Servicing

The Teamsters Local 445 Freight Division Pension Fund has filed a lawsuit alleging fraud and securities violations by Dynex Capital Inc., a real estate investment trust based in Glen Allen, Va., according to the REIT.Also included as defendants are Merit Securities Corp., a Dynex subsidiary, and certain current and former Dynex and Merit executives, Dynex reported. The suit alleges securities law violations in connection with the issuance in 1999 of Merit Series 13 securitization financing bonds, which are collateralized by manufactured housing loans, the company said. The suit also alleges fraud and negligent misrepresentations in connection with the securitization. "The company is currently evaluating the allegations made in the lawsuit and intends to vigorously defend itself against them," Dynex said. The suit was filed in the U.S. District Court for the Southern District of New York. The company can be found online at http://www.dynexcapital.com.

Two classes from two Access Financial Manufactured Housing issues have been downgraded by Fitch Ratings. Class B-1 of series 1995-1 was downgraded from BBB-minus to CCC, and class B-1 of series 1996-1 was downgraded from BB-minus to CCC. In addition, the ratings on two classes from each transaction were affirmed. "Losses on series 1995-1 have reduced the collateral at a faster rate than payments on the related certificates and have consequently created an undercollateralized amount of $723,000," Fitch said. Cumulative losses now represent 23% of the original balance, the rating agency said. Series 1996-1 has also experienced higher losses than expected, and the certificates are undercollateralized by $6.5 million, Fitch said.

Two classes in Citigroup Mortgage Loan Trust, series 2003-1, have been downgraded by Fitch Ratings.Class WB-4 of group W was downgraded from BB to BB-minus, and class WB-5 was downgraded from B to CCC. In addition, Fitch affirmed the ratings on 10 other classes in the deal. The downgrades were attributed to poor collateral performance and the deterioration of asset quality beyond original expectations. As of the December distribution date, the approximately $63,000 in realized losses in group W were absorbed by the nonrated WB-6 class, Fitch reported. "While the WB-6 class currently has a balance of $221,498, the loans in foreclosure and bankruptcy total more than $2.3 million," the rating agency said. "Fitch is therefore concerned about the adequacy of protection against future losses available to classes WB-4 and WB-5." Fitch can be found online at http://www.fitchratings.com.

The Department of Housing and Urban Development has sent a rule that could inflict severe penalties on FHA servicers to the Office of Management and Budget for final clearance.The final rule sets the parameters for charging treble damages, or three times the loan amount, if a Federal Housing Administration servicer fails to take appropriate loss mitigation actions to help a delinquent borrower avoid foreclosure. On a $90,000 loan, servicers could face a $270,000 penalty for loss mitigation violations. HUD has been slow to implement the treble damages rule that was mandated by Congress in 1998 -- when the FHA's loss mitigation program was just getting started. The proposed rule, issued for comment in early 2004, limited treble damages to a handful of servicers with the lowest loss mitigation rating. However, lenders contend that treble damages are excessive and that levying such fines would make FHA servicing less attractive.

The Department of Veterans Affairs is proposing to revamp its servicing requirements and delegate more responsibilities to private servicers, particularly in the area of loss mitigation."The new regulations will change just about every aspect of our servicing operation," said Keith Pedigo, director of the VA loan guarantee program. VA personnel currently handle loss mitigation efforts after a veteran misses three monthly payments. Under a proposed rule, which is being issued for 60-day comment period, private servicers will handle loss mitigation. However, the VA will be monitoring the servicers' performance through a new electronic reporting system. And the VA will intervene if necessary, Mr. Pedigo told MortgageWire. "We want to make sure -- doubly sure -- that veterans are being given every possible opportunity to save their properties," he said. The proposed rule is expected to be published in the Federal Register by Feb. 18.

Fidelity National Financial Inc., Jacksonville, Fla., has announced the addition of new reporting capabilities and a search feature to its BuyBankHomes.com Web portal on foreclosed properties.The new reporting capabilities enable financial institutions to obtain information on their listed properties, including the number of times a property has been displayed or e-mailed to an interested party. The search feature allows brokers to locate properties that have not been distributed to other brokers or agents, FNF said. The portal can be found at http://www.buybankhomes.com.

The Chicago Federal Home Loan Bank is looking for new ways to fund and capitalize mortgage acquisitions under its mortgage partnership finance program and to resell MPF loans.The changes to the MPF program are part of a new capital and business plan that has been accepted by the FHLBank's regulator. Under the plan, the Chicago bank said it "will explore alternative methods of capitalizing and funding MPF assets including techniques to liquefy MPF assets, creating additional capacity for the bank and other FHLBs." The Chicago bank has used excess or "voluntary" stock to capitalize its MPF loan portfolio. It has to reduce its reliance on voluntary stock as part of the capital plan. The Chicago bank remains committed to the MPF program, according to president and chief executive J. Mikesell Thomas. But MPF assets are expected to remain flat or decline gradually during the capital restructuring period. "Paydowns of existing MPF assets will create capacity for the bank to serve the needs of participating members," the Chicago FHLBank said.

Analysts at Sanford C. Bernstein & Co., New York, have downgraded their ratings on Freddie Mac, Radian Guaranty, and PMI Group.All three are now rated "market perform" instead of "outperform." Analysts Jonathan Gray and Adam Weinrich added that, "There are few mortgage finance stocks that we remain very interested in owning" in a recent report, citing political and economic pressures that might hurt the stocks. The downgrade of Freddie Mac reflects the stock's price, the analysts said. Fannie Mae remains rated "outperform" with a "moderate 20% upside." The analysts also are not keen on the mortgage insurance sector, saying that business growth will be unexciting and that possible home price declines "would terrify investors and damage relative valuations for the MIs."

The Department of Housing and Urban Development has program approval authority over Fannie Mae and Freddie Mac but has rarely denied them any new activities, assistant housing secretary John Weicher told the Senate Banking Committee on Thursday. Mr. Weicher noted that the last time HUD turned down an application for a new GSE activity was in the early 1990s when Fannie Mae tried to launch a product "that seemed to go into the business of making advances" to seller/servicers. The granting of advances is a bread-and-butter activity of the Federal Home Loan Bank system. Mr. Weicher told policy makers that he usually hears word about a new GSE product "when I read about it in a press release." New program activity approval was an important issue in last year's debate over a GSE bill and is likely to be again as the House and Senate try to construct passable legislation. The assistant HUD secretary testified before the panel, highlighting Fannie and Freddie's inability to "lead the market" in affordable housing loans, citing figures published in the Bush Administration's 2006 budget.

Radian Group Inc., Philadelphia, has completed a structured finance transaction to help manage nonprime credit risk that is the second of its kind.The transaction, Smart Home Reinsurance 2005-1 Ltd., was funded through the sale of $98.5 million of credit-linked notes backed by a pool of $1.68 billion of Alt-A mortgages that were insured by Radian. Roy J. Kasmar, president and chief operating officer of Radian, said the nonprime segment of the mortgage insurance market "is profitable, but it also requires a disciplined approach to risk management. Radian's experience in mortgage insurance and structured finance has enabled us to create a risk management solution so that we can continue to take advantage of growing opportunities in the [nonprime] market." The first structured transaction of this kind, Smart Home Reinsurance 2004-1, was completed in August 2004 and involved $882 million of first-lien, nonprime residential mortgages.