Servicing

The nationwide inventory of foreclosed residential properties rose 3.5% in January, to 95,073, according to Foreclosure.com, an online foreclosure listing service based in Boca Raton, Fla.There were 23,982 new foreclosed residential properties listed in the United States in January, the company reported. "The ballooning inventory of available foreclosure properties should be an area of concern among lending institutions," said Brad Geisen, president and chief executive officer of Foreclosure.com. "It puts pressure on REO departments to reduce this expanding inventory." The company can be found online at http://www.foreclosure.com.

Fannie Mae has extended and limited its foreclosure moratorium in the Gulf Coast states to 21 counties and parishes that sustained the most damage in hurricanes Katrina and Rita.However, the government-sponsored enterprise is continuing to give its servicers flexibility in other devastated areas. The new guidance, which extends the current moratorium until the end of May, stresses that "foreclosure proceedings may begin (or continue) only when foreclosure is the only alternative." The GSE says it is particularly concerned that many borrowers who were forced to evacuate their homes have not contacted their lenders and servicers. Fannie Mae says servicers should continue their "proactive efforts" to contact borrowers and that the GSE will assist in those searchers. "In some cases, we will work with commercial search service providers to perform a comprehensive multi-state search in an attempt to locate the borrower," Fannie said. Fannie Mae can be found online at http://www.fanniemae.com.

The cost of repairing the 95,000 properties in New Orleans damaged by flooding related to Hurricane Katrina will total $8 billion to $10 billion, according to a study by the Mortgage Bankers Association.Flood insurance is expected to cover $4 billion to $5 billion, leaving $3 billion to $6 billion in uninsured losses, the MBA said. The pre-Katrina market values of the properties totaled $17 billion to $18 billion, according to the study, which used property-level damage reports on over 117,000 properties and applied repair cost estimates based on structure types, location, degree of damage, and current builder quotes. Damage percentages vary dramatically by ZIP code, ranging from only 2% of structures to 95%, the MBA said. The study was written by Jay Brinkmann, the MBA's vice president of research and economics, and Wade Ragas, president of Real Property Associates and retired head of the Real Estate Market Center at the University of Orleans. The MBA can be found online at http://www.mortgagebankers.org.

Mortgage lenders are now following in the footsteps of credit card and auto lending operations by incorporating predictive analytics to better manage risk, according to James Caldwell, a partner with Deloitte & Touche LLP, at the MBA's National Mortgage Servicing Conference & Expo in Phoenix."There are several stages of increasing sophistication in collections, ranging from traditional to enhanced and then to risk-based," Mr. Caldwell told conference attendees during his session, "Leveraging Predictive Analytics to Drive Profit in Mortgage Collections." Deloitte & Touche conducted an online survey with the assistance of the Mortgage Bankers Association in which it conducted in-depth interviews with senior executives. With rising rates, concerns over housing prices, and a strained economic outlook, the survey found that lenders are implementing a variety of techniques to lower costs and boost revenues. "Mortgage lending has always looked for trends in customer data," Mr. Caldwell said. "However, sophisticated analytic tools can recognize critical patterns beyond trends. The market for decision analytics software in the U.S. was $2.3 billion in 2004 and is expected to grow by 30% in the next two years."

Mortgage payment resets may result in $110 billion in foreclosure losses over several years, but this would represent less than 1% of total U.S. mortgage lending during the same period and would not significantly affect the economy, according to a study by First American Real Estate Solutions.The resets -- stemming from the conversion of low, teaser interest rates on adjustable-rate loans to higher prevailing rates -- will nevertheless hurt some families and firms involved with the riskiest loans, the company said. "Mortgage payment reset is likely to be the most important issue facing mortgage servicers and investors in the nonprime market during the next few years," said George Livermore, president of the Property Information and Services Group of The First American Corp., the parent company of First American RES. "This analysis provides helpful guidance for mortgage professionals by explaining key dynamics associated with mortgage payment reset and provides a method for evaluating risk." The study, "Mortgage Payment Reset: The Rumor and the Reality," was conducted by Christopher Cagan, director of research and analytics at First American RES. The company can be found online at http://www.firstamres.com.

Over the next two decades, the mortgage industry will need to attract $6-8 trillion of new capital to finance the housing needs of a rapidly expanding population, Mortgage Bankers Association chairman Regina Lowrie has told attendees at the MBA's annual mortgage servicing conference in Phoenix.The MBA estimates that the U.S. population, fueled by immigration and internal growth, will increase by some 70 million over the next two decades. That translates into roughly 30 million new households that will need housing, Ms. Lowrie said. Citing a Brookings Institution report, Ms. Lowrie said this population growth will require the construction of enough residential and commercial building space to double the nation's total space over the next 25 years. "That's the challenge we face with everything going smoothly," she said.

Wells Fargo Home Mortgage, Des Moines, Iowa, has announced a mail campaign to give customers affected by last year's Gulf Coast hurricanes a chance to select a repayment option that meets their personal needs.The company said the campaign was prompted by the fact that a second 90-day deferral period is about to expire. Options include a repayment plan, loan modification, a partial claim, or full reinstatement of a customer's loan. Wells Fargo said it is working with Freddie Mac and Fannie Mae "to ensure that an effective approach is taken with these customers." The company said its Consumer Credit Group launched a similar campaign in December to offer repayment options to its home equity customers. Wells Fargo can be found online at http://www.wellsfargo.com.

The class B notes issued by HarbourView CDO III Ltd., a collateralized debt obligation that includes mortgage-backed securities, has been downgraded from CCC to C by Fitch Ratings.Fitch also affirmed the rating on the class A notes. The rating agency said the deal has been technically in default since March 2005, because the principal balance of the collateral debt securities fell below the aggregate balance of the rated notes. "Fitch has determined that the class B noteholders will continue to experience an impairment of principal and interest over the remaining life of the transaction and that the current ratings of the class B notes no longer reflect the current risk to noteholders," Fitch said. HarbourView III is composed of residential MBS, asset-backed securities, commercial MBS, real estate investment trusts, CDOs, and corporate debt.

Two classes of notes issued by Mid Ocean CBO 2000-1 Ltd., a collateralized debt obligation that includes mortgage-backed securities, have been downgraded by Fitch Ratings.Classes A-2 and A-2L have been downgraded from B-minus to CCC. The rating agency attributed the downgrades to deteriorating collateral quality that has caused overcollateralization and interest coverage to fall "well below their required test levels." The transaction, a CDO managed by Deerfield Capital Management, is composed of residential MBS, commercial MBS, asset-backed securities, and CDOs. The rating agency can be found online at http://www.fitchratings.com.

LandAmerica Financial Group Inc., a real estate company based in Richmond, Va., has announced that it will restate its audited financial results for fiscal years 2000-2004 and unaudited quarterly results for the first three quarters of 2005 to correct an accounting error that resulted in a net understatement of reported earnings.The error involved the calculation of the company's policy and contract claims accrual, or claims reserve, and has no impact on the company's cash flows, LandAmerica said. The error stemmed from a misinterpretation of data in a report generated by a new claims system introduced in 1999. The misinterpretation caused claims paid to be reported to the company's actuaries "without the appropriate reduction for recoveries," LandAmerica said. The restatements will result in higher net income for all periods except 2002, with upward revisions ranging from 0.8% in the third quarter of 2005 to 25.3% in 2004, according to LandAmerica.