Servicing

Wachovia Securities, Charlotte, N.C., with $407.9 billion in U.S. master and primary servicing, heads up the list of commercial and multifamily mortgage servicers at the end of 2007, the Mortgage Bankers Association reports. Wachovia is followed by Midland Loan Services/PNC Real Estate Finance, Pittsburgh, with $268.5 billion; Capmark Financial Group, Inc., Horsham, Penn., with $258.1 billion; and Wells Fargo, San Francisco, with $175.6 billion. Wachovia, Capmark, Midland/PNC and Wells Fargo are the largest master and primary servicers of commercial and multifamily loans that went into U.S. commercial mortgage and asset-backed securitizations, the Washington-based MBA reports. GEMSA Loan Services, Houston; Prudential Asset Resources, Newark, N.J.; Midland Loan Services/PNC Real Estate Finance and NorthMarq Capital are the largest servicers for life companies. Midland/PNC, Wachovia, Deutsche Bank, and Capmark are the largest Fannie Mae and Freddie Mac servicers. Wachovia also tops the list of master and primary servicers of commercial bank and savings institution loans; Capmark is the top servicer of FHA and Ginnie Mae-related loans.

Over 70% of commercial banks expect the performance of their single-family loan portfolios will deteriorate in 2008, but most don't expect the streamlined loan modification plan endorsed by the Hope Now Alliance will have a significant impact on their loan mitigation efforts. The vast majority of banks expect to take a "case-by-case" approach to loan modifications, according to a Federal Reserve Board survey of senior loan officers. Only six of the 45 banks surveyed in January said streamlined modifications endorsed by the Hope Now alliance would play a "very significant" role in their attempts to prevent foreclosures. A large number of respondents indicated they expect to refinance subprime borrowers into Federal Housing Administration or conventional loans. More than 65% of respondents also anticipate using short sales or deed-in-lieu of foreclosure as a significant loss mitigation strategy, the Fed said.

Mortgage Assistance Center Corp., Dallas, has hired Dennis D. Downey as executive vice president and chief operating officer. He was the founder and chairman of Downey Capital Corp., where he handled the marketing, structuring and closing of commercial real estate financing transactions using a broad range of funding programs. In the late 1980s into the early 1990s, Mr. Downey was the southwest regional director of servicing and real estate owned activities for Freddie Mac. Mr. Downey also currently serves on the board of Lanier Capital REIT Inc.

The Financial Accounting Standards Board has rejected a request by the Mortgage Bankers Association for relief from having to treat all loan modifications as troubled debt restructurings. As the secondary market seized up in last year, many mortgage bankers got caught with mortgages on their books that they couldn't sell. MBA claimed these lenders do not have the computer systems to project discounted cash flows on principal and interest, as required by FAS 114, to calculate loan impairment or losses. MBA suggested an alternative standard, FAS 5, which measures impairment based on the amount a principal the lender does not expect to recover. At a Jan. 30 meeting, FASB members noted that FAS 114 was designed to prevent lenders from avoiding losses on restructurings and they unanimously rejected MBA's request. "We are disappointed by the decision. But our members have accepted the decision and they are now working to enhance their computer systems to apply FAS 114 as necessary," MBA's accounting expert Alison Utermohlen said.

Over 70% of commercial banks expect the performance of their single-family loan portfolios will deteriorate in 2008, but most don't expect the streamlined loan modification plan endorsed by the Hope Now Alliance will have a significant impact on their loan mitigation efforts. The vast majority of banks expect to take a "case-by-case" approach to loan modifications, according to a Federal Reserve Board survey of senior loan officers. Only six of the 45 banks surveyed in January said streamlined modifications endorsed by the Hope Now alliance would play a "very significant" role in their attempts to prevent foreclosures. A large number of respondents indicated they expect to refinance subprime borrowers into Federal Housing Administration or conventional loans. More than 65% of respondents also anticipate using short sales or deed-in-lieu of foreclosure as a significant loss mitigation strategy, the Fed said.

Fannie Mae has helped 68,000 subprime borrowers refinance through its HomeStay loan purchase program that was launched in April, and loan volumes are increasing every month, according to a Fannie Mae executive. "We have been able to put most borrowers into a fixed-rate loan," Fannie Mae vice president Jef Kinney said. And in most cases, the interest rate is lower than the teaser rate on their subprime adjustable-rate mortgage. So far, Fannie has purchased $13 billion HomeStay loans, up from $6 billion in September. Fannie Mae can be found on the Web at http://www.fanniemae.com.

Standard & Poor's Ratings Services has lowered its financial strength and issuer credit ratings on Financial Guaranty Insurance Co. from AAA to AA and placed various ratings on MBIA Insurance Corp., XL Capital Assurance Inc., and their related entities on CreditWatch with negative implications. The rating agency also downgraded its senior unsecured and issuer credit ratings on FGIC Corp. from AA to A and placed all FGIC ratings on CreditWatch with developing implications. S&P said the actions take into account its recently announced negative rating actions on thousands of residential mortgage-backed securities and collateralized debt obligations and are "the result of our most recent review of all the bond insurance companies' capital plans." The review is part of S&P's "ongoing assessment of the potential subprime-related losses that these bond insurers might incur and how they are managing their capital positions to handle the losses," the rating agency said. S&P can be found online at http://www.standardandpoors.com.

Moody's Investors Service has revised its expected loss assumptions for structured finance collateralized debt obligations holding 2006 vintage subprime residential mortgage-backed securities due to expectations that the performance of the latter asset class will continue to deteriorate. The rating agency said it would "apply the revised loss assumptions and revise specific CDO ratings within the coming weeks." Moody's can be found online at http://www.moodys.com.

Defaults on securitized subprime mortgage loans are accelerating and hit a new high of 21.3% in November, up 188 basis points from the level of the previous month, according to a report by Friedman Billings Ramsey Investment Management. The default rate on these nonagency loans has accelerated "briskly" since August, according to the Structured Finance Insights report, which indicates that the default rate on subprime mortgages has doubled since November 2006. FBRIM managing director Michael Youngblood attributes the rapidly deteriorating performance to falling house prices and weakening labor market conditions that are "characteristic" of a recession. The default rate on alternative-A loans rose 31 bps to 5.7% in November, up from 1.4% in November 2006. Meanwhile, the foreclosure rate on subprime mortgages stood at 8.6% in November and at 2.7% on alt-A mortgages.

Despite the turmoil in the housing market, homebuilder D.R. Horton and Option One Mortgage's parent company, H&R Block, have been added to Mergent Inc.'s Dividend Achievers indices, though Freddie Mac has been removed. Mergent, a New York-based provider of business information, said Dividend Achievers are companies that have increased annual regular dividends for at least the past 10 consecutive years and have met certain liquidity criteria. Mergent can be found on the Web at http://www.mergent.com.