Servicing

Twenty tranches from four mortgage-backed securities deals issued by BCAP in 2007 have been downgraded by Moody's Investors Service, and six tranches have been placed under review for possible downgrade. The negative rating actions were attributed to 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, fixed- and adjustable-rate alternative-A mortgage loans. Moody's can be found online at http://www.moodys.com.

The long- and short-term issuer default ratings of PHH Corp., Mt. Laurel, N.J., have been affirmed by Fitch Ratings, but a negative rating outlook has been assigned. The company's long-term IDR stands at BBB-plus, and the short-term IDR is F2. The negative outlook was assigned (and the ratings were removed from Rating Watch Evolving) after PHH's announcement that it had terminated a merger agreement with General Electric Capital Corp. "Recent weakness in the company's mortgage unit has been offset by PHH's fleet leasing business, which has performed well," Fitch said. "Fitch believes, however, that the mortgage industry remains challenging and highly uncertain." Fitch can be found online at http://www.fitchratings.com, and PHH can be found at http://www.phh.com.

UnionBanCal Corp., San Francisco, has announced that it expects to make a $60 million provision for credit losses for the fourth quarter, a $45 million increase from its October forecast stemming chiefly from loans to homebuilders. The company held approximately $850 million in homebuilder loans as of Dec. 31, about 2% of its loan portfolio, said Philip Flynn, vice chairman and chief operating officer of UnionBanCal. "We believe that our homebuilder exposure is less than peer banks, on average, and that our homebuilder customers collectively are financially stronger than average," Mr. Flynn said. "Still, given the poor fundamental conditions in the homebuilding industry today, and the weak outlook for the industry, we concluded that it was appropriate to increase reserves for probable future loan losses."

CIT Group Inc., New York, has announced an approximately $300 million expected increase in its reserves for credit losses in the fourth quarter, chiefly related to the company's held-for-investment home lending portfolio. The action is expected to reduce net income by approximately $190 million, the company said. CIT also announced that it expects to record an approximately $40 million pretax loss on home lending receivables held for sale as of Sept. 30. The company can be found online at http://www.cit.com.

Rutgers Investment Group Inc., a subsidiary of FirstPlus Financial Group, Irving, Texas, has announced an outsourcing agreement with HomeLoanAdvisors.com to provide mortgage processing and fulfillment services. Jack Roubinek, chief executive officer at Rutgers, said the pact allows both firms to do what they do best. "HomeLoanAdvisors.com manages the client contact, while we at Rutgers take care of the back-office work, pulling the whole package together for the borrower," he said. The companies can be found on the Web at http://www.firstplusgroup.com and http://www.homeloanadvisors.com.

JPMorgan Chase & Co. is talking to Washington Mutual about possibly buying the nation's largest thrift, according to industry sources. One source close to WaMu said, "there's a lot of suits walking around the hallways" at the lender's headquarters in Seattle. The JPMorgan-WaMu rumors are not new. In years past the two parties have engaged in sale talks, investment bankers said. Among residential lenders, Chase Home Finance ranks third and WaMu sixth, according to the Quarterly Data Report. Both depositories do not comment on market rumors. WaMu has a market cap of $13 billion based on Friday's share price.

After surging on deal rumors Thursday, Countrywide's stock declined Friday morning after details of its acquisition by Bank of America were released. In the all-stock transaction, Bank of America will be paying the equivalent of $7.16 per share based on BoA's share price at the time the deal was announced. That was below Countrywide's closing price of $7.75 on Jan. 10, which represented a 51% increase in value on the day. In Friday morning trading, Countrywide's shares declined to $6.52 shortly after noon, a 16% drop on the day, as the market digested details of the transaction.

Once Bank of America swallows the mortgage operation of Countrywide Financial Corp., the brand name "Countrywide Home Loans" will survive, according to an internal e-mail message sent to Countrywide employees. However, on Friday questions were being raised about who will manage the new mortgage unit. Sources told MortgageWire that Countrywide executives expect to be in charge of the combined lending/servicing operation, leaving BoA mortgage chief Floyd Robinson out in the cold. At deadline time, neither institution was discussing the merger. The email, obtained by MW notes: "Bank of America has indicated that it intends to retain core elements of our operating platform, including our technology and management expertise."

The Bank of America's acquisition of Countrywide could leave mortgage brokers out in the cold. Last fall, BoA said it was closing its wholesale operations in this channel, citing a desire to concentrate on its retail businesses. Yet Countrywide is the nation's largest wholesaler, with third-quarter volume of $15.27 billion. It is also the largest correspondent purchaser, with volume of $44.35 billion for the third quarter, according to the Quarterly Data Report. But once the acquisition is completed, will BoA keep the third-party channel open? That is the big question, said David Olson of Wholesale Access, Columbia, Md. BoA is not fond of the wholesale channel. But the deal was structured, possibly with the encouragement of the federal government, to provide an orderly transition for the marketplace, he said. Mr. Olson said his guess is that BoA will keep the Countrywide channel going for awhile. But will there still be a Countrywide wholesale channel a year from now? "Probably not," Mr. Olson said.

Bank of America Corp. confirmed Friday that it has agreed to buy Countrywide Financial Corp. for $4 billion in stock, a deal that rescues the ailing Countrywide and makes BoA the largest residential lender in the United States, with a market share of almost 24%. Once their mortgage operations are combined, BoA/Countrywide will service $1.9 trillion worth of home loans, giving it a 21% share in that business. The boards of both companies have approved the sale, which is expected to close in the third quarter. Countrywide is a thrift, BoA a commercial bank. In a statement, BoA said the new company will not originate subprime loans. Back in August BoA bought a small stake in Countrywide, paying $2 billion for it. Now it is buying the entire company for $4 billion. The sale comes after a tumultuous week for Countrywide, a company that is almost 40 years old. Early in the week, bankruptcy rumors sent Countrywide's stock reeling to just $4.43, compared with a 52-week high of $45. The statement issued by BoA does not address the fate of Countrywide's founder, chairman, and chief executive, Angelo Mozilo. Mr. Mozilo, 70, was expected to retire at year's end.