Servicing

Fitch Ratings has announced the introduction of new model-based stress criteria for securitizations involving the U.S. dollar London interbank offered rate that it says will better capture the potential effects of basis risk.Fitch said it will solicit market feedback for one month before releasing its final criteria, after which the stresses will be updated monthly. The criteria changes are likely to have the biggest effect on consumer asset-backed securities and residential mortgage-backed securities, according to Claire Mezzanotte, a Fitch managing director. Ahmet Kocagil, a managing director in Quantitative Financial Research at Fitch, said the major advantage of the new methodology is that "the basis-risk assumptions are applied uniformly over different securitized products based on past occurrences and future projections of market interest rate dynamics." The rating agency can be found online at http://www.fitchratings.com.

Freddie Mac has announced changes to the eligibility requirements for its real estate mortgage investment conduit program, starting with August settlements.Initial Interest fixed-rate Gold participation certificates with the prefixes H0 (10/20), H1 (15/15), and H2 (10/10) will now be eligible for use as assets in REMIC securities, Freddie Mac said. Freddie will also permit Initial Interest fixed-rate Gold PCs and regularly amortizing fixed-rate Gold PCs with the same coupon and term to be included in the same REMIC group. Freddie Mac said the change is aimed at offering more options for secondary-market execution for the products and, ultimately, providing more competitive rates to mortgage borrowers. The company began offering Initial Interest Gold PCs early last year. The securities are backed by loans that initially have interest-only periods and thereafter are fully amortizing. For example, the prefix H0 (10/20) identifies a 10-year interest-only period followed by a 20-year fully amortizing period.

C&F Financial Corp., West Point, Va., has announced a delay in the reporting of its second-quarter earnings, citing recently uncovered evidence that two former employees of C&F Mortgage Corp. embezzled approximately $2.2 million from the subsidiary.The parent company said its management, general counsel, external and internal auditors, and outside counsel are undertaking "a full and complete investigation" of the matter under the supervision of its audit committee. C&F Financial said it expects to release its financial results for the second quarter within about two weeks. The company can be found online at http://www.cffc.com.

Sanders Morris Harris Group Inc., Houston, has announced plans to exit the mortgage-backed agency and high-grade corporate bond businesses in New York City.The company said the move will close most of the fixed-income activities that it staffed with former Advest bond department employees at the end of last year. It estimated that its operating losses in the New York Fixed Income Division totaled approximately $2.2 million in the second quarter. SMHG said its core high-yield and syndicate activities in New York will continue, as will its Houston Fixed Income Division. The company can be found online at http://www.smhgroup.com.

Five classes from two issues of CDC Mortgage Capital Trust mortgage pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: series 2003-HE1, class B-1, from BBB to BB-plus, and class B-2, from BBB-minus to BB-minus; and series 2003-HE2, class B-1, from BBB-plus to BBB, class B-2, from BBB to BB-plus, and class B-3, from BBB-minus to BB-minus. The last two classes were also removed from Rating Watch Negative. In addition, Fitch affirmed the ratings on six classes from the two transactions. The rating agency attributed the downgrades to a deterioration in the relationship between credit enhancement and expected losses. The pools consist of fixed- and adjustable-rate subprime mortgages.

RealtyTrac, an online foreclosure marketplace based in Irvine, Calif., has reported that 272,109 properties nationwide entered some stage of foreclosure in the second quarter, a 16% decrease from the level of the previous quarter but a 25% year-over-year increase.The company's 2006 Q2 U.S. Foreclosure Market Report is based on the company's database of pre-foreclosure and foreclosure properties, which it says includes nearly 600,000 properties in more than 2,500 counties across the country. "Foreclosure filings in the second quarter of 2006 present a classic 'good news, bad news' scenario," said James J. Saccacio, RealtyTrac's chief executive officer. "A 25% increase from the second quarter of 2005 obviously isn't a positive trend. But, despite some of the sensational reports we've seen lately, foreclosure filings have actually slowed down since peaking in February." The company said Colorado, Georgia, and Texas had the nation's highest foreclosure rates in the second quarter. RealtyTrac can be found online at http://www.realtytrac.com.

Eight classes from four issues of subprime Long Beach Mortgage Loan Trust residential mortgage-backed securities have been downgraded by Fitch Ratings.The downgrades were as follows: series 2001-4 group 1, class I-M2, from BB to CCC; series 2001-4 group 2, class II-M1, from AA-minus to A-minus, and class II-M2, from BB to CCC; series 2003-1, class M-4, from BBB-minus to BB-minus; series 2003-2, class M-4, from BBB-plus to BBB, and class M-5, from BBB to BBB-minus; and series 2003-3, class M-3, from BBB to BBB-minus, and class M-4, from BBB-minus to BB-minus. The downgraded classes from series 2003-1, 2003-2, and 2003-3 were removed from Rating Watch Negative. Fitch also affirmed the ratings on 20 classes from five Long Beach transactions, and removed class M-3 of series 2003-1 and class M-6 of series 2003-4 from Rating Watch Negative. The downgrades were attributed to continued deterioration in the relationship between credit enhancement and loss expectations. "Of particular note, the performance of these transactions has also been adversely affected by a growing concentration of loans secured with manufactured homes," Fitch said.

Following on the heels of the S&P announcement, Fitch Ratings reported that it has also lowered its minimum servicing fees for U.S. residential mortgage-backed securities."The economies of scale brought about by portfolio size, advances in servicing technology, and lower default and recovery costs, as well as the increase in individual loan sizes, have reduced the costs associated with servicing residential loans," Fitch said. The new minimum fees for first-lien prime loans are: 17 basis points for jumbo fixed-rate mortgages; 20 bps for jumbo adjustable-rate mortgages; 22 bps for conforming fixed-rate loans; and 25 bps for conforming ARMs. The rating agency said it has been reviewing servicers for over 10 years to provide a standardized analysis that is part of the transaction rating process, and noted that it has been issuing servicer ratings since 1999. Fitch can be found online at http://www.fitchratings.com.

Standard & Poor's Ratings Services has lowered the minimum servicing fees required on mortgage-backed security deals containing prime residential mortgage loans.S&P said the revised minimum fees are based on surveys of mortgage loan servicers, servicing cost data provided by its Servicer Evaluations group, and changes in servicing costs relative to loan-size balances. The new minimum fees are: 17.5 basis points for prime jumbo fixed-rate loans; 20.0 bps for prime jumbo adjustable-rate mortgages; 22.5 bps for prime conforming balance fixed-rate loans; and 25.0 bps for prime conforming balance ARMs. S&P said it establishes such requirements "to attract quality servicers should the servicing function need to be transferred." The average loan servicing cost has declined as a result of technological advances, electronic commerce initiatives, outsourcing, and enhanced workflow automation, the rating agency said. In addition, industry consolidation has allowed the remaining participants to spread their fixed-cost base over a larger pool of loans. S&P can be found online at http://www.standardandpoors.com.

IndyMac Bancorp Inc., Pasadena, Calif., has reported record mortgage loan volume and record net earnings of $105 million ($1.49 per share) for the second quarter, compared with $82 million ($1.24 per share) a year earlier.IndyMac's mortgage loan production totaled a record $20.1 billion in the second quarter, up 41% from that of a year earlier, the company said. "While our mortgage volumes were at a record level for the ninth consecutive quarter, they were essentially flat compared with the first quarter, and we are redoubling our efforts to profitably gain market share," said Richard H. Wohl, IndyMac Bank's president. "In keeping with this goal, our mortgage pipeline was at an all-time record level of $12.5 billion as of June 30, up 7% from the first quarter of 2006 and up 29% year over year, boding well for our mortgage production volumes and profits for the third quarter." IndyMac can be found online at http://www.indymacbank.com.