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Secondary Solutions

Secondary SolutionsRecent secondary marketing activity

September 16, 2008


Service providers and secondary lenders are promoting services that help secondary players price, acquire and manage loan portfolios. One firm is targeting potential commercial mortgage assets from a bankrupt firm, while other secondary activity centered around the functioning of the secondary market in the aftermath of Fannie Mae’s and Freddie Mac’s seizure by their regulator.

Fannie executive Thomas A. Lund issued a letter to customers indicating the Washington, D.C.-based company is operating “business as usual” despite that its regulator, the Federal Housing Finance Agency, has placed it in conservatorship.

“In fact, the conservatorship is specifically designed to enhance our ability to serve the market,” Lund stated. “In addition, the U.S. Department of the Treasury has agreed to provide up to $100 billion in capital as needed to ensure our company continues to provide additional market stability and liquidity as well as enhance mortgage affordability.

“FHFA has announced that existing contracts with Fannie Mae remain in effect and that we continue to have the authority to enter into new contracts.”

Ginnie Mae issued a statement last week in support of the government takeover of Fannie and its government-sponsored rival Freddie, noting the conservatorship was in the best interest of all affected parties. Government-owned Ginnie said it will continue to serve its mission of providing market stability, mortgage availability and taxpayer protection while handling an increase in mortgage-backed securities volume brought on by ongoing fluctuations in the housing finance market.

First American Subordinate Lien Outsourcing announced last week the debut of its Tool for Reserve Underwriting Scoring Model, which defines the potential loss, predicted recovery and velocity of recovery on a monthly timeline for subordinate loan pools. The model provides gross recovery cash-flow projections on a 24- to 36-month basis for performing and nonperforming pools of subordinate lien assets based on internal collection experience with similar types of collateral. It also uses securities prepayment and default data matched with market pricing to determine forward market assumptions and the resulting cash-flow projections.

“It has been an invaluable solution in managing performance expectations in relation to market servicing benchmarks for the 100,000 distressed junior lien assets that we monitor in our operation,” Brett Benson, director of analytics at the First American Corp. unit, said in the statement.

Lend America said Thursday that it is working with leading Wall Street firms and hedge funds to refinance performing mortgage portfolios within 10 days. The company, which refinances the loans into FHA programs, said it is already working with firms that trade or hold adjustable-rate paper as well as other performing paper.

Lend America, which noted it ranks as the 12th largest retail FHA lender, indicated it is well equipped to move quickly due to its centralized structure, 300 “highly trained” FHA loan specialists and approval as a Ginnie MBS issuer. The Melville, N.Y.-based firm said it also works with customers on non-performing portfolios to maximize cash flow and deliver a profitable exit strategy.

Blackburne & Brown Mortgage Co. Inc. is assembling a consortium to bid on some commercial mortgage assets of Lehman Brothers Holdings Inc., which announced yesterday it would file a petition under Chapter 11 of the U.S. Bankruptcy Code, a statement yesterday said. Blackburne is targeting small, subprime commercial first mortgages Lehman originated with yields of around 9.5 percent and loan-to-values in the neighborhood of 68 percent.

“For the last seven years my commercial mortgage company … has been competing against Lehman Brothers for small, subprime commercial loans,” owner George Blackburne III said in the statement. “Since their rates were better than ours, Lehman Brothers was able to cream the market for the best quality subprime commercial loans. I never knew them to make a foolish loan.”

DebtX announced earlier this month that its loan pricing data on commercial MBS is now available on BLOOMBERG PROFESSIONAL. The Boston-based firm said it has aggregated commercial real estate loan pricing data from transactions involving more than 300 financial institutions and 4,000 investors.

Associated Software Consultants Inc. said last month that its PowerSeller Secondary Marketing and Risk Management System is now available on a subscription basis. The subscription service — which includes related training, installation and configuration — requires a reduced up-front fee and a 3-year payment plan. After the third year, quarterly payments are significantly reduced.

Modules in the system include core secondary marketing functionality, risk management and post-closing management.


Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of


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