Servicing

Sy Naqvi, who ran PNC Mortgage for 11 years until it was sold to Washington Mutual earlier this decade, has returned to the bank-owned lender. According to an official familiar with the matter Mr. Naqvi's chief job will be to evaluate all the mortgage operations of PNC Bank and National City Mortgage, which the bank inherited when it bought National City Corp. of Cleveland at year end. (For the full story see the Monday edition of National Mortgage News.)

The Obama administration's plan to modify 3 million nonprime loans will be a boon for Federal Housing Administration lenders, according to the chief executive of Lenders One, an alliance of 135 mortgage bankers. "FHA will end up with a huge market share of these modified loans," CEO Scott Stern said in an interview with National Mortgage News this week. Several Wall Street firms are using Lenders One to refinance loans that have already been written down in value. Because of the credit scores and loan-to-value ratios, "the refinancing option of choice is FHA," Mr. Stern said. "Servicers like it because you are replacing risky loans with safe FHA loans."

A troubled homeowner should be given every chance to modify his mortgage before filing for bankruptcy, according to the nation's GSE regulator who is concerned that changes in the bankruptcy code could actually hurt families and their bankers. Homeowners should not have to go through the "hardship and rigors" of bankruptcy to get their monthly payments reduced to an affordable level, said Federal Housing Finance Agency director James Lockhart. The Obama administration has outlined a $75 billion program to modify and refinance problem mortgages. But the administration also is supporting changes to the bankruptcy code that would allow judges to reduce or 'cram down' the principal amount of the mortgage. Although Obama's bankruptcy cramdown proposal is much more conservative than the bankruptcy bill recently passed by the House Judiciary Committee, Mr. Lockhart is concerned Congress will "go too far" and pass legislation that could be harmful. Bankruptcy sounds like a "good" solution, he said, "but it hurts individuals. And it can really dramatically weaken the balance sheets of our weak financial institutions, so we must be careful." Once a homeowner is in bankruptcy, Mr. Lockhart wants him to get one more chance at a loan modification and avoid living under a five-year bankruptcy financial plan. The bankruptcy judge should tell the servicer what the court is prepared to do and give the servicer "one more shot at it," he said.

Mission Capital Advisors, LLC, a commercial, residential and consumer loan sale advisor with offices in New York, Florida and Texas, has hired Jason Cohen as a managing director in the firm's New York office. In his new role, Mr. Cohen will originate loan sales, trade loans and create loan sale financing platforms. For the past five years he was a managing director with the Ackman Ziff Real Estate Group, where his volume of deals completed exceeded $3 billion and he originated and placed senior debt, mezzanine debt, preferred equity, and equity for all types of real estate. "Jason joins us at a time when there is a significant amount of commercial and residential loan portfolios on the market, with an expected increase throughout 2009 and beyond," said David Tobin, principal at Mission Capital Advisors.

Corus Bankshares Inc. and its subsidiary Corus Bank NA, both of Chicago, have entered into a written agreement with the Federal Reserve Bank of Chicago and a consent order with the Office of the Comptroller of the Currency. Corus Bank is a nationwide construction lender, specializing in condominium, office, hotel, and apartment projects. These agreements include several requirements related to loan administration as well as procedures for managing the bank's growing portfolio of foreclosed real estate assets. "The regulatory agreements are the result of ongoing discussions between the OCC, the FRB and Corus' senior management over the last few months to address the negative impact that current market conditions are having on Corus and how best to resolve them. We believe the remedial measures agreed upon with the regulators are necessary to address asset quality deterioration and overall risk management," said Robert J. Glickman, president and chief executive. He added the company's board is actively exploring strategic alternatives, including a merger or capital infusion. Corus' outstanding commercial real estate loans and unfunded construction commitments total approximately $5.8 billion.

Bond insurer MBIA has split its non-municipal exposures - including its problematic mortgage-related exposures in the structured finance sector - into a separately capitalized company. "This is not a 'good bank/bad bank' split, although that is how I expect many observers will report on the change," said MBIA chairman and CEO Jay Brown in a letter to investors. He said that structured finance policyholders should "feel very comfortable that their policies remain in an entity with ample claims-paying resources to meet any expected claims, even under our stress loss scenarios." He added that the company would "no longer use credit derivatives to guarantee new insurance transactions" of any type because "exposure to this market injected too much volatility into our financial statements." In response to the restructuring, Moody's Investors Service has downgraded the insurance financial strength ratings of MBIA Insurance Corp. and its supporting subsidiaries while placing the rating for the municipal subsidiary on review for possible upgrade. The downgraded ratings have a "developing" outlook, the rating agency said. Moody's cited among reasons for its ratings moves "the deteriorating credit profile of alt-A mortgage-backed securities, corporate CDOs and CMBS - all of which are negatively affecting MBIA Corp.'s risk-adjusted capital adequacy." The rating agency added, "The claims-paying resources of MBIA Corp. post-restructuring are roughly equivalent to Moody's expected loss estimates for the entity." It also noted that MBIA Corp.'s developing outlook "reflects the potential for further deterioration in the insured portfolio. It also incorporates positive developments that could occur over the near to medium term, including greater visibility about mortgage performance, the possibility of commutations or terminations of certain ABS CDO exposures, and/or successful remediation efforts on poorly performing RMBS transactions." In addition, Moody's said the developing outlook "is also based on the potential for various initiatives being pursued at the U.S. federal level to mitigate the rising trend of mortgage loan defaults."

Local municipalities across the country are increasing penalties and fining lenders as much as $100 a day for code violations such as each broken window on an REO home, according to speakers on the vacant property registration panel at the Mortgage Bankers Association's National Mortgage Servicing Conference in Tampa. Robert Klein, chief executive of Safeguard Properties, said servicers need to make sure their property preservation units communicate with code enforcement officials at the city and county levels to open up dialogue and prevent this from happening. "If you won't listen, they will look for every legal measure they can to inflict some pain," he said. Cary Sternberg, senior vice president, American Home Mortgage Servicing, said servicers are searching for creative and aggressive strategies to dispose of these properties while figuring out the best way to preserve the assets. They are partnering up with preservation vendors to update the carpet, paint, and if needed, replace the roof, in order to make sure the home is in "lendable condition." Caroline Reaves, president and chief operating officer, Mortgage Contracting Services, said more mid-value and high-end properties are seeing cosmetic enhancements with furniture staging. The panelists also said home managers are sometimes being used to maintain the property and travel from house to house, to occupy and maintain the house.

Servicers are seeing increased cases where borrowers are trying to stall or stop foreclosures by filing "right to rescind" notices as violations of the Truth in Lending Act, according to speakers at the MBA's National Mortgage Servicing Conference in Tampa. During a panel on mortgage litigation, Terry Hutchens, president of the law firm of Hutchens, Senter & Britton, said that debtors attorneys are claiming that borrowers were given inadequate documents at the time of closing and did not understand the loan, which judges are starting to honor. It's worth it for servicers to try and negotiate a settlement or consider a loan modification with the borrower rather than take the case through expensive litigation, he said. "We're not so vulnerable that we are rolling over in every case, but we have to consider doing things differently than we have in the past," said Mr. Hutchens. The cost of defending these types of cases has gone up in the past year, he said. Shaun Ramey, a partner with Sirote & Permutt PC, said servicers must decide how to handle these new cases. Cities, states and counties are putting giant roadblocks up to fight foreclosures, he said. "There are new claims and new defenses. Public nuisance lawsuits are coming up because foreclosures are driving up the cost of mounting properties sitting around and the cost it takes to maintain them." It was also said that claims of reverse redlining are being brought against lenders at the city level as well as borrowers bringing suitability actions against lenders. "If the judges feel that something isn't right, they will stop the foreclosure."

CU National Mortgage, a private label funder that served the nation's smaller credit unions, closed its doors recently, according to industry sources. As MortgageWire went to press, CUNM officials could not be reached for comment. A subsidiary of U.S. Mortgage Corp. of Pine Brook, N.J., the company was founded 13 years ago. USMC officials also could not be reached for comment. According to The Credit Union Journal, CUNM had 50 offices and 200 employees. CUMAnet, in Basking Ridge, N.J., told the newspaper that it would assist CUNM's credit union clients. "There are many, many good people at CU National and our hearts go out to them during this difficult time," said CUMAnet president Daniel von Schaumburg. "Even though they are our direct competitor in the credit union space, we do respect them for their work in providing credit unions with mortgage lending packages to members who want to become homeowners."

Obama administration officials have decided to limit refinancings of "underwater" Fannie Mae and Freddie Mac mortgages to a loan-to-value ratio of 105% so the new mortgages can be securitized, according to Federal Housing Finance Agency director James Lockhart. "That is why the line is drawn there," Mr. Lockhart said at a meeting of government accountants. The refinancing program is designed to lower borrowers' mortgage rates, which the Federal Reserve Board and Treasury Department are trying to drive down by aggressively purchasing GSE mortgage-backed securities. About 75% of the mortgages with LTVs above 80% the government sponsored enterprises own or guarantee fit under the 105% cap. If the program is successful, four million to five million mortgages may be refinanced. Servicers are already "overwhelmed," Mr. Lockhart said, and they didn't want to push the LTV any higher because of capacity issues. He also noted that the GSEs have other loan modification programs to deal with more problematic underwater mortgages.