Servicing

Thornburg Mortgage Inc., Santa Fe, N.M., has priced an offering of 4.5 million shares of common stock at $27.05 per share.Thornburg said the gross proceeds of $121.7 million will be used primarily to fund adjustable-rate loans originated by the company and to buy additional ARM securities. Citigroup Global Markets Inc. was the book-running lead manager of the transaction, and A.G. Edwards & Sons Inc. acted as co-lead manager. The underwriters were granted an option to buy up to 675,000 additional shares of common stock to cover any overallotments. Thornburg, a real estate investment trust focused mainly on the jumbo segment of the ARM market, can be found online at http://www.thornburg.com.

Fitch Ratings has announced the launch of SMARTView for U.S. subprime residential mortgage-backed securities.Fitch also announced that 96 subprime RMBS transactions have been placed "under analysis" following a review of the rating agency's $454.1 billion rated subprime portfolio. Under the SMARTView system, introduced for certain structured finance asset classes in 2006, classifying a transaction as Under Analysis means that Fitch will issue a rating action within 30 days. SMART stands for surveillance, metrics, analytics, research, and tools.

The House Financial Services Committee, in a 45-19 vote, has approved a Federal Housing Administration reform bill that would encourage more mortgage brokers to market FHA loans and raise the loan limits on these federally insured mortgages.To achieve wider distribution of FHA single-family loans, the reform bill (H.R. 1852) would allow mortgage brokers to forgo an annual audit and post a $75,000 surety bond. The National Association of Mortgage Brokers maintains that the audit is an unnecessary expense that prevents many brokers from offering FHA loans to their customers. "This is a great day for consumers, as there will be broad access throughout the country for FHA loan products," NAMB president Harry Dinham said. But the Mortgage Bankers Association said it is "foolhardy" to weaken the standards for brokers at a time when mortgage defaults are rising. "Replacing the audited financial statement with a surety bond would not only remove an additional layer of protection for consumers but could also threaten the safety and soundness of FHA," MBA president John Robbins said.

The residential mortgage industry employed 484,100 workers in March, a 3.8% decline from the level of a year earlier and an indication that the subprime crisis is starting to result in permanent job losses.According to the Bureau of Labor Statistics, the industry lost 5,700 jobs from February to March. (The BLS figures represent mortgage bankers, brokers, and related jobs in the industry.) Figures compiled by National Mortgage News show that about 45 mortgage banking firms have either closed their doors or shut part of their production platforms since mid-December. The BLS can be found online at http://stats.bls.gov.

The U.S. Treasury Department has decided to discontinue the three-year note that has been used to some extent as a reference point in the mortgage market.An interpolated three-year Treasury rate will likely be used in its place, and the note has not been a major focal point for the market. "Introduced and withdrawn at the whim of the Treasury, the note never regained the prominence it once had prior to the first cancellation in 1998," said Bear Stearns in a report. Anthony Ryan, Treasury assistant secretary for financial markets, said in a May 2 report that discontinuing the three-year note "will allow Treasury to ensure large liquid benchmark issuances, better balance its portfolio, and manage the improving fiscal outlook." The Treasury plans to discontinue the note after a final scheduled auction on May 7.

Mortgage brokers and other nonbank lenders would have a fiduciary duty to their borrowers under a bill introduced by Sen. Charles E. Schumer, D-N.Y., that also holds lenders accountable for the subprime loans they fund and purchase from brokers.The bill introduced by Sens. Schumer, Robert P. Casey Jr., D-Pa., and Sherrod Brown, D-Ohio, amends the Truth in Lending Act to prohibit all lenders from steering borrowers into loans they cannot afford or repay. It also requires all originators to underwrite loans at the fully indexed rate and mandates the establishment of escrow accounts. The subprime market has been the "Wild West" of the mortgage industry, and this bill "brings the sheriff back in town," Sen. Schumer said. The senators are also calling for a $300 million appropriation to fund foreclosure prevention counseling that could help 300,000 distressed subprime borrowers. The senators are also calling on mortgage companies to voluntarily match these federal funds.

Citigroup, JPMorgan Chase, Litton Loan Servicing, and HSBC have agreed to a set of principles espoused by Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., to take early action to help subprime borrowers through loan modifications to avoid foreclosure."I commend the organizations and companies that have joined me in formulating and agreeing to these principles, and I urge others to participate," Sen. Dodd said. Under the principles, lenders and servicers should contact subprime borrowers with adjustable-rate mortgage loans to make sure they can afford the payments once the loan resets. If not, loan modifications should be explored, including switching the loan to a fixed rate or making the introductory rate permanent. The principles also call for servicers to ramp up so that loan modifications can be done on a scale needed to address the foreclosure crisis. Chase Home Loan chief executive David Lowman said his company supports Sen. Dodd's efforts to help families who are struggling with their mortgage payments. "We believe we can develop the best solutions by working with the Senate committee, our regulators, borrowers, investors, and community representatives," Mr. Lowman said. The Mortgage Bankers Association, Fannie Mae, Freddie Mac, Bear Stearns & Co., and Self-Help Credit Union also support the principles.

A key rating of Residential Capital LLC was lowered by Standard & Poor's Ratings Services after the announcement of ResCap's huge subprime-related first-quarter loss, and Moody's Investors Service and Fitch Ratings revised ResCap's ratings outlook from stable to negative.S&P downgraded ResCap's counterparty credit rating from BBB/A-3 to BBB-minus/A-3, while affirming the counterparty credit rating of its parent company, GMAC LLC, at BB-plus/B-1. "ResCap's loss was significantly worse than we had anticipated," S&P said. S&P rated ResCap's outlook as stable, but GMAC's outlook was revised from developing to negative. Moody's revised ResCap's outlook from stable to negative and said GMAC's ratings are not affected. Fitch also revised its rating outlook for ResCap from stable to negative and affirmed the company's issuer and debt ratings. The rating agencies can be found online at http://www.standardandpoors.com, http://www.moodys.com, and http://www.fitchratings.com.

Two certificates from two transactions issued by CWABS Asset-Backed Certificates Trust have been downgraded by Moody's Investors Service.Class B of series 2005-IM1 was downgraded from Baa3 to Ba3, and class B of series 2005-IM2 was downgraded from Baa2 to Ba1. Moody's also confirmed one CWABS class. The downgrades were attributed to credit enhancement levels that were deemed too low in view of projected losses. "Both transactions had a spread holiday during the first six months, delaying the buildup of overcollateralization," Moody's said. "Furthermore, loans in foreclosure and REO have significantly increased since closing." The transactions are backed by alternative-A mortgage loans.

Three certificates from two deals issued by GSAMP Trust in 2002 and 2003 have been downgraded by Moody's Investors Service.The downgrades were as follows: series 2002-HE, class B-1, from Baa1 to Ba2, and class B-2, from Baa2 to B1; and series 2003-HE1, class B-2, from Baa3 to B2. In addition, class B-2 from series 2003-HE2 was placed on review for possible downgrade, and the ratings on three certificates were confirmed. The actions were based on an "analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to the expected loss," Moody's said. The rating agency can be found online at http://www.moodys.com.