Servicing

More than 10 months after a new bankruptcy law took effect, debtors' attorneys are finding new ways to create headaches for mortgage servicers, according to creditors' lawyers who spoke at the Western States Loan Servicing Conference in Las Vegas.Michael Ackerman, an attorney with Zucker, Goldberg & Ackerman in New Jersey, said that debtors' lawyers are urging debtors in bankruptcy court to sue servicers for "proof of claim" issues involving fees such as broker price opinions and inspections that are routinely required during default servicing. Because the law is new, he said servicers should consider litigation in order to have a greater say in the development of case law involving the bankruptcy statute. Being a plaintiff gives lenders more control over the facts of the case coming to court and what bankruptcy judge decides it, he noted. "Whoever hits the issue first in each district will have an overwhelming influence on the cases that come after," Mr. Ackerman said.

Eight classes from five Ameriquest Mortgage Securities Inc. home equity issues have been downgraded by Fitch Ratings.The downgrades were as follows: series 2002-3, class M-4, from B to C; series 2002-4, class M-4, from BBB-minus to BB-minus; series 2003-1, class M-3, from BBB to BBB-minus, and class M-4, from BBB-minus to BB; series 2003-2, class M-3, from BBB to BBB-minus, and class M-4, from BBB-minus to BB; and series 2003-AR2, class M-3, from BBB to BB, and class M-4, from BBB-minus to BB-minus. Fitch also assigned a DR4 Distressed Recovery rating to class M-4 of series 2002-3. In addition, Fitch upgraded two Ameriquest classes and affirmed the ratings on eight classes from the five Ameriquest deals. The downgrades were attributed to a deterioration in the relationship between credit enhancement and expected losses.

Morgans Hotel Group Co., a New York-based hospitality company that operates boutique hotels in gateway cities, has announced the issuance of $50 million in trust preferred securities in a private placement.The securities, issued through a newly established trust subsidiary, MHG Capital Trust I, have a 30-year maturity and are redeemable after five years at par. They bear interest at a fixed rate of 8.68% until October 2016, and thereafter at a floating rate of 3.25% over the London interbank offered rate. Net proceeds from the issuance will be used to pay down the company's credit line and provide financing for development and other corporate activities. The company can be found online at http://www.morganshotelgroup.com.

TMSF Holdings Inc., a Los Angeles-based residential mortgage lender, has announced the termination of its plan to convert to a real estate investment trust.The company said its board of directors voted unanimously to terminate the reorganization plan because of unfavorable market conditions. TMSF said the market conditions prevent it from satisfying the conditions necessary to carry out the reorganization.

Freddie Mac is ending its foreclosure moratorium in the Gulf Coast areas hit hardest by hurricanes Katrina and Rita, but servicers can still extend forbearance on a case-by-case basis for an additional 90 days."The year-old blanket moratorium ends August 31," the secondary-market agency told its servicers and lenders in a bulletin. "Lenders must still obtain Freddie Mac's prior approval before initiating any foreclosure actions and continue to provide relief options before pursuing a foreclosure." While conceding that there is still "much to do" in the Gulf Coast, a Freddie executive said the blanket foreclosure moratorium "helped thousands of borrowers with Freddie-owned loans cope with the financial aftermath of those storms." Freddie Mac can be found online at http://www.freddiemac.com.

Class B of GSRPM Mortgage Trust series 2002-1 has been downgraded from B to C and assigned a Distressed Recovery rating of DR5 by Fitch Ratings.Fitch also affirmed the rating on three other classes in the transaction. The downgrade was attributed to a deterioration in the relationship between credit enhancement and loss expectations. The DR5 rating reflects Fitch's expectation that the overcollateralization will be "completely exhausted" in a few months, the rating agency said. The collateral consists primarily of performing and re-performing, seasoned, mainly first-lien residential mortgage loans that were purchased by an affiliate of GS Mortgage Securities Corp. and then sold to GS Mortgage Securities.

Luminent Mortgage Capital Inc., San Francisco, has reported the establishment of a $1 billion single-seller commercial paper facility, Luminent Star Funding I, to fund its mortgage-backed securities portfolio.Gail P. Seneca, Luminent's chairman and chief executive officer, said the facility will enable the company to reduce its reliance on repurchase agreement financing and increase its access to "economical and reliable funding." Luminent, a real estate investment trust, can be found online at http://www.luminentcapital.com.

ECC Capital Corp., a real estate investment trust based in Irvine, Calif., has announced the completion of a $1.06 billion securitization of subprime mortgage loans.ECC Capital said it has sold the notes from BMAT Mortgage Asset NIM Trust, series 2006-1, representing the completion of the Bravo Mortgage Asset Trust 2006-1 securitization. The Bravo deal was a private placement with an initial closing on May 2 and prefundings on June 7 and June 30. Bear, Stearns & Co. was the sole offering agent for the notes and the certificates. ECC Capital, a mortgage finance REIT, can be found online at http://www.encorecredit.com.

Mortgage companies added 2,200 full-time employees to their payrolls in June, which could be an indication that mortgage originations are holding up better than expected.The U.S. Bureau of Labor Statistics reported Friday that employment in the mortgage banker/broker sector rose from 500,900 in May to 503,100 in June. (The May employment number was revised upward from 500,000.) Overall, mortgage industry employment is up 3% since the housing market peaked in June 2005. Four quarters later, existing-home sales are off 8.9% and new-home sales are off 11.1%. But refinancings have remained surprisingly strong and represented 42% of originations in the second quarter, according to Freddie Mac. Preliminary survey figures compiled by National Mortgage News show that second-quarter residential fundings are down about 2% from those of the second quarter of last year. The 2% decline is based on data from 30 companies, and the actual results could change dramatically as more lenders file survey figures. See the Aug. 7 issue of NMN for the full story.

Two classes of Structured Asset Security Corp. Amortizing Residential Collateral Trust series 2002-BC9 have been downgraded by Fitch Ratings.Class M4 was downgraded from BBB to BB-plus, and class B was downgraded from BBB-minus to BB. Fitch also affirmed the ratings on six classes in two SASCO ARC transactions. The downgrades were attributed to a deterioration in the relationship between credit enhancement and expected losses due to higher-than-expected delinquencies and losses and to overcollateralization that is below the target amount. Approximately 34% of the pool is more than 60 days delinquent, and in seven of the past 12 months the excess spread has not been sufficient to cover the monthly losses, the rating agency reported. The pool consists of fixed- and adjustable-rate mortgage loans secured by first and second liens.