Servicing

Foreclosure sales jumped 27% in California last month and now represent 15% of home sales in the state, according to Foreclosure Radar, a foreclosure listings and software company based in Discovery Bay, Calif.The company reported that 5,316 California foreclosures were sold at auction in March, representing a 264% increase in foreclosure sales over the past six months. Of the $2 billion worth of properties sold in March, 4,796 ($1.82 billion) went back to the lender after receiving no bids, the company said. "Foreclosures sold at auction now account for 15% of all home sales in California and continue to rise," said Sean O'Toole, founder and chief executive officer of Foreclosure Radar. "This isn't just a story about failing subprime lenders and their customers. At the current pace, foreclosures will be a significant part of the real estate economy." The company can be found on the Web at http://www.foreclosureradar.com.

Mortgage companies added 3,000 full-time employees to their payrolls in February after laying off 16,400 workers over the previous three months.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banking/broker sector rose from 488,300 in January to 491,300 in February. Considering the meltdown in the subprime sector, the sudden hiring may be explained by increasing demands on servicers to deal with rising delinquencies and foreclosures. The subprime default rate hit 10.52% in January, up 40 basis points in one month, according to a recent report by the investment banking firm Friedman, Billings, Ramsey & Co. Defaults on alternative-A loans rose to 1.86% in January, up 20 bps in one month.

CitiMortgage has renewed its partnership with America's Community Bankers' for-profit subsidiary to continue providing ACB members with secondary-market execution and services."This agreement rewards our members for delivering high-quality loans, giving them a competitive edge in the marketplace," said William Kroll, ACB Business Partners president and chief executive. In other news, ACB has appointed Barbara L. Shyoff to be senior vice president/ legislative counsel and run the trade group's lobbying shop. She was previously special counsel in the Office of Thrift Supervision's regulation and legislation division.

RealtyTrac, an online marketplace for foreclosure properties, has announced a redesign of Yahoo! Real Estate Foreclosure Center that integrates three key functions: foreclosure searches, trend analysis, and education about buying properties in foreclosure.In the current slowing real estate environment, potential buyers can realize substantial discounts on homes that are in foreclosure while helping out homeowners in default and cutting costs for foreclosing lenders, RealtyTrac said. The redesign "incorporates some of the most advanced tools and analytical features from RealtyTrac, and is a major leap forward in providing millions of consumers who access Yahoo! Real Estate with data on foreclosures," said James J. Saccacio, chief executive officer of RealtyTrac. The company can be found online at http://www.realtytrac.com, and the Yahoo foreclosure center can be found at http://realestate.yahoo.com/foreclosures.

Lenders are already using a number of tools to help financially stretched borrowers avoid foreclosure, but these cases need to be addressed individually rather than with a blanket moratorium, according to the Mortgage Bankers Association.Lenders and servicers have developed loss mitigation tools to help borrowers who are at risk of losing their homes, MBA chairman John Robbins said in response to calls for an immediate six-month moratorium on foreclosures. Mr. Robbins acknowledged that a credit crunch in the subprime market has left some borrowers "trapped" and unable to refinance into a more affordable loan. "They are trapped, and we are doing everything we can to help them, including looking at new products designed to help troubled borrowers," Mr. Robbins said. Four civil rights groups have called for a moratorium. Allen Fishbein, director for housing policy at the Consumer Federation, said "unprecedented action" is needed. "We certainly think the situation is serious enough that it warrants consideration of all possible solutions, including a moratorium," he said.

Civil rights group are calling for an immediate six-month moratorium on foreclosures so that borrowers with subprime hybrid mortgages can transition to a more affordable loan product."If lenders, servicers, Wall Street, and policymakers allow the flood of subprime foreclosures to continue rising unchecked, years of economic progress in communities of color will be wiped out," NAACP Washington bureau director Hilary Shelton said. The Leadership Conference on Civil Rights, the National Fair Housing Alliance, the National Council of La Raza, and the Center for Responsible Lending joined the NAACP in calling for a moratorium. These groups contend that subprime lenders targeted minority communities with reckless and unaffordable adjustable-rate 2/28 mortgages, and now the borrowers are losing their homes on a massive scale. "Those responsible for these mortgages have a duty to fix the broken product they sold just like everyone else," CRL president Mike Calhoun said. "The industry must work quickly."

Fannie Mae says it will reduce its work force by several hundred full-time employees as part of an effort to cut operating expenses by $200 million in 2007."While determinations are still being made as we undertake this restructuring, we anticipate that the company will have several hundred fewer full-time employees at the end of this year," Fannie spokesman Brian Faith said. The publicly traded company has 6,500 full-time employees, and its operating expenses have ballooned in the aftermath of an accounting scandal that has forced it to restate earnings. Now the government-sponsored enterprise is trying to catch up and file timely financial reports with the Securities and Exchange Commission. Fannie's administrative expenses totaled $3.1 billion in 2006, including $850 million in costs associated with the restatement process and related regulatory examinations, investigations, and litigation defense, according to a Feb. 27 SEC filing. The GSE also wants to cut back on contractors who are working on the restatement process. Fannie Mae can be found online at http://www.fanniemae.com.

Collateralized debt obligations issued in 2005 and 2006 will come under greater ratings pressure as stresses continue in the subprime market because they have substantially larger concentrations of subprime residential mortgage-backed securities, according to Fitch Ratings.Ratings volatility stemming from later-vintage subprime RMBS will likely occur in 12-18 months as the actual loss experience becomes clearer, according to Fitch senior director Derek Miller. "Though 2006 performance will be very poor, Fitch's more immediate concerns focus on near-term ratings volatility that will arise from earlier vintage subprime RMBS," Mr. Miller said. "Negative selection among borrowers due to prepayments is occurring simultaneously with the release of credit enhancement due to RMBS performance triggers passing, against the backdrop of a slowdown in the U.S. housing market." The rating agency can be found online at http://www.fitchratings.com.

The senior unsecured debt and preferred stock ratings of New Century Financial Corp. have been downgraded to D by Standard & Poor's Ratings Services.The debt had previously been rated CC, and the stock had been rated C. New Century's counterparty credit rating was lowered from CC to D on March 12, S&P said. "The latest rating action follows New Century's announcement that it has filed for Chapter 11 bankruptcy protection in light of continuing financial difficulties," the rating agency said. "Upon a bankruptcy filing, the 'D' category is used when we believe that payments on an obligation are jeopardized even though no payment default has yet occurred." S&P can be found online at http://www.standardandpoors.com.

Eleven tranches from five deals issued by Option One Mortgage Loan Trust have been downgraded by Fitch Ratings, and five classes have been placed on Rating Watch Negative.In addition, Fitch has affirmed the ratings on 156 classes from 18 Option One deals. The negative rating actions were attributed to a deterioration in the relationship between credit enhancement and loss expectations. The transactions consist of fixed- and adjustable-rate, conforming and nonconforming mortgage loans secured by first or second liens.