Hanover Posts Big Loss, Needs Cap Infusion

Hanover Capital Mortgage Holdings, a mortgage investing REIT based in Edison, N.J., lost $37.7 million in the fourth quarter, signaling that it may not survive as a going concern unless it receives a capital infusion. "Additional sources of capital are required for the company to generate positive cash flow and continue operations beyond 2008," the real estate investment trust said in a statement. Hanover lost $80 million in all of 2007, compared to a slight loss in 2006. Hanover invests in prime mortgage securities and mortgage loans on a leveraged basis. Its portfolio of investments includes subordinated tranches of mortgage-backed securities whose value has slipped greatly over the past year. It noted that its net loss "is primarily due to an impairment expense of $73.6 million for other than temporary declines in fair value" of its MBS portfolio. Hanover said it is seeking additional capital and has engaged Keefe, Bruyette & Woods Inc. as an investment adviser.

Consumer Credit Delinquencies Soar

Consumer loan delinquency rates, including those for home equity lines and loans, increased sharply in the fourth quarter of last year, according to the American Bankers Association. The delinquency rate on closed-end home equity loans rose 11 basis points from the level recorded in the third quarter to 2.39%, according to the ABA. The delinquency rate on home equity lines of credit rose 12 bps to 0.96%, the ABA reported. All eight consumer loan types saw an increase in overdue rates, with the largest increase being posted by indirect auto loans. The ABA's composite consumer loan delinquency rate rose to its highest level since 1992. "The rise in consumer credit delinquencies is consistent with a rapidly slowing economy," chief economist James Chessen said. "Stress in the housing market still dominates the story, but it's a broader tale of an overall weak economy." The ABA news details can be found on the Web at http://www.aba.com.

Judge Clears Way for Countrywide Subpoenas

A federal judge in Pittsburgh has ruled that a bankruptcy trustee can subpoena loan documents from Countrywide Financial Corp. and interview company executives under oath as part of a civil case involving the nation's largest residential servicer. Judge Thomas Agresti is overseeing a months-old case in which 293 Pennsylvania homeowners sued Countrywide, charging that the servicer sought improper fees and payments from distressed borrowers that violated bankruptcy regulations. In a Tuesday ruling, the judge said it has not been proven that Countrywide did anything wrong but that a bankruptcy trustee involved in the case "has made a showing of a common thread of potential wrongdoing" in several instances where it moved to foreclosure on bankrupt homeowners. At deadline time, a Countrywide spokesman had not returned a telephone call about the matter. Countrywide's foreclosure practices are under investigation in Florida, Georgia, and Ohio. The company is being sold to Bank of America. The sale is expected to close by the third quarter. Countrywide can be found online at http://www.countrywide.com.

Fitch Downgrades More B&C Classes

More than 30 additional classes of subprime mortgage pass-through certificates were downgraded by Fitch Ratings on April 2 as a result of changes to its subprime loss forecasting assumptions. Fitch also placed three classes of subprime pass-throughs on Rating Watch Negative and affirmed the ratings on classes with outstanding balances of over $570 million. The securities affected by the latest downgrades were 33 classes from four issues of IndyMac mortgage pass-throughs. The rating actions were attributed to changes to Fitch's subprime loss forecasting assumptions that "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness." Fitch can be found this online news at http://www.fitchratings.com.