Servicing

Meanwhile, foreclosures in the Southeast and the Southwest have already exceeded half of those recorded in the first quarter of 2006, according to ForeclosureS.com.Florida was the hardest-hit state in the Southeast, with nearly 11,500 foreclosure filings in January, accounting for over half the region's 20,199 filings, the company reported. In the Southwest, 50,404 foreclosure filings were recorded in January, compared with 94,631 in the entire first quarter of last year. Alexis McGee, president of the firm, said California (with 25,107 filings), Texas (with 10,296), and Colorado (with 4,968) are still among the top five states nationally in foreclosures, but noted improvement elsewhere in the region. "In Oregon, Washington, Oklahoma, and Arkansas, the numbers of filings actually are flat to down," she said. "And even in Colorado, where filings typically have gone through the roof, thus far this quarter the state's filings are less than a third of the total 16,006 for the entire first-quarter 2006."

Foreclosure filings are mounting in the Northeast, which recorded about two-thirds as many in January as in the entire first quarter of last year, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm.The company said the region could experience a surge of more than 50% in foreclosure filings this year if the pace continues unabated. Massachusetts surpassed New York in January as the state with the most foreclosures in the region, recording 4,153 filings compared with the Empire State's 3,062. "The numbers sound bleak, but there is a light at the end of the tunnel," said Alexis McGee, president of the firm. "As I've said before, the worst is over. Markets have bottomed. We're just not through yet with the aftereffects of all the people who used creative financing to buy homes beyond their means." The company can be found online at http://www.foreclosures.com.

RealtyTrac, an online foreclosure marketplace based in Irvine, Calif., has reported that new foreclosure filings rose 19% in January and were 25% higher than the level recorded a year earlier.The company's U.S. Foreclosure Market Report indicates that 130,511 new foreclosure properties were added to the rolls in January. "January's foreclosure number represented the highest monthly number we've seen since we began issuing this report two years ago," said James J. Saccacio, RealtyTrac's chief executive officer. "The month-over-month increase is similar to what we saw last January, when foreclosures shot up 27% from the previous month. However, the year-over-year increase of 25% is well below the 45% annual increase we saw in January last year." The company said Nevada, Michigan, and Georgia recorded the highest foreclosure rates in January. RealtyTrac can be found online at http://www.realtytrac.com.

Capstead Mortgage Corp., Dallas, has reported a net loss attributable to common stockholders of $16.4 million ($0.87 per share) for 2006, compared with net income available to common stockholders of $36.9 million ($1.96 per share) in 2005.Capstead attributed the loss to payment of preferred-share dividends totaling $20.3 million. For the fourth quarter, the company reported a net loss attributable to common stockholders of $2.7 million ($0.14 per share), compared with net income available to common stockholders of $33.9 million ($1.80 per share) a year earlier. The company said its financing spreads have declined significantly over the recent two-year period of rising short-term interest rates and are "only now" beginning to improve. "Although our operating results have been disappointing in the wake of this prolonged period of Federal Reserve interest rate tightening, we have remained focused on our core investment strategy of investing in a large portfolio of residential [adjustable-rate mortgage] securities," said Andrew F. Jacobs, Capstead's president and chief executive officer. Capstead can be found on the Web at http://www.capstead.com.

Fannie Mae will issue its 2005 annual 10-K financial report in August and its 2006 annual report by the end of this year, according to the mortgage company's chief financial officer.CFO Robert Blakely made the announcement during a presentation at a Credit Suisse financial services forum. The new guidance indicates that the government-sponsored enterprise is making more progress in correcting its accounting systems. Fannie Mae vice president Thomas Lund told the investors that market fundamentals have become very positive for the GSE because it stayed away from the subprime market and other risky products. Mr. Lund said he expects Fannie's mortgage securitization business to achieve steady growth and increased market share. "We are confident in our ability to grow faster than the market," he said.

Fannie Mae is working on new structures that would allow the mortgage giant to guarantee and securitize mortgages it likes (in terms of pricing and risk) and sell off the pieces it doesn't like to other investors."We tested our first structure to transfer risk to other market participants who have a different view of risk than us," Fannie executive vice president Thomas Lund told a Credit Suisse financial services forum Feb. 8. "These structures will allow Fannie to serve its customers and participate in more transactions," he said, and it works with many products, including subprime mortgages. The EVP for single-family mortgages noted that Fannie started purchasing subprime loans from a "very limited" number of its lenders last year. "We began to dip our toe in the water of subprime whole loans to determine if we could bring value to that segment of the market," Mr. Lund said. He indicated that Fannie wants to increase its involvement in the subprime market. The government-sponsored enterprise can be found on the Web at http://www.fanniemae.com.

Five classes from Ameriquest Mortgage Securities Inc. home equity issues have been downgraded by Fitch Ratings.The downgrades were as follows: series 2002-4, class M-4, from BB-minus to B; series 2003-AR2, class M-4, from BB-minus to B; and series 2003-1, class MF-3, from BBB-minus to BB, class MV-3, from BBB-minus to BB, and class M4, from BB to B. In addition, Fitch upgraded 18 classes and affirmed the ratings on nearly 300 classes from 44 Ameriquest deals. The downgrades were attributed to a deterioration in the relationship between credit enhancement and expected losses. Fitch can be found online at http://www.fitchratings.com.

The Mortgage Partnership Finance program of the Federal Home Loan Banks has announced a new partnership with the U.S. Department of Agriculture's Rural Development Program.Under the arrangement, approved FHLBanks participating in the MPF program can purchase RHS Section 502 government-guaranteed loans from qualified members, including commercial banks, thrifts, credit unions, and insurance companies. USDA Rural Development Guaranteed Loans are offered to qualifying low- and moderate-income families to purchase or refinance homes in rural areas with a population of less than 10,000 and non-metropolitan communities with populations of 10,000-25,000, the MPF reported. The partnership enables the FHLBank of Chicago, which pioneered the MPF program, and the FHLBank of Pittsburgh to buy such loans from their members as "a competitive alternative to the secondary mortgage market." The MPF program can be found online at http://www.fhlbmpf.com, and the Rural Development Program can be found at http://www.rurdev.usda.gov.

Prepayment rates for 30-year mortgages in Fannie Mae and Freddie Mac mortgage-backed securities fell modestly in January, driven by a seasonal decline in turnover that offset a 15-basis-point rally in mortgage rates, according to the Bear Stearns Prepayment Commentary.The aggregate speed on 30-year Fannie Maes was a constant prepayment rate of 11.5 CPR, down from 12.0 CPR in December, compared with 10.2 CPR for comparable Freddie Macs, down from 11.1 CPR in December, said Bear Stearns analysts Dale Westhoff and V.S. Srinivasan. "The biggest surprise in today's numbers was the decline in prepayments in higher coupons in the face of a significant rally in mortgage rates," the analysts said, noting that the rally exposed mainly newly originated mortgages backing 6.0% and 6.5% coupons. "These borrowers have seen little or no home price appreciation, reducing the cash-out incentive that has been such a critical component to the prepayment response in recent years." Meanwhile, aggregate speeds for 30-year Ginnie Mae collateral declined by 9% in January. Bear Stearns can be found online at http://www.bearstearns.com.

Anticipating a major spike in subprime second-lien delinquencies, HSBC Holdings, London, on Wednesday increased the bad-debt reserve on its U.S. B&C unit to $10.56 billion -- a stunning 125% increase from the reserve level on Sept. 30.During a Feb. 7 conference call, HSBC officials in London noted that adjustable-rate mortgage resets are set to explode -- and that most of the anticipated damage will come from residential loans funded through the wholesale/broker division of HSBC Financial, Prospects Heights, Ill. (the old Household Finance). In response to the deteriorating situation, HSBC officials signaled that the channel will be scaled back significantly, focusing only on broker-originated loans that have cross-sell or emerging market opportunities. HSBC bought Household Finance almost four years ago, agreeing to pay $14 billion for the business. In a December conference call with analysts, HSBC said it had increased the bad-debt reserve on its subprime business to $8.8 billion. According to a third-quarter Securities and Exchange Commission filing by HSBC Finance (the unit that houses HSBC Financial, the lender), the reserve was $4.64 billion. According to the Quarterly Data Report, HSBC services $51 billion in subprime mortgages, ranking seventh nationwide. In the third quarter, HSBC funded $11.7 billion in subprime loans, ranking third. (For more details, see the Feb. 12 issue of National Mortgage News..)