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Wells, BoA Dominate Ginnie Mae Servicing

Washington-Wells Fargo Home Mortgage and Bank of America continued to dominate the GNMA servicing business in the second quarter, achieving a combined market share north of 46%, according to figures released by the Government National Mortgage Association.

Wells serviced $192 billion of GNMA MBS at June 30, ranking first with BoA finishing second with $153 billion. (JPMorgan Chase was a distant third with just $67 billion.)

At year-end Wells and BoA had a combined market share of 44%. Issuance of GNMA securities has boomed this year with outstanding MBS at $740 billion, a 16% jump in six months.

(The two also dominate overall servicing, though the order is reversed. Bank of America serviced $2 trillion in loans at June 30 of this year, and Wells $1.8 trillion, for a 39% share between them. See table below.)

The securities include FHA and VA loans and carry higher servicing fees than Fannie Mae/Freddie Mac products - 44 basis points to 23 bps on average. The secondary market for GNMA servicing rights has been picking up steam in recent quarters with some new entrants eyeing the market, including Ocwen Loan Servicing of Florida.

At June 30 Wells had a 25.8% market share compared to 20.7% for BoA. BoA has three different units represented in the rankings including BAC Home Loan Servicing of Simi Valley, which is a master subservicer for GNMA itself. (The $153 billion figure is for all three units.)

BACHLS recently was assigned a 180,000 unit GNMA portfolio by the agency. The rights belonged to Taylor, Bean & Whitaker, which is now in bankruptcy. The TBW assignment, however, is not represented in the June ranking because the assignment occurred after that date.

In GNMA-related news, the FHA single-family insurance fund will not need a capital infusion from Congress. (The program has been profitable for several years.)

FHA commissioner David Stevens - responding to concerns that the program is experiencing larger than expected credit losses - said the fund will not need a congressional subsidy even if the congressional capital reserve ratio falls below 2%.

A recent report in The Wall Street Journal said that rising defaults have "eaten through" FHA's capital cushion and that the fund is in danger of falling below the statutory minimum of 2%.

FHA's capital reserve is based on an annual actuarial study that is generally completed by October. The FHA commissioner said he would not comment on FHA's reserve ratio until he sees the study.

At the end of the second quarter, 6.88% of FHA single-family loans were 90 days or more past due, up 35 basis points from June 2008, according to FHA. FHA foreclosures are up 17%, however.

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