Servicing

Interactive Mortgage Advisors expects roughly 20 different investors to submit applications to clear them for bidding on an $11 billion jumbo servicing portfolio that belongs to the bankrupt Thornburg Mortgage of Santa Fe. IMA managing member Tom Piercy said interest in the receivables has been strong with potential bidders including hedge funds, private equity money and existing residential servicing firms. "Interest has come from across the board," said Mr. Piercy. To be deemed suitable, investors must submit an application package by Monday afternoon. Each bidder must have a minimum net worth of $15 million. The portfolio has average loan balances of $650,557 and a weighted average FICO score of 740. A subservicing firm is currently doing the paperwork on the loans.

In lieu of cash bonuses for 2009, the board of Wells Fargo & Co., San Francisco, Calif., has approved multimillion-dollar retention performance shares for three key executives, including the head of Wells Fargo Home and Consumer Finance, Mark Oman. Mr. Oman, a senior executive vice president, and Howard Atkins, also a senior EVP as well as well as the company's chief financial officer, both got approved for a target of 189,800 shares having a current value of about $5 million. The board approved for John Stumpf, president and chief executive officer, a target of 379,600 shares having a current value of about $10 million. "These retention performance shares, which are not a form of cash compensation or annual incentive bonus, are forfeited if the executive receiving the shares leaves the company to work for a competitor," Wells said. The shares will vest after three years of service only if the company meets specified performance goals. A portion of all shares earned by executives as compensation must be held for as long as they remain employed by the company. Steve Sanger, chair of the board's human resources committee and retired chairman and CEO of General Mills Inc., said the executives receiving the compensation have been "leading the company through the largest merger integration in U.S. banking history and they have played key roles in generating record profits in the first three quarters of 2009, despite the challenging economy." Commenting on the rationale behind the performance shares, he noted that given those accomplishments and "the current challenges impacting the banking industry, Wells Fargo executives, at all levels, are being increasingly and aggressively recruited by competitors."

GMAC Financial Services has used a $3.8 billion capital infusion from the Treasury Department to take a $2 billion writedown on its mortgage assets and pursue options that could include the sale of Residential Capital. GMAC also made a $2.7 billion capital contribution to ResCap in the form of mortgage loans, debt forgiveness and cash. "These decisive balance sheet actions and resulting capital infusions are intended to minimize the impact on GMAC and Ally Bank of any future losses related to ResCap's legacy mortgage business," GMAC chief executive Michael Carpenter said. (ResCap was known as a subprime and Alt-A mortgage lender before that market died.) The CEO also noted these actions will allow GMAC to "pursue strategic alternatives" with respect to ResCap and the mortgage business. "We expect to consider various possible options," company spokeswoman Gina Proia said when asked about a possible sale. "There are no special plans at this time," she added. Losses due to ResCap's mortgage operations totaled $3.9 billion for the first three quarters of 2009, including a $747 million loss in the third quarter. In propping up ResCap, GMAC also took a $500 million "repurchase reserve expense" for mortgage buyback demands from investors who claim the loans they purchased from ResCap violate representations and warranties. GMAC took a similar $515 million expense in the third quarter. ResCap and its mortgage affiliates originated $15.4 billion in residential loans in the third quarter - predominantly Fannie Mae, Freddie Mac and Federal Housing Administration product. It is a top-10 mortgage servicer with a $380 billion servicing portfolio.

Fitch Ratings has downgraded 293 classes and affirmed 246 classes in 82 U.S. scratch and dent residential mortgage-backed securities transactions. "Many of these transactions contain collateral that was seasoned and/or seriously delinquent at the time of the transaction's issuance," Fitch said of the transactions, which have issuance dates ranging from 1997 to 2007. The deals were comprised at the time of issuance of some combination of performing, reperforming, subperforming, or nonperforming collateral.

Marc Paul and Robert Robotti, co-founders of the Los Angeles-based SCI Real Estate Investments, are launching TREO Capital Group, Inc., a real estate firm that aims to help buyers capitalize on opportunities in today's residential foreclosure market. Along with principals Janice Jay, Berto Gonzalez, Jay Belson, Matt Epstein, Joel Adelman, Michael Sihilling and Dieter Hochheimer, the TREO real estate team has developed a process to monitor and purchase distressed-priced residential real estate at auctions in Los Angeles County. TREO principals have already purchased over 30 homes for prospective buyers. "Currently there are thousands of distressed-priced homes scheduled for auction each week in LA County alone," said Mr. Paul, president, who is also the former head of the foreclosure divisions of Merrill Lynch Realty and Prudential California Realty. "The challenge for buyers is that most are unable to track all the homes scheduled for auction, analyze all the market and sales data, perform a title search and make a decision to buy ... oftentimes in a matter of hours." The company said most of its clients acquire multiple properties each month seeking to earn yields that can regularly exceed 30% IRR. Messrs. Paul and Robotti's SCI Real Estate Investments has a nationwide portfolio with over $2 billion worth of residential and commercial properties.

To expedite sales of foreclosed properties, Fannie Mae says it will accept a buyer's purchase offer without notifying the servicer and before it determines whether the lender has to reimburse the secondary market agency for any losses. According to a December 24 servicing guide, Fannie Mae will accept a purchase offer "whether or not" the mortgage quality assurance review has been completed. "If, after completion of the review, Fannie Mae determines that the mortgage loan did not meet its eligibility or underwriting requirements and Fannie Mae has incurred a loss by selling the property, the lender will be required to fully reimburse Fannie Mae for its loss," according to Fannie Announcement 09-38. During the first three quarters of 2009, Fannie has taken control of 98,400 single-family or real estate owned properties and sold 89,700 REOs.

Monday was the last day of trading for MacroShares Major Metro Housing Up Trust and MacroShares Major Metro Housing Down Trust. The depositor said a final distribution payment will be made on Jan. 6 to shareholders of record on Dec. 31 based on the underlying values of the trusts. The trusts' values will be determined based on the Nov. 24 release of the reference value of the S&P/Case-Shiller Composite-10 Home Price Index, plus or minus any interest or expense accrued in the trust for the period.

OneWest Bank FSB, Pasadena, Calif. has put $10 million into the creation of a nonprofit foundation aimed at offering affordable housing and other types of support to the communities in which it operates its branch network. The bank has 72 retail branches in Southern California and total assets of $24 billion. Its assets include a loan portfolio, a securities portfolio, a servicing platform with mortgage servicing rights representing over 550,000 borrowers, and Financial Freedom, a reverse mortgage platform.

House prices were unchanged in October after a 0.4% increase in September, according to the Standard & Poor's/Case-Shiller 20-city house price index. Until October, prices had been on the rise for four consecutive months. "Coming after a series of solid gains, these data are likely to spark worries that home prices about to take a second dip," said David Blitzer, chairman of S&P's index committee. Overall, the 20-city HPI is down 7.3% from a year ago and 29% from the peak in home prices in the second quarter of 2006. IHS Global Insight economist Patrick Newport expects prices to decline by another 5% to 10% due to downward pressure by sales of distressed properties. "The foreclosure outlook is not a good one," Mr. Newport said. Foreclosure and delinquency rates hit a record in the third quarter and they are "likely to rise, perhaps sharply," he said.

The serious delinquency rate of Fannie Mae's single-family loans nearly hit 5% at the end of October and its loan performance is deteriorating at a rate of 100 basis points per four-month period. Fannie reported Tuesday that 4.98% of its conventional single-family loans are 90 days or more past due, up from 3.94% in June. On a month-to-month basis, the serious delinquency rate rose 26 basis points in October. The government-sponsored enterprise has $2.8 trillion in conventional loans. The serious delinquency rate does not include loans in private-label securities held by Fannie. Meanwhile, Fannie issued $40.4 billion in mortgage-backed securities in November, down slightly from October, according to the GSE's monthly activity report. Ginnie Mae issued $35.5 billion in MBS in November and Freddie Mac issued $26 billion. Freddie has started releasing additional information involving loan modifications and refinancing volumes with its monthly activity report. But Fannie has not followed in its sister GSE's path. Fannie could not be reached before deadline to comment on the difference in disclosures.