Servicing

Sen. Hillary Rodham Clinton, D-N.Y., is urging the Bush administration to impose a 90-day moratorium on subprime foreclosures so that at-risk borrowers are not harmed before lenders and servicers are able to implement a freeze on interest rates.The presidential candidate said she is "encouraged" by news that Treasury officials are working with the mortgage industry to curb foreclosures and freeze interest rates on adjustable-rate subprime mortgages. A freeze of at least five years or until the mortgage is converted to an affordable fixed-rate mortgage will "give the housing market time to stabilize," Sen. Clinton says in a letter to Treasury Secretary Henry Paulson. In March, Sen. Clinton called for "foreclosure timeout," which the Bush administration dismissed as unnecessary. "While you and others in the administration misdiagnosed the problem, over 1 million additional foreclosure notices were sent out," the New York Democrat said.

Fitch Ratings has assigned an RPS2-minus residential primary servicer rating for subprime product to HSBC Mortgage Corp (USA).The rating agency also affirmed the company's RPS2-plus residential primary servicer ratings for prime, alternative-A, and home equity/home equity line of credit loans. Fitch said the ratings reflect HSBC Mortgage's "experienced management team, adequate internal controls, and integrated technology," as well as the "strong" financial condition of its parent company, HSBC Bank USA. HSBC Mortgage is based in Depew, N.Y., with a subprime collections unit in Elmhurst, Ill. Fitch can be found online at http://www.fitchratings.com.

Post Properties, an Atlanta-based multifamily real estate investment trust, has been designated the "Bear of the Day" for Dec. 3 by Zacks Equity Research, Chicago.The Bear of the Day is a stock expected to underperform the markets over the next three to six months. Zacks said the REIT continues to report good quarterly results, but that "there are signs that rental rate growth will slow in the coming quarters and could turn negative in 2008 as the U.S. economy heads toward a recession. Despite a sector-wide selloff over the past six months, Post still trades at an inflated valuation due to persistent buyout rumors." Zacks can be found online at http://www.zacks.com, and Post can be found at http://www.postproperties.com.

Freddie Mac has announced that it will conduct cash tender offers during the week of Dec. 3 for the repurchase of a targeted group of its euro Reference Notes.The company said it will offer to repurchase all outstanding amounts of the selected securities from investors through Goldman Sachs International, the designated lead dealer manager for the offers, or Barclays Bank PLC and Deutsche Bank AG, London Branch, the designated dealer managers. Each eligible security will be repurchased at a fixed spread over the applicable reference swap rate. Freddie Mac can be found online at http://www.freddiemac.com.

Lennar Corp., a Miami-based homebuilder, and Morgan Stanley Real Estate, New York, have announced the formation of a joint venture to acquire, develop, manage, and sell residential real estate.The new venture has acquired a diversified portfolio of land from Lennar consisting of approximately 11,000 homesites in 32 communities around the country, the companies reported. Lennar purchased a 20% ownership interest and 50% voting rights in the investment venture. It will manage the venture's operations and will receive fees for its services. The companies can be found online at http://www.lennar.com and http://www.morganstanley.com/realestate.

The FBI's Mortgage Fraud Report indicates that up to 70% of early payment defaults may be linked to borrower misrepresentations on mortgage loan applications, according to Rapid Reporting, a Fort Worth, Texas-based provider of fraud prevention products and services.The study found that mortgage defaults were largely concentrated in adjustable-rate loans, but occurred among other types as well. The report also revealed that seven of the 10 states with the highest concentration of mortgage fraud were also among the top 10 states for foreclosures: California, Florida, Georgia, Indiana, Michigan, Ohio, and Texas. "While it would be naïve to assume that we could narrow the cause of every foreclosure down to one single factor, this FBI information clearly indicates that borrower fraud plays a significant role in the record number of defaults and foreclosures we've been seeing over the past couple of years," said Jay Meadows, chief executive officer for Rapid Reporting. He said lenders can "significantly reduce" defaulted and foreclosed loans by implementing a good fraud prevention program. Rapid Reporting can be found online at http://www.rapidreporting.com.

Mortgage servicers are going to face many challenges in processing loan modifications of subprime adjustable-rate mortgages, including the capacity of their systems to deal with the loan impairment requirements of Financial Accounting Standard 114.Mortgage servicers are concerned that "they don't have the systems infrastructure in place today" to manage loan modifications in compliance with FAS 114, Steve Davies of PricewaterhouseCoopers told a meeting of the American Institute of Certified Public Accountants on Nov. 30. Once a loan is modified, it has to be evaluated for impairment on an individual basis to determine the loss. Servicers generally evaluate groups of mortgages segmented into loan types. Industry groups are expected to ask the Financial Accounting Standards Board for some relief.

A panel of mortgage professionals -- including the chief executives at Fannie Mae and Washington Mutual -- have told an OTS-sponsored forum that they believe a series of interest rate cuts by the Federal Reserve could help alleviate the current liquidity crisis facing the nonconforming mortgage market."The Fed needs to keep cutting rates," WaMu chairman and CEO Kerry Killinger told the Office of Thrift Supervision housing forum, adding that "We need liquidity for the immediate future, not three years from now." Mr. Mudd said lower rates could help banks clear out their inventory of collateralized debt obligations and specialized investment vehicles. North Carolina Banking Commissioner Joseph A. Smith Jr. cautioned that too many rate cuts "could cause another mess" by adding too much liquidity.

A pickup in loan modifications could be an important factor in keeping the U.S. economy out of recession, according to Mark Zandi, chief economist of Moody's Economy.com.Speaking at a housing forum sponsored by the Office of Thrift Supervision, Mr. Zandi argued that the Federal Reserve Board has to be aggressive in cutting interest rates and said 20% to 30% of adjustable-rate mortgages need to be modified before they reset to give the housing and mortgage markets any chance of a recovery. Countrywide Financial Corp. chairman and chief executive Angelo Mozilo said he supports the Bush administration's effort to increase loan modifications. However, he stressed that the lack of liquidity in the secondary market (except for Fannie Mae, Freddie Mac, and Federal Housing Administration-eligible loans) is putting downward pressure on sales and house prices. Mr. Mozilo called on the administration to relax its grip on Fannie and Freddie so the two mortgage giants can use their resources to "jump-start" the secondary mortgage market and restore investor confidence.

Hope Now alliance members are close to agreeing on a systematic approach for dealing with resets on adjustable-rate mortgages, but they are still developing criteria for determining which borrowers will be eligible for streamlined refinancings and loan modifications."I am confident they will finalize these standards soon," Treasury Secretary Henry Paulson told a housing forum sponsored by the Office of Thrift Supervision. Secretary Paulson also stressed that he expects the industry to implement the streamlined procedures "quickly" and create benchmarks for measuring their success in preventing foreclosures. One mortgage industry executive said he expects that an agreement on the criteria and for freezing the initial interest rate for borrowers facing an unaffordable reset will be worked out by the end of the week. Meanwhile, Secretary Paulson saluted the Hope Alliance members for expanding the capacity and hours of its 888-995-HOPE hotline so that struggling homeowners can talk with a mortgage counselor 24 hours a day.