Servicing

BancorpSouth, Tupelo, Miss., saw its earnings trimmed by a $16.3 million writedown in the value of its mortgage servicing rights during the fourth quarter. The bank valued its MSRs at $25 million, or 82 basis points of the outstanding balance. On the bright side, BancorpSouth said mortgage lending revenue, excluding the servicing impairment, rose 20% from the prior year period to $4.1 million during the fourth quarter. CEO Aubrey Patterson said that despite MSR impairment, the sharp drop in interest rates during the fourth quarter presents an ongoing opportunity to increase mortgage lending revenue through refinancing and home purchase originations. The servicing hit and smaller writedowns to investment securities trimmed earnings-per-share by 18 cents. The bank reported EPS of $0.20 for the fourth quarter.

House Speaker Nancy Pelosi said enacting a bankruptcy provision to help struggling homeowners modify their mortgages is a "very high priority" and wants to pass a bill soon. But the California Democrat indicated the $825 billion economic stimulus bill may be moving too fast to insert a bankruptcy provision. The House is expected to vote on the massive bill next week. "We have a housing bill. We will have other legislation, or a free standing bill, but we will get it done," Ms. Pelosi said at a press conference. At a House Judiciary Committee hearing, several Democratic members spoke in favor of attaching a bankruptcy bill to the economic stimulus package. However, the Obama administration wants to include a bankruptcy provision in a housing bill that will provide foreclosure relief. The mortgage industry continues to oppose a broad bankruptcy bill that would allow judges to reduce or cram down the principal amount of a mortgage.

The Senate late Thursday unanimously confirmed Shaun Donovan to be the nation's new housing secretary in the Obama Administration. The former New York City housing commissioner worked at the Department of Housing and Urban Development as a deputy assistant secretary for multifamily housing during the Clinton administration. At his confirmation hearing, Mr. Donovan noted that originations of Federal Housing Administration-backed single-family loans have tripled over the past year. FHA has "capacity issues that require immediate attention," he said. The General Accountability Office released its new list of high-risk agencies on Thursday and it did not include FHA. FHA was removed from the GAO list in 2007. The HUD nominee has pledged to undertake strong enforcement of fair housing laws and to make management reform at HUD a "high priority."

Fannie Mae, which has been operating under a government conservatorship since September, has laid off hundreds of workers over the past four weeks, according to sources both inside and outside the mortgage investing giant. At press time, a Fannie Mae source confirmed that "hundreds" of layoffs have occurred but said the company is beefing up its foreclosure and loss mitigation efforts -- particularly in its Dallas office -- and hopes to end 2009 with as many employees as it had in 2008. The GSE issued a statement saying it is "taking steps to realign the company's organization, personnel and resources to focus on our most critical priorities, which include preventing foreclosures to help keep people in their homes and aiding in the recovery." Among the known job cuts, said one individual, are reductions in government affairs, communications, marketing, and technology. "They can't lobby any more so what's the point in having a government affairs division?" said the individual. Freddie Mac also has been quietly laying of workers with more cuts on the way, said one mortgage executive close to the company. "This shouldn't be surprising to anyone," he said.

The Seatle-based ForeclosurePoint.com says over 60,000 investors, homebuyers and real estate professionals are now members of the website, which provides free access to full street addresses of more than 3 million foreclosure filings in the U.S. The company launched its free national service six months ago. The site offers information to identify foreclosure home-buying opportunities, including properties available through short sales, auctions and REOs. Buyers can search for properties by state, county, or zip code and see exact home locations, default filing dates, estimated property values, satellite images and other details. Once members find properties that interest them, ForeclosurePoint can connect buyers and investors with real estate agents who specialize in foreclosure and bank-owned properties. "Foreclosures represent the majority of inventory in many markets," said Dennis Green, general manager of ForeclosurePoint, a service of DepotPoint, Inc. "Buyer interest in foreclosure properties is high, but there is still a lack of transparency in this market which affects a buyer's ability to acquire distressed properties."

House speaker Nancy Pelosi said enacting a bankruptcy provision to help struggling homeowners modify their mortgages is a "very high priority" and she wants to pass it soon. But the California Democrat indicated the $825 billion economic stimulus bill may be moving too fast to insert a bankruptcy provision. The House is expected to vote on the massive bill next week. "We have a housing bill. We will have other legislation, or a free standing bill, but we will get it done," Ms. Pelosi said at a press conference. At a House Judiciary Committee hearing, several Democratic members spoke in favor of attaching a bankruptcy bill to the economic stimulus package. However, the Obama administration wants to include a bankruptcy provision in a housing bill that will provide foreclosure relief. The mortgage industry continues to oppose a broad bankruptcy bill would allow judges to reduce or cram down the principal amount of a mortgage.

The Federal Home Loan Bank of New York is concerned it may have to take an impairment charge against $2 billion in private-label mortgage-backed securities and it has reduced the fourth quarter dividend to 1.1%. The FHLBank has subjected its private-label MBS to a "substantial review," under the "other than temporary impairment" accounting rules that should be completed in late February, according to FHLBank president Alfred DelliBovi. "Based on our current knowledge, we do not expect to record material impairment charges in relation to our non-agency portfolio," Mr. DelliBovi said in a report to shareholders. Once the OTTI review is completed, the board of directors will consider a supplemental dividend. The New York bank paid a 3.5% dividend in the third quarter.

Ellington Management Group and six of its hedge funds sued Ameriquest Mortgage Co. and several subsidiaries for allegedly misrepresenting the loans backing securities the fund manager bought for $354 million from 2005 to 2007. The bonds Ellington purchased, which are known as "net interest margin" securities, are extremely risky by nature. They generally only pay out if, near the end of the terms of the deal, reserves set aside to absorb losses on all of the other tranches have not been exhausted. But Ellington alleges in a complaint filed in the U.S. District Court for the Southern District of New York last week that a large number of loans backing these securities failed to meet Ameriquest's own stated underwriting criteria, as described in the prospectus and in other places. As a result, the income streams from the securities were not what Ellington expected. The complaint says Ellington asked Ameriquest to provide loan samples in 2007, after a high number of mortgages backing the securities defaulted. The fund manager said its analysis revealed that a large percentage of these defaulted loans violated Ameriquest's underwriting guidelines. Additionally, Ellington's analysis showed that many of the underlying loans broke laws against predatory or high-cost lending by, for example, violating "borrower's bill of rights" laws, charging exorbitant fees or failing to give proper disclosures and notices. Ellington alleges that internal documentation in Ameriquest's possession at the time it created the securities showed the deficiencies, which "were so apparent that they would have been readily discovered had the mortgage company defendants conducted even a minimal compliance review."

Steve Dibert, founder of MFI-Miami, LLC, a forensic mortgage auditing firm in West Palm Beach, Fla., is launching MFI-Mod Squad LLC, to expose illegally run loan modification and foreclosure rescue companies and the people who run them. According to Mr. Dibert, these firms convince desperate homeowners to pay them huge upfront fees by playing on homeowner's fears when their real intent is to take the home owner's money and run. Many operate by doing business in states that have not adapted their laws to include loan modifications, he said. They solicit clients in states outside their own even if the state where the homeowner lives has laws that govern loan modifications, Mr. Dibert said. "This is done intentionally because they think the client won't know how to find them or they think a homeowner facing foreclosure does not have the funds to pursue them across state lines or in federal court. Some of these companies are even run by convicted felons who are barred from working real estate or lending." He hopes the site will give homeowners a place on the Internet where they can educate themselves about loan modifications and these companies so they can protect themselves. The website, www.mfi-modsquad.com, is in a blog format so homeowners can share their stories.

Homes in the Western U.S. and South led in price declines in November, according to new figures compiled by the Federal Housing Finance Agency, the regulator of Fannie Mae and Freddie Mac. FHFA - which calculates its numbers solely on the value of homes collateralizing mortgages bought or guaranteed by Fannie and Freddie - said that nationwide home values fell 1.8% in November compared to the previous month. Year-over-year, prices fell 8.7%. In November the steepest declines occurred in the West North Central region of the nation (-2.7%), Mountain (-2.4%), South Atlantic (-2.3%) and Pacific (-2.2%). The Pacific region, which includes California, had the largest 12-month decline: -22.1%.