Servicing

The risk of price declines over the next two years has increased in the nation's 50 largest housing markets, according to the latest PMI U.S. Market Risk Index, whose median risk index value rose 11.6% in the third quarter.PMI Mortgage Insurance Co., the Walnut Creek, Calif.-based mortgage insurer that created the index, said the median value increased from 120 to 134, which means the probability of experiencing a home price decline in the next two years has risen from 12.0% to 13.4% in the 50 largest housing markets. "House prices are sticky, so moving to another phase in the real estate cycle can be a slow process," said Mark Milner, chief risk officer of PMI Mortgage Insurance. "But we believe that over the medium to long term, prices will move into better alignment with local economic factors -- in particular, income." According to the index, markets with a greater than 50% chance of price declines over two years are Boston-Quincy (Mass.), at 551; San Diego-Carlsbad-San Marcos (Calif.), at 536; Nassau-Suffolk (N.Y.), at 532; Santa Ana-Anaheim-Irvine (Calif.), at 522; and Oakland-Fremont-Hayward (Calif.), at 502. PMI can be found online at http://www.pmigroup.com.

Seven certificates from three Residential Asset Mortgage Products Inc. Trust asset-backed securitization deals have been placed under review for possible downgrade by Moody's Investors Service.The affected classes are as follows: series 2002-RS1, classes M-I-2, M-I-3, and M-II-3; series 2002-RS2, classes M-I-2, M-I-3, and M-II-3; and series 2002-RS3, class M-II-3. The rating actions were based on the weaker-than-expected performance of the mortgage pools and the resulting erosion of credit support, Moody's said. "The overcollateralization in the 2002-RS1 and 2002-RS3 deals is being depleted, and pipeline losses for these deals could cause eventual losses on the most subordinate tranches," the rating agency said. "In addition, the overcollateralization in the 2002-RS2 deal has been fully exhausted and the class M-1-3 certificates have realized losses." The transactions consist of a fixed-rate pool and an adjustable-rate pool made up of mortgages that are not eligible for inclusion in Residential Funding Corp. specific loan program securitization because they do not satisfy the underlying guidelines for those programs. Moody's can be found online at http://www.moodys.com.

Citing FBI statistics showing mortgage fraud on the rise, Calabasas, Calif.-based Interthinx has announced the integration of its DISSCO fraud detection and prevention system with Fiserv's easyLender mortgage loan origination system.Loans originated in Fiserv's easyLender now can be instantly submitted to DISSCO for automatic screening, with no rekeying necessary. DISSCO (data integrity search and score system) is an electronic fraud-prevention tool that can instantly search hundreds of mortgage-related data fields in a loan record to identify and score misinformation, inaccuracies, and inconsistencies that could indicate fraud. A DISSCO report is issued with step-by-step recommendations on how to respond. Interthinx can be found online at http://www.interthinx.com.

The Department of Housing and Urban Development and the Department of Veterans Affairs are now permitting lenders to charge borrowers MERS registration fees on all FHA-insured and VA-guaranteed mortgages, according to MERS, a McLean, Va.-based electronic loan registry.R. K. Arnold, president and chief executive officer of MERS, said the agencies' new policy is significant "because it reduces paperwork for lenders and will save borrowers a few more dollars because MERS eliminates the need to prepare and record assignments." The company said HUD has instructed its Homeownership Centers of the new policy and revised its Reference Guide, while the VA has made the change in its Administration Circular 26-05-04 and placed it on the VA loan guaranty website. MERS, which stands for Mortgage Electronic Registration Systems, can be found on the Web at http://www.mersinc.org.

The cash-strapped General Motors announced Monday that it is considering a partial sale of General Motors Acceptance Corp., home to the nation's seventh-largest mortgage banking franchise.GM said in a statement that it is "exploring the possible sale of a controlling interest" in GMAC "to a strategic partner." GMAC Residential and its affiliate, Homecomings, have a combined residential servicing portfolio of $345 billion. Both units are housed in a holding company, Residential Capital Corp., which is 100% owned by GMAC. On Monday GM reported a $1.6 billion loss for the third quarter. Fitch placed GMAC and ResCap on its watchlist, noting that a sale of the unit presents "unique challenges" due to its size. At June 30, GMAC boasted $309 billion in on-balance-sheet assets. Fitch opined that GM likely "will pursue a transaction with some urgency, if for no other reason to maintain GMAC's franchise value."

Four classes of Cityscape Home Equity Loan Trust home equity loan pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: Cityscape 1997-B group I, class M-2F, from A to BBB, and class B-1F, from BBB to BB; Cityscape 1997-B group II, class B-1A, from BBB to C; and Cityscape 1997-C group I, class B-1F, from CCC to C. Fitch also affirmed the ratings on nine classes in the two securitizations. The downgrades to series 1997-B were attributed to "elevated levels of losses and a forecast of continued poor collateral performance," the rating agency said. The overcollateralization is below target, and over 60% of both pools are more than 60 days delinquent, Fitch said. In addition, losses have resulted in a reduction in the principal balance of class B-1A. In series 1997-C, the OC of the fixed-rate portion is below target, more than 30% of the loans are more than 60 days delinquent, and class B-1F has taken a principal writedown, Fitch said. The rating agency can be found online at http://www.fitchratings.com.

Residential Capital Corp., the Minneapolis-based parent company of GMAC Mortgage and other residential finance companies, has filed a $12 billion shelf registration statement with the Securities and Exchange Commission for the potential issuance of senior and subordinated debt securities.Any senior notes issued under the shelf, which has not been declared effective by the SEC, would be guaranteed by certain of ResCap's subsidiaries, the real estate finance company said. ResCap said it intends to use the proceeds to repay all affiliated borrowings "on an expedited basis." The company can be found on the Web at http://www.rescapholdings.com.

Freddie Mac says it will purchase up to $1 billion in tax-exempt mortgage revenue bonds so that housing finance agencies in Louisiana and Mississippi can provide below-market rate mortgages and home repair loans to victims of hurricanes Katrina and Rita."We are committed to buy these MRBs at below-market rates so that as many as 10,000 low-income families affected by the disasters can rebuild their homes at the lowest rates available," said Freddie chairman and chief executive Richard Syron. The government-sponsored enterprise has been an investor in mortgage revenue bonds for some time. Freddie held $9.1 billion in MRBs in its $652.9 billion investment portfolio at the end of 2004. Rep. Richard Baker, R-La., a long-time GSE critic, welcomed Freddie's initiative to facilitate low-cost housing loans for storm victims. "Freddie Mac's announcement will certainly help," the Louisiana congressman said. Freddie Mac can be found online at http://www.freddiemac.com.

The nationwide inventory of foreclosed residential properties declined 6% in September, according to Foreclosure.com, an online foreclosure listing service based in Boca Raton, Fla.The decline is mainly attributable to the removal of all Department of Housing and Urban Development real-estate-owned properties in 11 states following Hurricane Katrina, including Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, and Texas, Foreclosure.com said. There were 20,347 new foreclosed residential properties listed in the United States in September, and such properties totaled 87,717 overall, the company reported. "During the second quarter of 2005, new foreclosure inventory in the U.S. has stayed relatively flat," said Brad Geisen, president and chief executive officer of Foreclosure.com. ".... Some influences such as high fuel costs, rising interest rates, recent natural disasters, and changes in bankruptcy law could quickly disturb the current environment." The company can be found online at http://www.foreclosure.com.

The mortgage industry's average profit per loan declined by almost 50% in 2004, according to an annual cost study conducted by the Mortgage Bankers Association of America.The MBA cost study found that average loan production profits fell to $657 per loan in 2004, down from $1,272 in 2003. As loan production volume shrank, per-loan operational costs increased and were only partially offset by secondary marketing income, including loan servicing values. "The year 2004 marked a departure from the recent years of unprecedented mortgage activity and profitability," said Douglas Duncan, MBA chief economist and senior vice president. "Narrowing warehouse interest spreads, increased pricing pressures, and higher sales and fulfillment costs on a per-loan basis posed challenges for mortgage bankers. But at the same time, we did see recoveries in the area of servicing -- after three years of worsening losses, servicing operations posted a profit in 2004 on a per-loan basis." That servicing profit averaged $21 per loan last year, compared with a net loss of $166 per loan in 2003. The MBA can be found online at http://www.mortgagebankers.org.