Servicing

Equifax Inc., Atlanta, has introduced a loan modification system aimed at streamlining the determination of who qualifies for assistance under the HOPE NOW alliance of counselors, servicers, investors, and other mortgage market participants.HOPE NOW recently developed a plan to help financial institutions direct borrowers into four categories: those eligible for refinancing; those eligible for a loan modification; those who need intensive analysis of their debts and income; and those who can afford the higher reset rate and therefore require no assistance. "Leveraging the power of our vast data and advanced analytics, we are equipping lenders with a systematic solution that offers a clear and concise way to segment their portfolios, evaluate loan modification requests, and streamline the qualification process," said Dann Adams, president of U.S. consumer information solutions at Equifax. the company can be found on the Web at http://www.equifax.com.

Barclays Bank of London, which lent $400 million to two subprime hedge funds managed by Bear Stearns & Co., has sued the Wall Street firm, charging that Bear misled it about the performance of the funds.The funds -- High-Grade Structured Credit Strategies Fund, and High-Grade Structured Credit Strategies Enhanced Leverage Fund -- filed for bankruptcy protection in the Cayman Islands this summer. Barclays is owed money by the firms. The funds were managed by two Bear executives: Ralph Cioffi and Matthew Tannin. Mr. Cioffi recently left Bear. At deadline time, Bear Stearns had not commented on the suit. The failure of the funds is the subject of a criminal probe and an investigation by the Securities and Exchange Commission.

Bear Stearns & Co. posted an $854 million loss in the fourth quarter and increased its provision for subprime writedowns to $1.9 billion, a 60% hike from its previous damage estimate.Bear was a major player in the subprime asset-backed securities market, funding nondepository mortgage bankers, buying their loans, and then securitizing them. Bear Stearns currently owns a nonprime shop in Texas called EMC Mortgage. The Wall Street firm made headlines this summer when two subprime-related hedge funds it had started filed for bankruptcy protection. The London-based Barclays Bank -- which had lent $400 million to the funds -- sued Bear on Wednesday, saying the Wall Street firm misled it about the funds' performance. Bear Stearns can be found online at http://www.bearstearns.com.

Classes M-10 and M-11of Ameriquest Mortgage Securities Inc. series 2005-R2 have been placed on review for possible downgrade by Moody's Investors Service.The actions were based on an analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to expected losses, the rating agency said. The transactions are backed by subprime mortgage loans. Moody's can be found online at http://www.moodys.com.

Twenty-three classes of mortgage-backed securities from four issuers have been downgraded by Fitch Ratings as a result of changes to its subprime loss forecasting assumptions.Fitch also placed two classes on Rating Watch Negative and affirmed the ratings on classes with outstanding balances of about $2.4 billion. Securities affected by the latest downgrades were as follows: 11 classes from two issues of HASCO mortgage pass-through certificates; six classes from two issues of Fieldstone mortgage pass-throughs; four classes of RASC mortgage pass-throughs; and two classes of NovaStar Mortgage Funding Trust mortgage pass-throughs. The rating actions were attributed to changes in 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." The rating agency can be found online at http://www.fitchratings.com.

Zions Bancorp, Salt Lake City, says it will take a $94 million pretax charge in the fourth quarter because the collateral backing some of its investments in collateralized debt obligations is "impaired."According to a new filing with the Securities and Exchange Commission, Zions said the collateral backing the CDOs includes debt issued by residential mortgage real estate investment trusts, commercial mortgage-backed securities, home builder debt, and commercial income REITs. Seven REIT-related CDOs are of concern to the bank. (It has investments in 12.) Even though it expects to take a large hit, Zions said five of the seven CDOs are rated "investment grade."

Morgan Stanley, a top player in home equity and asset-backed securities, took a $9.4 billion writedown in its fiscal fourth quarter, citing declining values in the subprime market.In November the Wall Street firm disclosed $3.7 billion in subprime writedowns, but on Wednesday it revealed $5.7 billion in additional charges. In its earnings statement, Morgan blamed the writedowns on "continued deterioration and lack of liquidity in the market for subprime and other mortgage-related securities." Roughly $7.8 billion of the writedowns are tied to subprime trading positions. For the quarter, Morgan posted a $3.58 billion operating loss. Morgan owns Saxon Mortgage, a nonprime wholesaler that recently cut back its loan menu. Morgan Stanley can be found online at http://www.morganstanley.com.

Nearly 202,000 foreclosure filings were reported nationwide in November, down 10% from the level recorded in October but up 68% from that of a year earlier, according to RealtyTrac, an online foreclosure marketplace based in Irvine, Calif.The nation's foreclosure rate stood at one foreclosure filing for every 617 households, the company said in its November 2007 U.S. Foreclosure Market Report. (Foreclosure filings include default notices, auction sale notices, and bank repossessions.) "The 10% drop in November is the first double-digit monthly decrease we've seen since April 2006," said James J. Saccacio, chief executive officer of RealtyTrac. "This could indicate that foreclosure activity has topped out for the year, but the test of whether this ceiling will hold will come at the beginning of next year -- when we anticipate that a seasonal surge in foreclosure filings and another possible wave of resetting mortgages could place further pressure on the housing market." RealtyTrac said Nevada, Florida, and Ohio recorded the highest foreclosure rates in November. The company can be found online at http://www.realtytrac.com.

The House has passed a mortgage tax relief bill that encourages loan modifications and extends a deduction for mortgage insurance premiums -- clearing the way for the legislation to be sent to the president for his signature.The Senate passed the same bill (H.R. 3648) on Dec. 14. It ensures that homeowners are not penalized when a lender reduces the principal amount of their mortgage in a restructuring or foreclosure. Currently, any reduction in mortgage debt by a lender is treated as income for tax purposes. The tax relief is temporary, as requested by the Bush administration, and it applies to a discharge of debt on a principal residence before Jan. 1, 2010. Meanwhile, the bill extends the deduction on MI premiums for three years. Continuing this tax deduction is an "important step forward as Congress seeks solutions to the current housing and mortgage crisis," said Kevin Schneider, president of Genworth Financial Inc. "Many potential buyers can't make a traditional 20% downpayment, and a loan with tax-deductible mortgage insurance may make the difference in their ability to become homeowners safely."

Twenty-two classes of mortgage pass-through certificates from five First Horizon Alternative securitizations have been downgraded by Fitch Ratings.Fitch also placed one class on Rating Watch Negative, removed four classes from Rating Watch Negative, and affirmed the ratings on eight classes from the five First Horizon transactions. The negative rating actions were attributed to deterioration in the relationship between credit enhancement and expected losses. The collateral for the deals generally consists of adjustable-rate, first-lien, fully amortizing and interest-only, alternative-A mortgage loans.