Servicing

Many subprime borrowers who stretched their financial resources to buy a home are running into trouble and creating a new trend in foreclosures, according to a former Federal Housing Administration commissioner.Pockets of foreclosures are developing in the middle of relatively new subdivisions, former Housing Commissioner William Apgar told a Federal Deposit Insurance Corp. advisory committee. The Harvard University lecturer noted that builders "push-marketed" subprime loans with teaser rates as "affordability" products to keep home sales going and to clear their inventories. "Major homebuilders are some of the largest holders of foreclosed properties in Texas," Mr. Apgar said. He also said that defaults on these subprime affordability mortgages are "going to ultimately lead to a ramp-up" in foreclosures. Mr. Apgar is a lecturer at Harvard's Kennedy School of Economics.

Three certificates from two IndyMac trusts have been downgraded by Moody's Investors Service.The downgrades were as follows: IndyMac Home Equity Mortgage Loan Asset-Backed Trust, series SPMD 2000-C, class MV-1, from A3 to Baa3, and class MV-2, from B2 to Caa2; and IndyMac ARM Trust mortgage pass-through certificates, series 2001-H1, class B-2, from Baa1 to Ba1. The downgrades were "based on the analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to expected losses," Moody's said. Collateral in the 2000 deal consists of first-lien adjustable-rate subprime mortgages, while the 2001 deal is backed by first-lien, alternative-A mortgages.

Thirty-three classes from 19 collateralized debt obligations backed partly by subprime residential mortgage-backed securities have been placed on Rating Watch Negative by Fitch Ratings.The CDO rating actions "are a direct result of collateral deterioration, specifically subprime RMBS, whereby significant portions of the portfolio have been downgraded, placed on RWN or 'Under Analysis' by either Fitch, Moody's, or S&P in recent weeks," Fitch said. The rating agency said it also factored in exposure to 2006 vintage closed-end second-lien RMBS "regardless of any rating activity, based on the severe underperformance of this subsector."

Fitch Ratings has announced that 170 subprime residential mortgage-backed securities transactions have been placed "Under Analysis," which indicates that rating actions on the deals will be taken over the next few weeks.Fitch said the latest under-analysis list reflects June performance results that show "continued negative trends, particularly for the late 2005 and 2006 subprime vintages," as well as changes to Fitch's subprime loss forecasting assumptions based on the new data. "These changes were made to better capture the deteriorating performance of pools from 2006 and late 2005 in the face of continued poor loan performance and home price weakness," the rating agency said. Fitch can be found on the Web at http://www.fitchratings.com.

Meanwhile, Standard & Poor's has downgraded 64 other classes backed by first-lien subprime mortgage collateral that involve CreditWatch actions taken before July 10 on 70 tranches of residential mortgage-backed securities.Of six classes that remain on CreditWatch, three remain "because the issuer is appealing the decision based on the presence of mortgage insurance," and three others remain because they involve either closed-end second-lien or alternative-A mortgage collateral, S&P reported. The 70 classes were rated from the fourth quarter of 2005 through the fourth quarter of 2006, S&P said. The rating agency can be found online at http://www.standardandpoors.com.

Standard & Poor's Ratings Services has downgraded 498 of the 612 classes of residential mortgage-backed securities that it placed on CreditWatch with negative implications July 10, and it has corrected the value and status of the securities.S&P said the 612 classes, rated from the fourth quarter of 2005 through the fourth quarter of 2006, represent $7.35 billion of securities, not $12.018 billion as originally reported. The downgraded classes, representing approximately $5.69 billion in securities, are backed by first-lien subprime mortgage collateral. S&P also left 26 of the first-lien subprime classes on CreditWatch and affirmed the ratings on 74 classes and removed them from CreditWatch. Of the remaining 14 classes, the ratings on nine were affirmed and removed from CreditWatch "because they involve alternative-A mortgage collateral and were not intended to be included" in the July 10 rating actions, and five were left on CreditWatch because they are backed by closed-end second-lien mortgage collateral and will be reviewed later by S&P, the rating agency said.

Ginnie Mae has set the stage for the launch of its reverse mortgage securitization program this September with the release of a guide for mortgage-backed securities issuers.The new guide for securitizing Federal Housing Administration-insured Home Equity Conversion Mortgages provides detailed issuer pooling and reporting specifications. "The HECM Mortgage Backed Securities Guide will be an essential source of information for issuers preparing to participate in the HMBS program," said Michael Frenz, executive vice president of Ginnie Mae. A Ginnie Mae HMBS pool must have a minimum outstanding balance of $1 million, and issuers must have a minimum net worth of $500,000, according to the HMBS guide.

R&G Financial Corp., San Juan, Puerto Rico, has reported that its status as a HUD/FHA-approved lender has been withdrawn by the Department of Housing and Urban Development because of R&G's failure to submit timely audited financial statements.As a result, R&G said it is currently unable to originate loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. The company said its subsidiary R&G Mortgage will file an appeal with HUD, and its subsidiary R-G Premier Bank will apply to be licensed as a HUD/FHA-approved lender. "As a licensed bank lender, R-G Premier would not be subject to the audited financial statement requirements applicable to R&G Mortgage," R&G said. The company also reported that it has received "notice of non-objection" from the Federal Reserve Bank of New York and the Federal Deposit Insurance Corp. to "engage in what amounts to the last of its 'unwinding' transactions with other Puerto Rican financial institutions resulting from the restatement of its audited consolidated financial statements." R&G can be found on the Web at http://www.rgonline.com.

Moody's Investors Service has announced that 184 tranches of 91 collateralized debt obligations backed primarily by residential mortgage-backed securities have been placed on review for possible downgrade.The CDO rating actions affect securities with an original face value of approximately $5 billion, Moody's said. They primarily reflect recent rating actions by Moody's on residential mortgage-backed securities associated with first-lien subprime mortgages from the 2006 vintage and second-lien loans of the 2005/2006 vintage, as well as the structures of the individual transactions, the rating agency said.

The Prestwick Mortgage Group is brokering the sale of mortgage servicing rights on $72 million of Freddie Mac loans backed primarily by homes in Utah.The weighted average note rate is 5.721%, and the weighted average servicing fee is 25 basis points, Prestwick said. The fixed-rate portfolio has an average loan balance of $107,392. About 17% of the loans are balloon payment products. The weighted average seasoning is 53 months, and the portfolio has a 1.04% delinquency rate. Prestwick said the seller is a bank. Bids are due July 19.