Agencies Continue Focus on Loss Mit, Servicer Performance

The government agencies are taking a closer look at distressed mortgages. Image: Fotolia.

Representatives from the Federal Housing Administration, Ginnie Mae, the government-sponsored enterprises and the Department of Veteran Affairs provided updates about servicing initiatives, loss mitigation efforts and upcoming plans for 2013.

In 2012, the Department of Housing and Urban Development acquired 103,000 real estate owned properties and sold 106,000, marking the first time since the onset of the crisis that FHA REO sales outpaced property acquisitions.

"Having that shift for the outflows being larger than the inflows is huge for us and we expect that to continue," said Charles Coulter, HUD deputy assistant secretary for single-family housing.

The FHA will soon be launching a new loss mitigation waterfall to further emphasize its Home Affordable Modification Program in hopes of further reducing foreclosures.

"The key dynamic here is to get more borrowers to FHA HAMP because that’s where they're have the most benefit and get the highest level of success in staying in their house," Coulter said.

When borrowers can't be brought current, FHA is having improved efforts in preforeclosure sales, which typically yield a 20% higher sales price than an REO sale. The FHA is also preparing for another round of bulk distressed note sales, currently scheduled to occur in March. The sales give investors opportunities to workout distressed loans beyond the FHA's capabilities.

"They can write down the loan further or set up a rent-to-own program," Coulter said. "We're fairly bullish on the notion that these investors are going to be able to help stabilize neighborhoods."

Ginnie Mae is in the midst of increasing its oversight of issuers and more closely monitoring requests for servicing rights transfers, said Leslie Meaux, Ginnie Mae director of monitoring and asset management.

"We are asking for a lot more information from you and a lot more documentation," she said, adding that reviews emphasize examinations of issuers deemed to be the highest risk to Ginnie Mae.

In fiscal year 2012, Ginnie fielded portfolio transfer requests equivalent to $47 billion in servicing rights, up from $22 billion in FY 2011. In 2013, Ginnie expects to see the volume increase fivefold from the 2012 levels. As a result, the organization is increasing its due diligence on operational, financial, and collateral reviews of both parties before approval is granted.

The GSEs are continuing their alignment initiatives and further emphasizing loss mitigation efforts.

"Delinquencies across the board are declining...but the problem is that there are still 350,000 loans that are seriously delinquent," said Tracy Mooney, Freddie Mac senior vice president of servicing and REO.

Mooney added that Freddie Mac will be expanding its servicer loan file reviews, moving from a quarterly to a monthly cycle for reviews. With the addition of more automated processes, the reviews will be more comprehensive and include both performance-based and loss recovery-based samples of servicers’ books of business.

"We plan to be more visible and spend more time with you,” she said.

Fannie Mae’s loss mitigation efforts now include borrower counseling services that continue during the trial phase of a loan modification and for a year after the mod becomes permanent. About 20 servicers currently offer post-modification counseling, said Leslie Peeler, senior vice president of Fannie Mae’s national servicing organization.

"What we have found is that through counseling the borrower on budget and credit, we're able to drive a significant increase in performance...We're really focused on helping the borrower rehabilitate across all of the challenges that they may be facing,” she said.

The VA has experienced an uptick in foreclosures in 2013, 6,746 already this year, compared to a total of 16,466 foreclosures in 2012. And the VA has already acquired 5,326 REO properties in 2013, compared to 13,038 properties in 2012.

The VA has stepped up its loss mitigation efforts by requiring servicers to report delinquencies earlier, at 61 days delinquent, rather than the previous threshold of 105 days delinquent, said the VA’s Terry Cere.

Cere added that part of the increase can be attributed to a higher volume of VA mortgage originations, including 151,000 mortgages year-to-date in 2013. Veterans are taking advantage of low interest rates and 88% of VA-backed loans are originated without a downpayment.