Servicing

The performance of home equity loans at banks improved in the first quarter, while the overdue rate on home equity lines of credit increased slightly, according to the American Bankers Association.As of March 31, the home equity delinquency rate fell to 1.94% from 2.07% at the end of 2005. The past-due rate on HELOCs increased to 0.55%, up from 0.51% three months earlier. It marked the fifth consecutive increase in the overdue rate for HELOCs, though the products remained the consumer credit category with the lowest delinquency rate in the ABA's survey. Credit card delinquencies also rose in the first quarter, and ABA chief economist James Chessen said rising interest rates and weak consumer savings are taking a toll. "Not since the Great Depression has the national savings rate remained below zero for so long," he said. "Absent savings to cushion financial stress, some consumers end up missing a payment on their credit card loan." The ABA can be found online at http://www.aba.com.

Fannie Mae has announced that many changes to its MyCommunityMortgage product line -- including 40-year mortgages, new adjustable-rate and interest-only options, streamlined pricing, and expanded eligibility -- will go into effect in August and September.The changes, some of which were outlined in May at the Mortgage Bankers Association's National Secondary Market Conference in Chicago, are aimed at expanding the MCM line of affordable housing products. The government-sponsored enterprise said, for example, that standard whole-loan commitments and mortgage-backed security pool purchase contracts for delivery of MCM first-lien fixed-rate mortgages (and certain ARMs) will be offered beginning Aug. 1. Streamlined pricing that reduces the number of options requiring different guaranty fees or whole-loan pricing will also become available on Aug. 1, along with commitment and delivery options for 40-year loans. Several MCM IO options will be added as of Sept. 1. Numerous other MCM changes are presented in Fannie Mae announcement 06-07, "Community Lending Enhancements -- MyCommunityMortgage." Fannie Mae can be found online at http://www.fanniemae.com.

Fidelity National Property and Casualty Insurance Co., a subsidiary of Fidelity National Financial, has received permission to purchase a portfolio of 63,000 flood insurance policies from Southern Family Insurance Co.Fidelity said it had received permission from the Circuit Court of Florida to purchase the entire portfolio of flood insurance policies of Southern Family through the Florida Department of Financial Services. The policies are part of the National Flood Insurance Program. Fidelity said it will service the policies through its in-house flood processing unit located in St. Petersburg, Fla. Southern Family, a member of the Poe Financial Group, was placed in receivership by the state of Florida on June 1. FNF can be found on the Web at http://www.fnf.com.

1st National Bank of Arizona has selected GMAC Mortgage Corp. to subservice mortgage loans.FNBA is a privately held bank that focuses on alternative-A lending. GMAC Mortgage specializes in subservicing multiple products and asset grades on one system. Ranked as the country's third-largest subservicer, GMAC Mortgage had a subservicing portfolio in excess of $41.8 billion at the end of March. FNBA's wholesale, correspondent, and warehouse divisions lend in 49 states. The bank, which has $3.4 billion in assets, can be found online at http://www.fnbavenue.com.

Heritage Bank of Commerce, San Jose, Calif., has acquired a portfolio of fixed- and adjustable-rate closed-end home equity loans from Fremont Bank for $10.3 million, according to Heritage Bank's parent company, Heritage Commerce Corp.The average yield of the portfolio is 6.504%. The fixed-rate loans, amortized over periods of five to 15 years, have a face value of $8.5 million and an average yield of 6.498%, the company reported. The adjustable-rate loans, amortized over 30 years (with the balance of unpaid principal due at the end of the 15th year), have a face value of $1.8 million and an average yield of 6.533%. The parent company can be found online at http://www.heritagecommercecorp.com.

New foreclosures in Massachusetts recorded in May were more than double those of a year earlier, according to ForeclosuresMass, Framingham, Mass.The company said 1,613 foreclosures were recorded in May, 105% higher than the level of a year earlier and 165% higher than that of May 2004. "We expected foreclosure rates to increase again this year, but the levels we are tracking outdistance our earlier predictions," said Jeremy Shapiro, president and co-founder of ForeclosuresMass. "It is clear that many homeowners, especially those with adjustable-rate mortgages, are being pushed closer to the edge as interest rates rise at such a consistent clip. We may be witnessing a 'perfect storm' scenario where a flat real estate market, higher interest rates, rising energy costs, and specialty loans are causing significant difficulty for thousands of Massachusetts property owners." The company can be found online at http://www.foreclosuresmass.com.

Foreclosure activity is surging in several Western housing markets, partly as a result of "high-risk mortgages," according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm and publisher of foreclosure information.The company said Los Angeles County reported over 14,000 notices of default as of June 22, with over 700 properties that have gone to foreclosure. Foreclosure activity is also rising sharply in Denver and Phoenix, according to Alexis McGee, president of ForeclosureS.com. "Interest-only loans and so-called option adjustable-rate mortgages with very low initial rates and high negative amortization are financial time bombs," Mr. McGee said. "When these loans reset to full amortization and market rates, the payment shock to homeowners is severe." The company can be found on the Web at http://www.foreclosures.com.

RealtyTrac, an online foreclosure marketplace based in Irvine, Calif., has reported that the number of new properties in some stage of foreclosure rose about 2% in May.The company's U.S. Foreclosure Market Report indicates that 92,746 new foreclosure properties were added to the rolls in May. "Our May numbers echo the recent report by the Mortgage Bankers Association, which noted that delinquency and default activities were lower in the first quarter of 2006," said James J. Saccacio, RealtyTrac's chief executive officer. "While our report confirms that the number of properties entering foreclosure is still significantly higher than it was during the same period of 2005, we've now seen two months of decreasing foreclosure rates followed by May numbers that were essentially flat. That three-month trend indicates foreclosure activity has stabilized in most housing markets across the country after spiking sharply at the beginning of the year." The company said Colorado recorded the highest foreclosure rate of any state for the third consecutive month in May, jumping 13% (to 4,198 new foreclosures) from April's level. RealtyTrac can be found online at http://www.realtytrac.com.

Many of the nation's hottest housing markets are cooling, but the strength of the economy is balancing the risk of price declines in the nation's 50 largest housing markets, according to PMI Mortgage Insurance Co., Walnut Creek, Calif.The average score in the PMI U.S. Market Risk Index rose from 287 to 288 in the second quarter, the company reported. This means the company's estimate of the probability of experiencing a home price decline in the next two years has risen from 28.7% to 28.8% in the 50 largest metropolitan statistical areas. According to the index, there are now 13 markets with a greater than 50% chance of price declines over two years, down from 14 in the first quarter. "This quarter's data signals that in many areas the expansion of the housing balloon has slowed substantially," said Mark Milner, chief risk officer of PMI Mortgage Insurance. "The Risk Index also shows that slowing price appreciation is balanced by underlying economic strength. In the absence of an unexpected economic shock, this makes a gradual cooling of the market the most likely outcome." PMI can be found online at http://www.pmigroup.com.

Freddie Mac has reported that its retained mortgage portfolio declined by $700 million, to $723.1 billion, in May.The government-sponsored enterprise is under intense pressure from the Bush administration and regulators to slow the growth of its portfolio while it fixes its accounting and internal control systems. So far this year, Freddie has increased the size of its portfolio by 4.4%, whereas last year the portfolio grew by 9%. Meanwhile, Freddie Mac's issuance of mortgage-backed securities slowed in May to $25.4 billion from $26.6 billion in April -- probably reflecting an overall decline in mortgage originations. In January, Freddie issued $33.7 billion in MBS.