Servicing

Freddie Mac has announced that it will release its quarterly and full-year results for the year ended Dec. 31 before the market opening of the New York Stock Exchange on March 23.The government-sponsored enterprise said it will hold a conference call at 8:30 a.m. EDT on that date to discuss the results. Freddie Mac said in a conference call in early January that it expected to post a loss for the third and fourth quarters of 2006. The company estimated that net income would total $2.5 billion for the first nine months of 2006, up from $1.4 billion for the first nine months of 2005, but that it would report a loss of about $550 million for the third quarter. The GSE can be found online at http://www.freddiemac.com.

Congress may have to act quickly to protect subprime borrowers who are in danger of losing their homes over the next 18 months, according to Senate Banking Committee Chairman Christopher J. Dodd, D-Conn."We may need to get some forbearance or something like that to give them a chance to work through their problems," Sen. Dodd told reporters after speaking to the National League of Cities. "Clearly we are looking at what we can do to help out." Before deciding whether predatory lending legislation is needed, the committee chairman told reporters he wants to see how the subprime securities market behaves and what actions federal and state regulators take to correct underwriting standards on subprime loans. If the regulators finally do a "good job" and the market is "working well," that may be enough, Sen. Dodd said.

Mortgage Bankers Association chairman John Robbins has told an industry conference that predatory lending is the biggest and most challenging issue he has faced, but he also accused certain consumer groups of hyping potential foreclosure numbers.At the Regional Conference of Mortgage Bankers Associations in Atlantic City, N.J., Mr. Robbins specifically addressed the Center for Responsible Lending's claim of 2 million foreclosures from subprime loans. He said the largest loss in the modern history of foreclosures was in 2000, but that current foreclosures are less than half that number. Furthermore, 50% of loans using loss mitigation techniques do not enter the foreclosure process. Approximately 86% of subprime borrowers are current on their mortgages, he said. Mr. Robbins also attacked Freddie Mac's plan to require 2/28 and 3/27 loans that it purchases to be underwritten to the fully indexed rate. He said this would create a disparity in the marketplace, and would hit those who need credit the most, especially the borrowers of $1.1 trillion in adjustable-rate mortgages that are set to reset this year. Some of these borrowers will not be able to get out of the products, he said.

Residential Capital Corp., which houses the GMAC-related mortgage units, posted a $651 million operating loss in the fourth quarter due to higher delinquencies and loss severities on subprime loans.For the full year, ResCap earned $182 million, an 81% decline from its profit level in 2005. However, General Motors Acceptance Corp., which includes ResCap, earned $2.1 billion last year, a modest 9% decline from that of 2005. (Approximately $791 million of the $2.1 billion represents a one-time tax benefit.) In a statement, GMAC chief executive Eric Feldstein said, "The sharp downturn in the U.S. mortgage market in the fourth quarter posed enormous challenges for the industry as a whole -- origination volume was down, margins narrowed, delinquencies rose, and pressure on home prices intensified." According to the Quarterly Data Report, GMAC ranks 10th among subprime funders. GMAC-RFC is a major warehouse lender to subprime firms. In November, hedge fund Cerberus Capital bought 51% of GMAC.

H&R Block says it has reduced by $29.2 million the carrying value of "residual interests" in its Option One Mortgage Corp. unit due to "volatility in the mortgage market."The tax services giant said it will provide an update on Option One's sale by the end of the month. The announcement came late Tuesday. Because of the hit on Option One, Block restated its fiscal third-quarter earnings downward by $15.5 million (after tax), resulting in a $60.3 million loss in the period. The Irvine, Calif.-based Option One lost $69.7 million in its most recent quarter (ending Jan. 31), reflecting a large increase in loan-loss reserves. Option One's earnings are reported as part of H&R Block's. According to the Quarterly Data Report, Option One ranked seventh among subprime funders in the fourth quarter, originating $6 billion, a 38% decline from the volume in the fourth quarter of 2005.

Some 700,000 homes funded by subprime mortgages could return to the market in 2008 and 2009, according to an upcoming report by Lehman Brothers.Lehman economist Michelle Meyer told MortgageWire that many of the homes in question were purchased in 2005 and 2006 using stated-income, 80/20 loan combinations and no-money-down subprime mortgages. She could not offer a geographic breakdown, but said her impression is that many of the homes are in California, Florida, and Michigan. Currently, some 4 million homes are on the market. Lehman said it expects the subprime crisis to return 300,000 homes to the market in 2008 and 400,000 in 2009. She expects "fewer" to return this year. The Lehman report will be released March 16.

OceanFirst Financial Corp., Toms River, N.J., will revise earnings for 2006 because of early payment defaults at its subprime mortgage affiliate, Columbia Home Loans.On certain loans, Columbia was funding 100% of the purchase price to subprime borrowers. The Jersey shore, where OFFC funds mortgages, has experienced incredible home price appreciation the past few years. In a statement issued Monday, the federally chartered savings bank said it is evaluating how much in reserves it should set aside for EPDs. As MortgageWire went to press, no dollar amount had been mentioned. In trading, its stock fell 5% on Monday.

The New York Stock Exchange has informed ECC Capital Corp., a real estate investment trust headquartered in Irvine, Calif., that trading in the company's common stock will be suspended and the exchange will take action to delist it prior to the market's opening on March 15.On March 1, NYSE warned ECC that it had fallen below the exchange's continued listing standard related to minimum share price. NYSE requires firms to have a minimum average closing price of $1 per share during a 30-day period. ECC said it was in contact with NYSE Regulation Inc. (the Big Board's regulatory unit) regarding the noncompliance issue but was unsuccessful in its efforts to avoid suspension and delisting. ECC Capital is considering appealing the latest ruling. When the stock is suspended, ECC Capital expects it to be quoted on the OTC Bulletin Board. ECC sold its mortgage production unit in February and now exists as the holder of a portfolio of mortgage investments.

The New York Stock Exchange on Tuesday halted trading in the common and preferred stock of ailing subprime giant, New Century Financial Corp., Irvine, Calif. Investment banking sources told MortgageWire that they expect the lender to file for bankruptcy protection shortly. The non-depository REIT is the subject of a criminal probe into its accounting and recently disclosed that the Securities and Exchange Commission is now investigating the company. Late last week most of its warehouse lenders stopped financing the company. It has $40 billion in servicing rights on its books.

Countrywide Financial Corp., the nation's eighth largest subprime table-funder, has cut 108 jobs in its wholesale subprime division, citing a need to align the lender's "workforce with the recent changes in the mortgage market."The company declined to comment further and would not disclose how many of the jobs eliminated belong to account executives. Last week the Calabasas-based Countrywide disclosed that 19% of its $119 billion subprime servicing portfolio was in some stage of delinquency. According to the Quarterly Data Report, CFC ranks first among all subprime servicers, and third among lenders.