Servicing

Natural disasters caused "a stunning $89 billion" in privately insured catastrophic losses in 2004 and 2005, and property insurance premiums have risen "from 100% to over 600%" in some coastal areas that are vulnerable to hurricanes, according to the Mortgage Bankers Association.In a white paper on natural disasters and catastrophic insurance, the MBA said there is an insurance availability and affordability crisis in some states that is also affecting commercial mortgage borrowers, lenders, and servicers. The MBA hopes the white paper will spark discussion about finding solutions to promote access to property insurance at affordable prices, MBA vice chairman Kieran Quinn said. The association can be found online at http://www.mortgagebankers.org.

Two classes of Metropolitan Asset Funding Inc. II, series 1998-B, have been downgraded by Moody's Investors Service.Class B-1 was downgraded from B3 to Caa1, and class B-2 was downgraded from Ca to C. The downgrades were attributed to credit enhancement levels that are deemed low in view of projected losses on the underlying pools. The transaction consists of subprime and seller-financed first-lien fixed-rate loans.

Twenty mezzanine and subordinate certificates from 10 home equity loan transactions issued by Structured Asset Securities Corp.'s Amortizing Residential Collateral Trusts in 2001 and 2002 have been downgraded by Moody's Investors Service.In addition, Moody's confirmed the ratings on four certificates from four SASCO transactions. The downgrades were based on the weaker-than-expected performance of the mortgage pools and the resulting erosion of credit support, the rating agency said. Overcollateralization amounts in most of the deals are below their targets, and pipeline losses could cause further depletion of the overcollateralization and put pressure on the most subordinate tranches, Moody's said. The rating agency can be found online at http://www.moodys.com.

Freddie Mac increased its purchases of private-label mortgage-backed securities by nearly 50% in 2005, while Fannie Mae's purchases fell by 50%, according to a report by the Office of Federal Housing Enterprise Oversight."Private-label MBS purchases by Fannie Mae fell 54% by $41.1 billion, while purchases by Freddie Mac jumped 49% to $180.0 billion," the OFHEO reports says. Freddie Mac is increasing it purchases of highly rated variable-rate securities, chairman and chief executive Richard Syron told a recent investors conference. "These purchases are essential to meeting our housing goals, and they also provide good financial returns," he said. The OFHEO mortgage market report also points out that combined MBS issuance by Fannie and Freddie fell 1%, to $908 billion, in 2005 -- the lowest level in five years.

Countrywide Financial Corp., Calabasas, Calif., the nation's largest residential lender, has confirmed that it will cut up to 10% of its "general and administrative" work force in the coming months.A Countrywide spokesman confirmed the job cuts to MortgageWire but could not offer a head count for the reduction. Layoffs have already begun, he said. Countrywide employs about 56,000 nationwide. He stressed that the layoffs -- which the company hopes to achieve mostly through attrition -- will not affect the lender's sales staff. One source told MW that the company has even canceled its regular practice of providing employees with free doughnuts on the last Friday of every month. (For further details, see the Sept. 25 issue of National Mortgage News.)

Wachovia Securities, which services securitized commercial mortgages and facilitates related defeasance transactions, has announced the receipt of a private letter ruling from the Internal Revenue Service that may help reduce defeasance costs for borrowers.Charlotte, N.C.-based Wachovia said the ruling expands the time period for using securities in the defeasance process, but noted that it has not been published by the IRS and "may only be relied upon by the taxpayer who requested it." In a defeasance, a borrower substitutes government securities as collateral for a loan to obtain a release of the property that originally secured the loan, Wachovia noted. Existing practice required the securities to provide a stream of payments to fund the loan's debt service within four months of receipt. The IRS letter, which Wachovia received on behalf of a client, indicates that tax rules would not be violated by using securities maturing within 12 months rather than four, the company said. T.J. Maher, a managing director in Wachovia's Municipal Products Group, said expanding the period from 120 to 365 days will expand the security combinations available to borrowers.

The use of "trigger leads" to solicit mortgage customers is raising concern among state regulators and mortgage lenders, according to William Lund, director of the Maine Office of Consumer Credit Regulation.Mr. Lund told MortgageWire that some complaints have come from mortgage lenders concerned about tactics used by competitors who receive trigger leads from credit reporting agencies. Speaking at the New England Mortgage Bankers Conference in Providence, R.I., Mr. Lund said Maine is considering whether trigger leads should be regulated to prevent misleading solicitations. Trigger leads occur when a credit reporting agency sells information about credit requests from lenders, indicating that a consumer is applying for a mortgage loan. That information, when sold to a competing lender or broker, allows the originator to contact the customer and make a competing offer. Mr. Lund said this does not necessarily violate any rules or ethics. But in some cases, brokers or lenders have been accused of calling consumers and pretending to be their current lender offering a new loan product, or pretending that a referral was made because the original lender cannot fund the loan. Those practices may violate the Federal Fair Credit Reporting Act, he said.

Fieldstone Investment Corp., a real estate investment trust that originates both nonconforming and conforming mortgages, has been given a No. 5 (Strong Sell) rating by Zacks.com, Chicago.Zacks pointed to a drop in analysts' earnings estimates for Fieldstone, which now stand at $0.84 per share, down $0.12 over the past 30 days. Fieldstone missed its earnings estimates for the second quarter by $0.04 per share, and the results were 70% below those of the same period in 2005, Zacks said. Zacks can be found online at http://www.zacks.com.

Rapidly slowing appreciation and declining affordability have produced "a marked increase" in the risk of home price declines in the nation's 50 largest housing markets, according to PMI Mortgage Insurance Co., Walnut Creek, Calif.The average score in the PMI U.S. Market Risk Index rose from 288 to 328 in the third quarter, the company reported. This means the company's estimate of the probability of experiencing a home price decline in the next two years has risen from 28.8% to 32.8% in the 50 largest metropolitan statistical areas. According to the index, there are now 18 markets with a greater than 50% chance of price declines over two years, up from 13 in the second quarter. "No one should be surprised by the slowdown we're seeing," said Mark F. Milner, chief risk officer of PMI Mortgage Insurance. "Over the past five years home prices appreciated much faster than incomes, and that can't continue forever." PMI can be found online at http://www.pmigroup.com.

John Johnson has been elected chairman of MERS, the industry-owned system for tracking ownership of mortgage loans and servicing rights.Mr. Johnson is president and chief executive officer of MortgageAmerica Inc., Birmingham, Ala. He has served as president of the Mortgage Bankers Association of Alabama and was chairman of the national Mortgage Bankers Association's Residential Board of Governors. The announcement of Mr. Johnson's election as chairman of MERS came at the organization's annual Strategic Planning Conference. MERS, based in Vienna, Va., can be found online at http://www.mersinc.org.