Servicing

House and Senate Democratic leaders are urging the Bush administration to act more forcefully in addressing the "foreclosure crisis," and they are threatening to pass a measure to temporarily raise the caps on Fannie Mae's and Freddie Mac's portfolios if the administration does not take such action quickly.Fannie and Freddie could provide more liquidity to the mortgage market and help subprime borrowers refinance to save their homes, said Sen. Charles E. Schumer, D-N.Y., adding that he is prepared to press the Senate to pass a bill that would remove the caps on the government-sponsored enterprises for one year. House Financial Services Committee Chairman Barney Frank, D-Mass., said he would support the Schumer bill if it clears the Senate. Democratic leaders are also calling on the administration to appoint a czar to oversee its response to the foreclosure crisis and to press servicers and lenders to modify loans for distressed homeowners.

Four certificates from RAMP series 2004-KR1 Trust have been placed under review for possible downgrade by Moody's Investors Service.The affected securities are classes M-I-4, M-I-5, M-I-6, and M-II-3. The actions were based on an analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to the expected loss, the rating agency said. The mortgage pool includes various types of residential mortgage loans that were not eligible for inclusion in Residential Funding Corp.'s regular securitizations because they did not meet the underwriting guidelines of any of the company's conduit loan programs. Specifically, the loans were fall-outs from the prime jumbo A, alternative-A, Home Solution, and subprime programs, Moody's said.

Six certificates from two deals backed by WMC subprime loans have been placed on review for possible downgrade by Moody's Investors Service.The affected securities were as follows: MASTR Asset Backed Securities Trust 2003-WMC2, classes M-5 and M-6; and Morgan Stanley ABS Capital I Inc. Trust 2004-WMC3, classes M-6, B-1, B-2, and B-3. In addition, Moody's placed one certificate from another deal backed by WMC subprime loans, Soundview Home Loan Trust 2004-WMC1, on review for possible upgrade. The actions are based on the analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to the expected loss, Moody's said.

Thirty-four certificates from eight deals issued by CDC Mortgage Capital Trust in 2001, 2002, and 2003 and two deals issued by IXIS Real Estate Capital Trust in 2005 have been placed on review for possible downgrade by Moody's Investors Service.The affected transactions were as follows: CDC Mortgage Capital Trust series 2001-HE1, 2002-HE1, 2002-HE2, 2002-HE3, 2003-HE1, 2003-HE2, 2003-HE3, and 2003-HE4; and IXIS Real Estate Capital Trust series 2005-HE1 and 2005-HE2. The negative rating actions on the eight CDC Mortgage deals were attributed to "very low" pool factors. "The stepping down and continuous losses have left them with thin credit enhancement levels and made them more vulnerable to pool deterioration in the tail end of a deal's life," Moody's said. The actions on the IXIS deals were based on insufficient credit enhancement in view of "the high pipelines for both deals," the rating agency said. All the transactions are backed by first- and second-lien fixed- and adjustable-rate subprime mortgage loans. Moody's can be found online at http://www.moodys.com.

Fannie Mae has priced 15 million shares of series Q noncumulative, perpetual fixed-rate preferred stock with a stated value of $25 per share at an annual dividend rate of 6.75%.The government-sponsored enterprise said it has agreed to sell to "qualified institutional buyers" (as defined in Rule 144A under the U.S. Securities Act of 1933) a total of $375 million of the series Q preferred stock (CUSIP: 313586778). Fannie said it will have the option to redeem all or part of the stock on or after Sept. 30, 2010. Goldman, Sachs & Co. and Merrill Lynch & Co. acted as the placement agents for the transaction. Fannie can be found online at http://www.fanniemae.com.

Baker, Donelson, Bearman, Caldwell & Berkowitz, a law firm based in Memphis, has announced the creation of a Subprime Mortgage Task Force, a multidisciplinary practice group of attorneys from across Baker Donelson's five-state footprint in the Southeast and Washington, D.C.Linda S. Finley, a shareholder in the Atlanta office, and Hank Arnold, a shareholder in the New Orleans office, are leading the firm-wide effort. "We've assembled a team of attorneys who can assist clients with the wide spectrum of matters [relating to the subprime mortgage crisis], whether involving complex litigation defense in class-action suits, providing advice on regulatory compliance, or tracking and advancing financial institution client interests before local, state, and federal legislative bodies," said Ben Adams, Baker Donelson's chairman and chief executive officer. The firm said task force members are experienced in areas such as representing lenders, servicers, and investors in state, federal, and bankruptcy courts; default representation; quality control/quality assurance review of suspect loans; loss mitigation; state and federal regulatory compliance; and capital market activities. The firm can be found online at http://www.bakerdonelson.com.

Morgan Stanley plans to close offices and cut several hundred staff members in its residential mortgage area but says it remains committed to the business.The company said it plans, on a net basis, to reduce U.S. positions by 500 and European posts by 100, including 90 in its U.K. mortgage subsidiary, Advantage. In addition, the Wall Street firm's three stand-alone businesses are slated to be combined into one integrated mortgage company with four centrally managed business channels: servicing, conduit, wholesale, and retail. The company can be found on the Web at http://www.morganstanley.com.

Congressionally chartered mortgage giant Fannie Mae has expressed interest in buying C-BASS LLC and its "scratch-and-dent" servicing affiliate, Litton Loan Servicing, Houston, industry sources have confirmed to MortgageWire."They've been working on this for at least two months," said one source familiar with the matter. The source, requesting anonymity, described Fannie's motivations as "charter creep." According to the Quarterly Data Report, Litton Loan Servicing ranks 12th among subprime servicers, with $46 billion in receivables. Two weeks ago, when Fannie Mae chief executive Daniel Mudd was asked by reporters about Litton, he declined to comment. In early August C-BASS was hit by margin calls from its lenders, forcing its two mortgage insurance company owners to write down its value by more than $1 billion. Earlier this year, C-BASS bought Fieldstone Mortgage, Columbia, Md., a nondepository, nonprime lender that has suspended originations.

The residential servicer ratings of IndyMac Bank FSB, a residential mortgage lender and servicer based in Pasadena, Calif., have been placed on Rating Watch Negative by Fitch Ratings.The affected residential ratings (all RPS2-plus) are as follows: primary servicer for prime, alternative-A, and subprime products; and special servicer. The rating actions reflect the corporate rating of the bank's parent company, IndyMac Bancorp, which has been placed on Rating Watch Negative, as well as the "unprecedented disruption of the secondary mortgage market," Fitch said. Fitch rates residential mortgage primary, master, and special servicers on a scale of 1 to 5, with 1 being the highest rating. The rating agency can be found online at http://www.fitchratings.com.

New York Mortgage Trust Inc., a New York City-based real estate investment trust, has announced that it will not pay a common-stock dividend for the third quarter.The REIT said the decision by its board of directors "reflects the difficult market conditions during the third quarter and the company's ongoing focus to conserve capital to build future earnings." The company can be found on the Web at http://www.nymtrust.com.