April, 2012

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THE LATEST SERVICING Slow Start to 2012 Numbers were down for private mortgage insurance companies following credit downgrades. P rivate mortgage insurance companies backed home loans to the tune of $4.9 billion in January, a decline from $6.9 billion last year, as the industry continues to reel from sapped business and credit downgrades. Mortgage Insurance Companies of America (MICA) found $399 billion in insurance- in-force for member companies Genworth Mortgage Guaranty Insurance Corp., Radian Mortgage Insurance Co., and Republic Mortgage Insurance Co. The trade group said that some 21,904 borrowers made a purchase or loan refinance with their private policies, while the companies received 24,097 in total applications in January. The three companies reported 29,348 defaults for insured loans Mortgage Insurers Endure in January, together with 23,728 cured mortgages. The mortgage insurance industry continues to suffer from record-high mortgage delinquencies and defaults, a lingering conse- quence of the financial crisis and overexposure by lenders and bor- rowers to the real estate market. In November last year, PMI Group Inc. filed bankruptcy in response to a series of lost battles for the insurer, with hopes that Chapter 14 would better allow it to provide for claims payments and back policyholder interests. The Arizona Department of Insurance had earlier prohibited the company from writing new insurance, offering another sign of trouble for the industry. A spokesperson for MICA did not immediately return a request for comment. Moody's Slashes Wells Fargo's Servicer Rating The investor service predicts a decline in Wells Fargo's servicing portfolio, resulting in a downgrade. M oody's Investor Service slashed credit ratings for Wells Fargo Home Mortgage of late over concerns about deterioration in the quality of prime and subprime loans. The ratings agency downgraded the servicer from SQ1 to SQ2+. When reviewing residential mortgage servicers, Moody's rates SQ1 as strong and SQ5 as weak, with modifiers like pluses and minuses signifying their relative strength and weakness in each category. Moody's cited the $25 billion servicer settlement as one reason why, saying that added public pressure over negotiations sub- stantially lengthened the foreclosure review and completion time frames under Wells Fargo Home Mortgage. Analysts attributed the downgrade to "de- terioration in loan performance—particularly in prime collections and timeline management." Signaling ongoing scrutiny by the ratings agency globally, Moody's also delivered ratings actions for 114 financial institutions in 16 euro- zone countries, citing debt crises in Europe, challenges for the capital market, and deterio- rating creditworthiness for sovereign debt. Debt-saddled countries with downgraded banks included Italy (24), Spain (21), and France (10). Moody's actions follow negative forecasts and downgrades by other Nationally Recognized Statistical Rating Organizations (NRSROs), namely Fitch Ratings and Standard & Poor's. Fitch said in recent weeks that as many as 20 U.S. banks could see $80 billion in total loss- es over the next three years, as their portfolios continue to sag under the weight of overexpo- sure to the real estate market. Analysts say the NRSROs have increased their level of scrutiny and action against banks, servicers, and mortgage-backed securities in recent years in response to accusations of poor judgment from the financial crisis. THE M REPORT | 51 ORIGINATION SERVICING ANALYTICS SECONDARY MARKET

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