Servicing

When it comes to wooing customers, mortgage brokers and loan officers may be the first in line, but a recent study suggests that servicers are the ones who win the customers' loyalty in the long run.According to the J.D. Power & Associates 2005 Home Mortgage Study, a far greater number of consumers name their mortgage servicer as "their" mortgage company than name the originator. When asked, "Which do you think of as your mortgage company?", 76% of consumers named their mortgage servicer, while 24% named their mortgage originator. The survey also finds some areas of concern for servicers. Jeremy Bowler, a director at J.D. Power who spoke at the MBA National Mortgage Servicing Conference in Orlando, Fla., said that only 18% of mortgage servicing customers reported being "delighted" overall with their lender. Just 16% said they were delighted with their originator. Mr. Bowler said the stakes are high for achieving customer satisfaction, because satisfied customers are much more likely to recommend doing business with a lender. By contrast, dissatisfied customers can become word-of-mouth "brand terrorists," he said.

Servicers of subprime mortgage loans face a perplexing conundrum: only about a quarter of the loans include escrow accounts to ensure payment of insurance premiums and property taxes, yet subprime borrowers are the least likely to save money to make such payments.Speaking at a panel discussion at the MBA National Mortgage Servicing Conference in Orlando, Fla., several B&C servicers said they believe the escrow rate for insurance and tax payments should be higher. Nigel Brazier, senior vice president for business development and strategic initiatives at Select Portfolio Servicing, said only about 25% of the loans in his company's subprime portfolio have escrow accounts. He said that is typical for the subprime industry. Some in the industry believe that failing to escrow can lead to higher delinquency and default rates among subprime borrowers. Mr. Brazier said investors are "starting to realize" that they should perhaps be concerned about the low rate of escrowing in the nonprime sector. And Fabiola Camperi, a senior vice president at Option One Mortgage, said her company has been trying to promote escrowing in its portfolio. "We have seen our ratio of escrow loans increase significantly," to more than 50%, she said.

Fannie Mae acquired $48 billion in home mortgages in January, its lowest purchase volume in more than three years.Meanwhile, the company's on-balance-sheet portfolio fell to $890 billion at the end of January, which translates into an annualized growth rate of negative 16.8%. Fannie Mae, which is facing a $9 billion earnings restatement, is operating under the close scrutiny of its regulator, the Office of Federal Housing Enterprise Oversight. Last week its stock fell to a new 52-week low after Federal Reserve Chairman Alan Greenspan suggested that the company and its chief competitor, Freddie Mac, should be no larger than $200 billion. In a recent report, analyst Matt Vetto of Smith Barney predicted that Fannie's portfolio would grow in the "single-digit" range after 2005, adding that the company may face a "permanent" 20% to 30% capital surplus requirement. Smith Barney is maintaining a "buy" rating on the government-sponsored enterprise. Fannie Mae can be found online at http://www.fanniemae.com.

The ratings on 19 classes in five manufactured housing transactions from four issuers have been lowered by Standard & Poor's Ratings Services.The downgrades from IndyMac Manufactured Housing Contract Pass-Thru Trust 1998-2 were as follows: classes A-2 through A-4, from BBB to BB; and class M-1, from B-plus to CCC. All four classes were removed from CreditWatch negative. The downgrades from Bombardier Capital Mortgage Securitization Corp., series 1998-C, were as follows: class A-1, from BB-plus to BB-minus; class M-1, from B to CCC-plus; class M-2, from CCC-plus to CCC; and class B-1, from CCC to CCC-minus. The downgrades from Bombardier series 1999-A were as follows: classes A-2 through A-5, from BB to B-plus; class M-1, from B-minus to CCC-plus; class M-2, from CCC-plus to CCC-minus; and class B-1, from CCC to CC. In Associates Manufactured Housing Contract Pass-Thru Certificates, series 1996-2, class B-1 was downgraded from BBB to BB-plus and class B-2 was downgraded from B-plus to CCC. And in UCFC Funding Corp. Manufactured Housing Pass-Thru Certificates, series 1998-3, class M-1 was downgraded from B to CCC-plus and class M-2 was downgraded from CCC-plus to CCC. S&P attributed the downgrades to "continued adverse performance trends" in the underlying MH installment sales contracts and mortgage loans. S&P can be found online at http://www.standardandpoors.com.

Countrywide Financial Corp., Calabasas, Calif., has revised the timing for gain on sale from certain mortgage-backed securitizations originally recognized during 2004 in a move the company said will slightly reduce its earnings for that year and increase them by an equal amount for the first quarter of this year."The net effect of the change is a reduction in 2004 earnings of $0.20 per diluted share, to $3.63 per diluted share (compared to previously announced unaudited 2004 earnings of $3.83 per diluted share), and a corresponding increase of approximately $0.20 per diluted share to be recognized in the first quarter of 2005," Countrywide reported. The company said the change "applies to unaudited financial results for 2004 that have been reported by Countrywide, and does not apply to any previously issued financial statements." Countrywide made the change because its independent auditor, KPMG LLP, has informed the company that it reported certain mortgage-backed security sales too soon. The company said it believed at the time that it was reporting the transactions in compliance with all applicable accounting principles. Countrywide can be found online at http://www.countrywide.com.

The Mortgage Bankers Association is adding a Certified Mortgage Servicer program to its CampusMBA suite of industry training and educational programs.The program, which includes education and certification tracks in loan administration, financial controls/investor reporting, and default administration, was announced at the MBA National Mortgage Servicing Conference in Orlando, Fla. Dan Thoms, the MBA's vice president of education, told MortgageWire that the program will include a series of achievement and educational designations aimed at promoting professionalism in the mortgage servicing sector.

The chairperson of the Mortgage Bankers Association loan administration committee has called on loan servicers to expand their involvement in the industry association's efforts to influence public policy.Speaking to some of the 1,900 attendees at the MBA National Mortgage Servicing Conference in Orlando, Fla., J. K. Huey, senior vice president at IndyMac Bank, said the mortgage servicing business is constantly changing and lenders cannot afford to be complacent about evolving issues in the mortgage banking industry. "We should not be bystanders in this whirlwind of change. We need to get involved," she said, urging servicers to support both the MBA and MorPAC, a political action committee that promotes the industry's political causes. MBA leaders want MorPAC to raise $1.3 million during the coming two-year election cycle. In the last election cycle, it raised just over $1 million. The MBA can be found online at http://www.mortgagebankers.org.

Freddie Mac has announced that 23 single-family mortgage servicers achieved "Tier One" performance rankings for superior investor reporting and default management during two or more quarters last year.The company also inducted 12 servicers into its Tier One Hall of Fame for maintaining that status for four consecutive years. The announcement was made at the MBA National Mortgage Servicing Conference in Orlando, Fla. Each month, Freddie Mac ranks its servicers on a range of activities covering two primary performance benchmarks -- investor reporting and default management. Servicers that receive an overall top Tier One rating for at least two quarters in a year receive a number of benefits, including financial rewards and national recognition. Tier One Hall of Fame honorees for 2004 are Amcore Mortgage Inc.; Bank of America Consumer Real Estate; Chase Home Finance; Chevy Chase Bank FSB; Colonial Savings FA; Countrywide Home Loans; First Horizon Home Loan Corp.; HSBC Mortgage Corp. (USA); M&T Mortgage Corp.; National City Mortgage Co.; Sovereign Bank; and Wells Fargo Home Mortgage. The additional 2004 Tier One recipients are Bank of Oklahoma NA; Citimortgage; Doral Financial Corp.; First Federal Savings Bank; IndyMac Bank; PHH Mortgage; Provident Funding Associates; R&G Crown Bank; SunTrust Mortgage; U.S. Bank Home Mortgage; and Ulster Savings Bank.

Freddie Mac has started a new pilot program designed to make sure that affordable home loan customers who run into potential trouble have the opportunity to stay in their homes.The "affordable servicing" initiative, which is now in the first phase of a pilot program, is designed to increase the success of "delinquency intervention" when affordable home loan customers become seriously delinquent, according to Ingrid Beckles, a vice president at Freddie Mac and a speaker at this year's MBA National Servicing Conference in Orlando, Fla. Ms. Beckles told MortgageWire that the first phase of the pilot is designed to help borrowers that the loan servicer has been unable to contact. She said servicers are often unable to reach 40%-50% of troubled borrowers before the loan goes to foreclosure, in many cases because the borrower does not respond to attempts to reach him or her by phone or mail. That hinders efforts to offer help in the form of repayment plans, loan modifications, forbearance, short sales, or other foreclosure alternatives, Ms. Beckles noted. "They go straight down a road to foreclosure without realizing we are trying to help them," Ms. Beckles said. The pilot is testing ways lenders can increase the contact rate with seriously delinquent borrowers, she said. Freddie Mac can be found online at http://www.freddiemac.com.

Freddie Mac has announced the settlement of a $2.5 billion 6% Gold MACS Strip security with a weighted average coupon of 6.399% and a weighted average loan age of 13 months.The issue, designated FHS 228, settled Feb. 17. (The CUSIPs are 31282YDP1 for the interest-only portion and 3128HVDZ9 for the principal-only portion.) The transaction is lead-managed by UBS Investment Bank. Freddie Mac can be found on the Web at http://www.freddiemac.com.