Servicing

The expansion-minded MetLife Home Loans is eyeing a possible entry into both correspondent residential lending and warehouse financing, a company spokesman confirmed. In an interview with National Mortgage News, the spokesman said MetLife is exploring these sectors for 2010 but could not provide any details at press time. Over the past two months rumors have circulated that MLHL, a subsidiary of MetLife Bank, N.A., was not only entering correspondent and warehouse lending but had hired a manager to spearhead the effort. The spokesman said he could not confirm the hiring of anyone at this time. In mid-2008 MetLife bought the origination and servicing divisions of First Horizon National Corp. of Memphis. The sale was accomplished through an asset purchase that included 230 retail and wholesale offices. Today, MLHL ranks 11th nationwide in both residential lending and servicing, according to the Quarterly Data Report.

The House Financial Services Committee this year will hold hearings on not only restructuring the nation's financial system, but what to do with Fannie Mae and Freddie Mac which together guarantee half of all outstanding home loans in the U.S. Committee chairman Barney Frank (D-Mass.) noted that the GSEs currently operate as public utilities and he has no desire to see them returned to their former "hybrid" status as private companies with a public mission. Talking to reporters, he said he does not know, at this time, what form the two eventually will take. (Fannie and Freddie were taken over by the federal government in September 2008 and continue to draw billions in taxpayer aid to maintain a net worth above zero.) The chairman stressed that the housing finance system, as a whole, must be analyzed, including the Federal Home Loan Bank System, the Government National Mortgage Association and the Federal Housing Administration. In terms of specific legislation, the chairman wants to address mortgage servicing and the decision-making process among investors, trustees, and servicers in regard to modifying loans. He said it seems unclear at this time which entities have the decision-making power on loan mods. "That is something we want to solve," he said.

The HUD Inspector General has subpoenaed 15 Federal Housing Administration direct-endorsement lenders as part of an investigation into why these firms have the highest default and claim rates in the nation. "We are not making any accusations at this time." said Department of Housing and Urban Development IG Kenneth Donohue. "We have no evidence of wrongdoing, but we will aggressively pursue indicators of fraud." Despite the subpoenas, the targeted lenders will continue to originate FHA-insured mortgages. This investigation is "focusing on many of the worst performers in the FHA portfolio," said FHA commissioner David Stevens at a Washington press conference. The FHA chief said he supports the IG's effort to determine why these lenders have such a high claim rate on mortgages that are only 30 months old. "I will be interested to see what comes out of the audit work," said Mr. Stevens. The lenders issued subpoenas include: First Tennessee Bank N.A., Memphis; Alethes LLC, Lakeway, Texas; Security Atlantic Mortgage, Edison, N.J.; Pine State Mortgage of Georgia; Birmingham Bancorp Mortgage, West Bloomfield, Mich.; Alacrity Financial Services, Southlake, Texas; Assurity Financial Services, Englewood, Colo.; D and R Mortgage Corp. Farmington, Mich.; Webster Bank, Cheshire, Conn.; Mac-Clair Mortgage Corp., Flint, Mich.; Americare Investment Group, Inc., Arlington, Texas; 1st Advantage Mortgage, Lombard, Ill.; American Sterling Bank, Independence, Mo.; Sterling National Mortgage, Great Neck, N.Y.; and Dell Franklin Financial, Columbia, Md. These lenders have originated at least 1,000 FHA loans and their claim rates exceed their peers by 200%, HUD said. FHA streamlined refinancings or loans approved by automated underwriting systems are excluded from the claims rate.

One in 7.5 U.S. homeowners are either behind on their mortgage payments or in foreclosure, according to a new report from Lender Processing Services Inc., Jacksonville, Fla. LPS, in a 'Mortgage Monitor' report, notes that at the end of November 13.2% of mortgagors were non-current on their loans. (The figure includes both late payments and foreclosures.) Over the past year delinquencies increased by 21%, according to LPS.

U.S. CMBS delinquencies, at 4.71%, had increased to about five times what they were the previous year as of yearend 2009, according to the latest Loan Delinquency Index results from Fitch Ratings. The delinquency rate may not peak until 2012, according to Fitch managing director Mary MacNeill. "An increased amount of loans are coming due over the next two years that will result in delinquencies possibly peaking at 12%," she said.

While some U.S. subprime residential MBS prices are continuing to stabilize, 2004 and 2007 vintages are still showing notable declines, according to a Fitch Solutions credit default swap-based price index. On a month-to-month basis, prices for RMBS overall as of Jan. 1 had jumped just over 5% to 7.62 from 7.25 the previous month. "The 2005 vintage was the main driver of the positive trend, showing strong growth up 4.7% to 8.42," the company said. "The 2006 vintage also showed marginal improvement by rising to 2.81." However, the 2004 and 2007 vintages dropped 7% and 11%, respectively. "Higher quality borrowers' ability to refinance this summer resulted in higher prepayment rates, but left 2004 vintage pools on average with lower credit quality borrowers," said Fitch Solutions managing director Thomas Aubrey. He also noted the historical 90-day plus delinquencies in the 2007 vintage "jumped significantly," which he said suggests "default rates may begin increasing within the 2007 vintage."

Fitch's latest 12-month forecast for rate recasts on prime and alternative-A credit residential mortgage-backed securities indicates that more than $47 billion of collateral could be affected by rate shock. The forecast pertains to prime and alt-A RMBS slated to convert from interest-only payments to full principal and interest payments. "Sixty-day delinquency rates have risen over 250% in the 12 months following previous recasts for prime and alt-A loans," said Fitch managing director Roelof Slump. He said Fitch's current ratings consider the risks of upcoming IO recasts but mortgage pools with "significant" IO concentrations still could be downgraded "if performance is worse than anticipated."

Invesco Mortgage Capital Inc., Atlanta has priced its public offering of 7 million shares of common stock at $21.25 per share. The transaction will give the company gross proceeds of nearly $149 million. In addition, the underwriters have a 30-day option to purchase up to an additional 1 million shares to cover over-allotments. The offering is expected to close early next week. Invesco, a real estate investment trust that focuses on financing and managing residential and commercial mortgage-backed securities and mortgage loans, expects to use the proceeds to acquire residential and commercial MBS (and loans) on a leveraged basis, and to invest in a public-private investment fund managed by Invesco Advisers Inc. Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. are acting as joint book-running managers for the offering. Invesco's shares have been trading for about $22 each of late.

Jaymes Financial of Virginia is offering a $61 million portfolio of delinquent residential loans -- an auction that is actually a "re-trade" of an earlier sale. Jaymes Financial principal Andy Jaymes declined to identify the seller but noted that the $61 million is part of a $365 million sale of nonperforming loans sold by DebtX of Boston on behalf of the Federal Deposit Insurance Corp. A majority of the package being offered by Jaymes Financial includes Florida condominium loans.

Standard & Poor's Ratings Services has lowered its ratings on 99 classes from six residential mortgage-backed securities transactions. The securities, issued between 2005 and 2007, are backed by U.S. subprime and alternative-A credit mortgages as well as prime credit jumbo loans. S&P said 42 of the 99 classes were on its CreditWatch list for possible downgrades and now have been removed from that list. The credit rating agency also affirmed its ratings on 31 classes from four affected MBS and removed two of the affirmed ratings from its CreditWatch negative list.