Servicing

The Department of Housing and Urban Development and the Department of Veterans Affairs are now permitting lenders to charge borrowers MERS registration fees on all FHA-insured and VA-guaranteed mortgages, according to MERS, a McLean, Va.-based electronic loan registry.R. K. Arnold, president and chief executive officer of MERS, said the agencies' new policy is significant "because it reduces paperwork for lenders and will save borrowers a few more dollars because MERS eliminates the need to prepare and record assignments." The company said HUD has instructed its Homeownership Centers of the new policy and revised its Reference Guide, while the VA has made the change in its Administration Circular 26-05-04 and placed it on the VA loan guaranty website. MERS, which stands for Mortgage Electronic Registration Systems, can be found on the Web at http://www.mersinc.org.

The cash-strapped General Motors announced Monday that it is considering a partial sale of General Motors Acceptance Corp., home to the nation's seventh-largest mortgage banking franchise.GM said in a statement that it is "exploring the possible sale of a controlling interest" in GMAC "to a strategic partner." GMAC Residential and its affiliate, Homecomings, have a combined residential servicing portfolio of $345 billion. Both units are housed in a holding company, Residential Capital Corp., which is 100% owned by GMAC. On Monday GM reported a $1.6 billion loss for the third quarter. Fitch placed GMAC and ResCap on its watchlist, noting that a sale of the unit presents "unique challenges" due to its size. At June 30, GMAC boasted $309 billion in on-balance-sheet assets. Fitch opined that GM likely "will pursue a transaction with some urgency, if for no other reason to maintain GMAC's franchise value."

Four classes of Cityscape Home Equity Loan Trust home equity loan pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: Cityscape 1997-B group I, class M-2F, from A to BBB, and class B-1F, from BBB to BB; Cityscape 1997-B group II, class B-1A, from BBB to C; and Cityscape 1997-C group I, class B-1F, from CCC to C. Fitch also affirmed the ratings on nine classes in the two securitizations. The downgrades to series 1997-B were attributed to "elevated levels of losses and a forecast of continued poor collateral performance," the rating agency said. The overcollateralization is below target, and over 60% of both pools are more than 60 days delinquent, Fitch said. In addition, losses have resulted in a reduction in the principal balance of class B-1A. In series 1997-C, the OC of the fixed-rate portion is below target, more than 30% of the loans are more than 60 days delinquent, and class B-1F has taken a principal writedown, Fitch said. The rating agency can be found online at http://www.fitchratings.com.

Residential Capital Corp., the Minneapolis-based parent company of GMAC Mortgage and other residential finance companies, has filed a $12 billion shelf registration statement with the Securities and Exchange Commission for the potential issuance of senior and subordinated debt securities.Any senior notes issued under the shelf, which has not been declared effective by the SEC, would be guaranteed by certain of ResCap's subsidiaries, the real estate finance company said. ResCap said it intends to use the proceeds to repay all affiliated borrowings "on an expedited basis." The company can be found on the Web at http://www.rescapholdings.com.

Freddie Mac says it will purchase up to $1 billion in tax-exempt mortgage revenue bonds so that housing finance agencies in Louisiana and Mississippi can provide below-market rate mortgages and home repair loans to victims of hurricanes Katrina and Rita."We are committed to buy these MRBs at below-market rates so that as many as 10,000 low-income families affected by the disasters can rebuild their homes at the lowest rates available," said Freddie chairman and chief executive Richard Syron. The government-sponsored enterprise has been an investor in mortgage revenue bonds for some time. Freddie held $9.1 billion in MRBs in its $652.9 billion investment portfolio at the end of 2004. Rep. Richard Baker, R-La., a long-time GSE critic, welcomed Freddie's initiative to facilitate low-cost housing loans for storm victims. "Freddie Mac's announcement will certainly help," the Louisiana congressman said. Freddie Mac can be found online at http://www.freddiemac.com.

The nationwide inventory of foreclosed residential properties declined 6% in September, according to Foreclosure.com, an online foreclosure listing service based in Boca Raton, Fla.The decline is mainly attributable to the removal of all Department of Housing and Urban Development real-estate-owned properties in 11 states following Hurricane Katrina, including Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, and Texas, Foreclosure.com said. There were 20,347 new foreclosed residential properties listed in the United States in September, and such properties totaled 87,717 overall, the company reported. "During the second quarter of 2005, new foreclosure inventory in the U.S. has stayed relatively flat," said Brad Geisen, president and chief executive officer of Foreclosure.com. ".... Some influences such as high fuel costs, rising interest rates, recent natural disasters, and changes in bankruptcy law could quickly disturb the current environment." The company can be found online at http://www.foreclosure.com.

The mortgage industry's average profit per loan declined by almost 50% in 2004, according to an annual cost study conducted by the Mortgage Bankers Association of America.The MBA cost study found that average loan production profits fell to $657 per loan in 2004, down from $1,272 in 2003. As loan production volume shrank, per-loan operational costs increased and were only partially offset by secondary marketing income, including loan servicing values. "The year 2004 marked a departure from the recent years of unprecedented mortgage activity and profitability," said Douglas Duncan, MBA chief economist and senior vice president. "Narrowing warehouse interest spreads, increased pricing pressures, and higher sales and fulfillment costs on a per-loan basis posed challenges for mortgage bankers. But at the same time, we did see recoveries in the area of servicing -- after three years of worsening losses, servicing operations posted a profit in 2004 on a per-loan basis." That servicing profit averaged $21 per loan last year, compared with a net loss of $166 per loan in 2003. The MBA can be found online at http://www.mortgagebankers.org.

Moody's Investors Service has placed Residential Capital Corp.'s ratings under review for possible downgrade after its corporate parent, General Motors, experienced downgrades related to the Oct. 9 bankruptcy filing of Delphi Corp., a former nonmortgage subsidiary to which GM still has financial ties.The ResCap ratings had previously been assigned a negative rating outlook. Moody's said the move "is not a result of any change in Moody's views regarding ResCap's intrinsic creditworthiness … but rather reflects the rating reviews for possible downgrade of its parent, GMAC, and ultimate parent, GM." The rating agency added that, "Although the residential real estate finance business of ResCap, and auto finance business of GMAC, are separate from an operating perspective, ResCap continues to be substantially dependent on the support of GMAC in regard to its capital structure, though such support should continue to diminish."

LandAmerica Financial Group Inc., a provider of real estate transaction services based in Richmond, Va., has reported a tax servicing loss and a related $38 million noncash writedown of customer relationship intangible involving Washington Mutual Inc.LandAmerica said WaMu has decided to in-source future tax services in California and Colorado, while LandAmerica will continue to manage its remaining portfolio of tax and flood services. "In the last two years, LandAmerica has acquired the businesses it needs to deliver quality lender services to major national mortgage originators and servicers," said Theodore L. Chandler Jr., the company's chief executive officer. "We have largely completed the accumulation stage and are now fully integrating our tax and flood business into our complete lender services offering." The company can be found online at http://www.landam.com.

Countrywide Home Loans, the nation's largest residential lender, funded $49 billion in mortgages during September, a 58% gain from the volume in the same month last year, but the news didn't help its stock price.For the quarter ended Sept. 30, Countrywide funded a record $146 billion, according to figures released by the company Oct. 11. In trading Tuesday, its share price fell about 1% to $30.70, just 40 cents above its 52-week low. Even though Countrywide's September-to-September production increased nicely, it was down 7.8% from the August level. At the end of the third quarter its servicing portfolio totaled $1.047 trillion, a 32% annualized gain. Over the past two months many publicly traded subprime stocks -- especially real estate investment trusts -- have tested new lows. Countrywide, though, is not a REIT. It ranks third among subprime funders, according to the Quarterly Data Report.