Servicing

Fannie Mae acquired $51.1 billion in loans during January, its weakest purchase month since June of last year.According to company figures, its portfolio holdings also slipped during the month -- to $725.3 billion, a 3% decline from the previous month's level. However, compared with the level recorded in January of last year, Fannie's portfolio has fallen by a stunning 19%. The company is working its way through an $11 billion earnings restatement scandal. Currently, Congress is weighing legislation to create a tougher regulator for Fannie Mae and its rival government-sponsored enterprise, Freddie Mac. A key sticking point in the bill is the size of their portfolios. The White House and the Treasury Department are in favor of shrinkage, but Democrats and some Republicans in Congress are against it.

General Electric Co., Fairfield, Conn., has announced that it will complete its total divestiture of Richmond, Va.-based Genworth Financial, the holding company it spun off to own its former life and mortgage insurance operations.In a secondary public offering, GE will sell 71 million shares of Genworth class A common stock in the offering. In addition, Genworth will repurchase 15 million shares of class B common stock from GE at the net price per share of the secondary offering. Afterward, GE will no longer own any shares of Genworth. Genworth will not receive any of the proceeds of the secondary offering. The repurchase will close simultaneously with and be contingent upon the completion of the secondary offering. The global coordinator and bookrunner for the offering is Merrill Lynch & Co. Other bookrunners are Citigroup, Goldman Sachs & Co., J.P. Morgan, and Morgan Stanley.

The refinancing share of loan applications fell to 38.2% for the week ending February 17, according to the Mortgage Bankers Association of America.Adjustable-rate mortgages also dipped as a percentage of all applications, to 29.1% from 29.6%. Overall, loan applications increased slightly for the week due to an increase in applications for home loan purchases. However, total home loan applications were down 20% compared to the same week a year earlier.

Mortgage companies have scored a victory in the bankruptcy court for the Northern District of Illinois, according to the law firm of Stewart Chapman, Pierce & Associates.In the case of CTX Mortgage v. William Graf, the law firm had argued that a forced "reinstatement" of the loan according to a model plan was improper. The court ruled that "a confirmed plan cannot trump a presumptively valid secured claim." That reversed a lower court ruling, and the case has been remanded back to the lower bankruptcy court. The dispute centered on the amount of arrears owed by the borrower.

The Department of Housing and Urban Development has issued Mortgagee Letter 2006-05, extending foreclosure moratoriums that affect FHA loans in areas of Louisiana, Mississippi, Alabama and Florida.The moratoriums in areas hit by Hurricanes Katrina, Rita, or Wilma will be extended by an additional 120 days. The letter requires lenders to assess the status, condition, and habitability of the mortgaged property by March 31 and establish contact with borrowers to evaluate their short term and long-term plans for housing, employment repayment of mortgage debt and home repairs. If, by March 31, the borrower provides a written commitment to work with the servicer to develop a plan to resolve the mortgage delinquency, the time to initiate foreclosure will automatically be extended an additional 90 days to June 30.

Investment banking firm Friedman, Billings, Ramsey Group lost $170.9 million in 2005, with a previously disclosed write-down of its mortgage-backed securities portfolio serving as the main cause of the company's disappointing results.Friedman, Billings, Ramsey said that write downs and losses in the company's MBS and merchant banking portfolios totaled $261.6 million in the fourth quarter. The breakdown of those losses included $180.1 million in write downs, net of hedging gains, related to the MBS portfolio; $7 million of realized losses on MBS; and $74.5 million recognized in the write-down of nine equity investments to reflect "other than temporary" impairments in the merchant banking portfolio." Also contributing to FBR's weakness in the fourth quarter was a $15.5 million loss at First NLC Financial services, a wholly owned non-conforming mortgage lending subsidiary of FBR.

A study conducted by the National Association of Consumer Bankruptcy Attorneys claims that 97% of consumers seeking relief under the new law are unable to repay debts.The NACBA says the reforms enacted last October "are not working as intended." According to NACBA, 61,355 consumers have been seen by credit counseling firms since the new law took effect, and almost all of them were unable to repay any of their debts. The analysis also claims that four out of five would-be filers were forced into financial difficulty by "circumstances beyond their control," such as a job loss, divorce or the death of a spouse, or catastrophic medical expenses. Brad Botes, executive director of NACBA, said the new law has "put new hurdles in the path of people who are already flat on their back."

Fitch Ratings has unveiled a new Web portfolio management tool, Fitch Alert Surveillance Tracker.Fitch said that FASTracker allows investors to monitor how new research and performance data are affecting asset backed bonds, including residential and commercial mortgage-backed securities. The service allows users to build a portfolio of Fitch rated structured finance bonds, set customized performance triggers, and receive e-mail alerts when a trigger is breached. Jayme Laurash, managing director at Fitch, said FASTracker allows investors "to capture performance trends as they are happening, and not after the fact."

Combined earnings of the 12 Federal Home Loan Banks totaled $2.4 billion in 2005, up 25% from 2004, according to preliminary report by the FHLBank's Office of Finance.The un-audited 2005 results show that advances rose 7% to $620 billion and investments grew by 18% to $259 billion. However, holdings of one-to-four family loans purchased from FHLBank members declined by 8% to $105 billion. "Net income increased in 2005 over 2004 due to higher interest income on advances and investments as a result of increased volume and higher yields," the Office of Finance said.

Bank of America will restate earnings going back to 2002 to adjust for the accounting of certain derivative transactions related to hedging interest rate risk and foreign exchange exposure.The adjustments, which pertain to Financial Accounting Standard 133, will increase earnings by $345 million over that period. Bank of America said its financial strength will not be adversely affected by the restatement. Alvaro de Molina, chief financial officer, said in a statement, "The interpretations of how to apply FAS 133, a quite complex standard, continue to evolve." Bank of America's review of recent interpretations of the accounting rule led Bank of America to decide that certain of its hedges did not warrant "short cut" treatment under FAS 133, he said. In those cases where the short cut method didn't apply, Bank of America decided it had to run fluctuations in the value of hedging instruments through its earnings statement.