Servicing

Genworth Financial, Richmond, Va., has teamed up with a professor at the University of Pennsylvania's Wharton School of Economics to create the U.S. Mortgage Index, a quarterly report to look at trends in residential real estate financing.The author of the report, Susan M. Wachter, said consumers and mortgage professionals "should take a look at more traditional financing tools" in the current market environment. The first report compares monthly payments for five popular low downpayment products. In her study, the pay-option adjustable-rate mortgage has the lowest first month payment, but the highest payment in month 61. The piggyback product and the 10/1 interest-only ARM also have higher payments, while the 30-year fixed-rate mortgage with single premium mortgage insurance stays level and the 30-year FRM with monthly MI has a lower payment. Genworth is the parent of a Raleigh, N.C.-based private mortgage insurer. "It's troubling that short term, adjustable-rate mortgages remain popular, even for borrowers who might not be able to afford their mortgage payment after the interest rate adjusts. This includes piggyback loans and other mortgages that lead to little equity build up," Ms. Wachter said. "With little or no equity available, refinancing has become difficult, and foreclosures are up nationwide." The report is available at http://www.genworth.com/mortgageinfo.

Eight classes from four First Franklin Financial Corp. residential mortgage-backed security transactions have been downgraded by Fitch Ratings.The downgrades were as follows: series 2001-FF2, class M-1, from AA to A, class M-2, from BBB-minus to BB, and class M-3, from BB-minus to B; series 2002-FF2, class M-2, from BBB-minus to BB-plus; series 2003-FF2, classes M-4-A and M-4-F, from BBB-plus to BBB; and series 2003-FF3, class M-4, from BBB-plus to BBB-minus, and class B, from BBB to BBB-minus. In addition, 12 classes from six deals were placed on Rating Watch Negative, and the ratings on over 200 classes from more than 20 deals were affirmed. The downgrades were attributed chiefly to "negative trends" in the relationship between delinquency and credit enhancement. The collateral for the transactions consists of subprime mortgage loans secured by first liens on residential properties. Fitch can be found online at http://www.fitchratings.com.

OceanFirst Financial Corp., Toms River, N.J., has revised its fourth quarter and full year 2006 earnings after previously revealing it failed to set aside reserves for early payment defaults for subprime loans made by its Columbia Home Loans subsidiary.OceanFirst has established a $9.6 million reserve for $148.2 million in 100% loan-to-value subprime loans originated by Columbia in 2006. OceanFirst said that Columbia's officers failed to report investor repurchase demands made as a result of early payment defaults. As a result it has discontinued originating subprime loans and "taken disciplinary action" against "certain officers of Columbia." The reserve caused OceanFirst to post a loss of $0.13 per share for the fourth quarter; it originally posted profits of $0.40 per share. For the year, it had a net profit of $1.07 per share; the original announcement was for profits of $1.59 per share.

Nine classes from four First Franklin Financial Corp. residential mortgage-backed security transactions have been downgraded by Fitch Ratings.The downgrades were as follows: series 2004-FFH1, class M-7, from BBB-plus to BB-plus, class M-8, from BB to B-plus, and class M-9, from BB-minus to C/DR4; series 2004-FFH2, class B-1, from BB-plus to B-plus, and class B-2, from BB to CC/DR2; series 2004-FFH3, class M-9, from BBB-minus to BB-minus, and class B-1, from BB-plus to B-plus; and series 2004-FFH4, class M-11, from BBB-minus to BB-minus, and class B-1, from BB to B-plus. In addition, six classes from the same four deals were placed on Rating Watch Negative, and the ratings on nearly 100 classes from eight deals were affirmed. The downgrades were attributed primarily to losses that have exceeded excess spread for at least seven of the past nine months, eroding the over-collateralization. The collateral for the transactions consists of subprime mortgage loans secured by first liens on residential properties.

Nationwide, the number of new foreclosure filings totaled 130,786 in February, down 4% from January, according to RealtyTrac.That translates into a national foreclosure rate of one filing for every 884 households. The foreclosure rate in February of this year was up 12% from February of 2006. RealtyTrac's foreclosure yardstick includes default notices, auction-sale notices and bank repossessions. But despite the month-over month improvement, 2007 still could shape up to be a troublesome year. "Based on our numbers for the first two months of 2007, foreclosure activity is running at a rate that would project to a 33% increase over 2006," said James Saccacio, CEO of RealtyTrac. The states with the highest foreclosure rates in February were Nevada, Colorado and Florida. The company can be found online at www.realtytrac.com

On Thursday morning Morgan Stanley will hold a public auction of $2.48 billion in mortgages originated by ailing subprime giant New Century Financial Corp.A source familiar with the matter said Morgan believes it has the legal right to the loans because NCFC is in default on its warehouse covenants. (Morgan is one of several warehouse lenders that recently informed NCFC that they no longer will fund its production.) Morgan is auctioning off the loans "as is" with no representations and warranties. Morgan had originally committed $2.5 billion in warehouse lines to NCFC. The source said Morgan is holding a "clean auction" in order to establish a value for the mortgages in anticipation of a "pre-packaged" bankruptcy sale of NCFC. Late last week NCFC said it will realize a $46 million loss on a deal struck with Barclays Bank PLC to settle $900 million in buyback/financing claims. NCFC, which is no longer funding loans, has been delisted by the New York Stock Exchange. It is the subject of criminal and civil investigations.

Capital Trust Inc., a New York-based real estate investment trust, has announced the closing of a $50 million senior unsecured revolving credit facility with WestLB AG.The REIT said the facility will bear interest at 1.50% above the London interbank offered rate. The company can be found on the Web at http://www.capitaltrust.com.

Freddie Mac has disclosed that it held $124 billion of securities backed by subprime home loans at the end of last year, though virtually all were triple-A rated tranches from mortgage securities deals.That accounted for about 18% of Freddie Mac's $704 billion retained portfolio. In total, nonagency mortgage-backed securities accounted for $238 billion of the retained portfolio, consisting of both prime and subprime credits. Nearly all -- 96% -- of the nonagency mortgage securities were rated triple-A, Freddie Mac said. The government-sponsored enterprise said that by most measures, its credit risk exposure remains low. The guarantee portfolio had a loan-to-value ratio of 57% at the end of 2006. Fixed-rate loans constituted 82% of the company's guarantee portfolio. Freddie can be found online at http://www.freddiemac.com.

Mortgage secondary market giant Freddie Mac lost $480 million (under generally accepted accounting principles) in the fourth quarter as losses in the market value of derivatives and the company's credit guarantee portfolio offset interest income and guarantee fee income.For the full year, Freddie Mac earned net income of $2.2 billion, up from $2.1 billion in 2005. Freddie attributed the fourth-quarter loss to a widening of option-adjusted spreads and to credit deterioration on its guaranteed loan obligation. The company's "fair-value" results, designed to strip out the volatility associated with mark-to-market changes in the value of derivatives, also weakened in the fourth quarter, with the value of net assets attributable to common shareholders declining by $200 million. However, the company said that fair value increased by $2.5 billion for the year as a whole. In a conference call with investors and analysts, chairman and chief executive Richard Syron noted that in 2006, both net income and fair value before capital transactions exceeded $2 billion, attributing the increase to growth in Freddie Mac's credit guarantee business. Investors reacted calmly to the news, with Freddie's share price edging up slightly in the hours after the data were released.

New Century Financial Corp., says it will realize a $46 million loss on a deal struck with Barclays Bank PLC to settle $900 million in buyback/financing claims.In a filing with the Securities and Exchange Commission, New Century said it will be relieved of an obligation to repurchase $900 million in loans and Barclays will accept the mortgages "as is." However, if New Century strikes a similar deal with better terms with other warehouse providers/investors, the subprime lender will compensate Barclays by offering the London bank the same terms. As part of the deal, the Irvine-based New Century has agreed to transfer the servicing of the mortgages to a third party approved by Barclays. New Century, which is no longer funding loans, has been delisted by the New York Stock Exchange. Investment banking sources told MortgageWire that the company is working on a pre-packaged bankruptcy and sale agreement but is in the very early stages of negotiations. (See the March 26 issue of National Mortgage News for more details.)