MORTGAGE LOAN COMPLIANCE®

More than two-thirds of the 94,000 foreclosure sales in June involved properties previously financed by prime mortgages as the tide of subprime foreclosure sales has declined over the past four quarters, according to the Hope Now alliance.

The alliance's monthly report shows the foreclosure sales involving subprime loans crested in the second quarter of 2008 and foreclosure sales involving prime loans have surged since the expiration of several moratoriums in March of this year.

Ambac Financial Group Inc., New York, said it expects to see second-quarter statutory loss and loss expenses that relate primarily to deterioration in second-lien and alternative-A credit securitized mortgage financial guarantee portfolios amount to $800 million.

The company said it also expects to see a more than $1 billion increase in its second-quarter statutory impairment losses. Ambac estimates the second quarter statutory impairment losses will increase by about $1.6 billion to roughly $4.9 billion.

"The increase in impairment losses, which relate to [Ambac Assurance Corp.'s] insured portfolio of collateralized debt obligations of asset-backed securities transactions, was driven by rising forward LIBOR rates, which increase estimated future cash outflows, and further deterioration of the underlying collateral within the CDO of ABS transactions," Ambac said.

Prime foreclosure sales hit 154,000 in the second quarter, up 36% from the first quarter. Prime sales totaled 62,600 in June, up 13% from May and 50% from April. Meanwhile, the Hope Now servicers completed 96,000 loan modifications in June, down 5% from the previous month.

This marks the second monthly decline as servicers put more modification candidates through a 90-day trial period as required by the Obama administration's Home Affordable Modification Program. Most of the Hope Now servicers have signed up for President's program but many are waiting for permission from their investors to modify loans.

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