Servicing

Two million households with adjustable-rate subprime mortgages could end up in foreclosure by the end of 2009 and lose $71 billion of their housing wealth, according to a Joint Economic Committee report that breaks down the impact of foreclosures on each state."The Bush administration needs to take off its ideological handcuffs and act quickly to save financially strapped families from drowning in a tidal wave of subprime foreclosures," JEC Chairman Charles E. Schumer, D-N.Y., said in releasing the report. The report estimates foreclosure losses by state, including projections that neighboring homeowners will see the value of their homes decline by $32 billion. The congressional report covers subprime foreclosures from the beginning of 2007 to the end of 2009 and assumes that house prices will decline sharply. The Bush administration estimates that foreclosures will not exceed 500,000, Sen. Schumer said, adding, "That is much too low."

Countrywide Financial Corp. on Friday morning posted a stunning $1.2 billion loss in the third quarter -- the largest loss in its history -- but predicted a return to profitability in the fourth quarter and next year.The company also revealed that it moved $12 billion of nonagency loans and securities onto the balance sheet of its bank, into a "held-for-investment" account. In a statement, Countrywide chairman and chief executive Angelo Mozilo blamed the loss on the mortgage market's nonprime liquidity crisis, noting that it was forced to revalue its mortgage holdings downward and pay more to third parties for credit protection. The Calabasas, Calif.-based company said it lost $1 billion by selling mortgage assets at a discount or marking down their value. Its servicing business was a major source of income in the quarter, posting operating earnings of $764 million, a 47% rise from that of a year earlier. But its loan production unit lost $1.3 billion in the third quarter. Countrywide funded $94.6 billion in loans during the quarter, a 19% drop from the level of a year earlier. The company can be found online at http://www.countrywide.com.

Class M-11 of Mortgage Asset Securitization Transactions Asset Back Securities Trust series 2004-HE1 has been downgraded from BBB-minus to BB by Fitch Ratings.Fitch also affirmed the ratings on 12 other classes in the transaction. The downgrade resulted from a deterioration in the relationship between credit enhancement and expected losses, the rating agency said. The collateral for the deal consists primarily of fixed- and adjustable-rate, first- and second-lien subprime mortgage loans.

Eight classes of mortgage securities issued by Morgan Stanley series 2006-5AR have been downgraded by Fitch Ratings.The downgrades were as follows: class M-4, from A-plus to A; class M-5, from A to A-minus; class M-6, from A to A-minus; class M-7, from A-minus to BBB-plus; class M-8, from BBB-plus to BBB-minus; class M-9, from BBB to BB; class B-1, from BB to C/DR4; and class B-2, from B 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 consists of fixed- and adjustable-rate, first-lien, alternative-A loans. Fitch can be found on the Web at http://www.fitchratings.com.

Foreclosure.com, Boca Raton, Fla., has announced the formation of a partnership with IndyMac Bank to market and facilitate the sale of thousands of real-estate-owned properties via the Internet.Foreclosure.com said it maintains a nationwide database of more than 1.2 million listings that includes foreclosures, preforeclosures, bankruptcies, for-sale-by-owner homes, and tax liens. Potential homeowners can view the REO listings and foreclosed properties owned by IndyMac Bank online and set appointments with listing agents/brokers to view the properties. "Our research indicates that only 17% of a traditional real estate marketing budget is spent online," said Brad Geisen, Foreclosure.com's founder, president, and chief executive officer. "That means sellers are spending 83% of their marketing dollars chasing only 20% of the buyers. Put simply, times are changing, and the practices of lenders and others involved in the sale of real estate need to change along with it." The companies can be found online at http://www.foreclosure.com and http://www.indymacbank.com.

Fidelity National Information Services Inc., a Jacksonville, Fla.-based provider of technology services to financial institutions, has announced a plan to spin off its Lender Processing Services division as a publicly traded company.The plan, recently approved by the company's board of directors, contemplates that FNIS will contribute the assets of the division to a newly formed subsidiary in exchange for 100% of the new company's common stock and approximately $1.6 billion of its debt securities. If approved by the Securities and Exchange Commission and favored with a tax-free ruling by the Internal Revenue Service, FNIS would distribute 100% of the new company's common stock to FNIS shareholders in a tax-free spinoff, the company said. William P. Foley II, executive chairman of FNIS, said the reason for the spinoff is that the company's Transaction Processing Services and Lender Processing Services divisions are "distinct and unique businesses that serve different customers, operate in different markets, and attract different investors." The company can be found online at http://www.fidelityinfoservices.com.

Fitch also downgraded four classes from First Franklin Mortgage Loan Trust series 2005-FFH2 as a result of changes in the rating agency's subprime loss forecasting assumptions.The downgrades were as follows: class M-8, from BBB to BBB-minus; class M-9, from BBB-minus to BB-plus; class B-1, from BB-plus to B; and class B-2, from BB to C/DR5. Fitch also affirmed the ratings on eight other classes in the deal. The revised assumptions in Fitch's subprime loss model "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 said.

Twenty classes from five First Franklin Mortgage Loan Trust transactions issued in 2002, 2003, and 2004 have been downgraded by Fitch Ratings.Fitch also placed three of the downgraded classes on Rating Watch Negative, removed three classes from Rating Watch Negative, and affirmed the ratings on 13 other classes in the deals. The downgrades were attributed to a deterioration in the relationship of credit enhancement to loss expectations. The collateral consists primarily of fixed- and adjustable-rate first-lien and fixed-rate second-lien subprime mortgage loans. Fitch can be found on the Web at http://www.fitchratings.com.

EMC Mortgage Corp., Lewisville, Texas, has announced an emergency response and crisis management plan to assist customers affected by the catastrophic wildfires in Southern California.The company said it will cease all foreclosure and bankruptcy proceedings for the next 30 days, as well as negative credit reporting activity, the imposition of late fees, and the placing of collection calls. "Automatic adjustable-rate mortgage resets may be modified as needed," EMC said. The company said it will contact customers deemed likely to have been affected by the fires, encourage affected borrowers to contact EMC on its customer service line, and assess whether customers need further assistance when the fires have been extinguished. EMC, a wholly owned subsidiary of The Bear Stearns Cos., can be found online at http://www.emcmortgagecorp.com.

Stewart Lender Services Inc., Houston, has announced the introduction of the Pre-Foreclosure Report, which is designed to help attorneys and lenders determine the condition of a property title when the borrowers are in financial distress.The new report provides a quick "snapshot" of the subject residential property, including a two-owner search, vesting information, open liens, judgments, pending lawsuits, tax information, and other data, the company said. Stewart Lender Services, a subsidiary of Stewart Information Services Corp., can be found on the Web at http://www.stewart.com.