Secondary Market

After losses last month, Fitch Solutions reports a recovery among subprime credit-default swaps (CDS) in July. Subprime CDS prices increased 1 percent overall for the month. The largest increases in prices were among 2006 and 2007 vintages, which rose 6.1 percent and 10 percent, respectively. The rate of 90-day plus delinquencies reached a new low for the year - declining 1.4 percent to 10.8 percent. The share of subprime loans with balance modifications has increased by 120 percent over the last year.

Freddie Mac says it is seeing a ""material increase"" in mortgage insurer rescissions, cancellations, and denials of coverage. The GSE has issued a notice alerting lenders that they may be forced to buy back loans if Freddie Mac determines they do not have the insurance coverage required at delivery, or if the mortgage insurance coverage is no longer in force. Freddie requires a primary mortgage insurance policy as protection against default for loans with a loan-to-value ratio of more than 80 percent.

Home Loan Servicing Solutions, Ltd. (HLSS) is preparing an initial public offering (IPO) of 18.3 million shares. HLSS is a spin-off of Georgia-based Ocwen Financial Corporation. Simultaneously with the offering, HLSS founder and chairman of the board of directors, William C. Erbey, will purchase $10 million of HLSS's ordinary shares at the same price as the IPO. HLSS plans to distribute at least 90 percent of its net income to shareholders through monthly cash dividends.

CoreLogic announced the availability of RiskModel Version 4.4 this week. The new technology offering is an analytics application that forecasts future mortgage prepayments, defaults, losses, and cash flows at both the loan and portfolio level. This latest version integrates the CoreLogic Home Price Index (HPI) with new transition and loss-given-default models for Alt-A first and second-lien mortgages, allowing more than 75 percent of the loans in the development dataset to be estimated at the ZIP code level.

Delaware Attorney General Beau Biden has announced his opposition to the proposed $8.5 million Bank of America settlement. He sent a petition to the New York Supreme Court expressing his disapproval and requesting permission to intervene in the court's review of the settlement. ""I am intervening to enforce our laws and to protect Delaware investors who may have been harmed by these toxic securities,"" Biden said. ""Intervening in this settlement puts us in position to ensure that the banks are playing by the rules.""

Fannie Mae and Freddie Mac have suspended Republic Mortgage Insurance Company (RMIC) and Republic Mortgage Insurance Company of North Carolina as approved mortgage insurers. According to North Carolina law, mortgage insurers must maintain at least one twenty-fifth of their aggregate insured risk outstanding. RMIC fell below this amount in September 2010 but was granted waivers from the North Carolina Department of Insurance. A recent extension of the waiver is set to expire August 31.

Bank of America has sold the servicing rights of 400,000 home loans to Fannie Mae, according to media reports. The unpaid principal balance on the loans is said to be $73 billion. The loans were sold at a price of $500 million. BofA's CEO Brian Moynihan referenced a sale of mortgage servicing rights in a CNBC interview this week, but did not name the purchaser. A BofA spokesperson told DS News the sale is consistent with steps the company is taking to address legacy mortgage issues and position for growth.

The National Credit Union Administration (NCUA) is suing Goldman Sachs in hopes of recovering losses it incurred as the result of two failed credit unions - U.S. Central and Western Corporate federal credit unions. The complaint filed in a California district court alleges Goldman Sachs misrepresented the risks associated with residential mortgage-backed securities bought by the two credit unions, ultimately leading to their demise. It's the fourth securities-related suit NCUA has filed, and the agency says there's more to come.

The Federal Reserve put a conditional timestamp on its interest rate policy Tuesday - a different voice from the ""extended period"" mantra heard from the U.S. central bank for the past two-and-a-half years. The Fed's board again voted to hold the target range for the rate at which banks lend to one another at 0 to 0.25 percent, but this time they included an advisory that the rate would remain at this level for the next two years. Officials cited the ""depressed"" state of the housing market as one of the economy's biggest hindrances.

Arizona State Credit Union is now offering Fannie Mae HomePath loans, making it one of only a handful of credit unions in the nation approved for the mortgage program. HomePath is the GSE's venture for marketing and selling its REO properties, providing special financing terms for the purchase of select Fannie Mae-owned properties. Arizona State Credit Union says its participation in the program is expected to help reduce the inventory of foreclosed homes on the market in Arizona.