Servicing

The House Judiciary Committee approved a narrowly targeted bankruptcy bill by a 17-15 vote Dec. 12 that would give subprime and nontraditional mortgage borrowers facing foreclosure one last chance to get their mortgage restructured so they can stay in their homes.Only homeowners who have received a foreclosure notice could seek a Chapter 13 restructuring under a compromise worked out between committee Democrats and Rep. Steve Chabot, R-Ohio. Under the bill, bankruptcy judges could waive prepayment penalties and reduce the mortgage amount to the fair market value and reduce the interest rate to a conventional rate plus a risk premium. These restructurings would be limited to subprime and nontraditional mortgages originated from 2000 through the date of enactment of the legislation. The Mortgage Bankers Association and the American Bankers Association oppose the bill.

Countrywide Financial Corp. chairman and chief executive Angelo Mozilo said Thursday that his company cannot pass on all additional guarantee fee charges to the lender's customers.In a brief interview with MortgageWire, Mr. Mozilo said, "You have to try and pass on those costs, but it's tough in this market. You cannot pass on the entire cost." Countrywide sells its conventional production to both Fannie Mae and Freddie Mac, which in recent months have hiked their "g-fees" to as high as 25 basis points. (Individual seller/servicers do not disclose their g-fee deals. In years past some lenders were paying as little as 12 bps, sources said.) Meanwhile, Countrywide released its November production numbers, reporting that loan production totaled $23 billion, a 40% decline from that of November 2006. Retail production fell 29%, wholesale 55%, and correspondent 46%. The company can be found online at http;//www.countrywide.com.

Evest Capital LLC and EvestMAC LLC, both based in Stamford, Conn., have announced the closing of equity and financing transactions for a recently launched finance subsidiary that invests in distressed and subperforming mortgage assets.The subsidiary, EvestMAC Funding II LLC, received an equity infusion and a total of $46 million from two financing facilities with a national bank and a group of private investors, Evest said. The company said it plans to apply EvestMAC's proprietary enhanced asset recovery model and investment methodology to "a superior asset refinance platform." Evest can be found online at http://www.evestcapital.com.

National Bank of Kansas City, Overland Park, Kan., has announced the introduction of a Mortgage Recovery program by its mortgage division to help borrowers hurt by the turmoil in the subprime mortgage market.Under the program, the bank will review a loan's terms, including prepayment penalties, adjustment dates, and variable rates, and counsel the borrower about the loan and the available options. "With so many stories in the media regarding subprime loans, refinancing, [Federal Housing Administration] loans, rate freezes, and foreclosures, consumers are confused about their options," said Todd Geiman, executive vice president of the Kansas bank's mortgage division. "We were taken aback by the misinformation given to many of the people we've spoken with. Many homeowners don't even realize they fall in the subprime category."

Citizens Republic Bancorp, Flint, Mich., has announced that it will use PHH Mortgage, Mt. Laurel, N.J., for certain outsourced functions in the mortgage originations process.PHH will provide Citizens Republic with mortgage loan processing, servicing of new mortgage originations, certain secondary-market functions, and other mortgage-related loan origination services. The arrangement allows for Citizens Republic loan officers to use Web-based software while PHH does all the processing work under the bank's name. PHH will also take applications directly through a call center and website. In a Securities and Exchange Commission filing, Citizens Republic said it would reduce its work force by 60 employees as a result. It will record $1.1 million to $1.3 million in severance-related costs in the fourth quarter. It also announced plans for "better utilization of part-time employees" that would add an additional $900,000 to $1.2 million of severance-related costs. "Our new mortgage loan operating model increases our ability to originate loans through more channels with quicker loan decisions and closings," said William R. Hartman, president and chief executive of Citizens Republic. PHH Mortgage, a subsidiary of PHH Corp., can be found on the Web at http://www.phh.com.

Over 25% of Fannie Mae's credit losses in the third quarter came from its book of guaranteed alternative-A mortgages, according to the company's president and chief executive officer, Daniel Mudd.The giant secondary-market agency has guarantees on $324.7 billion in alt-A mortgage-backed securities, which had a serious delinquency rate of 1.36% as of Sept. 30. "Alt-A drove about 28% of Fannie Mae's total credit losses in the most recent period," Mr. Mudd told a Goldman Sachs investor conference. "So this book gets an awful lot of attention." Only 40% of its guaranteed alt-A loans have credit enhancements, which suggests many are piggy-backed with second liens. The weighted average credit score is 719. Fannie took $1.2 billion in credit-related expenses in the third quarter, including a $670 provision for credit losses on delinquent loans it purchased out of Fannie-guaranteed MBS. The government-sponsored enterprise can be found online at http://www.fanniemae.com.

The Federal Reserve Board will meet Dec. 18 to issue long-awaited revisions to its Home Ownership and Equity Protection Act regulations that address abuses associated with subprime loans.The proposed HOEPA rule will address prepayment penalties, failure to escrow taxes and insurance, stated-income and low-documentation lending, and ability-to-repay standards. In a letter to the Fed, 17 Democrats on the Senate Banking Committee urged the Fed to act "forcefully" to protect consumers. "We appreciate the fact that the Board is moving forward with a rulemaking under HOEPA, and expect the Board to meet the duty Congress entrusted to it to end the abusive practices … that have undermined confidence in the subprime mortgage market and the economy as a whole," the Dec. 7 letter says.

As MortgageWire's deadline approached, the House Judiciary Committee was on track to approve a narrowly targeted bankruptcy bill that would give subprime and nontraditional mortgage borrowers facing foreclosure one last chance to get their mortgage restructured.Only homeowners who have received a foreclosure notice could seek Chapter 13 bankruptcy relief under a compromise worked out by committee Democrats and Rep. Steve Chabot, R-Ohio, who is the only Republican on the committee expected to vote for the bill (H.R. 3609). The Ohio congressman said, however, that he expects more Republicans to support the bill when it comes up for a vote on the House floor next year. Under the bill, bankruptcy judges could waive prepayment penalties and reduce the mortgage amount to the fair market value and reduce the interest rate to a conventional rate plus a risk premium. These restructurings would be limited to subprime and nontraditional mortgages originated from 2000 through 2007 and up to the date of enactment of the legislation. Rep. Brad Sherman, D-Ohio, said the bill exempts prime loans and that he may offer an amendment to exempt prime interest-only mortgages. The Mortgage Bankers Association and American Bankers Association continue to oppose the bill.

The class P notes of Westways Funding XI Ltd., a mortgage market value collateralized debt obligation, have been downgraded from AA-plus to AA by Fitch Ratings.Fitch said the rating of the notes is directly linked to the rating of Citigroup Inc., which was recently downgraded from AA-plus to AA.

Three classes from Ace Securities Corp. mortgage pass-through certificates series 2003-NC1 have been downgraded by Fitch Ratings.The downgrades were as follows: class M-4, from BBB-minus to BB, class M-5, from BB to CC/DR3, and class M-6, from BB-minus to C/DR5. Fitch also affirmed the ratings on four other classes in the deal. The downgrades were attributed to a deterioration in the relationship between credit enhancement and expected losses. The collateral for the deals consists of fixed- and adjustable-rate, first- and second-lien subprime mortgage loans.