Servicing

Servicers should not start foreclosure proceedings until a borrower has missed three monthly payments of principal and interest, according to a Federal Trade Commission attorney.That is a "key provision" in the Fairbanks settlement agreement, FTC attorney Allison Brown told a National Community Reinvestment Coalition conference. The 2003 settlement spelled out best practices that the FTC expects all servicers to follow. And the consumer protection agency said it does not want to find servicers charging delinquent borrowers a lot of fees and using those unpaid fees as justification for initiating a foreclosure. The FTC is also concerned that some forbearance agreements are unworkable, because the borrowers are expected to make double payments when they resume making their monthly payments. "That is an area we are looking at," Ms. Brown said, as well as "how we can encourage better forbearance practices."

Credit-Based Asset Servicing and Securitization LLC will pay 28% less for Fieldstone Investment Corp., Columbia, Md., under an amended purchase agreement disclosed March 16.According to a statement released by the two firms, C-BASS will pay $4 a share for the struggling nonprime lender, compared with an original purchase price of $5.53. The price is being reduced to reflect "the cost to provide Fieldstone with needed additional liquidity," the two firms said. "This additional liquidity will be provided through the sale to C-BASS, at Fieldstone's option, of securities and mortgage loans owned by Fieldstone." Announced last month, the original cost of the deal was $260 million. C-BASS is a specialty servicer controlled by mortgage insurance giants MGIC and Radian. Fieldstone is a mortgage banking real estate investment trust. It lost $37.2 million through the first nine months of last year.

Delta Financial Corp., Woodbury, N.Y., has announced the securitization of $950 million of mortgage loans through its subsidiary Renaissance Mortgage Acceptance Corp.The co-lead managers of Renaissance Home Equity Loan Trust 2007-1 were Citigroup and Banc of America Securities LLC, Delta said. The company can be found on the Web at http://www.deltafinancial.com.

Touting record new-business volume of $3 billion in 2006, the Federal Agricultural Mortgage Corp., Washington, has reported net income of $29.8 million ($2.68 per share) for the year, down from $47.0 million ($4.09 per share) in 2005.For the fourth quarter, Farmer Mac's net income totaled $7.6 million ($0.70 per share), compared with a net loss of $11.9 million ($1.04 per share) in the fourth quarter of 2005. "Farmer Mac's record business volume for 2006 was attributable principally to its marketing strategies focused on large, high-asset-quality program transactions, backed by increasing numbers of mortgage loans on farmers, ranchers, and rural homeowners," said Henry D. Edelman, Farmer Mac's president and chief executive officer. "These transactions achieve greater protection for Farmer Mac against adverse credit performance, with commensurately lower compensation for the assumption of credit risk and administrative costs, resulting in projected risk-adjusted marginal returns on equity approximately equal to those of other Farmer Mac transactions." The government-sponsored enterprise can be found online at http://www.farmermac.com.

Dozens of credit unions around the country are struggling to untangle their finances from a San Francisco mortgage banker that filed for bankruptcy last month.The Chapter 7 filing by LoriMac Inc. has caused the U.S. Bankruptcy Court to freeze millions of dollars in credit union funds, leaving thousands of credit union borrowers who had their mortgages serviced by LoriMac in the dark, according to a report in The Credit Union Journal, a sister publication to MortgageWire. Steinbeck Credit Union president Mike McHale said, "I see this as the start" of the potential for credit union exposure in the melting mortgage market. Based in Salinas, Calif., Steinbeck had more than $500,000 in mortgages serviced through LoriMac. Roughly $6,000 of its funds was frozen by the courts. It is one of 30-plus credit unions -- most of them small -- listed as creditors for the failed mortgage lender. Most, if not all, of LoriMac's business appears to have been with CUs. Its biggest CU customer was Transit Employees FCU, Washington, which had $17.2 million of its loans serviced by the company.

The rating on University Finance Pass-Through Certificates series 2006 has been downgraded from Baa1 to Baa3 by Moody's Investors Service due to the rating agency's recent downgrade of the debt rating of the University of Quebec at Montreal.The certificates were issued in connection with the construction and permanent financing of a university complex to be constructed on behalf of UQAM across from its main campus. Moody's attributed the downgrade to capital cost overruns, which contributed to a high debt burden, and concerns regarding the effectiveness of governance practices.

When the National Home Equity Mortgage Association merged into the larger Mortgage Bankers Association late last year, the MBA registered a net gain of 77 new members -- but almost half those companies have never paid dues to their new trade master.The MBA said the 37 firms in question likely failed. "They just didn't make it," said Paul Green, the MBA's senior vice president of corporate relations. Mr. Green noted that NHEMA also had its billing cycle last summer -- while the merger was under way. The deal closed in November. NHEMA had 192 members, but 115 were already members of MBA. According to figures compiled by National Mortgage News, at least 30 nonprime-related shops or wholesale platforms have shut down since last year. (See the March 19 issue of NMN for details.)

In a regulatory filing with the Securities and Exchange Commission, Cleveland-based National City Corp. says one of the two mortgage insurance companies covering its home equity loan portfolio has refused to make claims payments.Published reports identified the MI firm as Radian Group. In the SEC filing, NCC said one of the two providers has been paying claims on the lender-paid MI policies promptly, while the other "has been rejecting a reasonable number of claims filed for reasons that National City believes are inappropriate under the insurance contract." National City said that depending upon how the dispute on the MI coverage for the $2.2 billion second-lien portfolio is resolved, it may have to increase loss reserves by an amount in the range of $50 million. In the same filing, National City said the hedging of its mortgage servicing portfolio resulted in a $45 million pretax loss during the first two months of this year.

PHH Corp., Mt. Laurel, N.J., has agreed to be acquired by GE Capital Solutions, the business-to-business leasing, financing, and asset management unit of General Electric Co., in an all-cash transaction valued at approximately $1.8 billion.In connection with the transaction, GE has entered into an agreement to sell the mortgage operations of PHH, a prime mortgage originator and servicer, to an affiliate of The Blackstone Group, a global private investment and advisory firm. Under the terms of the merger agreement, PHH stockholders would receive $31.50 per share in cash at closing, representing a premium of 13.3% over the March 14 PHH stock closing price of $27.81 on the New York Stock Exchange. "We are attracted to [PHH's] platform and business model and look forward to working with the PHH Mortgage team to accelerate and enhance their strategic objectives and growth potential," said Chinh Chu, senior managing director at Blackstone. According to the Quarterly Data Report, PHH ranks 11th among mortgage servicers, with $160 billion in servicing.

Saying that the recent sell-off of Countrywide's stock is "overdone," analysts at Friedman, Billings, Ramsey and Co. recently changed their recommendation on the company to "outperform."The FBR analysts said in a report that they are confident Countrywide "will remain among the premier mortgage originators in the country." They also noted that subprime loans make up only about 10% of Countrywide's servicing portfolio. The company recently disclosed a 19% delinquency rate on subprime loans. FBR gives Countrywide's stock a price target of $45 per share.