Servicing

Freddie Mac has announced the pricing of $500 million of fixed-rate noncumulative perpetual preferred stock.The 20 million shares of preferred stock (CUSIP: 313400657) are being offered at $25 per share with a dividend rate of 6.02%, the government-sponsored enterprise said. The GSE will have the option to redeem all or part of the shares on or after June 30, 2012, at $25 per share plus accrued dividends. The stock is being offered via a syndicate of six dealers. Freddie Mac can be found online at http://www.freddiemac.com.

Standard & Poor's Ratings Services has placed 68 classes from 19 collateralized debt obligations with exposure to recently downgraded subprime residential mortgage-backed securities on CreditWatch with negative implications.The actions followed S&P's July 12 downgrades of numerous classes from first-lien subprime RMBS transactions. S&P said it has reviewed the results of preliminary cash flow analyses for the CDOs and compared them with scenario default rates generated by its CDO Evaluator model to determine whether the credit enhancement is still adequate. The CreditWatch placements "reflect the increased probability of default within the overall portfolios and take into consideration the CDO structures and the rating cushions available to support each tranche," S&P said. The rating agency can be found online at http://www.standardandpoors.com.

Interactive communications specialist Varolii Corp. has announced that BOK Mortgage, a division of $18 billion multibank holding company BOK Financial, is now using Varolii's interactive collections system to reduce its mortgage delinquency ratio.Since adding Varolii to its mortgage collections process, BOK Mortgage has realized a 12% reduction in its mortgage delinquency ratio, according to the announcement. BOK Mortgage leverages the Varolii platform to automate much of the communications process around early-stage delinquencies, enabling the company to focus its contact center resources on more complex, high-priority accounts. Seattle-based Varolii can be found online at http://www.varolii.com, and BOK Financial can be found at http://www.bokf.com.

NovaStar Financial Inc., a mortgage lender based in Kansas City, Mo., has announced an equity investment of $48.8 million by MassMutual Capital Partners LLC and funds managed by Jefferies Capital Partners IV LLC, as well as commitments under which a shareholder rights offering will raise an additional $101.2 million.The transactions, which represent the end of the exploration of strategic options by NovaStar's board of directors, were accompanied by a four-for-one reverse stock split of NovaStar's common stock. The equity investment came in the form of the purchase of $48.8 million of convertible preferred stock, and MassMutual and Jefferies committed to buy up to $101.2 million of any unsubscribed shares of the forthcoming shareholder rights offering for a similar series of preferred stock, NovaStar said. "These steps will strengthen our financial position and establish NovaStar as one of the leading independent lenders and portfolio managers in the nonconforming mortgage sector," said Scott Hartman, chairman and chief executive officer of NovaStar. The company can be found online at http://www.novastarmortgage.com.

Wells Fargo & Co., San Francisco, has reported record net income of $2.28 billion ($0.67 per share) for the second quarter, up from $2.09 billion ($0.61 per share) a year earlier.Wells Fargo's home mortgage business recorded originations totaling $80 billion in the second quarter, up from $68 billion in the first quarter but little changed from those of a year earlier. However, origination growth and higher net gains on origination/sale activities were offset by a net loss of $225 million related to the effect of higher interest rates on the valuation of mortgage servicing rights (net of hedging costs), the company said. "As a result of our responsible lending and risk management practices, we do not face many of the issues others do in the mortgage industry," said Mark Oman, senior executive vice president in the Wells Home and Consumer Finance Group. "First, we do not retain any credit interest in any prime and nonprime securitizations. Second, we do not originate any negative-amortizing mortgages, including option adjustable-rate mortgages. Finally, we do not portfolio any nonprime no-documentation mortgages or nonprime low-documentation mortgages." The company can be found online at http://www.wellsfargo.com.

The Federal Reserve Board should impose tough restrictions on prepayment penalties in the subprime market, according to an FDIC advisory committee, as a way to prevent mortgage brokers from "steering" borrowers into higher interest-rate loans."Lenders will not pay [an excessive] yield spread premium, which is the incentive structure for steering, unless they have a prepayment penalty," Martin Eakes, chief executive of Self-Help Credit Union, told his fellow members on the advisory board. The Federal Deposit Insurance Corp. advisory committee agreed to send a letter to the Fed urging it to restrict prepayment penalties at the end of all-day discussion on subprime lending problems. In the subprime market, prepayment penalties can equal six months' worth of interest payments. Under the recommendation, lenders could only charge a penalty that recovers the administrative costs of setting up a new loan. The Fed is considering changes to its Home Ownership and Equity Protection Act regulations to ban certain subprime lending practices that it deems unfair or deceptive.

DBRS, New York, has downgraded 94 classes of residential mortgage-backed securities from 62 RMBS transactions.DBRS also placed 15 other classes under review with negative implications, and upgraded 17 classes. The negative rating actions were based on an increase in the pipeline of 90-day-plus delinquencies relative to the available credit enhancement, the rating agency said.

Ginnie Mae has declared R&G Mortgage Corp. in default under its guaranty agreements as a result of the previously announced withdrawal of R&G's status as a HUD/FHA-approved lender by the Department of Housing and Urban Development, according to R&G Financial Corp., the company's San Juan, Puerto Rico-based parent company.The notification by Ginnie Mae said R&G Mortgage will lose its authority to act as a Ginnie Mae issuer and a servicer of Ginnie mortgage pools within 30 days, and that it may not issue additional Ginnie Mae-guaranteed mortgage-backed securities unless approved by Ginnie Mae. (R&G reported recently that it is currently unable to originate loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs because of the company's failure to submit timely audited financial statements.) The parent company said R&G Mortgage would file an appeal with HUD, and that its subsidiary R-G Premier Bank would apply to be licensed as a HUD/FHA-approved lender. R&G can be found on the Web at http://www.rgonline.com.

Capital Markets Cooperative, Ponte Vedra Beach, Fla., has announced an alliance with Fannie Mae aimed at providing CMC members greater benefits when selling loans to the secondary market.CMC members will now have access to Fannie Mae's Desktop Underwriter platform in addition to advantageous pricing, increased flexibility in methods of execution, and a variety of loan products and value-added services, CMC said. "[O]ur clients now have greater flexibility and receive better pricing on the loans they sell upstream to Fannie Mae," said CMC president Tom Millon. "They'll also pay lower fees to use Desktop Underwriter." CMC, a provider of services aimed at reducing risk and maximizing profits for mortgage bankers, can be found online at http://www.capmkts.org, and Fannie Mae can be found at http://www.fanniemae.com.

Senate appropriators have approved a Department of Housing and Urban Development spending bill that includes $100 million for foreclosure prevention counseling.Sen. Charles E. Schumer, D-N.Y., said the $100 million will go to nonprofit counseling agencies that work with borrowers who are trapped in unaffordable subprime loans. "The current situation in the subprime mortgage market is untenable," Sen. Schumer said. "The more we do to help solve it, the fewer families will be faced with losing their homes because of bad loans and dubious mortgage brokers." Sen. Schumer and two fellow Democrats -- Sens. Robert P. Casey Jr. (Pa.) and Sherrod Brown (Ohio) -- have co-sponsored a bill that would provide $300 million for foreclosure prevention counseling and clamp down on certain kinds of subprime lending. The HUD appropriations bill also increases the loan limit on Federal Housing Administration-insured multifamily mortgages and suspends for one year a cap on the number of reverse mortgages the FHA can insure.