Servicing

Researchers at investment management and research firm Winans International, Novato, Calif., predict that housing prices will not recover in 2009. "This bear market will probably not end in 2009. Past real estate markets ended when the average time it took to sell a new house dropped to three and a half months. Currently, it is taking over nine months for transactions to close due to tight credit conditions," said president and founder Ken Winans. Furthermore, home prices nationally have fallen 23% since March of 2007, according to The Winans International Real Estate Index. Sales are down 71% since that time and listings have contracted 34%, according to the index. The firm said that the inventory of new homes on the market reached a record time to sell high of 16.5 months in December.

Under a pilot program involving reduced documentation loans from California, Nevada and other high delinquency states, Freddie Mac is turning calls over to third-party servicers to perform loan workouts. Ingrid Beckles, Freddie Mac's senior vice president for default asset management, said the strategy is designed to help lenders manage "unprecedented call volume" by directing calls to a specialist in handling alternative-A credit mortgages and other high-risk loan products. Under the pilot, a selected portfolio of 5,000 loans that are at least 60 days delinquent will be given to a specialty servicer that can implement a Freddie Mac workout option, including a streamlined loan modification. Ocwen Financial Corp. is one of the servicers Freddie Mac has selected for the pilot. Freddie Mac said that alt-A mortgages account for half of its seriously delinquent home loans.

The number of vacant houses for sale edged up 2.3% in 2008 and remains stubbornly high at 2.23 million units, according to the U.S. Census Bureau. The number of vacant houses on the market rose above 2 million in the fourth quarter of 2006 and has not retreated due to distress in the housing market and rising foreclosures. Earlier in the decade, the number of vacant homes for sale averaged 1.25 million. This inventory of vacant new and existing homes is concentrated in the most troubled housing markets - Arizona, California, Florida, Nevada, Michigan and Ohio. The National Association of Home Builders estimates that builders reduced their inventory of unsold homes by 100,000 units since December 2007. But they still have an inventory of 400,000 to 450,000 of newly constructed and vacant homes, despite a precipitous drop in building over the past 18 months. The Census Bureau report also shows the nation's homeownership rate dropped to 67.8% in the fourth quarter from 68.9% in the same period in 2007.

Senate Republicans want to attach several housing amendments to an economic stimulus bill that would expand a homebuyer tax credit and create an interest rate buydown program that would reduce mortgage rates to 4%. "We must stabilize home values if we are going to reverse this deep and precipitous slide in our economy," said Sen. John McCain, R-Ariz. The mortgage rate buydown program would stimulate home sales and soak up excess inventory, according to Sen. John Ensign, R-Nev. It also would help 40 million creditworthy homeowners save $400 per month, the Nevada senator said. "This is like a permanent tax cut, which economists believe is the best stimulus for our economy," he said. Republicans also are proposing to expand a $7,500 first-time homebuyer tax credit to $15,000 or 10% of the purchase price that would be available to all buyers. The tax credit could be used in one year or spread out over two years. To facilitate loan modifications, the Republicans want to shield servicers from investor lawsuits. The amendments also would change a one-time $1,000 fee for loan modifications to $60 a month over the life of the loan.

House Financial Services Committee chairman Barney Frank, D-Mass., might attach his bill to revamp the Federal Housing Administration's Hope for Homeowners program to a bankruptcy mortgage cramdown bill that is making its way to the House floor soon. "Bankruptcy is not a fun thing for anyone. So I want to have a series of alternatives to bankruptcy," Rep. Frank told reporters. The Hope for Homeowners bill (H.R. 703) would make the FHA program more effective in restructuring underwater mortgages. The original bill also contained a safe harbor provision to shield servicers that modify loans from investor lawsuits and provisions to strengthen the Federal Deposit Insurance Corp. But Rep. Frank has divided H.R. 703 into three separate bills so they can be attached to other related legislation. Rep. Frank also might attach the safe harbor provision to the bankruptcy bill.

In response to declining home values, Freddie Mac is increasing delivery fees for certain high LTV and low FICO score mortgages, effective April 1. Some wholesalers -- in response to Freddie's actions and similar changes implemented by Fannie Mae -- are implementing price increases, especially on condominium loans. One broker provided an e-mail from Taylor Bean & Whitaker that notes, "As a result of recently announced Freddie Mac revised delivery fees, TB&W will implement new price adjustments on any loan locked on or after Feb. 4, 2009 with the issue of the rate sheet posted in the morning." A TB&W account executive did not return a telephone call about the matter. The hikes in delivery fees ultimately will be paid for by the consumer who will see an increase in his closing costs. Besides high LTV loans and low FICO scores, increases in delivery fees are coming on cash-out refis, condominiums, and certain ARMs. A Freddie Mac spokesman said the GSE is increasing its fees because of "market dynamics." The changes in fees are outlined in a Freddie bulletin dated January 30.

The Mortgage Bankers Association Tuesday afternoon asked Congress to provide short-term government guarantees on warehouse lines of credit to address what it believes is a liquidity crisis facing non-depository residential funders. The trade group also thinks it might be a good idea to allow Fannie Mae and Freddie Mac to buy participations in warehouse lines of credit, a move it thinks will add liquidity to the sector. In years past mortgage bankers -- and warehouse executives -- were adamantly opposed to allowing the GSEs to get anywhere near the warehouse niche. MBA claims warehouse lending capacity has shrunk to just $25 billion or so compared to $200 billion two years ago. "This sub-crisis is the result of a shortage of warehouse lines of credit, meaning independent mortgage bankers are doubly hamstrung to originate new mortgages threatening their viability," said MBA chief John Courson in written testimony before the House Financial Services Committee. According to exclusive survey figures compiled by National Mortgage News, there are just 10 or so active warehouse lenders compared to 30 two years ago. Many warehouse providers have either failed or closed down that line of business including most of the Wall Street firms that played in the space. Active warehouse firms include Horizon Bank, Flagstar, GMAC-RFC, National City, and a few others. MBA wants the government to provide federal guarantees on warehouse lines for 12 to 24 months -- but only on Fannie Mae, Freddie Mac and government-backed loans, which currently accounts for most of the market.

Under a pilot program involving reduced documentation loans from California, Nevada and other high delinquency states, Freddie Mac is turning calls over to third-party servicers to perform loan workouts. Ingrid Beckles, Freddie Mac's senior vice president for default asset management, said the strategy is designed to help lenders manage "unprecedented call volume" by directing calls to a specialist in handling alt-A and other high-risk loan products. Under the pilot, a selected portfolio of 5,000 loans that are at least 60 days delinquent will be given to a specialty servicer that can implement a Freddie Mac workout option, including a streamlined loan modification. Ocwen Financial Corp. is one of the servicers Freddie Mac has selected for the pilot. Freddie Mac said that alt-A mortgages account for half of its seriously delinquent home loans.

The number of vacant houses for sale edged up 2.3% in 2008 and remains stubbornly high at 2.23 million units, according to the U.S. Census Bureau. The number of vacant houses on the market rose above two million in the fourth quarter of 2006 and has not retreated due to distress in the housing market and rising foreclosures. Earlier in the decade, the number of vacant homes for sale averaged 1.25 million. This inventory of vacant new and existing homes is concentrated in the most troubled housing markets -Arizona, California, Florida, Nevada, Michigan and Ohio. The National Association of Home Builders estimates that builders reduced their inventory of unsold homes by 100,000 units since December 2007. But they still have an inventory of 400,000 to 450,000 of newly constructed and vacant homes, despite a precipitous drop in building over the past 18 months. The Census Bureau report also shows the nation's homeownership rate dropped to 67.8% in the fourth quarter from 68.9% in the same period in 2007.

Senate Republicans want to attach several housing amendments to an economic stimulus bill that would expand a homebuyer tax credit and create an interest rate buydown program that would reduce mortgage rates to 4%. "We must stabilize home values if we are going to reverse this deep and precipitous slide in our economy," said Sen. John McCain, R-Ariz. The mortgage rate buydown program would stimulate home sales and soak up excess inventory, according to Sen. John Ensign, R-Nev. It would also help 40 million creditworthy homeowners save $400 per month, the Nevada senator said. "This is like a permanent tax cut, which economists believe is the best stimulus for our economy." Republicans also are proposing to expand a $7,500 first-time homebuyer tax credit to $15,000 or 10% of the purchase price that would be available to all buyers. The tax credit could be used in one year or spread out over two years. To facilitate loan modifications, the Republicans want to shield servicers from investor lawsuits. The amendments also would change a one-time $1,000 fee for loan modifications to $60 a month over the life of the loan.