Servicing

There are $171 billion of commercial and multifamily mortgage loans held by non-bank lenders and investors that are set to mature this year, a survey from the Mortgage Bankers Association said. The Commercial Real Estate/Multifamily Survey of Loan Maturity Volumes found that short-term floating-rate mortgages in commercial mortgage-backed securities and mortgages held by credit companies, warehouse facilities and other investors are more likely to mature in 2009 and 2010 than are fixed-rate CMBS mortgages, mortgages held by life insurance companies or multifamily mortgages held or guaranteed by Fannie Mae, Freddie Mac or FHA. MBA found that $120 billion of non-bank commercial/multifamily mortgages are scheduled to mature in 2010. "Substantial concerns have been raised about the volume of mortgages maturing in the face of the current credit crunch," said Jamie Woodwell, MBA's vice president of commercial real estate research. "This study shows that while the dollar volume of maturing non-bank mortgages represents only one-tenth of the total outstanding balance, it is not evenly spread across investor and lender groups. Across all these investor groups, commercial/multifamily lenders and servicers have a wide variety of tools to help them deal with maturing mortgages, which should mitigate - but not eliminate - the impact of maturities in 2009." Of the total non-bank holdings of commercial/multifamily mortgages coming due in 2009, 52.8% is in CMBS, collateralized debt obligations or other forms of asset-backed securities, and an additional 33.6% is held by credit companies, warehouse facilities or other investors. Life insurance companies hold only 9.8% of the non-bank mortgages maturing in 2009, and 3.8% are held or guaranteed by Fannie Mae, Freddie Mac or FHA.

The U.S. Mortgage Insurance operations at Genworth Financial Inc., Richmond, Va., had a fourth quarter 2008 net operating loss of $114 million; one-year prior, it had an operating loss of just $3 million. The company said higher captive reinsurance coverage benefits and loss mitigation actions were more than offset by higher incurred losses. For the period, Genworth received $206 million in pre-tax income from lender captive reinsurance coverage. Paid claims were $173 million, an increase of $41 million over the third quarter 2008 and $108 million over the fourth quarter 2007. Average paid claim increased from $39,200 in the fourth quarter 2007 to $52,300 for the most recent period. The amount of new flow insurance written during the quarter was down 48% from the third quarter 2008, to $3.2 billion. For the year, the U.S. MI business lost $330 million, compared with net operating income of $167 million in 2007. Genworth's MI business in Canada had net operating income of $67 million, down from $88 million one-year prior. Net operating income at the Australian MI unit was flat, at $40 million. However higher delinquencies in Spain were responsible for the "other international" segment of Genworth's MI business, recording an $8 million loss for the fourth quarter 2008.

Despite an increasing willingness among lenders to forgive a portion of the principal balance on loan modifications, Fitch Ratings predicts that 60% to 70% will still re-default within one year. The "aggressive" use of streamlined modification without income verification is one factor behind Fitch's gloomy prediction. Rising unemployment and continuing home price declines also will undermine efforts to keep troubled borrowers in their homes, the rating agency said. Initial data does not suggest that principal reduction alone has much impact on re-default rates, according to Fitch. The rating agency found that even with principal forgiveness of 20% or more of the loan amount, 28% of loans re-defaulted within six months. That compares to a 30% re-default rate on loans where the outstanding principal increased on a modification due to the capitalization of past due interest and other costs. By contrast, Fitch said modifications that reduce the borrower's monthly payment do appear to reduce the re-default rate. Reducing the borrower's payment by 20% or more lowered the six-month re-default rate to 21%. That compares to a 49% re-default rate for modifications where the monthly payment increased by 10% or more due to the capitalization of arrears. Fitch recommends that servicers focus on a borrower's cash flow and payment-to-income ratio in fashioning loan mods. "Some combination of payment reduction and either principal forbearance or forgiveness may be the most effective approach to mortgage modification as it may increase borrower's ability and willingness to repay the modified amounts," Diane Pendley, a managing director and head of Fitch's operational risk group, said in a press release.

Treasury Secretary Timothy Geithner Tuesday morning promised that a "comprehensive" government program to revive the housing market and help consumers avoid foreclosure is in the works but offered no details on what the effort might entail. The new Treasury secretary said specifics of the plan will be released in the next few weeks. At press time, Treasury officials were offering no guidance on the issue. "Millions of Americans have lost their homes, and millions more live with the risk that they will be unable to meet their payments or refinance their mortgages," said Mr. Geithner. Meanwhile, the new Term Asset-Backed Securities Loan Facility, or TALF, does not include single-family mortgages. (See related story.)

Echo Loans, Foothill Ranch, Calif., announced today that Paul Rodriguez has been promoted to president of the company. The company's primary business focus is on the restructuring of unsustainable home loans through an 11-step loss mitigation process. Mr. Rodriguez's responsibilities will be all facets of the company's operations including production, development of products and services, recruitment and staffing. Mr. Rodriguez said "These are very challenging times for homeowners and lenders and we think we can play a key role in assisting consumers in keeping their homes and at the same time assist the lender in maintaining a return on their investment." His most recent positions were as executive vice president of Sage Credit Co., managing director of Quick Loan Funding Inc. and chief executive of Wall St. Funding Inc.

REOMAC, a trade association serving the mortgage default industry, has created a commercial real estate committee. Until now, the group had been primarily focused on residential real estate owned. The new committee is led by co-chairs John Murray and Peter Monroe. "In light of the imminent tsunami of commercial mortgage defaults and foreclosures, it is crucial that our organization find new and innovative ways to help the private REO industry respond," said Shelley Kaye, president of REOMAC. Mr. Monroe is currently the president and chief executive of a venture capital firm. He served as the president of the Resolution Trust Corp. Oversight Board during the late 1980s and early 1990s. "There are more than a half a trillion dollars of commercial mortgages requiring refinancing over the next three years," Mr. Monroe said. "Given the state of the economy, the debt markets and the great number of commercial mortgages in complex conduit structures, a commercial meltdown of historic proportions is inevitable." Mr. Murray is a managing member of an investment firm.

Wachovia Securities, which services $413 billion of commercial mortgages as either a master or primary servicer, tops the commercial real estate servicing list just released by the Mortgage Bankers Association. Following Wachovia is PNC Real Estate/Midland Loan Services, with $310 billion, Capmark Finance, with $261 billion, and Wells Fargo, with $183 billion. The MBA also collects data about "special servicers," who are named to take over management of delinquent loans. The top special servicers named in securitized loan transactions are LNR Partners, CWCapital, Centerline Servicing and PNC/Midland.

The Federal Reserve on Friday released details on how it will jump-start the asset-backed securities market but for now is excluding real estate-backed receivables from the program. Initially, the central bank will provide financing on consumer debt including auto, credit card and student loans but not commercial or private label mortgages. At press time a spokesman from the Fed had not returned a telephone call about the matter. The private label residential mortgage market ground to a near halt almost a year ago. When the $200 billion ABS program was announced late last year commercial real estate loans and private label mortgages were supposed to be included in the effort, at least according to comments made by then Treasury secretary Henry Paulson. According to the outline released Friday, the Fed will provide non-recourse financing to ABS issuers on only AAA rated collateral. If the borrower/issuer does not repay the loan to the Fed the agency will sell the note to a special purpose vehicle whose job it will be to collect on the debt.

Treasury secretary Timothy Geithner is slated to present the Obama administration's plan to stabilize the financial section and address the foreclosure crisis on Feb. 10. It appears Mr. Geithner will offer banks a menu of options so they can apply for new capital infusions, sell bad assets to the government and receive assistance in modifying troubled single-family loans. The new secretary has been rushing to put this plan together and it is unclear how soon the various parts can be implemented. Secretary Geithner is expected to unveil the plan at a Treasury Department event in the morning and testify before the Senate Banking Committee later in the afternoon about the plan.

As the Senate moved closer to passing an $827 billion economic stimulus bill, lawmakers added language that directs the Treasury Department to use at least $50 billion of the Troubled Asset Relief Program funds for loan modifications. Obama administration officials had stated several times that they plan to use $50 billion to $100 billion of the TARP to prevent foreclosures and the administration might unveil its plan on Feb. 10. But the sponsor of the amendment, Sen. Christopher Dodd, D-Conn., said the Bush administration refused to use TARP for loan modifications and he doesn't want to be burned again. Sen. Dodd's amendment also includes changes to Hope for Homeowners to make the Federal Housing Administration refinancing program more attractive to borrowers and servicers. The Senate is slated to vote on stopping a Republican filibuster of the stimulus bill this evening and vote on Feb. 10 on passage of the compromise stimulus bill put together by Sens. Susan Collins, R-Me., and Ben Nelson, D-Neb. The $15,000 homebuyer tax credit is part of the compromise bill. But the National Association of Home Builders and other supporters are concerned the tax credit could be pared back when House and Senate conferees sit down to hammer out a final bill. "One of the most damaging - from a stimulative impact - would be to knock it down to first time homebuyers," NAHB chief executive Jerry Howard said.