Merrill Lynch First Franklin Mortgage Loan Trust/Series 2007-1 · 424B5 · On 3/27/07 Filed On 3/27/07 11:02am ET · SEC File 333-140436-04 · Accession Number 950123-7-4558 ————————————————————————————————— THE SPONSOR The Sponsor is MLML, a Delaware corporation.
MLML is an affiliate, through common parent ownership, of the Underwriter. MLML is also an affiliate of the Depositor, the Servicer and First Franklin Financial and a direct, wholly-owned subsidiary of Merrill Lynch Mortgage Capital Inc. The executive offices of MLML Are located at 4 World Financial Center, New York, New York 10080, Telephone number (212) 449-0336. MLML purchases first and second lien residential mortgageloans for securitization or resale, or for its own investment.
MLML also originates commercial mortgage loans. MLML does not currently service mortgage loans. Instead, MLML contracts with other entities to service the loans on its behalf. FIRST FRANKLIN FINANCIAL The information below has been provided by First Franklin Financial in response to the Sponsor’s request for information regarding First Franklin Financial and its underwriting guidelines.
Founded in 1981, First Franklin Financial is a Delaware corporation headquartered in San Jose, California. From 1981 to 2004, First Franklin Financial grew from a small mortgage broker to a full service mortgage lender with a wide variety of products. First Franklin Financial acquires first and second lien mortgage loans from third party originators and sells them in the ordinary course of business to affiliated and unaffiliated mortgage loan purchasers.
For 2006, First Franklin Financial’s acquisition portfolio from all third party originators totaled approximately $27,967,758,067. Merrill Lynch Bank & Trust Co., FSB acquired First Franklin Financial, Home Loan Services, Inc., and the affiliated business unit NationPoint from National City Bank on December 30, 2006. Simultaneously with the closing of such acquisition, the non-conforming mortgage loan origination business formerly maintained by National City Bank in its First Franklin division was transferred to First Franklin Financial.
Therefore, as of such date, the non-conforming mortgage loan origination business of National City Bank and First Franklin Financial was acquired by Merrill Lynch Bank & Trust Co., FSB. A copy of the Purchase Agreement between National City Bank and Merrill Lynch Bank & Trust Co., FSB is publicly available on the SEC website. FIRST FRANKLIN FINANCIAL’S PORTFOLIO AND UNDERWRITING GUIDELINES All of the Mortgage Loans were required to meet underwriting criteria substantially similar to that described in this prospectus supplement.
PAYMENTS DUE UNDER THE TERMS OF THE INTEREST RATE CAP CONTRACT MAY BE DELAYED, REDUCED OR ELIMINATED IF THE CAP CONTRACT COUNTERPARTY, BEAR STEARNS FINANCIAL PRODUCTS INC., BECOMES INSOLVENT The supplemental interest trust will include an interest rate cap contract, to be for the benefit of the offered certificates, under which the cap contract counterparty, Bear Stearns Financial Products Inc.
, is obligated on any distribution date prior to the termination of the cap contract to make certain payments to the supplemental interest trust in the event that one-month LIBOR (as determined under the interest rate cap contract) exceeds 5.322% with respect to that distribution date on or after the distribution date in October 2007 and on or prior to the distribution date in March 2012.
However, in the event of the insolvency or bankruptcy of the cap contract counterparty, payments due under the cap contract may be delayed, reduced or eliminated. Moreover, the cap contract may be subject to early termination if either party thereto fails to perform or the cap contract becomes illegal or subject to certain kinds of taxation. In the event of early termination of the cap contract, there may not be a replacement cap contract.
COLLECTIONS ON THE MORTGAGE LOANS MAY BE DELAYED OR REDUCED IF THE SPONSOR OR THE SERVICER BECOMES INSOLVENT The sale of the mortgage loans from First Franklin Financial Corporation to Merrill Lynch Mortgage Lending, Inc. and from Merrill Lynch Mortgage Lending, Inc. to Merrill Lynch Mortgage Investors, Inc.
will each be treated as a sale of the mortgage loans. However, in the event of an insolvency of First Franklin Financial Corporation or Merrill Lynch Mortgage Lending, Inc., the conservator, receiver or trustee in bankruptcy of such entity may attempt to recharacterize the mortgage loan sale as a borrowing by the applicable entity, secured by a pledge of the applicable mortgage loans.
If this transfer was to be challenged, delays in payments of the certificates and reductions in the amounts of these payments could occur. FAILURE OF THE SWAP COUNTERPARTY TO PROVIDE INFORMATION REQUIRED OF PROVIDERS OF DERIVATIVE INSTRUMENTS PURSUANT TO REGULATION AB AND SUBSEQUENT FAILURE TO REPLACE ITSELF WITH A SWAP COUNTERPARTY THAT CAN PROVIDE SUCH REQUIRED INFORMATION MAY RESULT IN A SWAP TERMINATION EVENT The swap agreement imposes a contractual obligation on the swap counterparty to provide all information that may be required pursuant to Regulation AB for providers of derivative instruments.
To the extent that the swap counterparty cannot provide the required information in accordance with the swap agreement, the swap counterparty is required to replace itself with a swap provider, or obtain a guarantor, that can provide the necessary information. If the swap counterparty cannot secure a replacement provider or guarantor, the failure to comply with the swap agreement will result in an “additional termination event” under the swap agreement in respect of which the swap provider will be the sole affected party.
In certain circumstances, a swap termination payment may be owed to the swap counterparty in connection with the additional termination event described above or in connection with any other additional termination event or event of default provided for under the swap agreement. Such swap termination payments will reduce the amounts available to make payments on the certificates.
FIRST FRANKLIN FINANCIAL CORPORATION MAY NOT BE ABLE TO REPURCHASE DEFECTIVE MORTGAGE LOANS First Franklin Financial Corporation has made various representations and warranties relating to the mortgage loans to Merrill Lynch Mortgage Lending, Inc.
Merrill Lynch Mortgage Lending, Inc. will assign those representations and warranties to Merrill Lynch Mortgage Investors, Inc. These representations are summarized in “Description of the Agreements—Representations and Warranties; Repurchases“ in the prospectus. If First Franklin Financial Corporation fails to cure in a timely manner a material breach of its representations and warranties with respect to any mortgage loan sold by it, then First Franklin Financial Corporation would be required to repurchase or substitute for the defective mortgage loan.
It is possible that First Franklin Financial Corporation may not be capable of repurchasing or substituting for any defective mortgage loans, for financial or other reasons. The inability of First Franklin Financial Corporation to repurchase or substitute for defective mortgage loans would likely cause the mortgage loans to experience higher rates of delinquencies, defaults and losses.
As a result, shortfalls in the distributions due on the certificates could occur. VIOLATIONS OF FEDERAL, STATE AND LOCAL LAWS Federal, state and local laws regulate the underwriting, origination, servicing and collection of the mortgage loans.
These laws have changed over time and have become more restrictive or stringent with respect to specific activities of the servicer and the originator. Actual or alleged violations of these federal, state and local laws may, among other things: S-28 – limit the ability of the servicer to collect principal, interest and servicing advances on the mortgage loans, – provide the borrowers with a right to rescind the mortgage loans, – entitle the borrowers to refunds of amounts previously paid or to set-off those amounts against their loan obligations, – result in a litigation proceeding (including class action litigation) being brought against the issuing entity, and – subject the issuing entity to actual or alleged liability for expenses, penalties and damages resulting from the violations.
As a result, these violations or alleged violations could result in shortfalls in the distributions due on your certificates. See “Certain Legal Aspects of Mortgage Loans“ in the prospectus. First Franklin Financial’s acquisition underwriting standards are primarily intended to assess the ability and willingness of the borrower to repay the debt and to evaluate the adequacy of the mortgaged property as collateral for the mortgage loan.
The standards established by First Franklin Financial require that the mortgage loans of a type similar to the Mortgage Loans were underwritten by the third party originators with a view toward the resale of the mortgage loans in the secondary mortgage market. In accordance with First Franklin Financial’s guidelines for acquisition, the third party originators must consider, among other things, a mortgagor’s credit history, repayment ability and debt service to income ratio (“Debt Ratio”), as well as the value, type and use of the mortgaged property.
The Mortgage Loans generally bear higher rates of interest than mortgage loans that are originated in accordance with Fannie Mae and Freddie Mac standards, and may experience rates of delinquencies and foreclosures that are higher, and that may be substantially higher, than those experienced by portfolios of mortgage loans underwritten in a more traditional manner. Unless prohibited by applicable law or otherwise waived by the third party originator upon the payment by the related mortgagor of higher origination fees and a higher mortgage rate, a majority of the Mortgage Loans provide for the payment by the mortgagor of a prepayment charge on certain full Principal Prepayments made within one to three years from the date of origination of the related Mortgage Loan.
S-35 Substantially all of the mortgage loans of a similar type as the Mortgage Loans were acquired by First Franklin Financial based on loan application packages submitted to the third party originators by third party mortgage brokers, which do not fund the mortgage loans. These mortgage brokers must meet minimum standards set by the third party originators and, once approved by the third party originators, the mortgage brokers are eligible to submit loan application packages in compliance with the terms of the mortgage broker agreement with the third party originator.
The third party originators must meet minimum standards set by First Franklin Financial, based on acquisition guidelines that require an analysis of the following information submitted with an application for approval: any applicable state lending license (in good standing), satisfactory credit report only if no federal income tax identification number, signed broker agreement, signed W-9 and signed broker authorization.
Once approved as a third party originator, these companies are eligible to submit loan packages for purchase by First Franklin Financial in compliance with the terms of a signed mortgage loan purchase agreement. The third party originators may originate mortgage loans for acquisition by First Franklin Financial under an underwriting program called the Direct Access Program.
Within the Direct Access Program, there are four documentation programs, the Full Documentation Program, the Limited Income Verification Program (the “LIV”), the Stated Plus Program and the Stated Income Verification Program. In addition, under the responsible party’s Blended Access Program, in the case of loans with two or more borrowers, if one of those borrowers with more than 50% of the total qualifying income is underwritten under a full documentation program, then the other borrower or borrowers may be underwritten under a stated documentation program.
All of the Mortgage Loans were acquired by First Franklin Financial under the Direct Access Program. While each underwriting program is intended to assess the risk of default, the Direct Access Program makes use of credit bureau risk scores (the “Credit Bureau Risk Score”). The Credit Bureau Risk Score is a statistical ranking of likely future credit performance developed by Fair, Isaac & Company (“Fair, Isaac”) and the three national credit repositories Equifax, Trans Union and First American (formerly Experian which was formerly TRW).
The Credit Bureau Risk Scores available from the three national credit repositories are calculated by the assignment of weightings to the most predictive data collected by the credit repositories and range from 300 to 850. Although the Credit Bureau Risk Scores are based solely on the information at the particular credit repository, such Credit Bureau Risk Scores have been calibrated to indicate the same level of credit risk regardless of which credit repository is used.
The Credit Bureau Risk Score is used as an aid to, not a substitute for, the underwriter’s judgment. The Direct Access Program was developed to simplify the origination process for third party originators. In contrast to assignment of credit grades according to traditional non-agency credit assessment methods, i.
e., mortgage and other credit delinquencies, Direct Access relies upon a borrower’s Credit Bureau Risk Score initially to determine a borrower’s likely future credit performance. Third party originators are able to access Credit Bureau Risk Scores at the initial phases of the loan application process and use the score to determine a borrower’s interest rate. First Franklin Financial’s acquisition guidelines require that the third party originator approve the Mortgage Loan using the Direct Access Program risk-based pricing matrix.
In accordance with First Franklin Financial’s guidelines for acquisition, under the Direct Access Program, the third party originators must require that the Credit Bureau Risk Score of the primary wage earner (the borrower that contributes the greatest percentage of overall income) be used to determine program eligibility. Credit Bureau Risk Scores must be obtained from at least two national credit repositories, with the lower of the two scores being utilized in program eligibility determination.
If Credit Bureau Risk Scores are obtained from three credit repositories, the middle of the three scores can be utilized. In all cases, a borrower’s complete credit history must be detailed in the credit report that S-36 produces a given Credit Bureau Risk Score or the borrower is not eligible for the Direct Access Program.
Generally, the minimum Credit Bureau Risk Score allowed under the Direct Access Program is 540. The Credit Bureau Risk Score, along with the loan-to-value ratio, is an important tool in assessing the creditworthiness of a Direct Access borrower. However, these two factors are not the only considerations in underwriting a Direct Access loan.
The third party originators are required to review each Direct Access loan to determine whether First Franklin Financial’s guidelines for income, assets, employment and collateral are met. In accordance with First Franklin Financial’s guidelines for acquisition, all of the mortgage loans of a type similar to the Mortgage Loans were required to be underwritten by the third party originator’s underwriters having the appropriate signature authority.
Each underwriter is granted a level of authority commensurate with their proven judgment, maturity and credit skills. On a case by case basis, a third party originator may determine that, based upon compensating factors, a prospective mortgagor not strictly qualifying under the underwriting risk category guidelines described below warrants an underwriting exception. Compensating factors may include, but are not limited to, low loan-to-value ratio, low Debt Ratio, substantial liquid assets, good credit history, stable employment and time in residence at the applicant’s current address.
It is expected that a substantial portion of the Mortgage Loans may represent such underwriting exceptions. In accordance with First Franklin Financial’s guidelines for acquisition, the third party originators’ underwriters are required to verify the income of each applicant under various documentation programs as follows: under the Full Documentation Program, applicants are generally required to submit verification of stable income for the periods of six months to two years preceding the application dependent on credit score range; under the LIV Program, the borrower is qualified based on six months of bank statement and applicants are generally required to submit verification of adequate cash flow to meet credit obligations for the six month period preceding the application; the Stated Plus Program allows income to be stated, but requires borrowers to provide verification of liquid assets equaling three months of income stated on the mortgage application; under the Stated Income Program, applicants are qualified based on monthly income as stated on the mortgage application and the underwriter will determine that the stated income is reasonable and realistic when compared to borrower’s employment type, assets and credit history.
For Direct Access first lien mortgage loans from self-employed or 1099 borrowers with a credit score greater than or equal to 540 and not originated in conjunction with a second lien mortgage, bank statements (for 12 months) are acceptable as full documentation. For Direct Access first lien mortgage loans from self-employed or 1099 borrowers with credit scores greater than or equal to 620, regardless of being originated with a corresponding second lien mortgage, twelve months of bank statements are acceptable as full documentation.
In all cases, the income stated must be reasonable and customary for the applicant’s line of work. Although the income is not verified under the LIV and Stated Income Programs, a preclosing audit should be conducted to confirm that the business exists. Verification may be made through phone contact to the place of business, obtaining a valid business license, CPA/Enrolled Agent letter or through Dun and Bradstreet Information Services.
The applicant generally must have a sufficiently established credit history to qualify for the appropriate Credit Bureau Risk Score range under the Direct Access Program. This credit history is substantiated by a minimum of two repository merged report prepared by an independent credit report agency.
The report typically summarizes the applicant’s entire credit history, and generally includes a seven year public record search for each address where the applicant has lived during the two years prior to the issuance of the credit report and contains information relating to such matters as credit history with local and national merchants and lenders, installment debt payments and any record of defaults, bankruptcy, repossession, suits or judgments.
In some instances, borrowers with a minimal credit history are eligible for financing under the Direct Access Program. S-37 The third party originators originate loans secured by one-to-four-unit residential properties made to eligible borrowers with a vested fee simple (or in some cases a leasehold) interest in the property.
In accordance with First Franklin Financial’s guidelines for acquisition, the third party originators are required to comply with applicable federal and state laws and regulations and generally require an appraisal of the mortgaged property which conforms to Freddie Mac and/or Fannie Mae standards; and if appropriate, a review appraisal. Generally, appraisals are provided by appraisers approved by First Franklin Financial.
Review appraisals may only be provided by appraisers approved by First Franklin Financial. In some cases, the third party originator may rely on a statistical appraisal methodology provided by a third party. Qualified independent appraisers must meet minimum standards of licensing and provide errors and omissions insurance in states where it is required to become approved to do business with the third party originators.
Each Uniform Residential Appraisal Report includes a market data analysis based on recent sales of comparable homes in the area and, where deemed appropriate, replacement cost analysis based on the current cost of constructing a similar home. The review appraisal may be an enhanced desk, field review or an automated valuation report that confirms or supports the original appraiser’s value of the mortgaged premises.
The review appraisal may be waived by a duly delegated Underwriter. In accordance with First Franklin Financial’s guidelines for acquisition, the third party originators must require title insurance on all mortgage loans secured by liens on real property. The third party originators must also require that fire and extended coverage casualty insurance be maintained on the secured property in an amount at least equal to the principal balance of the related residential loan or the replacement cost of the property, whichever is less.
The third party originators are required to conduct a number of quality control procedures, including a post funding compliance audit as well as a full re-underwriting of a random selection of loans to assure asset quality. Under the asset quality audit, all loans are required to be reviewed to verify credit grading, documentation compliance and data accuracy. Under the asset quality procedure, a random selection of each month’s originations must be reviewed by each third party originator.
The loan review is required to confirm the existence and accuracy of credit documentation, appraisal analysis and underwriting decision. A report detailing audit findings and level of error is sent monthly to each branch for response. The audit findings and branch responses must then be reviewed by the third party originator’s senior management.
Adverse findings are to be tracked monthly and over a rolling six month period. This review procedure allows the third party originator to assess programs for potential guideline changes, program enhancements, appraisal policies, areas of risk to be reduced or eliminated and the need for additional staff training. Under the mortgage loan programs, various risk categories are used to grade the likelihood that the applicant will satisfy the repayment conditions of the loan.
These risk categories establish the maximum permitted loan-to-value ratio and loan amount, given the occupancy status of the mortgaged property and the applicant’s credit history and Debt Ratio. In general, higher credit risk mortgage loans are graded in categories which permit higher Debt Ratios and more (or more recent) major derogatory credit items such as outstanding judgments or prior bankruptcies; however these loan programs establish lower maximum loan-to-value ratios and lower maximum loan amounts for loans graded in such categories.
“Equity Refinance” transactions are defined as those instances where the borrower receives the lesser of 2% of the new loan amount or $2,000 cash in hand. Funds used for debt consolidation are not included in this amount. S-38 “RapidRefi” is designed to streamline the loan process for borrowers who have demonstrated that their current mortgage has been paid as agreed for at least the prior 18 months.
It requires the property to be an owner-occupied primary residence. The third party originators’ origination guidelines under the Direct Access Program generally have the following criteria for borrower eligibility for the specified Credit Bureau Risk Score range.
The Debt Ratio generally may not exceed 50.49% for all credit scores on full documentation and LIV loans. Loans meeting the residual income requirements may have a maximum Debt Ratio of 55.49%. The Debt Ratio for Stated Income loans may not exceed 50.49%. Generally, First Franklin Financial’s acquisition guidelines require that all liens affecting title must be paid at closing.
Collections, charge-offs, judgments and liens not affecting title may remain open. PENDING PROCEEDINGS There are no material legal or governmental proceedings currently pending or known to be contemplated against First Franklin Financial.
To the best of First Franklin Financial’s knowledge, there are no material legal or governmental proceedings currently pending or known to be contemplated against First Franklin Financial, which if ultimately decided adversely to First Franklin Financial, would have a material adverse effect on the validity of the Mortgage Loans. TRANSACTION PARTIES Prior to acquiring any residential mortgage loans, MLML conducts a review of the related mortgage loan seller that is based upon the credit quality of the selling institution.
MLML’s review process may include reviewing select financial information for credit and risk assessment and conducting an underwriting guideline review, senior level management discussion and/or background checks. The scope of the mortgage loan due diligence varies based on the credit quality of the mortgage loans. The underwriting guideline review entails a review of the mortgage loan origination processes and systems.
In addition, such review may involve a consideration of corporate policy and procedures relating to state and federal predatory lending, origination practices by jurisdiction, historical loan level loss experience, quality control practices, significant litigation and/or material investors. MLML contracts with third party servicers for servicing the mortgage loans that it acquires.
Third party servicers are also assessed based upon the servicing rating and the credit quality of the servicing institution. The servicers may be reviewed for their systems and reporting capabilities, review of collection procedures and confirmation of servicers’ ability to provide detailed reporting on the performance of the securitization pool. In addition, MLML may conduct background checks, meet with senior management to determine whether the servicers comply with industry standards or otherwise monitor the servicer on an ongoing basis.
MLML has been the sponsor of securitizations backed by residential mortgage loans, including subprime mortgage loans, since 2003. The following table sets forth the approximate aggregate initial principal amount of securities issued in subprime mortgage loan securitizations sponsored by MLML since 2003. AdvertisementsSee Also: Prenatal Yoga First Trimester
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ABOUT FRANKLIN CREDIT LOAN SERVICING Franklin Credit strives to provide our borrowers with first class customer service. We understand the importance of prompt attention and thoughtful loan servicing. We provide many options for bill payment and customer service such as pay by phone, MoneyGram, mail payment and more. Some of our services will require the attention of our trained service staff. So please follow the directions listed below to insure your questions are answered quickly and handled by the appropriate personal.
Your home is an invaluable asset and we will always work to provide options that allow our customers to stay in their homes through financial hardship. Let Franklin Credit help you! Choose one of our convenient payment options: 1. Payment via Regular Mail Please contact one of our agents at 1(800) 255-5897 for more information. Back To Top 2. Payment via Overnight Mail Please contact one of our agents at 1(800) 255-5897 for more information.
Back To Top 3. Payoff via Regular Mail Please contact one of our agents at 1(800) 255-5897 for more information. Back To Top 4. Payoff via Overnight Mail Please contact one of our agents at 1(800) 255-5897 for more information. Back To Top 5. Pay via MoneyGram Please contact one of our agents at 1(800) 255-5897 for more information. Back To Top 6. Pay via Western Union Back To Top 7. Automatic Payments Using ACH Avoid the hassle of buying stamps, writing checks, and worrying about late or missed payments! Choose to enroll in our ACH Program as an easy method to remit your monthly payments free of charge.
Click HERE to EnrollThe plan enables you to have your loan payments withdrawn directly from your bank account and electronically transferred to Franklin Credit each month that your account is current. Back To Top 8. Wire Transfers Please contact one of our agents at 1(800) 255-5897 for more information. The above is a sample check indicating where you can locate your bank account and routing numbers.
REQUEST A PAYOFF QUOTE We currently have two easy methods for requesting a payoff:1) A borrower can request a payoff 24 hours a day 7 days a week by calling the toll free number 1 (800) 255-5897 and select the prompt for payoff to be mailed to home of record. The payoff will be processed and mailed out within 3 business days.2) A borrower can also fax in the request to (201) 839-4512. The Payoff request must have borrowers signed authorization to release payoff information.
The request will be processed within 3 business days and could be faxed back if a fax number is provided or mailed to the home of record. SPEAK TO SOMEONE ABOUT MY ACCOUNT If you would like to speak to someone about your account, below is a listing of numbers for the departments available in your Loan Service Center. Customer Service Department 1 (800) 255-5897 Collections Department 1 (888) 327-9900 Foreclosure Department (201) 604-1800 Loss Mitigation Department 1 (800) 650-7162 Bankruptcy Department (201) 604-1800 REO Department (201) 604-1800 ** Please note, our hours of operation are Monday and Wednesday, 8:00 AM - 8:00 PM ET , Tuesday, Thursday, and Friday 8:00 AM - 5:00 PM ET.
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