Servicing

Rising foreclosure activity in the Southeast indicates that speculators who bought houses when prices had peaked are "simply walking away" from houses they can't sell at a profit, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm."Over 8,500 properties in Florida went into foreclosure in the month of June alone," said Alexis McGee, president of ForeclosureS.com. ".... Now, price appreciation has gone flat and even reversed slightly, and this trend is colliding with rising interest rates. People who bought at or near the market peak are being squeezed out of their homes, and speculators find themselves trapped by rising costs and negative cash flows." The company can be found online at http://www.foreclosures.com.

Ginnie Mae has announced that Section 538 guaranteed loans under the U.S. Department of Agriculture's Rural Development Multifamily Housing Program are now eligible as collateral for Ginnie's multifamily securities.Section 538 loans are used to "revitalize" Section 515 multifamily loans, which are aimed at providing housing for persons in designated rural areas who have low or moderate incomes, Ginnie Mae said. "This product will complement Ginnie Mae's existing multifamily securitization products and will enhance the availability of multifamily housing for low- and moderate-income families in rural areas," the agency said. Ginnie Mae can be found online at http://www.ginniemae.gov.

Meanwhile, ForeclosureS.com has reported that foreclosure activity in several Western markets rose sharply in the second quarter after a first-quarter dip."Year over year, at the end of the second quarter of 2006, foreclosure activity in California has increased more than 67%," said Alexis McGee, president of the Fair Oaks, Calif.-based investment advisory firm. She added that defaults were also rising in formerly hot housing markets such as Las Vegas and Phoenix, where she said more than 25% of new-home sales were going to out-of-state investors who had no intention of occupying the homes. "Now those who came late to the party find themselves squeezed by rising interest rates and resulting negative cash flows," she said.

Mortgage defaults in the Chicago metropolitan area surged in the second quarter, rising 60% from the level recorded in the first quarter, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm."As of mid-August, 17,467 homes were in some stage of foreclosure in the Midwestern region that includes Chicago, Gary, Ind., and Kenosha in southern Wisconsin," said Alexis McGee, president of ForeclosureS.com. Ms. McGee said job losses in the manufacturing sector, growing consumer debt, and rising energy costs are "putting the squeeze" on the middle class in the Midwest. The company can be found online at http://www.foreclosures.com.

Fitch Ratings has announced that its residential master servicer rating of JP Morgan Chase Bank NA/Chase Home Finance LLC has been withdrawn at the request of the servicer.The rating was RMS1, Fitch's top rating for residential master servicers. The rating agency can be found on the Web at http://www.fitchratings.com.

Countrywide has begun work on its implementation of a business rules management system by Pittsburgh-based Haley Systems Inc. to support the company's loan servicing systems.Haley has been selected by the loan servicing division of Countrywide Home Loans Inc., the principal subsidiary of Countrywide Financial Corp., Calabasas, Calif. Among Countrywide's key criteria in looking for the system, according to Haley, were: rules-authoring functionality decoupled from software development, so that business logic can be externalized from applications; a natural language interface that enables business decision-makers to manage business logic themselves using plain English rather than programming code; platform-independent high performance; and a platform-independent rules language. In addition, Haley's application will support Countrywide's heterogeneous platforms (including, for example, MS Windows, IBM AIX, and IBM AS/400). The companies can be found on the Web at http://www.countrywide.com and http://www.haley.com.

Umbrella Bancorp Inc., Chicago, has announced an agreement to sell all the capital stock of Flower Bank FSB to American Home Mortgage Investment Corp. for $16.25 million in cash.The purchase price is subject to adjustment in certain circumstances, Umbrella said. Under the agreement, Umbrella said it will use approximately $13.2 million of the proceeds from the transaction to redeem the outstanding 11% capital securities of Argo Capital Trust Co. After the deal is completed, Umbrella said it plans to engage in the mortgage banking business, acquire strategic positions in other financial institutions, and develop a corporate restructuring and workout group to assist other entities. Flower Bank is a wholly owned subsidiary of Umbrella. American Home is a real estate investment trust based in Melville, N.Y., that focuses on investing in mortgage-backed securities and mortgage loans resulting from the securitization of residential mortgage loans that its subsidiaries originate and service. American Home can be found online at http://www.americanhm.com.

Delinquencies on commercial mortgage-backed securities were down to 0.59% in July, from 0.65% a month earlier, Fitch Ratings, New York, reported.The credit rating agency said that half of the six-basis-point delinquency rate decline stems from the addition of seven new deals totaling $15.2 billion to Fitch's deal universe. The rest of the decline is due to loans becoming less than 60 days delinquent, being paid off, defeased, or liquidated and therefore dropping out of the delinquent universe. And Fitch's "seasoned delinquency index," which includes transactions with at least a year of seasoning, dropped five basis points in July to 0.77%. The rating agency also reported that multifamily properties in the 2003 to 2005 vintages represent over 75% of delinquent loans by balance in those vintages, and almost 50% of the 2002 vintage's delinquencies. This is "significantly higher" than its overall delinquency share for all vintages (30%).

Prestwick Mortgage Group, Alexandria, Va., is brokering the sale of servicing rights on two bulk mortgage packages totaling $46 million.Bids are due on Thursday, Aug. 24 for servicing rights on a $31 million portfolio of Freddie Mac and Fannie Mae loans in Indiana. The weighted average note rate is 6.089%, the average loan balance is $129,972 and the weighted average servicing fee is 0.2514%. Bids are due Wednesday, Aug. 23 on the servicing rights for a $15 million portfolio of Fannie Mae loans from Ohio. The weighted average note rate is 6.10%, the average loan balance is $73,666 and the weighted average servicing fee is 0.2634%.

A national community group has identified 10 cities, including four cities in Texas, that face the greatest risk of "rate shock" and foreclosures due to high concentrations of adjustable-rate subprime mortgages."With 60% of subprime loans set to have their interest rate change by the end of 2006, ARMs pose a huge threat to the security of individual homeowners and entire neighborhoods," according to the ACORN study. ACORN researchers used Home Mortgage Disclosure Act data to examine subprime lending in 130 metropolitan areas. They concluded that Detroit; Memphis; Jackson, Miss.; McAllen, Texas; El Paso, Texas; Laredo, Texas; Brownsville, Texas; Flint, Mich.; Springfield, Ill.; and Birmingham, Ala., have the highest concentrations of subprime loans. "Too many of our neighbors are being steered into ARMs without being given an option for a fixed rate and without being given an explanation of the risks," ACORN president Maude Hurd said. ACORN is calling for tougher regulation of lenders and mortgage brokers to protect borrowers from being placed in unsuitable loans.