Barclays
Capital Real Estate Inc. d/b/a HomEq Servicing (“New HomEq”) replaced HomEq
Servicing Corporation (“HomEq”), as servicer, effective as of November 1, 2006
(the “Closing Date”), pursuant
to the transaction described below.
Wachovia
Corporation (“Wachovia”) and Barclays Bank PLC (“Barclays”) previously announced
the sale of the U.S. sub-prime residential mortgage loan servicing business
(the
“Sub-Prime Servicing Business”) of HomEq, a subsidiary of Wachovia, to Barclays
pursuant to the Asset Purchase Agreement, dated as of June 22, 2006 (the
“Purchase Agreement”), among Wachovia, HomEq, certain of Wachovia’s other
subsidiaries, and Barclays.
Under
the
Purchase Agreement, HomEq agreed to sell to Barclays substantially all of its
assets and Wachovia and certain of its other subsidiaries agreed to sell to
Barclays certain assets, related to the U.S. Sub-Prime Servicing Business
(collectively, the “Transaction”). Barclays now owns substantially all of the
assets relating to HomEq’s U.S. Sub-Prime Servicing Business and has agreed to
assume certain liabilities related to those assets that may arise and pertain
to
the period after the Closing Date, while HomEq will retain those liabilities
that may arise and pertain to the period prior to the Closing Date. In
connection with the Transaction, the rating agencies (a) assigned to New HomEq
the same servicer ratings, without a downgrade, that were previously assigned
to
HomEq and (b) confirmed that the transfer of servicing to New HomEq in and
of
itself would not result in a downgrade, qualification or withdrawal of the
then-current ratings of any asset-backed securities rated by them for which
HomEq was a servicer. New HomEq is an approved residential mortgage loan
servicer for Fannie Mae, Freddie Mac and HUD and is licensed to service mortgage
loans in each state where a license is required.
Pursuant
to the Purchase Agreement, HomEq has assigned the pooling and servicing
agreement or related servicing agreement (the “PSA”) to Barclays, and New HomEq
will be required to continue to service the mortgage loans in accordance with
the PSA, which is not being changed as a result of the Transaction. Expenses
relating to the Transaction and the transfer of the servicing platform to
Barclays will not be an expense of the securitization trust or the related
securityholders and, accordingly, no amounts are being set aside to cover such
expenses. No special backup servicing arrangements are being implemented as
a
result of the Transaction (other than those, if any, already provided for under
the PSA).
With
respect to the servicing experience of New HomEq, Barclays acquired the
servicing platform and related assets and retained the key employees and
management of HomEq. As a result, there have been no material changes to the
management or servicing platform of New HomEq in relation to HomEq.
Consequently, the information provided herein cumulatively reflects the
experience of HomEq and its predecessor. References below to HomEq's servicing
experience and servicing portfolio will reflect the experience and portfolio
acquired by HomEq as a result of the Purchase Transaction.
New
HomEq
is a nationwide consumer loan servicing company, primarily involved in mortgage
loan servicing, with facilities in North Highlands, California; Raleigh, North
Carolina; and Boone, North Carolina. New HomEq is a subsidiary of Barclays,
a
public limited company registered in England and Wales under number 1026167.
Barclays and its subsidiary undertakings (taken together, the “Group”) is a
major global financial services provider engaged in retail and commercial
banking, credit cards, investment banking, wealth management and investment
management services. Based on the Group’s unaudited financial information for
the period ending June 30, 2006, the Group had total assets
of approximately £986,375 million (2005: £850,388 million).
New
HomEq’s residential sub-prime and alternative servicing operations are currently
rated as “Strong” by Standard & Poor’s Rating Services, a division of The
McGraw-Hill Companies, Inc. Fitch Ratings has rated New HomEq “RPS1” as a
primary servicer of residential Alt-A and sub-prime products, and “RSS1” as a
special servicer. Moody's Investors Service currently rates New HomEq “SQ1-” as
a primary servicer of residential subprime mortgage loans. New HomEq is an
approved Freddie Mac and Fannie Mae servicer.
Although
Barclays Capital Real Estate Inc. did not have any significant residential
mortgage loan servicing experience prior to the Purchase Transaction, HomEq
and
its predecessors have been servicing residential mortgage loans since 1967.
At
the end of 2002, HomEq’s predecessors began acquiring servicing from third
parties, and currently a substantial majority of the loans in HomEq’s servicing
portfolio are serviced for third parties, including loans in over 100
residential mortgage-backed securities transactions. HomEq has serviced prime,
and non-prime mortgage loans and has experience acting as a special servicer
performing collections, loss mitigation, default reporting, bankruptcy,
foreclosure and REO property management.
Currently,
substantially all of New HomEq’s servicing portfolio consists of non-prime
mortgage loans, represented by fixed-rate and adjustable-rate, first- and
second-lien conventional mortgage loans. The following table reflects the size
and composition of HomEq’s servicing portfolio as of the end of each indicated
period.
New
HomEq’s Delinquency and Foreclosure Experience
The
following tables set forth the delinquency and foreclosure experience of the
mortgage loans serviced by New HomEq at the end of the indicated periods. The
indicated periods of delinquency are based on the number of days past due on
a
contractual basis. No mortgage loan is considered delinquent for these purposes
until it has not been paid by the next scheduled due date. New HomEq’s portfolio
may differ significantly from the mortgage loans in the mortgage loan pool
in
terms of interest rates, principal balances, geographic distribution, types
of
properties, lien priority, origination and underwriting criteria, prior servicer
performance and other possibly relevant characteristics. There can be no
assurance, and no representation is made, that the delinquency and foreclosure
experience with respect to the mortgage loans in the mortgage loan pool will
be
similar to that reflected in the table below, nor is any representation made
as
to the rate at which losses may be experienced on liquidation of defaulted
mortgage loans in the mortgage loan pool. The actual delinquency experience
with
respect to the mortgage loans in the mortgage loan pool will depend, among
other
things, upon the value of the real estate securing such mortgage loans in the
mortgage loan pool and the ability of the related borrower to make required
payments. It should be noted that if the residential real estate market should
experience an overall decline in property values, the actual rates of
delinquencies and foreclosures could be higher than those previously experienced
by New HomEq. In addition, adverse economic conditions may affect the timely
payment by borrowers of scheduled payments of principal and interest on the
mortgage loans in the mortgage loan pool and, accordingly, the actual rates
of
delinquencies and foreclosures with respect to the mortgage loan pool. Finally,
the statistics shown below represent the delinquency experience for New HomEq’s
mortgage servicing portfolio only for the periods presented, whereas the
aggregate delinquency experience with respect to the mortgage loans comprising
the mortgage loan pool will depend on the results obtained over the life of
the
mortgage loan pool. Totals in the tables that follow may not sum due to
rounding.
Upon
the
acquisition of servicing rights, New HomEq coordinates with the prior servicer
of the mortgage loans to achieve a transfer of servicing activities with minimal
impact to mortgagors. The transfer and boarding process involves notifying
the
mortgagors of the servicing transfer, transferring electronic files containing
loan set up information and a payment history, if applicable. In addition,
loan
documents are stored either in hard copy or electronically imaged form for
future review and reference. All boarding activities are regularly reviewed
to
assure best practices are employed throughout the boarding process.
Once
a
mortgage loan has been boarded, New HomEq begins to collect mortgage payments
in
adherence to the applicable servicing agreement and customary industry
standards. New HomEq’s collections strategy is based on a predictive behavioral
scoring system that enables collection efforts to be focused on mortgage loans
that represent the greatest risks within the servicing portfolio and is intended
to address potential collection problems as soon as possible before they migrate
into more costly delinquency, foreclosure and REO status. The predictive
behavioral scoring system is integrated with a predictive dialer and phone
switch to facilitate incoming and outgoing calls with mortgagors. Outgoing
calls
range from an introduction of New HomEq as servicer to advanced collection
activities. Incoming calls are directed by the phone switch based upon the
status of the loan to the appropriate customer service or collections
representative.
In
the
event collection efforts are not successful, New HomEq determines whether
foreclosure proceedings are appropriate. New HomEq considers a number of
factors, including the related mortgagor’s payment history, such mortgagor’s
ability and willingness to pay, the condition and occupancy of the related
property, the lien position of the mortgage loan and the amount of equity in
the
property. New HomEq also considers the costs associated with taking possession,
interest and expense carry, repairs and marketing. Unless impractical, New
HomEq
seeks to reduce the cycle time and loss severity of foreclosure actions in
a
manner that meets or exceeds published Fannie Mae timelines.
If
a
borrower goes into bankruptcy, New HomEq will pursue appropriate steps to
process the case quickly in an effort to increase monthly cash flows and reduce
loss severity, duration and servicing costs. New HomEq maintains internal
controls to monitor the status of all bankruptcies, whether handled internally
or through a multi-state network of attorneys specializing in bankruptcy
proceedings in the state of the mortgaged property. New HomEq utilizes
electronic notifications and case management tools in connection with its
bankruptcy account management.
When
New
HomEq acquires title to a mortgaged property through foreclosure proceedings,
it
ascertains property occupancy, obtains appraisals and broker price opinions,
determines property condition and whether the costs necessary to preserve or
enhance property marketability are justified, lists the property for sale and
oversees the final disposition of the property.
New
HomEq
provides full escrow services, including property tax, hazard insurance, flood
insurance and lender-placed insurance services. Most of these services are
provided through third-party vendors that specialize in these service areas.
New
HomEq conducts the initial and annual escrow analysis functions internally.
New
HomEq monitors escrow activities on an ongoing basis.
There
have been no material changes in New HomEq’s servicing policies and procedures
during the past three years.
Prior
Securitizations
During
the three years preceding the date of this Form 8-K, New HomEq has not been
terminated as a servicer in a residential mortgage loan securitization due
to a
servicing default or application of a servicing performance test or trigger.
During such time, New HomEq also neither has failed to make any required advance
with respect to any issuance of residential mortgage backed securities nor
disclosed material noncompliance with the servicing criteria applicable to
any
such securitization.
