Servicing

Lend America, a non-depository FHA lender based in Melville, N.Y., expects its origination volume to increase by almost 80% this year to $2.5 billion. The privately held company - which also will announce a new product launch this week - forecasts its servicing portfolio will grow to $1.5 billion by year-end, compared to just $223 million at the end of December 2008. Lend America is headquartered in an office building which once housed executives for American Home Mortgage, a non-depository alt-A and conventional lender/servicer that went bankrupt in the summer of 2007. A spokesman for the company provided the estimates to MortgageWire. Lend America uses warehouse lines to finance its production.

FirstFed Financial Corp., Los Angeles, which recently shut its mortgage wholesale production operations, lost $244.8 million ($17.91 per share) in the fourth quarter of 2008 because of a $220 million provision for loan losses. The company is now operating under an Office of Thrift Supervision cease and desist order. Its level of delinquent mortgage loans was affected by adjustable-rate mortgages which had reached their maximum allowable negative amortization and required an increased payment. In 2008, there were 1,741 loans with a total balance of $802.3 million that were scheduled to recast; in 2009, there are an additional 913 loans, with a total balance of $396 million set to recast. FirstFed chief executive Babette Heimbuch said "we are focused on modifying our adjustable-rate loans where possible so that borrower payments are affordable and stable." The company has $403.8 million in non-accrual single-family mortgage loans as of the end of last year, down from $445.2 million at the end of the third quarter.

Moody's chief economist Mark Zandi says that Troubled Asset Relief program funds should be used to "fund an aggressive foreclosure relief program." During a telephone press briefing with Senators Charles Schumer, D., N.Y., and Jack Reed, D., R.I., to press for passage of an economic stimulus bill, Mr. Zandi said that "mortgage writedowns" are needed to lower the re-default rate on loans that are modified to help borrowers stay in their homes. Also during the call, Sen. Schumer said that legislation to allow bankruptcy courts to modify loan terms would put pressure on bondholders who may be resisting the efforts of mortgage servicers to modify problem loans. Sen. Schumer also said he is confident that Democrats will get the 60 votes needed to avoid a filibuster against the stimulus legislation.

The House Financial Services Committee is slated to mark up a bill on Feb. 4 which, if passed, would revamp the Federal Housing Administration's Hope for Homeowners program and strengthen the Federal Deposit Insurance Corp. The Hope for Homeowners refinancing program has been considered to be a disappointment so far. But the bill, crafted by committee chairman Barney Frank, D-Mass., would eliminate the 3% upfront mortgage insurance premium and cut the 1.5% annual premium in half. If passed, FHA could charge a 55 basis point to 75 basis point annual premium based on the borrower's credit risk. The bill (H.R. 703) also contains a safe harbor for servicers that engage in loan modifications to shield them from investor lawsuits. This safe harbor provision applies to all loan modifications initiated before the end of 2011. Servicers would be required to regularly report their loan modification activities to the Treasury Department. H.R. 703 would also make the temporary hike in deposit insurance coverage to $250,000 permanent and increase FDIC's borrowing authority from $30 billion to $100 billion. Rep. Frank said he wants to move this bill quickly through the House and attach it to legislation the Senate must pass.

Fannie Mae has agreed to work with one of its fieriest critics -- the Neighborhood Assistance Corporation of America -- in restructuring mortgages for struggling homeowners. NACA chief executive Bruce Marks has complained the mortgage giant is not doing enough to prevent foreclosures and its supporters staged a protest outside Fannie's headquarters last fall. "Fannie Mae is working closely with NACA to establish a pilot program designed to assist distressed borrowers to stay in their homes by restructuring mortgages to achieve an affordable payment. Following review by our regulator, we hope to finalize the program shortly," Fannie said. Based in Boston, NACA offers housing counseling and low-cost mortgages through its nationwide branch system. An agreement with NACA generally includes a commitment to purchase its below-market rate mortgages.

It's official: Total housing production in California in 2008 slammed to the lowest level on record, according to the California Building Industry Association. Just 65,380 building permits were issued statewide last year for new homes, condominiums, townhouses and apartments, the trade group said. That's down 42 percent from 2007 and 69 percent -- 147,580 units - compared to 2004, the peak of the current cycle. Continuing the industry's siren call for help in bringing buyers back into the market, CBIA President Robert Rivinius said a temporary tax credit enacted in the 1970s during a similar downturn did the trick back then and could do so again. Just a few months after the credit was put in place, sales had increased by 100 percent, Mr. Rivinius said. And within two years, construction in the Golden State was back to normal levels. He also said the state's lagging economy is not likely to recover until homebuilding does. "Because homebuilding has declined so dramatically, California has lost nearly 300,000 jobs and $46 billion in economic impact in just the last three years, enough to plug the budget deficit and lift our economy out of the doldrums," he said. "New-housing construction creates jobs, generates revenue for state and local coffers and puts California back on the path to economic recovery."

Flagstar Bancorp of Michigan, one of the few remaining wholesale residential lenders left, reported a net loss of $200 million in the fourth quarter, after taking $292 million in charges during the period. In the fourth quarter, Flagstar originated $5.4 billion of residential mortgage loans, compared to $6.5 billion one year prior. For the full year, it funded $28 billion in home mortgages, a 9% gain from 2007. At year-end it serviced $55.9 billion, with a weighted average servicing fee of 33.3 basis points. In the fourth quarter of 2007 it lost $30.1 million. Among the items associated with the 4Q 2008 charges: an increase in the loan loss provision to ($176.3 million); a $270 million writedown on the value of its mortgage servicing rights (although this was mostly offset by hedging gains); a $16.4 million valuation adjustment; a $9.8 million reserve established to cover anticipated losses in its captive mortgage reinsurance arrangement; and an 'other than temporary' impairment of $43.6 million related to investment securities available for sale. Flagstar's full year loss was $257.3 million or $3.57 per share.

The top executive at James B. Nutter and Co., Kansas City, Mo., is citing a lack of warehouse capacity for both the company's decision to end wholesale production of traditional forward mortgages, and a new moratorium it placed on accepting reverse loan applications from brokers. James B. Nutter Jr., president of the family-run mortgage firm, said the warehouse funding problem exists throughout industry. The company, a non-depository, will continue to close and fund forward and reverse loans in its existing pipeline. The lender estimates it closed 1,100 reverse mortgage loans in January. Mr. Nutter said he hopes to resume wholesale reverse production in March. He added that the company would consider re-entering the wholesale forward mortgage production channel if it gains access to additional warehouse capacity. Nutter & Company's retail business remains strong, he said.

Lehman Brothers Holdings -- which filed for bankruptcy protection back in the fall -- has been shopping around its alt-A servicing division in recent months but with no takers. At one point the unit, Aurora Loan Services of Colorado, had $120 billion in servicing rights on its books. It's unclear how much of that portfolio is servicing versus subservicing contracts. ALS was both a funder and servicer of alt-A loans but also had ventured into subprime in recent years. One investment banker, requesting anonymity, said ALS is housed under Lehman Brothers Bank FSB of Delaware, which was not a party to the bankruptcy. A few years back Lehman hired away CEO Tom Wind from Chase Home Finance to manage its mortgage operations. A spokeswoman for Lehman in New York had not returned a telephone call at press time.

In the fourth quarter 2008, Bank of America, Charlotte, N.C., lent $45 billion through its mortgage unit, of which $11.3 billion went to low- and moderate- income borrowers. This was one of the findings of its first Lending & Investing Initiative, which the bank said covers its business activity in 10 sectors key to reviving the U.S. economy. BofA said in 2008 as part of its loss mitigation efforts, it modified approximately 230,000 mortgage loans representing over $44 billion in financing. Commercial real estate lending in the fourth quarter totaled nearly $7 billion. Through the end of October 2008, the bank delivered nearly $2 billion in "green" commercial real estate debt and equity transactions. For the full year, BofA invested $1 billion in affordable housing by using Low Income Housing Tax Credits. BofA and the recently acquired Merrill Lynch together made $450 million of loans and investments to Community Development Financial Institutions. In the fourth quarter of 2008, BofA had net purchases of $20 billion in mortgage-backed securities.