Servicing

NeighborWorks America and The Ad Council have launched a new public awareness campaign to help prevent foreclosures by urging struggling homeowners to call for assistance (888-995-HOPE.)"More than one million families will probably face foreclosure this year," said Ken Wade, chief executive officer of NeighborWorks. "Research tells us that more than half of these families will go into foreclosure without ever having any contact with their lender or a financial counselor who could probably help them." The ads will begin airing in July. Homeowners will be encouraged to contact their servicer to discuss their financial options. Solutions will range from establishing a repayment plan to finding a way to exit the mortgage responsibly without going through foreclosure.

Fannie Mae bought $66.38 billion in mortgages during May, a 26% increase from the level reported for the previous month.Compared with those of the same month last year, the government-sponsored enterprise's purchases were essentially flat. Its gross mortgage portfolio grew to $718.2 billion, a 1% increase from that of May but down from that of a year earlier ($733.8 billion). With lenders tightening their loan menus, Fannie Mae and Freddie Mac are expected to see their market share increase in the months ahead. Fannie Mae can be found online at http://www.fanniemae.com.

A new Freddie Mac subprime purchase program in development for release this summer is expected to support prepayment penalties, but in a more consumer-friendly manner than in the past, according to a presentation at the National Association of Mortgage Brokers annual convention in Seattle.The program, which Freddie has been testing with five or six lenders, will be in line with the government-sponsored enterprise's new restrictions on certain nontraditional mortgage purchases set to take effect Sept. 1, said Charles Coulter, vice president of sourcing strategies and solutions at Freddie Mac. When asked for further details, he said he could not be much more specific about the program because it is "still in development." However, when asked about prepayment penalties, he said the planned move down the credit curve is expected to support them, but would never allow them to go beyond the fixed period of the loans carrying them. Freddie Mac can be found online at http://www.freddiemac.com.

Bear Stearns & Co. tried to reassure investors Friday that a $3.2 billion loan to a subprime-related hedge fund it manages is adequately collateralized.In a conference call, Bear Stearns chief financial officer Sam Molinaro said the Wall Street firm is trying to restructure the hedge fund (and a similar one) but that the process could take several months. On Wednesday night Merrill Lynch, a lender to one of the funds, liquidated roughly $850 million in collateral after the fund failed to meet its margin calls. Sources say that on Thursday two other lenders to the funds -- Bank of America and Goldman Sachs & Co. -- were contemplating seizing collateral because of margin call concerns, but then reached some type of agreement with Bear. One investment banking source described BoA's and Goldman's actions as "self-preservation on the part of all three." The two Bear funds reportedly own subprime asset-backed and residual securities and have positions in the ABX index.

Two classes of notes issued by Ipswich Street CDO Ltd. and Ipswich Street CDO LLC have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are classes D and E. The transaction is a collateralized debt obligation supported by residential and commercial mortgage-backed securities and other CDOs, Fitch said. The negative rating actions were based on the downgrading of three subprime closed-end second-lien RMBS bonds representing 1.04% of the underlying portfolio, the rating agency said. In addition, 2.18% of the portfolio has been placed on Rating Watch Negative.

Four classes of notes from two collateralized debt obligations managed by ACA Management LLC have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are class D of ACA ABS 2003-1 and classes B-F, B-V, and C of ACA ABS 2003-2. The transactions are supported chiefly by residential mortgage-backed securities, along with asset-backed securities, other CDOs, commercial MBS, and the debt of real estate investment trusts, Fitch said. The negative rating actions were based on credit deterioration within the two portfolios and the high exposure of the two transactions to underperforming 2006 vintage subprime closed-end, second-lien RMBS assets, the rating agency said. In addition, 2.18% of the portfolio has been placed on Rating Watch Negative.

Two classes of EquiFirst Mortgage Loan Trust series 2004-1 have been downgraded by Fitch Ratings.Class M-7 was downgraded from BBB-minus to BB, and class B-1 was downgraded from BB-plus to B. In addition, Fitch upgraded three classes in the transaction and affirmed the ratings on 49 classes from five EquiFirst deals. The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations. The mortgage pools consist of first-lien, fixed- and adjustable-rate residential mortgage loans. Fitch can be found online at http://www.fitchratings.com.

The outlook for homeowners with subprime mortgages remains bleak, and concerns about foreclosures have not been exaggerated, according to the Center for Responsible Lending.The CRL said some in the mortgage industry have criticized foreclosure information provided by RealtyTrac to suggest that foreclosure concerns have been overblown. "Unfortunately, nothing could be further from the truth," the nonprofit research and policy group said. "Recent reports from business analysts, investment banks, and even mortgage lenders all confirm that Americans with subprime mortgages are losing their homes at an alarming rate." The group cited reports from Lehman Brothers, Fitch Ratings, Moody's Investors Service, and the Mortgage Bankers Association in support of its contention. The organization can be found on the Web at http://www.responsiblelending.org.

The Bear Stearns hedge fund "debacle" strengthens the argument that issuers of subprime mortgage securities should have some liability for the underwriting of loans they securitize, according to House Financial Services Committee Chairman Barney Frank, D-Mass.This past week, Merrill Lynch liquidated roughly $850 million in subprime-related assets it had seized from at least one Bear hedge fund after the fund failed to meet its margin calls. Bear Stearns -- after being pressured by other creditors -- is moving to shore up the hedge fund (and a second fund) to prevent a liquidation. Industry groups contend that assignee liability would "kill" the subprime securitization market. In an interview on public television's Nightly Business Report, Rep. Frank said, "But that market is dying of its own right now." He added that including a reasonable assignee liability provision in a predatory-lending bill would provide purchasers of subprime securities a "degree of confidence" that the issuer has vetted the loans. The congressman said he hopes to complete a draft of his predatory-lending bill before the August recess and hold hearings on it in the fall.

Chase has announced plans to expand its subprime bulk program later this year to include a flow process and has hired mortgage banker Rick Boyd to manage the new flow effort.Mr. Boyd has been named subprime flow manager at the company as part of its correspondent lending division, responsible for all program coordination, including risk and capital markets, operations, sales, and marketing. Chase originates $170 billion in residential mortgages and home equity annually -- including nearly $100 billion through the wholesale, correspondent, and correspondent-negotiated channels -- and services a portfolio of more than $500 billion.