Servicing

Treasury Secretary Henry Paulson is tasking mortgage servicers that are part of the new "Hope Now" alliance with finding a way to measure their success in loan modifications.In a speech Tuesday, he said servicers could be more effective in seeking out struggling homeowners who need help and counseling. "I expect to see results," the Treasury secretary said. He asked alliance members -- who currently service about 60% of all U.S. mortgages -- to quickly develop "standardized metrics" for measuring results and evaluating the performance of servicers. "The current process is not working very well," Secretary Paulson said. He expects members of the recently formed Hope Now to be more effective by taking an aggressive approach to loan modifications. "I expect Hope Now to develop and begin reporting these metrics to investors, policymakers, and homeowners," Mr. Paulson said. "It is important that we all be able to measure results."

Even though home values are sinking in many housing markets, the Office of Federal Housing Enterprise Oversight said Tuesday that "under no circumstance" will it decrease the Fannie Mae/Freddie Mac loan limit in 2008.Currently, the loan limit for the government-sponsored enterprises is $417,000. Politicians and lenders alike have been asking for an emergency increase in the limit as a way to improve liquidity in the secondary market. OFHEO also said it is seeking additional public comment on how it calculates and implements the conforming loan limit each year. (In the past, the loan limit was based on the sales price of homes across the United States. Historically, home prices rise each year, causing the cap to increase. However, in 2007 there was no increase in the GSE loan limit.)

Three classes of Merrill Lynch Mortgage Investors Inc.'s commercial mortgage pass-through certificates series 1999-C1 have been downgraded by Fitch Ratings.The downgrades were as follows: class F, from A-plus to BBB; class G, from B-minus/DR1 to CC/DR3; and class H, from C/DR5 to C/DR6. The rating agency also affirmed the ratings on six other classes in the deal. Fitch attributed the downgrades to "the increase in expected losses and the length of time that the assets have been in special servicing." Fitch can be found online at http://www.fitchratings.com.

Many homeowners facing foreclosure in 10 hard-hit states will be able to get legal assistance thanks to the Center of Responsible Lending and a $15 million grant from a hedge fund.Paulson & Co. Inc., New York, is providing the funds for the CRL's new Institute for Foreclosure Legal Assistance, which will support legal aid groups and law school clinics that provide legal services to subprime borrowers in danger of losing their homes. "By providing funding and other support for attorneys who can review loan documents and negotiate with loan servicers, we believe that many more homeowners will be able to stay in their homes," CRL chief executive Martin Eakes said. The National Association of Consumer Advocates is managing the legal assistance project. "We hope to be able to provide legal representation to at least 5,000 families with these funds," NACA executive director Ira Rheingold said.

Associated Software Consultants Inc., Middleburg Heights, Ohio, has announced the launch of PowerSeller GPS, a system designed to help small to mid-tier mortgage bankers and brokers increase profits in their secondary-marketing operation.PowerSeller GPS provides tools for managing pipeline and investor commitments and allows originators to capture key data elements to verify that loans are properly priced and ensure that investors are funding loans correctly. The system offers special features to enable mortgage brokers to monitor best-effort marketing activities by gathering information needed to determine the costs and benefits of switching a product line from a best-effort commitment approach to a mandatory trading model, the company said. By offering several features available in the company's comprehensive PowerSeller system, PowerSeller GPS allows small to mid-tier bankers and brokers to take advantage of numerous benefits without having to purchase an upfront license, the company said. Associated Software Consultants can be found online at http://www.asconline.com.

Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co., and other financial institutions have been working with the U.S. Treasury on a plan they believe may help mitigate the global credit crunch sparked by U.S. mortgage woes.The companies say they plan to create a single "master liquidity enhancement conduit" within the next 90 days that will agree, for a set period of time, to purchase "qualifying highly rated assets" from certain existing structured investment vehicles that choose to tap the new liquidity source. This may restore some liquidity by helping SIVs -- which borrow short-term and invest long-term -- refinance their asset-backed commercial paper borrowings. ABCP rollovers have been difficult during the credit crunch because many market participants have considered the trading value of mortgages and other assets to be uncertain, even if they have had strong credit.

The new chairman of the Mortgage Bankers Association has called for a "return to basics" as the housing finance sector enters uncharted territory.With home prices flagging in several markets and innovative loan products being tested for the first time in a negative environment, Kieran Quinn said what's important is not new government regulations or who gets bailed out and who doesn't. Rather, "it's what we do from today forward that counts," he said at the MBA's 94th annual convention in Boston. Mr. Quinn said the most important task lying before the industry is to "restore investor confidence, because right now they don't want to touch our paper." He said that if businesses and individuals "simply do what we've done for most of our careers, we'll have gone a long way" toward fixing the problems that confront the industry. The MBA can be found on the Web at http://www.mortgagebankers.org.

The increasing number of reverse mortgage originations make this product ripe for securitization, a panelist said at a session on Ginnie Mae Home Equity Conversion Mortgage mortgage-backed securities at the Mortgage Bankers Association annual convention in Boston.Arthur Axelson, a partner with Reed Smith LLP, added that the security will "revolutionize" the Federal Housing Administration's HECM loan. Craig Corn, president of BNY Mortgage Co., said the Ginnie Mae program would increase liquidity for the product as well as increase the number of secondary-market investors. "It is an incredible opportunity, but with that opportunity comes risks," he added. Theodore Foster, Ginnie Mae's senior vice president, said the agency is launching the new product because its charge is to support government-insured products. There is dramatic growth in the number of HECM originations, but no standardized secondary-market take-out for the product, he said. Among Ginnie Mae's goals is to increase availability of HECMs and to create a secondary market for them so lenders can offer more products.

Class B-2 of Morgan Stanley Dean Witter Capital I Inc. Trust series 2002-AM3 has been downgraded from B1 to Caa3 by Moody's Investors Service.The downgrade was attributed to credit enhancement levels that may be low given the projected losses on the underlying pools. "The transaction has taken significant losses, causing gradual erosion of the overcollateralization, and the most subordinate B-2 tranche is in danger of taking writedowns," Moody's said. The transaction is backed by first-lien adjustable- and fixed-rate mortgage loans originated by Aames Financial Corp.

Two tranches of CSFB Mortgage-Backed Pass-Through Certificates, series 2001-11, have been downgraded by Moody's Investors Service.Class C-B-1 was downgraded from Aaa to Aa2, and class C-B-2 was downgraded from Aa2 to Baa2. "The pools backing these securities have a very low pool factor of less than 1%, and include only five remaining loans, one of which is delinquent and another of which is in foreclosure," the rating agency said. On July 25, three subordinate tranches were fully written down due to loss, and class C-B-4 took a $4,000 writedown. "Today's action is a result of these writedowns, and also reflects the continued threat posed by remaining delinquencies in the pool which, although substantially covered by mortgage insurance, may see further high severities," Moody's said. The rating agency can be found online at http://www.moodys.com.