Servicing

The percentage of home loans that are past due or in foreclosure showed widespread improvement in the first quarter, according to the Mortgage Bankers Association.Overall, 4.41% of home loans were at least 30-days late at the end of the first quarter, down 29 basis points from the fourth quarter on a seasonally adjusted basis, according to the MBA's National Delinquency Survey. The percentage of loans in the foreclosure process declined one basis point to 0.98% from the previous quarter. MBA chief economist Doug Duncan said a strong economy and job growth in the first quarter offset factors such as the aging of the loan portfolio, rising short term interest rates, and high energy prices that have put upward pressure on delinquency rates.

Two classes of notes issued by Phoenix CDO II Ltd., a collateralized debt obligation that includes mortgage-backed securities, have been downgraded by Fitch Ratings.Classes C-1 and C-2 have been downgraded from CCC to C. Fitch attributed the downgrades to a recent default that it expects to cause the undiscounted principal received by the notes to fall "substantially" below their current balance. The transaction, a CDO managed by Phoenix Investment Partners, is composed of asset-backed securities, residential MBS, and commercial MBS. The rating agency can be found online at http://www.fitchratings.com.

Interactive Mortgage Advisors, Denver, is brokering the sale of servicing rights on a $50 million portfolio of home loans.The portfolio consists of Freddie Mac, Fannie Mae, and private-label loans from 26 states, with the largest concentration of loans in Georgia. The average loan size is $139,283. The weighted average interest rate is 5.794% on the loans, and the weighted average servicing fee is 0.296%. Bids are due on Thursday, June 22.

A stockholder proposal critical of Countrywide's executive compensation policies received a surprisingly strong 43% support at Countrywide Financial Corp.'s annual meeting June 14.The American Federation of State, County and Municipal Employees Pension Plan said chairman and chief executive Angelo Mozilo's 2005 total compensation, which the union pegged at $160 million (including stock options), accounted for 6% of Countrywide's net income. "It is time that shareholders are given a say on whether this type of compensation is in anyone's best interests but Mr. Mozilo's," said AFSCME president Gerald McEntee. Countrywide can be found on the Web at http://www.countrywide.com.

Fidelity National Information Services Inc., Jacksonville, Fla., has announced the launch of eRelease Payload, an automated utility designed exclusively for the company's mortgage servicing package clients.The eRelease product line is an end-to-end lien release processing system, and the launch of eRelease Payload provides the added functionality of automated order placement into eRelease when the loan payoff transaction occurs, the company said. Using the utility to place orders eliminates the inconvenience, time delays, and risk of using multiple queries to aggregate order placement data. "Prior to Payload, our eRelease clients created their own upload files to place orders using multiple reports or manual entry of MSP data," said Clay Cornett, president of Fidelity National Default Solutions. "The process was cumbersome and increased our clients' exposure to potential penalties and litigation due to misplaced orders and incomplete files." FNIS can be found online at http://www.fidelityinfoservices.com.

Four classes of notes issued by Prudential Structured Finance CBO I, which are supported in part by residential mortgage-backed securities, have been downgraded by Fitch Ratings.The downgrades were as follows: classes B-1L and B-1, from CCC/DR3 to C/DR3; and classes B-2L and B-2 notes, from CC/DR5 to C/DR5. In addition, two classes were upgraded and the rating on one other class was affirmed. Fitch attributed the downgrades to "the continued expectation of low recovery estimates for several distressed securities." The transaction, a collateralized bond obligation, is supported by a portfolio of RMBS (61.3%), asset-backed securities (31.7%), and collateralized debt obligations (7%).

NovaStar Financial Inc., a residential mortgage lender and portfolio investor based in Kansas City, Mo., has announced that its subsidiaries NovaStar Certificates Financing Corp. and NovaStar Mortgage Inc. recently securitized $1.2 billion of nonconforming mortgage assets.The transaction, NovaStar Mortgage Funding Trust series 2006-MTA1, offered 14 rated classes of notes with a face value of approximately $1.18 billion, NovaStar reported. NovaStar Certificates Financing LLC, an affiliate of NovaStar Mortgage, retained the M-8 and M-9 notes as well as the M-10 notes, which were not covered by the prospectus. NovaStar Certificates Financing Corp. retained the class C certificates, which entitle it to overcollateralization amounts and excess spread, and the trust certificates, which are also not covered by the prospectus. Greenwich Capital was the underwriter of the securitization. NovaStar can be found online at http://www.novastarmortgage.com.

Fannie Mae has priced $4 billion of 5.250% two-year Benchmark Notes and $3 billion of 5.375% 10-year Benchmark Notes.The two-year note (CUSIP 31359MS53) was priced at 99.963 to yield 5.27% at a spread of 26.5 basis points over the 4.875% Treasury due in May 2008. The 10-year note (CUSIP 31359MS61) was priced at 99.974 to yield 5.379% at a spread of 40.5 bps over the 5.125% Treasury due in May 2020. The joint lead managers for the two-year issue are Barclays Capital Inc., HSBC Securities (USA) Inc., and Morgan Stanley & Co. The joint lead managers for the 10-year issue are Lehman Brothers Inc., Merrill Lynch Government Securities, and J.P. Morgan Securities Inc. Fannie Mae can be found online at http://www.fanniemae.com.

Zacks Equity Research, Chicago, has made H&R Block its "Bear of the Day" -- a stock expected to underperform the markets over the next three to six months -- for June 13.Block is the parent of Option One Mortgage Corp., and recently reported earnings of $490.4 million ($1.49 per share) for its fiscal year, down from $623.9 million ($1.88 per share) for the prior year. Earnings for the quarter and the year were hurt by an after-tax charge of $6.4 million ($0.02 per share) for a restructuring of the mortgage operations. In a brief statement, Zacks said, "as expected, earnings in fiscal year 2006 were at the low end of previous guidance. Competition remains intense in the tax business, while fundamentals in the mortgage business continue to deteriorate." Zacks can be found online at http://www.zacks.com.

The values of U.S. commercial real estate properties in coastal areas may suffer -- and affect commercial mortgage-backed securities -- as insurance companies reduce loss exposure to hurricane-prone areas, according to Fitch Ratings.Joseph Kelly, a Fitch senior director, said CMBS servicers have noticed a "sharp increase" ranging from 25% to 400% in windstorm and flood insurance premiums since the beginning of hurricane season. "This may present a problem for commercial real estate properties where premium increases cannot be passed through to tenants," he said, "and in fact the resulting value decline may be severe enough so a property can no longer support its full debt service, increasing the likelihood of payment default." Besides premium hikes, insurance companies may raise deductibles, reduce coverage amounts, or drop coverage altogether, Fitch noted. "Fitch's chief concern is that windstorm insurance along coastal areas may become commercially unavailable, possibly echoing in severity the terrorism insurance issues of late 2001/early 2002," said Patty Bach, a Fitch senior director. Fitch can be found online at http://www.fitchratings.com.