Servicing

The nation's top five residential servicing firms, as a group, now control almost 67% of all housing debt in the U.S., another sign that consolidation in the struggling industry is rampant, according to exclusive survey figures collected by National Mortgage News. The group of five < Bank of America, Wells Fargo, Chase Home, CitiMortgage and Residential Capital Corp. < owned $6.513 trillion in servicing rights at year-end, a 27% increase from the same period 12 months earlier. At year-end 2008 the top five had a combined market share of 66.94%, compared to 55.93% 12 months earlier. Twelve months prior to that, the five had a 52.92% share, which might have indicated that consolidation was not picking up much speed. (For the complete story and rankings see the print edition of National Mortgage News.)

Fitch Ratings has removed IndyMac and reverse mortgage lender Financial Freedom from its "rating watch evolving" list and upgraded its servicer ratings on IndyMac. Fitch raised IndyMac's servicer ratings for alt-A, subprime, prime and special servicing to a "2" level from a previous rating of "3." Fitch also affirmed Financial Freedom's "3" rating as a primary servicer of reverse mortgages. IndyMac Mac serviced 725,000 loans with an outstanding principal balance of $179 billion as of Sept. 30, 2008. Financial Freedom, a wholly-owned subsidiary of IndyMac, serviced 161,375 loans with an unpaid principal balance of $22.3 billion as of November 30, 2008. Over 90% of the Financial Freedom portfolio consists of reverse mortgages backed by the Federal Housing Administration. IndyMac was seized by the FDIC last summer. At the end of last year, the FDIC signed a letter of intent to sell IndyMac to a consortium of private equity investors controlled by IMB Management Holdings.

Office of Thrift Supervision director John Reich said he is leaving his post as the chief supervisor of 800 federally chartered thrift institutions at the end of this month. OTS senior director Scott Polakoff will serve as acting director until President Obama nominates a new director to run the agency. During his four-year tenure at OTS, Mr. Reich witnessed the demise of some of the largest savings and loans in history. Washington Mutual, IndyMac Bank and Countrywide failed on his watch. The OTS director was the most reluctant of federal banking regulators to tighten subprime and Alt-A lending underwriting guidelines. He generally insisted on giving thrifts the most flexibility in setting their lending polices. Mr. Reich was a Sarasota, Fla., banker before he came to Washington to work on the staff of former Sen. Connie Mack, R-Fla. President Bush nominated Mr. Reich to run OTS in 2005.

National banks and federally chartered thrifts will have to provide more information about loan modifications to their regulators and indicate whether they reduced the borrower's monthly payment, left it the same or actually increased the burden. The Office of Comptroller of the Currency and Office of Thrift Supervision are concerned that so many modified loans are re-defaulting. And they want to find out why. "This information is important on banks' efforts to modify loans and will help inform lenders and policymakers as to what kind of modifications work, with particular focus on the effect of significant changes in monthly payments," Comptroller John Dugan said. Servicers will be able to indicate if they reduced the borrower's monthly payment by more than 10% or less than 10%. They will also have to report if the borrower's payment has been increased or remained the same.

Chase Home Mortgage, the nation's third largest residential servicer, today declared a three-week moratorium on home foreclosures. A subsidiary of JPMorgan Chase, the lender/servicer said is waiting for the White House to unveil its foreclosure reduction program. According to the Quarterly Data Report, Chase services $850 billion in home mortgages. Meanwhile, JPM opened its first homeownership assistance center in California -- in the town of Glendale -- as part of a plan to open a nationwide network of 24 centers by the end of March. Nine of the HOA centers will be in California to assist borrowers serviced by Chase, Washington Mutual or EMC, which now are part of JPMorgan Chase. "We created these local Homeownership Centers as a place for our borrowers to sit down and discuss their situation face-to-face with trained loan advisors in these challenging times," said David Schneider, head of mortgage servicing at Chase. "They are part of a wide-ranging initiative to help families stay in their homes whenever possible." Three other centers, designed to help families struggling with their mortgage payments, will open soon in the Los Angeles, Orange and San Bernardino County.

First Tennessee Bank said it has sold $14 billion in Fannie Mae/Freddie Mac residential servicing rights to an undisclosed third-party. No purchase price was disclosed. The sale was brokered by Milestone Advisors LLC of Miami. FTB is a subsidiary of the publicly traded First Horizon National Corp. of Memphis. In June of last year Metropolitan Life bought most of FHN's residential origination business, including 230 retail and wholesale offices scattered across the nationwide. The bank, though, continues to originate in its depository footprint and service loans.

MGIC Investment Corp., the nation's largest mortgage insurer, said it will still cover broker-sourced loans but come March 9 will eliminate other products from its menu, including cash-out refinancings. According to a company bulletin, MGIC also will no longer insure second homes, and notes on manufactured housing units. The MI also will not cover any condominium mortgages with LTVs north of 90% in certain "restricted" markets where home prices have fallen dramatically. In regard to broker-sourced loans, the company will continue coverage but is capping LTVs at 90% and FICOs at a minimum of 720. Also, wholesalers must track their MGIC brokers by providing an identification number on these third-party originators. Earlier this week, The PMI Group, said it would no longer cover any type of broker-sourced mortgages.

House and Senate conferees raised the first-time homebuyer tax credit to $8,000 (a $500 increase) during last-minute negotiations on the pending economic stimulus bill. Also, the effective date of the credit was increased by three months to December 1. The final stimulus bill (H.R. 1) also raises the maximum GSE loan limit to $729,720. At press time the House was voting on the $800 billion package. A Senate vote on final passage could come as early as Friday evening or during the weekend. As reported earlier, the conferees cut a $15,000 homebuyer tax credit approved by Senate in half and limited the tax benefit to first-time homebuyers. The final version of H.R. 1 also restores the maximum $729,750 loan limit for Fannie Mae, Freddie Mac and Federal Housing Administration loans for the rest of this calendar year. (The current limit is $625,500.) Reinstating the higher loan limits will "help to reduce inventory and improve liquidity in the overall mortgage market," said Charles McMillan, president of the National Association of Realtors. Although the $8,000 first-time homebuyer tax credit is a disappointment to many in the industry, the tax writers made it a real tax credit so homebuyers do not have to repay it like an interest-free loan. Eliminating the repayment provision should bring more buyers into the market, Mr. McMillan said. The final stimulus bill also raises the loan limit on FHA-insured reverse mortgages to $625,500 from $417,000 for the rest of the calendar year.

Standard & Poor's Corp. has upgraded its reverse mortgage servicing ranking for Celink - a company it said is the largest independent servicer of private label HECMs - based on improvements to its staff and operations. S&P raised the ranking to "above average" from "average," citing "the addition of new experienced management personnel, significantly improved proprietary systems environment, efficient internal controls, superior policies and procedures, additional staff, and an overall increase in the ability to effectively service reverse mortgage loans." S&P also said Celink "remains the fourth-largest servicer of Home Equity Conversion Mortgages."

Credit Suisse Group's saw 2.3 billion Swiss francs ($2 billion) in U.S. residential and commercial mortgage-related writedowns during the fourth quarter, a period when it took a net loss of 6 billion Swiss francs ($5 billion). The Zurich, Switzerland-based group said 1.3 billion Swiss francs ($1.1 billion) of the writedowns stemmed primarily from exposures to residential mortgages and subprime collateralized debt obligations and the remaining balance stemmed from warehouse exposures in the securitized commercial mortgage sector. The company said it is making progress reducing its exposure to these problematic asset classes.