Servicing

NovaStar Financial Inc., Kansas City, Mo., has announced the completion of a $2.43 billion securitization by its subsidiary NovaStar Mortgage.NovaStar Mortgage retained the M-11, M-12, and class C certificates of the transaction, NovaStar Mortgage Funding Trust, series 2005-3. Class C has a notional amount of $2.5 billion and entitles NovaStar to excess and prepayment penalty fee cash flow from the underlying loan collateral and serves as overcollateralization, the company said. The lead managers of the transaction are RBS Greenwich Capital, Wachovia Securities, and Deutsche Bank Securities. NovaStar Mortgage can be found on the Web at http://www.novastarmortgage.com.

Two Illinois law firms specializing in mortgage creditor's rights have announced that they will merge as of Oct. 1.Shapiro & Kreisman LLC and Fisher and Fisher, Attorneys at Law, PC said the new firm will operate as Fisher and Shapiro LLC and maintain its principal office in Northbrook, Ill., as well as an office in Chicago. Elizabeth Kaplan Meyers will be the managing attorney for the combined operation. Gerald Shapiro, a partner in the new venture, said the merger is "a natural move for both of our firms, as the legal needs of our clients continue to require increased investment in technology as well as the retention of highly experienced attorneys and staff."

New mortgage products in the U.S. housing market may hold greater risk for borrowers and for financial institutions holding more of the new products on their balance sheets, according to Fitch Ratings.Alternative products such as interest-only, option adjustable-rate, and alternative-A mortgages are still low-risk assets, but they carry higher credit risk than traditional mortgages and could bring greater credit losses for banks and finance companies, Fitch said. "With higher-yielding assets gradually being replaced by lower [-yielding] ones, financial institutions have struggled to maximize net interest margin in the current low-rate environment," said Marc Yaklofsky, a director in Fitch's financial institutions group. "As a result, banks and consumer finance companies have retained a greater proportion of mortgage loans, especially alternative mortgages, on their balance sheets, particularly as commercial and industrial lending has been challenged." Increased credit risk from retained alternative mortgages will probably not have "a debilitating effect" on the stability of financial institutions, the rating agency said, adding that it will nevertheless look to capital levels and earnings diversification as "possible mitigating ratings factors." Fitch can be found online at http://www.fitchratings.com.

Subprime giant New Century Financial Corp., Irvine, Calif., trimmed its earnings forecast for the year on Friday, its share price falling at least 7% to a new 52-week low.New Century, the nation's second-largest subprime lender, revised downward its earnings-per-share guidance from a range of $8.25-$9.00 to $7.25-$7.75. The company cited continued margin compression in its subprime residential business as the chief reason for the lower earnings projections. It also said the revised guidance does not reflect the impact of potential weather-related losses in the Gulf Coast region, which it said "could be significant." A few weeks ago, New Century closed its commercial mortgage business without explanation.

The Federal Home Loan Bank of Dallas has established a $5 million Disaster Relief Grant Program to assist recovery efforts in the wake of Hurricane Katrina.Although the program is aimed chiefly at addressing the housing and community investment needs of devastated communities in Louisiana and Mississippi, the FHLBank said the grants may also be used to support hurricane-displaced residents in other locations in its five-state district. The grants, which will be awarded through the bank's member institutions, can be used for rehabilitation, construction, working capital, and infrastructure development as well as principal reduction and downpayment and closing cost assistance for single-family homebuyers. The FHLBank said it will also donate $100,000 to disaster relief on behalf of its members and $45,000 raised through an employee and director matching contribution program.

Hurricane Katrina was the hot topic Wednesday at the opening general session of the 18th Annual New England Mortgage Banking Conference in Providence, R.I.Lawrence K. Fish, president and chief executive officer of Citizens Financial Group Inc., said Congress is expected to appropriate $250 billion toward the disaster in 2006, which would be a huge stimulant for the economy. Regarding the existence of a housing bubble, Mr. Fish said Katrina is "manageable" and that there is no major short-term collapse in sight. "This stimulant will mean higher long-term interest rates -- I'm sorry to tell you that," he told the conference, which is sponsored by the Massachusetts Mortgage Bankers Association. "I'm surprised it didn't happen sooner. I expect there will be a gradual slowing of the real estate market."

Safeguard Properties Inc., a privately held mortgage field services company based in Brooklyn Heights, Ohio, has announced that it will donate $500,000 in disaster relief for victims of Hurricane Katrina.In addition to the relief donation, Safeguard said it has hosted several "industry awareness" conferences calls that drew hundreds of participants, including representatives from the Department of Housing and Urban Development, Freddie Mac, Fannie Mae, the Department of Veterans Affairs, and the Mortgage Bankers Association, as well as numerous lenders, insurance carriers, field services vendors, and financial service institutions. It has offered to continue the conference calls on a regular basis for the duration of the crisis. Safeguard provides services such as property preservation, inspections, valuations, title, and real-estate-owned and asset management services. The company can be found online at http://www.safeguardproperties.com.

Losses on residential mortgage-backed securities loans secured by properties affected by Hurricane Katrina are not likely to be substantial for RMBS rated by Fitch Ratings, according to the rating agency.Fitch said it has reviewed all its rated RMBS transactions for which loan-level data were available -- totaling $475 billion -- and found that only about 0.65% of the outstanding balances are secured by properties in areas declared to be "individual assistance" disaster areas by the Federal Emergency Management Agency. "Given that the areas affected by the flooding and hurricane damage represent a smaller area than the FEMA-designated disaster areas, Fitch believes that losses on the 0.65% exposure will not be substantial," the rating agency said. Fitch also reported that 72% of the approximately $3 billion of loans in such areas consist of subprime product, 15% prime, 9% alternative-A, and 4% "scratch-and-dent" and manufactured housing loans. About 72% of the $3 billion of loans are located in Louisiana, 15% in Alabama, and 12% in Mississippi.

The Cincinnati Federal Home Loan Bank has established a $15 million fund to provide housing assistance for persons displaced by Hurricane Katrina."Given the success of our affordable housing delivery system, our board determined we are uniquely qualified to make a difference in the lives of thousands of displaced residents in critical need of permanent housing within our FHLBank district," said board member Charles Koch, chairman of Charter One Bank NA, Cleveland. The American Red Cross estimates that 33,000 Gulf Coast residents will be temporarily or permanently relocated in Kentucky, Ohio, and Tennessee, which are served by the Cincinnati FHLBank. The government-sponsored enterprise is required to contribute 10% of its earnings each year to fund affordable housing projects. However, the $15 million Katrina fund is "over and above" the congressionally mandated AH set-aside, according to the FHLBank's president, David Hehman.

Freddie Mac is providing additional services to credit unions under a newly restructured alliance with the Credit Union National Association.Under the new agreement, Freddie will provide a special account management team for CUs and it will provide secondary-market execution for single-loan transactions. "Other advantages include implementation and transaction fee discounts for Web-based Mortgagebot with the Loan Prospector business-to-consumer website," Freddie and CUNA said. Mortgagebot is a Web-based loan origination portal. CUNA first entered into an alliance with Freddie in 2002. CUNA senior vice president Wes Miller said the alliance provides CUs with much-needed flexibility to originate mortgages. "Through Freddie Mac, credit unions will have affordable lending solutions to meet the needs of low- and moderate income borrowers," he said.