Servicing

Foreclosures are still soaring in Massachusetts, according to ForeclosuresMass.com, a provider of foreclosure data based in Framingham, Mass.The company said 1,812 foreclosures were recorded in August, up 72% from the level of a year earlier and 266% from that of 2004. "Foreclosures in Massachusetts continue to escalate at levels we haven't seen since the housing crash of the early 1990s," said Jeremy Shapiro, president and co-founder of ForeclosuresMass.com. "In August alone there were over 90 new foreclosures filed every business day from every corner of the state. These latest findings have prompted us to extend our forecast: we expect foreclosure rates to continue this historic climb well into next year." The company can be found online at http://www.foreclosuresmass.com.

The annualized chargeoff rate of Moody's Home Equity Index Composite rose 31.6% on a year-over-year basis in June, jumping to 1.05% from 0.80% a year earlier, according to Moody's Investors Service.The rise represents the highest rate of increase since 2001, the rating agency reported. Delinquency rates also continued their ascent in June. As a percentage of current pool balances, the 60-day-plus delinquency rate rose to 6.76%, compared with 5.86% in June 2005, while foreclosure and real-estate-owned rates rose to 2.68% and 0.97% from 2.14% and 0.72%, respectively. The findings are detailed in a new report on the Moody's U.S. Home Equity Index Composite, which tracks the aggregate performance of home equity loans backing securities rated by Moody's.

Freddie Mac acquired $42.36 billion in loans in August, a 12% increase from its July volume but a 32% decline from that of a year earlier.August was Freddie's fourth-best purchase month of the year. On a year-to-date basis, Freddie Mac had acquired $333.7 billion in mortgages. During the first eight months of last year, Freddie bought $362.2 billion. The loan purchases of Freddie Mac -- and its chief competitor, Fannie Mae -- tend to track originations in the primary market. When industry production drops, so do loan acquisitions by the government-sponsored enterprises. In August Freddie's retained portfolio totaled $706.9 billion, a slight decline from its level in July but a 4% gain from that of August 2005.

The percentage of home equity loans that were overdue fell 5 basis points to 1.89% at banks in the second quarter, the American Bankers Association has reported.The delinquency rate on home equity lines of credit also improved, falling 3 bps to 0.52%. The improvement came despite a slight increase in overall consumer loan delinquencies. ABA chief economist James Chessen said that, while consumers continue to be pressured by higher short-term interest rates and high gas prices, those pressures may ease in the third quarter. However, he said weakening housing markets will make it more difficult for consumers to use home equity gains as a source of liquidity. "It's a different world now, and consumers will need to be more careful in managing their finances." The ABA can be found on the Web at http://www.aba.com.

Wachovia Securities, Charlotte, N.C., has announced that it is forming a new wholesale lending organization by combining the American Mortgage Network with Wachovia Mortgage's third-party lending business.The new unit, Wachovia Securities Wholesale Mortgage, will be part of Wachovia's Corporate and Investment Banking Group. Charlotte Catalfo and John Robbins will be the co-heads of the new unit. Combined production from both entities totaled $19 billion last year, Wachovia said. "We have aggressive goals for our new wholesale mortgage organization, which we believe has enormous potential for production and product innovation," said Curtis Arledge, head of Wachovia's Fixed Income Division. "Our vertically integrated mortgage model leverages our capabilities in the secondary market and will help drive profitability as we meet continued global demand for mortgage-backed securities." Wachovia Securities can be found online at http://www.wachoviasec.com.

Two classes from a Credit Based Asset Servicing and Securitization LLC mortgage loan securitization have been removed from Rating Watch Negative by Fitch Ratings.The affected securities are classes 1B-1 and 1B-2 of C-BASS series 1999-CB2, group 1, the rating agency said. Fitch said the original Rating Watch placements were made pending the review of misapplied losses to the trust. As of Sept. 25, there was a recovery of more than $300,000 to the trust, the rating agency reported. Fitch can be found on the Web at http://www.fitchratings.com.

The typical processes of many servicers of residential mortgage-backed securities do not apply to reverse mortgages or must be "dramatically adjusted" to successfully service this growing niche product, according to a new Fitch Ratings report.Servicers need a "distinct ... operational focus" to adequately administer reverse mortgages (which enable senior citizens to convert home equity into tax-free income) because the products may increase risk to their operations, according to Fitch senior director Karen Eissner. "A servicer's ability to track loan balances and disbursements to borrowers, as well as monitor taxes and insurance, are vital for properly servicing reverse mortgages," Ms. Eissner said. Also desirable are specialized training on the complexities of reverse mortgages and the use of "strict timeline management" in managing loss severities, Fitch said. The report, "Servicing U.S. Residential Reverse Mortgages," is available online at http://www.fitchratings.com.

The stock of Wachovia Corp. was been downgraded from Buy to Neutral by Merrill Lynch.Merrill Lynch analyst E. Najarian said the Wall Street firm has "reassessed" its view since the acquisition announcement last year regarding Golden West Financial Corp. and now sees more earnings-per-share risk. "As the mortgage cycle slows, investors are likely to remain concerned about the EPS risk of [Golden West's] two-dimensional business mix (mainly option ARMs and CDs)," the analyst said. The Golden West deal and "the realization that Wachovia may, over time, pursue more large deals" are likely to keep Wachovia at one of the lowest price/earnings ratios among banks, Merrill said. Therefore, Wachovia deserves to trade at "about a 10% discount to our large regional bank group, which implies fair value of $56-$57," the analyst opined.

Meanwhile, ForeclosureS.com says a midsummer drop in foreclosure activity in the Midwest was only "a temporary lull."Company president Alexis McGee said the Midwest "never got caught up in the speculative frenzy" that has occurred on the East and West coasts, but that rising energy costs, higher interest rates, and an estimated 40,000 plant closures in the Midwest have created fertile ground for foreclosures. "In Cook County, for example, as of Sept. 10, almost 7,000 homes have been lost in foreclosure, but 16,111 more are in some stage of the foreclosure process," Ms. McGee reported. "Only about 28% of the city's housing stock is owner occupied. These people in the foreclosure process have a limited buyer population to whom they can sell their way out of foreclosure."

Foreclosure activity in Florida is skyrocketing and "the party's over" for real estate speculators, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm.The publisher of foreclosure information said nearly 23,000 properties were in some stage of foreclosure in Florida as of mid-September. "We've known for some time that, especially in South Florida, the market was seriously overbuilt," said Alexis McGee, president of ForeclosureS.com. "For example, there were about 25,000 condo units under construction at the end of the second quarter of 2006. That is more than have been sold in that market in the last nine years." As for speculators who "flip" properties for profit, Ms. McGee said she believes that "they have been selling to each other in Florida, rather than to end-users. Now, like elsewhere in the country, the party's over." The company can be found online at http://www.foreclosures.com.