Servicing

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has announced that its residential master servicer rating of JP Morgan Chase Bank NA/Chase Home Finance LLC has been withdrawn at the request of the servicer.The rating was RMS1, Fitch's top rating for residential master servicers.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.

KeyCorp, Cleveland, has put its subprime residential lending division, Champion Mortgage, on the auction block.KeyCorp bought the subprime retail lender back in 1997, paying $289 million in stock for the company. A year later the subprime business began a severe correction that lasted about three years. In a statement, bank CEO Henry Meyer said Champion "no longer fits our longer-term strategic priorities." For years KeyCorp has refused to disclose production and servicing information on the Parsippany, N.J.-based company. In a statement it would only say that Champion has a $2.5 billion "loan portfolio." According to estimates made by the Quarterly Data Report, Champion/Key ranks 22nd among subprime servicers and 34th among funders. A few weeks back, another Cleveland bank, National City, disclosed that it might sell its subprime residential division, First Franklin.

One-third of banks expect the credit quality of their subprime and nontraditional mortgage holdings to deteriorate over the next 12 months, according to a July survey of senior loan officers by the Federal Reserve Board.But so far, the performance of those loans has been fairly steady. Over 85% of senior loan officers reported that the performance of their subprime loans and nontraditional loans is "unchanged" over the past 12 months. "Eight banks reported that the quality of their portfolios of nontraditional products performed better than had been expected, and only one institution indicated that the quality of its portfolio had performed somewhat worse than had been anticipated," the Fed said. The July survey of senior loan officers found that banks generally hold more nontraditional loans -- alt-A, interest-only and option-adjustable mortgages -- on their books than subprime credit quality loans. Only 30 banks said they hold subprime loans, compared to 48 banks taking part in the survey that hold non-traditional loans.

Class M-3 of Residential Accredit Loans Inc. 2004-QA2 has been placed under review for possible downgrade by Moody's Investors Service.The rating action was attributed to relatively low credit enhancement levels in relation to projected losses. The alternative-A deal consists of first-lien adjustable-rate residential mortgage loans. The majority of the hybrid collateral loans are still paying at a fixed rate, while the interest rate of the certificates has been increasing monthly, according to the rating agency. "As a result, the excess spread has significantly declined, causing the overcollateralization and subordinate tranches to be more vulnerable for defaults," Moody's said.

Three tranches of mortgage- and asset-backed securities containing collateral originated by New Century Mortgage Corp. have been placed under review for possible downgrade by Moody's Investors Service.The affected securities are: class B of Asset Backed Securities Corp. Home Equity Loan Trust, series 2001-HE1; and classes B-1 and B-2 of Morgan Stanley Dean Witter Capital I Inc., series 2002-NC4. The rating actions were based on low credit enhancement levels in relation to projected losses, Moody's said. "These deals are not performing as anticipated due to the increasing cumulative loss percentage, rising delinquency rates, and declining overcollateralization," the rating agency said. The underlying collateral for the deals consists of adjustable- and fixed-rate residential mortgage loans.