Servicing

RealtyTrac, an online foreclosure marketplace based in Irvine, Calif., has reported that the number of new properties entering some stage of foreclosure fell 5% in June, although it was still higher than that of a year earlier.The company's U.S. Foreclosure Market Report indicates that 88,195 new foreclosure properties were added to the rolls in June, down 17% from the level recorded in June 2005. "New U.S. foreclosures dropped to their lowest level of the year in June, despite some of the sensational and misleading figures that we've seen reported recently," said James J. Saccacio, RealtyTrac's chief executive officer. "We think it's irresponsible to present falsely inflated numbers to the media for commercial gain as we've seen happen recently. The fact is that most states, with the notable exception of California, Ohio, and Nevada, reported decreased numbers of foreclosure filings in June." The company said Colorado recorded the highest foreclosure rate of any state for the fourth consecutive month in June, although it actually declined 12% from the level in May. RealtyTrac can be found online at http://www.realtytrac.com.

Freddie Mac has announced the selection of JPMorgan Worldwide Securities Services to provide transaction processing and recordkeeping services for its approximately $700 billion portfolio of mortgage-backed securities and short-term assets.Freddie Mac said the decision to outsource the functions is part of an effort to upgrade its technological capabilities and streamline its operating infrastructure. JPMorgan Worldwide will provide administrative and settlement services for Freddie's estimated $700 billion retained portfolio of longer-term assets (chiefly Freddie Mac-issued MBS) and an estimated $70 billion liquidity and contingency portfolio of short-term assets, the government-sponsored enterprise said. Freddie senior vice president Joseph Rossi said the move would simplify the company's operating environment and enable it to manage its investment assets at the Federal Reserve Bank and the Depository Trust Co. more efficiently. He praised JPMorgan's "state-of-the-art systems," scalable infrastructure, and technology management experience with governments and central banks. The companies can be found online at http://www.freddiemac.com and http://www.jpmorgan.com.

National City Corp., Cleveland, took a $115 million hit in the second quarter due to hedging losses on its residential servicing portfolio.The company -- which is contemplating exiting the subprime business -- has taken $243 million in servicing-related hedging losses so far this year. The entire bank, overall, earned $473 million in the quarter, but its A-paper mortgage unit lost $52 million. Its residential subprime business, though, had a strong second quarter, posting a $148 million profit. (Its net mortgage profit for the quarter totaled $96 million.) NatCity has adopted a policy of selling into the secondary market all subprime loans funded by its First Franklin Financial affiliate. During a conference call on July 18, company officials blamed the hedging losses on the implementation of a new model to estimate mortgage loan prepayments. In a statement, it notes that prepayments "are a significant factor" in determining the asset value of mortgage servicing rights. Even though the bank may sell First Franklin, it called the company a "fabulous" business.

One class of MASTR Second Lien Trust 2005-1 mortgage pass-through certificates has been downgraded by Fitch Ratings, and two classes have been placed on Rating Watch Negative.Class M-10 was downgraded from BB-minus to B, and classes M-8 and M-9 were placed on watch. The downgrade and Rating Watch placements were attributed to the failure of overcollateralization to reach the target amount, Fitch said. "The slow OC growth is a result of deterioration in the dollar amount of excess spread due to much faster-than-expected prepayments and rising interest rates," the rating agency said.

One class of SACO I Trust second-lien mortgage-backed securities has been downgraded by Fitch Ratings, and four classes have been placed on Rating Watch Negative.Class B-4 of series 2005-2 was downgraded from BB to B, and the following classes were placed on watch: class B-3 of series 2005-1, class B-3 of series 2005-2, class B-4 of series 2005-3, and class B-4 of series 2005-4. The downgrade and Rating Watch placements reflect a decline in overcollateralization and a belief that the OC will not reach the target amounts for the five classes, Fitch said. "The OC deterioration is a result of reduction in the dollar amount of excess spread due to much faster-than-expected prepayments and rising interest rates," the rating agency said. Fitch can be found online at http://www.fitchratings.com.

Meanwhile, manufacturing-dependent Midwestern states are continuing to record foreclosure rates that are well above the national average, according to ForeclosureS.com, Fair Oaks, Calif.The investment advisory firm said the level of foreclosure activity in Chicago is more than double the national average. "The Chicago metro area as a whole posted a miniscule increase in May after a 57% jump in April, but in Cook County, the increase was about 4%," said Alexis McGee, president of ForeclosureS.com. Ms. McGee said a healthy housing market in Chicago has been enabling many financially distressed homeowners to sell their way out of foreclosure, but that this has not been the case in Michigan. "Over 10,000 homes have actually been lost in foreclosure in Michigan this year," she said. "Massive layoffs and plant closings by the major automakers have dealt a heavy blow to that state."

Foreclosure activity is accelerating in Georgia and Florida, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm.The publisher of foreclosure information said nearly 30,000 properties were in some stage of foreclosure in Florida as of mid-July, about a third of them in South Florida. Rising interest rates and a cooling housing market are causing the rise in foreclosures, according to Alexis McGee, president of ForeclosureS.com. "In Atlanta, for example, the inventory of unsold homes had grown by 28.2%, to 43,862, over the last six months," Ms. McGee said. "The foreclosure pace in Georgia is almost double what it was in May of 2005." The company can be found online at http://www.foreclosures.com.

Class M-7 of Bear Stearns Asset-Backed Securities series 2005-2 has been placed on Rating Watch Negative by Fitch Ratings.In addition, Fitch affirmed the ratings on seven other classes in the deal. The Rating Watch placement reflects a deterioration in the relationship between excess spread and monthly losses, Fitch said. "Due to faster-than-expected prepayments, the dollar amount of excess spread has been less than expected and has not been sufficient to build the overcollateralization to its target amount," the rating agency said. Fitch can be found online at http://www.fitchratings.com.

Classes M-5 and M-6 of First Franklin Mortgage Loan Trust 2003-FFH1 have been placed under review for possible downgrade by Moody's Investors Service.The actions were attributed to low credit enhancement levels relative to current loss projections for the deal, which consists of first-lien subprime residential mortgage loans. Due to credit defaults, excess spread is being used to cover losses and the overcollateralization is "eroding far below its target," the rating agency said.

Five classes of Asset Backed Securities Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings, and two classes have been removed from Rating Watch Negative.The downgrades were as follows: series 2001-HE1, class M-2, from A to BBB-plus, and class B, from BBB-minus to BB; series 2002-HE2, class B, from BBB-minus to BB-minus; and series 2003-HE1, class M-3, from BBB to BB, and class M-4, from BBB-minus to BB-minus. The two classes from series 2003-HE1 were also removed from Rating Watch Negative. In addition, Fitch affirmed the ratings on four classes in the three ABSC deals. The rating agency attributed the downgrades to a deterioration in the relationship between loss expectations and credit enhancement. The transactions consist of fixed- and adjustable-rate subprime residential mortgage loans. Fitch can be found online at http://www.fitchratings.com.