Servicing

The performance of prime jumbo mortgages weakened in February, as Moody's Investors Service's index of 60-plus-day delinquency rates rose from 0.349% to 0.383%.Delinquencies of 60-89 days and foreclosures saw the fastest absolute increases over the past several months, although their overall rates remain well below 1%, Moody's said. "Nevertheless, serious delinquencies over the first year of seasoning for the 2006 [adjustable-rate mortgage] vintage are tracking a level last seen in the 2001 vintage, which saw a 60+ day delinquency rate of 0.52% at 12 months of seasoning and represents the poorest-performing ARM vintage over the six years measured by the index thus far," the rating agency reported. "Fixed-rate pools, about 58% of total 2006 issuance by original balance, are faring better." The findings are presented in a new report on the rating agency's U.S. Jumbo Mortgage Credit Indexes for the March reporting period. Moody's can be found online at http://www.moodys.com.

More than 147,700 foreclosure filings were reported nationwide in April, down about 1% from the level recorded in March but up 62% from that of a year earlier, according to RealtyTrac, an online foreclosure marketplace based in Irvine, Calif.The nation's foreclosure rate stood at one foreclosure filing for every 783 households, the company said in its April 2007 U.S. Foreclosure Market Report. (Foreclosure filings include default notices, auction sale notices, and bank repossessions.) "After hitting a two-year high in March, U.S. foreclosures activity slipped slightly lower in April," said James J. Saccacio, chief executive officer of RealtyTrac. "Last year foreclosure activity subsided somewhat during the spring and summer months, thanks in part to increased interest from buyers. Whether the decrease in April is the beginning of a similar trend this year remains to be seen, but we expect foreclosure activity to at least stay above last year's levels for the remainder of 2007, fueled by a combustible mix of risky loans taken out in the last few years -- many in the subprime market -- and slowing home price appreciation." The company can be found online at http://www.realtytrac.com.

Over 100 community and consumer groups led by the California Reinvestment Coalition have called upon six top mortgage lenders to declare a temporary moratorium on home foreclosures in the state.The San Francisco-based coalition said it sent letters to the chief executive officers of Bank of America, Citibank, Countrywide Home Loans, Merrill Lynch, Washington Mutual, and Wells Fargo. "Many California homeowners are facing foreclosure because they were misled by unscrupulous mortgage brokers and lenders," said Kevin Stein, associate director of the CRC. "We are asking the largest lenders in the state to take leadership so that families can keep their homes and California's economy won't suffer." The coalition pointed to record-high foreclosure figures indicating that California recorded over 31,000 foreclosures in March, nearly triple the number of a year earlier. The CRC can be found online at http://www.calreinvest.org.

Rating agency DBRS is warning that the bankruptcy of prominent subprime mortgage lenders could lead to a change in the servicing fee on loans serviced by those companies.DBRS senior vice president Kathleen Tillwitz, who authored a new report on subprime lending, noted that there is historical precedent for bankruptcy courts to impose a mandatory increase in the servicing fee, citing a case involving bankrupt manufactured housing lender Conseco several years ago. In that case, a bankruptcy court increased the servicing fee from 50 basis points to 125 bps to facilitate the sale and transfer of the servicing asset. While the increased fee is designed to entice servicers to take over a portfolio when there are "few interested parties or a large number of delinquent loans" in a portfolio, it has the effect of leaving less money for the investors who own bonds securitized by the loans.

Class M-3 of ACE Securities Corp. Home Equity Loan Trust series 2002-HE3 has been downgraded from Baa1 to B3 by Moody's Investors Service.Moody's said losses over the past year have eroded the overcollateralization and caused credit enhancement to fall to a level that seems "too low to support the existing rating." The collateral for the deal consists of fixed- and adjustable-rate subprime mortgage loans.

Three subordinate certificates from the GSMPS Mortgage Loan Trust 2005-LT1 have been downgraded by Moody's Investors Service.The downgrades were as follows: class B1, from Baa2 to Baa3; class B2, from B1 to Caa1; and class B3, from Caa3 to Ca. The transaction consists of nonperforming loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs, virtually all of which were repurchased from Ginnie Mae pools. Moody's said the insurance covers a large percentage of any losses stemming from borrower defaults, but that "recent losses have significantly eroded credit protection."

Five tranches from three securitizations issued by Credit Suisse in 2001 and 2002 have been downgraded by Moody's Investors Service.The downgrades were as follows: CS First Boston Mortgage Securities Corp. 2001-HE30, class M-2, from A3 to Baa3, and class B, from B1 to Caa3; CSFB Mortgage Backed Pass-Through Certificates series 2001-28, class I-B-1, from Baa3 to B1, and class I-B-2, from Caa1 to Ca, and series 2002-10, class II-B-3, from B1 to Caa1. "Each tranche being downgraded has low levels of credit enhancement relative to the proportion of severely delinquent loans remaining in the pool," the rating agency said. Moody's can be found on the Web at http://www.moodys.com.

Bridger Commercial Funding, San Francisco, has implemented the Mortgage Industry Standards Maintenance Organization's Commercial Servicing Transfer Standard with Midland Loan Services Inc.The companies said this shows the business practicality of using XML to accelerate information exchange between commercial lenders and servicers and validates MISMO's approach for using a rational XML-based transaction for data standardization of commercial and multifamily mortgages. "This proof of concept was needed before other industry players would seriously join the efforts around these standards," said Dave Bodi, executive vice president for Midland. The MISMO model will now be used as "the basic foundation for all new standard transactions," he said. Bridger can be found online at http://www.bridgerfunding.com, and MISMO can be found at http://www.mismo.org.

Two classes of Ace Securities Corp. series 2005-HE2 mortgage-backed securities have been downgraded by Fitch Ratings and four classes have been placed on Rating Watch Negative.Class B-1 was downgraded from BB-plus to BB, and class B-2 was downgraded from BB to BB-minus. Class M-10 was placed on Rating Watch Negative, as were classes M-9 and M-10 of series 2006-HE1 and class M-11 of series 2006-HE2. In addition, Fitch affirmed the ratings on 30 classes from three Ace Securities deals. Fitch said the negative rating actions resulted from a deteriorating relationship between loss expectations and credit enhancement. The pool consists of adjustable- and fixed-rate, first- and second-lien residential subprime mortgage loans. Fitch can be found online at http://www.fitchratings.com.

Three savings-and-loan institutions engaged in mortgage lending ranked among the 20 top-performing thrifts in 2006, according to SNL Financial, a Charlottesville, Va.-based research firm.Downey Financial Corp., Newport Beach, Calif., ranked seventh in SNL's annual performance ranking of the 100 largest thrifts, with a score of 78.6. (FirstFed Financial Corp. ranked No. 1 with 90.9.) Tied for ninth was BankUnited Financial Corp., Miami Lakes, Fla., while IndyMac Bancorp, Pasadena, Calif., ranked 13th, SNL reported. "The rankings show how profitable it was to be in the mortgage business in 2006," said Maria Tor, a senior analyst at SNL. "However, many of the companies that did so well in 2006 are now being punished in the stock market for possibly underwriting risky loans." The company can be found online at http://www.snl.com.