Servicing

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.

Class B of Soundview Home Equity Loan Trust series 2000-1 has been downgraded from BBB to BB-plus by Fitch Ratings.Fitch also affirmed the ratings on nine classes in two Soundview transactions. The downgrade was attributed to a deterioration in the relationship between credit enhancement and expected losses. The mortgage loans backing the deals consist of fixed- and adjustable-rate loans to subprime borrowers. The rating agency can be found online at http://www.fitchratings.com.

The Mortgage Industry Standards Maintenance Organization, a not-for-profit subsidiary of the Mortgage Bankers Association, has released its first data standard for the commercial/multifamily mortgage industry.The release of version 1.0 of the Commercial Servicing Transfer Standard is the first of many planned for the industry, MISMO said. It was chosen to be MISMO's first commercial standard "because it answers the industry's need for a standardized way to move large amounts of data and improve what is currently a labor-intensive process," the organization said. MISMO said its data standards will ultimately "reduce costs, streamline processes, improve accuracy, increase data transparency, and boost investor confidence in mortgages as an asset class." MISMO can be found online at http://www.mismo.org.

Homecomings Financial Network Inc., Dallas, has announced an extension (for an unspecified period) of its mortgage relief for families most affected by Hurricane Katrina.For homeowners whose homes were flooded, Homecomings said it will continue to waive fees and penalties, suspend foreclosure activity, forgo collection actions, and cease negative credit reporting. In addition, the company said it is working on a case-by-case basis to provide various assistance options, including a special loan modification program. Homecomings is a business unit of Residential Capital Corp.'s U.S. Residential Finance Group, which can be found on the Web at https://www.rescapholdings.com.

In the wake of the prime lending sector's refinance contraction, the nonprime sector has picked up and become more mainstream, accounting for 28% of total loan originations, according to a panel member at the Mortgage Bankers Association's National Mortgage Servicing Conference and Expo in Phoenix.Rick Glass, managing partner with R.T. Glass & Associates, made the comments at a panel called "Repositioning Non-Prime Servicing," where he and other sector executives shared their thoughts on key challenges and competitive strategies in this market. Michael Drawdy, senior vice president at Countrywide Financial Corp., said half of subprime ARMs will be due in the summer and over the next 14 months. "There will be some people who can't pay for an ARM change," Mr. Drawdy said. "That is why you must make sure there is a system in place for collections -- to make sure borrowers know their options." Panelists talked about repayment plans and ARM modifications aimed at helping borrowers stay in their homes. Over the next 12-24 months, there is a potential for severe delinquencies, they said.