Servicing

Consumer satisfaction with the company that services their home loan declined for the second straight year, according to J.D. Power and Associates. The study measures four areas of customer satisfaction: billing, payments, contact with the lender, and annual account administration. On a 1,000-point scale, overall satisfaction fell 14 points to 784 in the 2008 survey. "For most customers, their mortgage servicer is akin to a utility company -- they just want things to work, and they expect a friction-free experience," said Rocky Clancy, executive director for financial services at J.D. Power and Associates. "Bumps in the road" that require consumers to ask questions or solve problems lowers customer satisfaction, he said. The survey found that electronic billing and payment options increased customer satisfaction. Branch Banking and Trust ranked highest among primary servicers for the second consecutive year, with a customer satisfaction score of 839. J.D. Power, headquartered in Westlake Village, Calif., can be found online at http://www.jdpower.com.

Residential home loan delinquencies have risen for six straight quarters, with 3.53% of borrowers being at least 60 days behind on their mortgage payments in the second quarter, according to a TransUnion analysis of consumer loan data. This was up 51% from the level recorded in the second quarter of last year, TransUnion said. Nevada and Florida continued to top the list of states with the highest 60-day delinquency rates in the TransUnion data, with rates of 6.63% and 6.47%, respectively. "The second quarter of 2008 showed not only a substantial increase in the nation's unemployment rate and unprecedented gas prices, but also a continued decline in consumer confidence," said Keith Carson, a senior consultant in TransUnion's financial services group. The company can be found on the Web at http://www.transunion.com.

More than 100,000 homeowners lost their properties to foreclosure in August, 6% more than in July and more than 80% higher than in August 2007, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm. Foreclosures hit nearly 102,000 in August, and so far this year lenders have repossessed a record 656,545 properties nationwide, the company said. That amounts to 8.6 of every 1,000 households in the United States. "While we continue to see record numbers of foreclosures and actions that may lead to foreclosure, and despite the higher 6.1% August unemployment rate, it does appear that the overall situation is beginning to stabilize," said Alexis McGee, president of the firm. "Importantly, many regions of the country -- particularly the Northeast and Midwest -- have seen a less dramatic increase in foreclosures and pre-foreclosure activity in 2008 compared with 2007." The company can be found online at http://www.foreclosures.com.

The International Swaps and Derivatives Association, New York, has announced that it will publish a protocol to facilitate settlement of credit derivative trades involving Fannie Mae and Freddie Mac. The decision to establish the protocol was made after consultation with industry participants, the ISDA said. The protocol will be open to ISDA members and nonmembers alike. Fannie and Freddie were taken over and placed in conservatorship by the U.S. government on Sept. 7. The association can be found on the Web at http://www.isda.org.

Genworth Financial Inc., the Richmond, Va.-based life and mortgage insurance holding company, says it has exposure of just under $200 million in debt and equity from Fannie Mae and Freddie Mac. As of Sept. 5, Genworth had reduced its total holdings of senior debt in these two companies to $119 million, compared with $141 million at the end of the second quarter, Genworth said. It also had reduced its preferred stock holdings to $72 million from $126 million on June 30. Genworth said it currently holds no subordinated debt or common stock in either Fannie Mae or Freddie Mac. The company added that its total preferred stock holdings in these two organizations represent one-tenth of 1% of its total investment portfolio of approximately $72 billion. Genworth can be found online at http://www.genworth.com.

An emergency credit facility that will give Fannie Mae and Freddie Mac access to short-term loans of seven to 30 days is also open to the 12 Federal Home Loans Banks, even though the banks are unlikely to need it, according to a GSE regulator. "The Federal Home Loan Banks have performed remarkably well over the last year," Federal Housing Finance Agency Director James Lockhart said. All but one is profitable, and "therefore it is very unlikely that they will use the facility," he added. The Chicago FHLBank posted a $74 million loss in the second quarter following a $78 million loss in the first quarter. The FHLBanks can put up advances or agency mortgage-backed securities as collateral to borrow at Treasury's credit facility at an interest rate of 50 basis points above the London interbank offered rate. "We can issue [consolidated] debt at much more attractive rates than that," said John Fisk, director of the FHLBank System Office of Finance. However, FHLBank consolidated debt is backed by all 12 FHLBanks. Individual banks can tap Treasury's credit facility. "We are pleased that Treasury has created this liquidity facility as a backstop," Mr. Fisk said. "Treasury created it to ensure stability and market access, and that is a good thing."

Some of the nation's largest depositories -- which are also seller/servicers for the government-sponsored enterprises -- are filing new disclosures indicating that they will take large hits on their investments in Fannie Mae and Freddie Mac preferred stock. On Monday Wells Fargo, the largest annual seller of loans to Freddie, disclosed that it would take a charge against earnings in the third quarter on the $480 million in Fannie/Freddie preferred stock it owns. A spokeswoman for Wells declined to provide a range on what the charge might be. Even though Wells is Freddie's biggest customer, it owned much more in Fannie preferred stock than Freddie -- $336 million to $144 million. Sovereign Bancorp of Pennsylvania said it would take a noncash "other-than-temporary" charge on the $622.6 million GSE preferred shares it owns. An other-than-temporary charge means it cannot "write up" the value of the stock unless the shares recover and it then sells the stock. Sovereign was the 17th-largest Freddie Mac customer in terms of loan sales.

The Mortgage Bankers Association is hoping to open up a dialogue with the Federal Housing Finance Agency on reducing guarantee and delivery fees charged to Fannie Mae and Freddie Mac seller/servicers. In an interview with MortgageWire, new MBA chief John Courson said, "We'll encourage the new conservatorship management to take a fresh set of eyes" to both types of fees, especially those charged on mortgages with high loan-to-value ratios. According to company figures, the average g-fee on a newly delivered Fannie Mae loan was 27.8 basis points in the second quarter. The charge on Freddie loans were much lower -- 22 bps, which indicates that the company was having a harder time passing on costs to its lending customers. The MBA says the two government-sponsored enterprises had also been tacking on delivery fees in the range of 25-50 bps. One executive, requesting that his name not be used, said some delivery fees were as high as 100 bps.

The government takeover of Fannie Mae and Freddie Mac has raised as many questions as it has answered in lenders' minds about what it will be like to do business with the government-sponsored enterprises in the months ahead. A stated goal of placing Fannie and Freddie into conservatorship (an action that has made "GSE" something of a misnomer) is to ensure that money keeps flowing into the mortgage market. But the Treasury Department's plan also envisions whittling away their portfolios after a brief period of expansion. Meantime, the Federal Housing Finance Agency said it plans to tighten regulation of the companies as mandated by the law that created it. Many market observers and lenders predicted Monday that the regulators' near-term actions would reduce mortgage rates, sparking a wave of refinancings, which would benefit lenders. Further, some said, the takeover could lead to a reduction of the guarantee fees that Fannie and Freddie charge. These sources pointed to Treasury Secretary Henry Paulson's remark Sunday that the GSEs should examine the structure of such fees "with an eye toward mortgage affordability." But other observers said having the government running Fannie and Freddie could make guarantee pricing less favorable for bigger lenders. No longer concerned about volume or market share, this line of thinking goes, Fannie and Freddie will be less inclined to give breaks on guarantee fees to their bigger suppliers. David Zugheri, the president of First Houston Mortgage Ltd., a retail lender that specializes in prime conforming loans, said he expects a change from the times during which the GSEs "paid up for volume." "What they should do is look at everyone's book of business and lower the g-fees for those lenders that have less risk, not volume," he said. "They should be paying more for quality" by reducing the guarantee fees for less risky loans, he said. In an e-mail to clients on Sunday, Joe Garrett of the consulting firm Garrett, Watts & Co., wrote that Fannie and Freddie might "cut way back on offering lower guarantee fees in return for promised volume. If this were to occur, it will suddenly be much more attractive to sell directly to them, as opposed to selling to the big aggregators who get lower ... fees." Joseph P. Bowen, the chief operating officer and head of secondary marketing at Franklin American Mortgage Co., a privately held lender in Franklin, Tenn., said he expects the fees to drop. "With the federal government intervening and providing that backstop, you would anticipate that credit costs would go down and the fees would go down," he said. During the past nine months, Fannie and Freddie have imposed several loan-fee increases to reflect higher market risk and to bolster their profits. Industry trade groups complained that the increases were making mortgage credit too expensive for consumers, but GSE executives insisted the increases were needed. "Rates were artificially high because Fannie and Freddie were paying for the sins of the past with the g-fees of the future," Mike Drury, an executive vice president at the M&T Bank unit of $65 billion-asset M&T Bank Corp. in Buffalo, said Monday.By Kate Berry and Paul Muolo. Brian Collins, Harry Terris, and Steven Sloan contributed to this article.

Four certificates from three transactions issued by Terwin Mortgage Trust and backed by second-lien loans have been downgraded by Moody's Investors Service. The downgrades were as follows: Terwin Mortgage Trust 2006-4SL, class M-1, from Caa3 to C; Terwin Mortgage Trust 2006-8, class I-G, from B3 to C, and class I-M-1, from Ca to C; and Terwin Mortgage Trust 2005-13SL, class G, from Baa1 to Baa3. The downgrades were based on credit enhancement levels that were low compared with projected losses and the "continued and worsening performance of transactions backed by closed-end-second and home-equity-line-of-credit collateral," Moody's said.