Servicing

The Federal Deposit Insurance Corp. is in the process of mailing 15,000 loan modification proposals to mortgage customers of IndyMac Bank of California. The effort is part of the agency's pilot program to help 40,000 mortgagors who are delinquent on their IndyMac home loans. FDIC chairman Sheila Bair testified before a Senate Committee yesterday that, "Specifically, the government could establish standards for loan modifications and provide guarantees for loans meeting those standards." FDIC has been operating IndyMac as a conservatorship since taking control of the thrift in July. It is in the process of taking bids on the lender/servicer. (For full details see the Monday edition of National Mortgage News.)

GSE regulator James Lockhart is not impressed with Fannie Mae and Freddie Mac's loss mitigation efforts -- but he anticipates that will change now that both are in conservatorships under his watchful eye. "Now that they are in conservatorship, their activities will increase significantly," the Federal Housing Finance Agency director told the Senate Banking Committee. An FHFA report shows the loan modifications by the government sponsored enterprises dropped by 20% from the first quarter to the second quarter while foreclosures rose 20%. In the second quarter, the GSEs modified 4,126 loans a month, compared to 5,204 loans a month during the first quarter. On average, the two completed 12,729 foreclosures a month during the second quarter, up from 10,511 a month during the first quarter.

If residential lenders and housing professionals didn't have enough bad economic news to worry about, they may soon have a fresh set of anxieties: rising delinquencies in the vacation or "second home" market. Obtaining hard numbers on just how many outstanding mortgages are backed by second/vacation homes is not easy -- but one figure is clear: of the $2.8 trillion in Fannie Mae loan guarantees 5% cover the sector, or $140 billion. According to Freddie Mac spokesperson Sharon McHale, 9% of her GSE's portfolio includes second homes, including "investment properties" where the owner is trying to make his mortgage payment by renting out a home or condo. No one is saying that property values in the second home business are in a freefall, at least not yet, but according to recent interviews with Realtors who sell beach properties the outlook borders on grim. Diana Silvester, a Realtor who sells properties in Cape Cod, Mass., told National Mortgage News that home values in this popular New England vacation area are down 20% in two years. (For the full story see the upcoming issue of Origination News.)

Wachovia posted a $24 billion net loss for the third quarter with much of the decline consisting of one-time, partially mortgage-related items, but executives from Wells Fargo say their plans to acquire Wachovia are still a go. The net loss included $18.8 billion of goodwill impairment, a $4.8 billion credit reserve and $2.5 billion of "market disruption losses." The company's total third-quarter credit loss was $6.6 billion, including charge-offs in addition to the reserve build, and $3.4 billion of the credit loss total related to pay-option ARMs. Wachovia now anticipates that its cumulative loss rate on its $119 billion option-ARM portfolio will be 22%, or $26 billion, reflecting a more severe outlook for the depth and length of the housing downturn. Wells Fargo CEO John Stumpf said in a statement that Wachovia's results "were very much in line with our expectations." And Wells Fargo's CFO, Howard Atkins, said, "We believe it was prudent for Wachovia to put these losses behind them."

Fitch Ratings estimates that home values have dropped 22% nationally and will fall another 10% before the market stabilizes. Fitch anticipates that home values will fall roughly 30% "peak to trough" when the housing correction is over. The rating agency said it expects that most of the remaining price decline will be absorbed during the next few quarters, with prices exhibiting more stability in 2010. Huxley Somerville, managing director of Fitch's residential MBS group, said, "Should economic conditions become much worse than expected, home prices would decline more than Fitch's projection and price stabilization would be delayed."

A trio of Ohio-based banks have reported third quarter losses, with exposure to residential lending adding to credit woes at National City Corp., Fifth Third Bancorp, and KeyCorp. KeyCorp has reduced its residential construction loan exposure by $1.3 billion from a year earlier, CEO Henry Meyer said in the company's earnings release. He also noted that Key does not have a subprime mortgage portfolio. KeyCorp lost $36 million in the third quarter, in large measure because the firm increased its loan loss reserve by $133 million, raising the reserve to 2% of total loans. National City Corporation's loss narrowed to $729 million for the third quarter from $1.8 billion in the second. National City said that charge-offs on its $21 billion "exit portfolio," consisting mostly of broker-originated home equity loans, nonprime mortgages, and construction loans, continue to drive credit loss activity. The company noted that this portfolio is running off at a rate of $500 per month and that National City has no option-ARM portfolio. Fifth Third Bancorp said a $51 million impairment to its investment in the preferred stock of Fannie Mae and Freddie Mac contributed to the company's $56 million third quarter loss. On the positive side, Fifth Third benefited from a $22 million gain to hedges used for its mortgage servicing rights asset that do not qualify for hedge accounting treatment.

National Quick Sale, a division of software innovator Infusion Technologies, has rolled out its Web-based platform designed to automate the process of real estate short sales, and shorten the transaction time from the several weeks currently required to a matter of days. National Quick Sale has been in a pilot with one of the nation's government sponsored enterprises and several of their mortgage servicers since earlier this year. A number of mortgage servicers are working with National Quick Sale to provide their loss mitigation departments with technology-based assistance for short sales, and have been impressed with the solution's capabilities. National Quick Sale's platform enables all parties to react quickly, improving the chances of completion before the potential buyer loses interest and the property is sold in foreclosure.

Attendees of the Mortgage Bankers Association's annual conference in San Francisco found anti-eviction and foreclosure advocates picketing their national conclave, with one protester getting inside to disrupt the meeting. The Bay Area chapter of ANSWER (Act Now to Stop War and End Racism) protested the MBA's opening activities on Sunday and the Monday appearances of the new government-appointed heads of Fannie Mae and Freddie Mac. "The banks are responsible for creating the housing crisis that is forcing millions of people out of houses and apartments across the country," the group said in flyers it handed out to attendees. "Despite receiving hundreds of billions of dollars in taxpayers' money to rescue them after their sub-prime and other high risk schemes collapsed, the bankers are opposed to reforms that would allow people to renegotiate their mortgages and stay in their homes." The advocacy group, whose position was endorsed by others including Green Party presidential candidate Cynthia McKinney and Congressional candidates Natalie Hrizi and Cindy Sheehan, said, "The banks and politicians-including Bush, Pelosi, McCain and Obama- blocked adding a point to the bailout bill that could have prevented millions of evictions."

Clayton Holdings, which is cooperating with an investigation into mortgage underwriting fraud on Wall Street, named Paul T. Bossidy its new chief executive officer on Tuesday. A spokeswoman said he replaces Frank Fillips who retired from the Connecticut-based Clayton this summer. Mr. Bossidy, 48, has worked for various divisions of General Electric, including GE Vendor Financial Services. Clayton is owned by Greenfield Partners, a hedge fund. Earlier this year New York attorney general Andrew Cuomo granted Clayton immunity from prosecution in exchange for providing information on the due diligence work it conducted for Wall Street firms that securitized subprime mortgages over the past five years. One key issue AG Cuomo is looking at is underwriting "exceptions" granted by projects managers working for Clayton on Wall Street accounts. Over the past three years subprime firms funded $1.7 trillion in A- to D and other non-conforming loan types -- much of it securitized through Wall Street firms such as Bear Stearns, Credit Suisse, Deutsche Bank, Lehman Brothers, and Merrill Lynch.

MountanView Servicing Group, Denver, has completed the transition to CompassPoint mortgage servicing rights valuation technology. MountainView provides MSR valuations for over 100 servicers. Compass's MSR valuation analytics were developed with significant input from Mountain View, the two companies said. The Compass MSR valuation analytics include both static and option adjusted spread valuations.