Servicing

TCB Financial, Wayzata, Minn., a top 50 ranked residential servicer, has asked permission to return $361.2 million in Troubled Asset Relief Program funds to the Treasury as soon as possible. Under current rules depositories receiving TARP money can return the money after giving the government 30 days notice. In a statement TCB CEO William Cooper said, "TCF has sufficient capital and access to capital to operate without the TARP money," adding that, "we believe participation in TARP has created a competitive disadvantage" for the bank. According to a research note put out by Sandler O'Neill, "TCB is perhaps among the few with the wherewithal to pay back the funds immediately."

Critics of the Obama administration's loan modification proposal say that it would not adequately address consumers' nonmortgage debt loads or the second liens on their homes, and that many borrowers would end up defaulting again.According to a report in American Banker, the proposal, part of a broad housing plan unveiled last month, would subsidize principal or interest rate reductions that lower a monthly mortgage payment to 31% of the borrower's income. But there is no maximum for the total debt-to-income ratio a borrower may carry to be eligible for a modification. Nor is there any requirement or incentive for a consumer's other creditors to write down their loans. "You're not getting a complete picture of what the borrower can afford to pay if you don't take into account all their debt," said Fred Melgaard, executive vice president of DRI Management Systems, a Newport Beach, Calif., provider of default management software.

The mortgage delinquency rate for borrowers 60- or more days past due increased for the eighth straight quarter, reaching 4.58% in 4Q -- a 53% increase from the same period a year ago, according to a new report from TransUnion, Chicago. In the third quarter the ratio, a national average, stood at 3.96%. Borrower delinquency rates in the fourth quarter were highest in Florida (9.52%) and Nevada (9.01%), while the lowest rates were found in North Dakota (1.21%), Alaska (1.74%) and South Dakota (1.97%). The three areas showing the greatest percentage growth in delinquency from the previous quarter were Arizona (26.2%), Montana (24.5%) and South Dakota (23.9%). However, the news is not all bad: North Dakota and Alaska both showed a decline in mortgage delinquency rates, down respectively from the previous quarter. The state with the highest average mortgage debt per borrower was California at $356,421, followed by the District of Columbia ($354,082) and Hawaii ($310,289). The lowest average mortgage debt per borrower is West Virginia with $96,242.

CitiMortgage says that 23% of delinquent home mortgages it modified over the past year fell into default again -- into the 60- and 90-plus day late categories.Citi's results appear to be better than government figures released late last year that showed 55% of loan modifications performed by national banks and thrifts were 30-plus days late after six months. The bank-owned mortgage lender also said that even if a loan goes late again it does not necessarily mean the home will go into foreclosure. "We continue to work with these borrowers after re-default to find long term solutions to help keep them in their homes," said a company official. Since 2007 CitiMortgage has modified 440,000 customers affecting $43 billion of mortgage debt. Meanwhile, CitiMortgage on Tuesday launched a new program allowing unemployed mortgagors to pay a reduced amount on their loans for up to three months. But the program is only for loans that CitiMortgage holds in portfolio and are for $417,500 or less. The new effort, called "Homeowner Unemployment Assist" can lower monthly payments to just $500 (on average) for up to three months. Investor loans are excluded from the program.

Financial institutions last year filed 62,084 mortgage-related "suspicious activity reports" with government regulators -- a 44% increase from the prior year, according to new figures released by the Financial Crimes Enforcement Network. FinCEN director James H. Fries said one trend the agency found "is the increase in mortgage fraud detection in connection with mortgage purchasers sending home loans back to originators for repurchase." FinCEN also is seeing an increase in foreclosure-related fraud. The SARs figures cover reports filed for the 12-month period ending June 30, 2008.

A civil lawsuit filed against CU National Mortgage last week - hours before the company filed for bankruptcy - charges that the owner and CEO of CUNM masqueraded as an executive vice president of another credit union and approved "allonges," assigning millions of dollars of that credit union's mortgages to Fannie Mae as part of a wide-ranging fraud scheme that may involve hundreds of millions of dollars of credit union loans. CUNM was a private-label lender/servicer for more than a dozen credit unions. During a hearing last week in U.S. bankruptcy court (where CUNM and its parent U.S. Mortgage of Pinebrook, N.J. filed for protection), lawyers for the other CU, Picatinny FCU of Dover, N.J., said CUNM may have sold as much as $14 million of its loans to Fannie Mae without authorization and without sending the receipts to the credit union. "[USM CEO Michael] McGrath endorsed Picatinny's name to a note which assigned the mortgages to Fannie Mae," said James Forte, Picatinny's lawyer in the case. "These loans were sold without our authorization." Picatinny and dozens of other CUs are currently working with officials of USM/CUNM for the return of tens of millions of mortgages sold to Fannie Mae without their authorization, according to a report in Credit Union Journal. Lawyers for Mr. McGrath did not return telephone calls about the matter. The FBI is now investigating the collapse of USM and CUNM.

Freddie Mac said chief executive David Moffett — who took the helm of the GSE when it was placed into conservatorship in early September — has resigned from the company effective March 13. The mortgage investing giant said its board is working with the Federal Housing Finance Agency to appoint a successor and hopes to name an interim CEO before the 13th. Freddie said Mr. Moffett is leaving "to return to a role in the financial services sector." Mr. Moffett retired as vice chairman and chief financial officer of U.S. Bancorp in 2007. After his retirement, and before joining Freddie, he was a senior advisor to The Carlyle Group, working on financial service matters. Freddie Mac is supposed to report earnings soon. Last week Fannie Mae reported an annual loss of $58.7 billion.

Freddie Mac said chief executive David Moffett — who took the helm of the GSE when it was placed into conservatorship in early September — has resigned from the company effective March 13. The mortgage investing giant said its board is working with the Federal Housing Finance Agency to appoint a successor and hopes to name an interim CEO before the 13th. Freddie said Mr. Moffett is leaving "to return to a role in the financial services sector." Mr. Moffett retired as vice chairman and chief financial officer of U.S. Bancorp in 2007. After his retirement, and before joining Freddie, he was a senior advisor to The Carlyle Group, working on financial service matters. Freddie Mac is supposed to report earnings soon. Last week Fannie Mae reported an annual loss of $58.7 billion.

Standard & Poor's has put 3,279 ratings of first-lien prime jumbo U.S. residential mortgage-backed securities from 2006 and 2007 on CreditWatch Negative, citing an increase in projected losses to 40% from 30%. "This change is based on our belief that the influence of continued foreclosures, distressed sales, an increase in carrying costs for properties in inventory, costs associated with foreclosures, and more declines in home sales will depress prices further and lead loss severities higher than we had previously assumed," S&P said. The rating agency said there also has been "a persistent rise in the level of delinquencies among the prime mortgage loans supporting these transactions." Specifically, it said severe delinquencies (payments late by 90 or more days, foreclosures and real estate owned) have increased by 45.60% over the past three months accounting for, on average, 4.41% of current aggregate pool balances on affected transactions.

Urban Settlement Services of Pittsburgh, which performs loan modifications for residential servicers, said it expects to hire 200 new workers this year. Company chief executive Charles Sanders said the new hires will come onboard over the next five to six months. "The positions will include workout specialists, call center and data operators and other people," Mr. Sanders said. The company, which also has offices in Colorado and North Carolina, presently employs about 150. When its subcontractors are counted, its head count is 600, said Mr. Sanders, a former professional football player for the Pittsburgh Steelers.