advances in August. The Cincinnati FHLBank said its advances grew by 26% in 2007 to end the year at $53.0 billion, after registering no growth in advances during the fourth quarter.

All the members of the Hope Now alliance have adopted the "Project Lifeline" approach focused on helping prime and subprime borrowers who are 90-days past due avoid foreclosure, according to the Treasury Department. Six alliance members endorsed the expanded Hope Now effort last week, and now the rest of the alliance servicers, including GMAC ResCap and HSBC North American Holdings Inc., have signed up for Project Lifeline. "Now that all the Hope Alliance members have signed on, more than 90% of the subprime servicing market and nearly 70% of the entire mortgage servicing market is committed to this coordinated method of reaching more homeowners," Treasury Secretary Henry Paulson said.

New York Mortgage Trust Inc., New York, has announced a private placement of 15 million shares of its common stock with new and existing institutional investors at a price of $4 per share. The real estate investment trust said it plans to use the proceeds of the offering to invest in agency mortgage-backed securities.

Eleven classes from three subprime second-lien issues of Soundview Home Loan Trust mortgage pass-through certificates have been downgraded by Fitch Ratings. Fitch also placed one class on Rating Watch Negative and affirmed the ratings on 16 other classes. The negative rating actions were based on deterioration in the relationship between credit enhancement and loss expectations, and "reflect continued poor loan performance and home price weakness," Fitch said.

Nineteen classes from five subprime second-lien issues of Terwin Mortgage Trust mortgage pass-through certificates have been downgraded by Fitch Ratings. Fitch also placed five classes on Rating Watch Negative and affirmed the ratings on eight other classes. The negative rating actions were based on deterioration in the relationship between credit enhancement and loss expectations, and "reflect continued poor loan performance and home price weakness," Fitch said.

Higher-balance loans now temporarily eligible for Federal Housing Administration and government-sponsored enterprise programs are slated to be securitized outside the "to-be-announced" market under updated Securities Industry and Financial Markets Association guidelines. The new higher-balance FHA/GSE loans are slated to trade under unique pool codes on a specified pool basis or to be included in real estate mortgage investment conduit transactions, according to SIFMA. SIFMA can be found on the Web at http://www.sifma.org.