Servicing

New foreclosures in Massachusetts recorded in May were more than double those of a year earlier, according to ForeclosuresMass, Framingham, Mass.The company said 1,613 foreclosures were recorded in May, 105% higher than the level of a year earlier and 165% higher than that of May 2004. "We expected foreclosure rates to increase again this year, but the levels we are tracking outdistance our earlier predictions," said Jeremy Shapiro, president and co-founder of ForeclosuresMass. "It is clear that many homeowners, especially those with adjustable-rate mortgages, are being pushed closer to the edge as interest rates rise at such a consistent clip. We may be witnessing a 'perfect storm' scenario where a flat real estate market, higher interest rates, rising energy costs, and specialty loans are causing significant difficulty for thousands of Massachusetts property owners." The company can be found online at http://www.foreclosuresmass.com.

Foreclosure activity is surging in several Western housing markets, partly as a result of "high-risk mortgages," according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm and publisher of foreclosure information.The company said Los Angeles County reported over 14,000 notices of default as of June 22, with over 700 properties that have gone to foreclosure. Foreclosure activity is also rising sharply in Denver and Phoenix, according to Alexis McGee, president of ForeclosureS.com. "Interest-only loans and so-called option adjustable-rate mortgages with very low initial rates and high negative amortization are financial time bombs," Mr. McGee said. "When these loans reset to full amortization and market rates, the payment shock to homeowners is severe." The company can be found on the Web at http://www.foreclosures.com.

RealtyTrac, an online foreclosure marketplace based in Irvine, Calif., has reported that the number of new properties in some stage of foreclosure rose about 2% in May.The company's U.S. Foreclosure Market Report indicates that 92,746 new foreclosure properties were added to the rolls in May. "Our May numbers echo the recent report by the Mortgage Bankers Association, which noted that delinquency and default activities were lower in the first quarter of 2006," said James J. Saccacio, RealtyTrac's chief executive officer. "While our report confirms that the number of properties entering foreclosure is still significantly higher than it was during the same period of 2005, we've now seen two months of decreasing foreclosure rates followed by May numbers that were essentially flat. That three-month trend indicates foreclosure activity has stabilized in most housing markets across the country after spiking sharply at the beginning of the year." The company said Colorado recorded the highest foreclosure rate of any state for the third consecutive month in May, jumping 13% (to 4,198 new foreclosures) from April's level. RealtyTrac can be found online at http://www.realtytrac.com.

Many of the nation's hottest housing markets are cooling, but the strength of the economy is balancing the risk of price declines in the nation's 50 largest housing markets, according to PMI Mortgage Insurance Co., Walnut Creek, Calif.The average score in the PMI U.S. Market Risk Index rose from 287 to 288 in the second quarter, the company reported. This means the company's estimate of the probability of experiencing a home price decline in the next two years has risen from 28.7% to 28.8% in the 50 largest metropolitan statistical areas. According to the index, there are now 13 markets with a greater than 50% chance of price declines over two years, down from 14 in the first quarter. "This quarter's data signals that in many areas the expansion of the housing balloon has slowed substantially," said Mark Milner, chief risk officer of PMI Mortgage Insurance. "The Risk Index also shows that slowing price appreciation is balanced by underlying economic strength. In the absence of an unexpected economic shock, this makes a gradual cooling of the market the most likely outcome." PMI can be found online at http://www.pmigroup.com.

Freddie Mac has reported that its retained mortgage portfolio declined by $700 million, to $723.1 billion, in May.The government-sponsored enterprise is under intense pressure from the Bush administration and regulators to slow the growth of its portfolio while it fixes its accounting and internal control systems. So far this year, Freddie has increased the size of its portfolio by 4.4%, whereas last year the portfolio grew by 9%. Meanwhile, Freddie Mac's issuance of mortgage-backed securities slowed in May to $25.4 billion from $26.6 billion in April -- probably reflecting an overall decline in mortgage originations. In January, Freddie issued $33.7 billion in MBS.

Two tranches of GSAMP Trust 2004-SEA2 have been downgraded by Moody's Investors Service, and two other tranches have been placed on review for possible downgrade.Class B-1 of the transaction was downgraded from Baa3 to Ba3, and class B-2 was downgraded from Ba1 to Caa3. Classes M-4 and M-5 were placed on review for possible downgrade. Moody's also upgraded one tranche issued by GSAMP Trust 2003-SEA2. The negative rating actions were based on a "rapid deterioration" of overcollateralization caused by accelerating losses, Moody's said. "From March to May of 2006. the transaction incurred nearly $4 million in losses," the rating agency reported. The deal consists of seasoned subprime mortgage loans, some of which experienced delinquency prior to securitization. Moody's can be found online at http://www.moodys.com.

Fitch Ratings has upgraded the residential primary servicer rating of National City Home Loan Services, Pittsburgh, from RPS2-minus to RPS2 for alternative-A and subprime loans.In addition, Fitch raised National City's special servicer rating from RSS3-plus to RSS2-minus. The primary servicer ratings are based on the company's "experienced management team, commitment to technology enhancements, and solid internal control environment," Fitch said. The special servicer rating reflects its "reliable default management and asset liquidation methodologies," the rating agency said. Fitch can be found online at http://www.fitchratings.com.

Two tranches of RFC's RFSC series 2003-RP1 Trust have been downgraded by Moody's Investors Service.Class M-2 was downgraded from A2 to Baa1, and class M-3 was downgraded from Baa2 to B3. The downgrades were attributed to "high and rapidly rising levels of cumulative loss," a large proportion of severely delinquent loans, and "significant deterioration" of overcollateralization in recent months. The underlying collateral consists of subprime and re-performing residential mortgage loans. Moody's can be found online at http://www.moodys.com.

Barclays Bank PLC, London, has announced an agreement to acquire the U.S. subprime mortgage servicing business of HomEq Servicing Corp. from Wachovia Corp., Charlotte, N.C., for a total consideration of $469 million.The consideration represents net book value for the mortgage servicing rights and fixed assets "and $209 million in respect of advances, the collection of which is fully indemnified by Wachovia," Barclays said. The consideration is subject to an adjustment mechanism based on the value of the MSRs and advances at the closing of the transaction. The company said the acquisition will expand the capabilities of the growing U.S. mortgage securitization franchise of Barclays Capital, the bank's investment banking division. Barclays Capital can be found on the Web at http://www.barclayscapital.com.

Moody's Investors Service has downgraded one subordinated tranche from a mortgage-backed securitization issued by Credit Suisse First Boston Mortgage Securities Corp. in 2001.The downgrade of class M-2 of series 2001-HE25 from A2 to Baa1 "is based on the fact that the bonds' current credit enhancement levels, including excess spread, are low compared to the current projected loss numbers for the current rating level," Moody's said. The rating agency can be found on the Web at http://www.moodys.com.