Servicing

Mortgage payment resets may result in $110 billion in foreclosure losses over several years, but this would represent less than 1% of total U.S. mortgage lending during the same period and would not significantly affect the economy, according to a study by First American Real Estate Solutions.The resets -- stemming from the conversion of low, teaser interest rates on adjustable-rate loans to higher prevailing rates -- will nevertheless hurt some families and firms involved with the riskiest loans, the company said. "Mortgage payment reset is likely to be the most important issue facing mortgage servicers and investors in the nonprime market during the next few years," said George Livermore, president of the Property Information and Services Group of The First American Corp., the parent company of First American RES. "This analysis provides helpful guidance for mortgage professionals by explaining key dynamics associated with mortgage payment reset and provides a method for evaluating risk." The study, "Mortgage Payment Reset: The Rumor and the Reality," was conducted by Christopher Cagan, director of research and analytics at First American RES. The company can be found online at http://www.firstamres.com.

Over the next two decades, the mortgage industry will need to attract $6-8 trillion of new capital to finance the housing needs of a rapidly expanding population, Mortgage Bankers Association chairman Regina Lowrie has told attendees at the MBA's annual mortgage servicing conference in Phoenix.The MBA estimates that the U.S. population, fueled by immigration and internal growth, will increase by some 70 million over the next two decades. That translates into roughly 30 million new households that will need housing, Ms. Lowrie said. Citing a Brookings Institution report, Ms. Lowrie said this population growth will require the construction of enough residential and commercial building space to double the nation's total space over the next 25 years. "That's the challenge we face with everything going smoothly," she said.

Wells Fargo Home Mortgage, Des Moines, Iowa, has announced a mail campaign to give customers affected by last year's Gulf Coast hurricanes a chance to select a repayment option that meets their personal needs.The company said the campaign was prompted by the fact that a second 90-day deferral period is about to expire. Options include a repayment plan, loan modification, a partial claim, or full reinstatement of a customer's loan. Wells Fargo said it is working with Freddie Mac and Fannie Mae "to ensure that an effective approach is taken with these customers." The company said its Consumer Credit Group launched a similar campaign in December to offer repayment options to its home equity customers. Wells Fargo can be found online at http://www.wellsfargo.com.

The class B notes issued by HarbourView CDO III Ltd., a collateralized debt obligation that includes mortgage-backed securities, has been downgraded from CCC to C by Fitch Ratings.Fitch also affirmed the rating on the class A notes. The rating agency said the deal has been technically in default since March 2005, because the principal balance of the collateral debt securities fell below the aggregate balance of the rated notes. "Fitch has determined that the class B noteholders will continue to experience an impairment of principal and interest over the remaining life of the transaction and that the current ratings of the class B notes no longer reflect the current risk to noteholders," Fitch said. HarbourView III is composed of residential MBS, asset-backed securities, commercial MBS, real estate investment trusts, CDOs, and corporate debt.

Two classes of notes issued by Mid Ocean CBO 2000-1 Ltd., a collateralized debt obligation that includes mortgage-backed securities, have been downgraded by Fitch Ratings.Classes A-2 and A-2L have been downgraded from B-minus to CCC. The rating agency attributed the downgrades to deteriorating collateral quality that has caused overcollateralization and interest coverage to fall "well below their required test levels." The transaction, a CDO managed by Deerfield Capital Management, is composed of residential MBS, commercial MBS, asset-backed securities, and CDOs. The rating agency can be found online at http://www.fitchratings.com.

LandAmerica Financial Group Inc., a real estate company based in Richmond, Va., has announced that it will restate its audited financial results for fiscal years 2000-2004 and unaudited quarterly results for the first three quarters of 2005 to correct an accounting error that resulted in a net understatement of reported earnings.The error involved the calculation of the company's policy and contract claims accrual, or claims reserve, and has no impact on the company's cash flows, LandAmerica said. The error stemmed from a misinterpretation of data in a report generated by a new claims system introduced in 1999. The misinterpretation caused claims paid to be reported to the company's actuaries "without the appropriate reduction for recoveries," LandAmerica said. The restatements will result in higher net income for all periods except 2002, with upward revisions ranging from 0.8% in the third quarter of 2005 to 25.3% in 2004, according to LandAmerica.

Wells Fargo & Co., whose home loan unit is based in Des Moines, Iowa, has reported that its managed servicing portfolio now exceeds $1 trillion in home loans and commercial mortgages serviced for others.At the end of last year, Wells Fargo said its servicing portfolio, including subservicing, totaled $1.016 trillion. Mark Oman, senior executive vice president in charge of Wells Fargo's home and consumer loan group, called the growth rate "astonishing," noting that Wells Fargo has doubled its servicing portfolio over the past five years. The company's totaled managed servicing portfolio increased 22% during 2005. Wells Fargo can be found online at http://www.wellsfargo.com.

Capital Trust Inc., a New York-based real estate investment trust, has announced the sale of $50 million of trust preferred securities through its consolidated statutory trust subsidiary, CT Preferred Trust I.The REIT said the subsidiary's assets consist solely of $51.55 million of junior subordinated notes concurrently issued by Capital Trust. The trust securities have a 30-year term, are redeemable at par on or after April 30, 2011, and pay distributions at a fixed rate of 7.45% for the first 10 years and at a floating rate of 2.65% over the three-month London interbank offered rate thereafter.

Freddie Mac is extending its foreclosure moratorium in many Gulf Coast communities for another three months, but starting March 1, servicers can initiate foreclosures in 65 counties and parishes that sustained only minimal storm damage in hurricanes Katrina and Rita.Freddie's current moratorium, which covers 120 counties and parishes in Alabama, Louisiana, Mississippi, and Texas, expires Feb. 28. "We are replacing our one-size-fits-all approach," Freddie senior vice president Janet Eakes said. "This announcement builds on our commitment and our servicers' commitment to continue to provide relief for borrowers in the worst disaster areas, while resuming normal business operations elsewhere." Freddie is extending the moratorium until May 31 in 21 counties and parishes with the most severe damage. In another 34 counties and parishes with less-severe damages, servicers must seek Freddie's approval to start a foreclosure. Freddie Mac can be found online at http://www.freddiemac.com.

Class B of Aegis Asset Backed Securities Trust, series 2003-1, has been placed on Rating Watch Negative by Fitch Ratings.Fitch also affirmed the ratings on four other classes in the transaction, whose collateral pool consists chiefly of subprime residential mortgage loans. The watchlist placement is due to monthly collateral losses that have exceeded excess spread and reduced overcollateralization, the rating agency said. "As of the January distribution date, the OC balance had declined to $1,079,166, below its current target of $3,006,562," Fitch reported.