Servicing

Many housing markets could see stronger recoveries two years from now even though the latest forecast for the coming year shows only modest ones, according to one company's forecast. Although there aren't any overwhelmingly strong appreciating forecasts in the near term, the depreciating ones are milder than they were a year ago, according to Veros Real Estate Solutions, a collateral valuation provider based in Santa Ana, Calif. In its quarterly forecast update for June 2010 through June 2011, Veros said California's Inland Empire area, including Riverside, San Bernardino and Ontario, is seeing modest appreciation, joining the state's strongest metro region, San Diego. "Colorado is beginning to look good again to buyers, with three cities among the top 10," said Eric Fox, Veros' vice president of statistical and economic modeling. "A new entry among the top five positive trending areas is Louisiana's Shreveport and Bossier City area." Chico, Calif. leads the list of weakening markets, but Florida continues its depreciation trend in many areas along its East Coast. Nevada's second largest market, Reno/Sparks, stays on the list of weakest markets while Las Vegas avoided inclusion. Utah did not, however; the Salt Lake City and nearby Provo/Orem areas occupy the last two slots in Veros' bottom 10. Fox said while the Houston metro area is also demonstrating modest improvement, at this point the company can only speculate on the effects, if any, that will result in the residential real estate market from the catastrophic BP oil spill in the Gulf. The company said none of its ZIP code level models for the impacted coastal areas have yet shown significant forecast differences from those ZIP code models that are further inland and less impacted. Real estate values in the Central Plains areas are expected to hold steady in the coming year. Texas, Oklahoma, Kansas, Nebraska and parts of Louisiana and Arkansas are holding steady, underscoring a weak but consistent mild recovery.

Mortgage investors are very interested in a refinancing program the Federal Housing Administration plans to roll out this fall to help underwater borrowers with non-FHA loans, according to a Government Accountability Office report. However, the GAO auditors also found that the investors don't believe many borrowers will qualify for this principal reduction program. The aim of the new program is to prevent strategic defaults by giving investors an incentive to reduce the principal amount of the first and second mortgages. The new refinance option requires servicers to write down the principal amount of the first mortgage by at least 10%. The loan-to-value ratio on the newly originated FHA mortgage cannot exceed 97.75%. If there is a second lien on the property, the combined LTV cannot exceed 115%. "Investors we spoke with supported the principal reduction in conjunction with an FHA refinance," the GAO report says. "However, they also noted that the program might reach only a limited number of borrowers as it would only help borrowers who are current on their existing first-lien mortgage payments," the report says. After the refinancing, the borrower's mortgage payments cannot exceed 31% of income. And other debts cannot push the back-end ratio over 50% unless the borrower has a strong credit history. FHA officials did not respond to requests for comment on the GAO report.

Alvarez & Marsal, a professional services firm specializing in advisory and performance improvement/turnaround services, has started a European real estate advisory services practice. The new real estate advisory services practice will provide services ranging from pre-acquisition due diligence to exit strategies, including real estate asset management. Michael Camp, head of Alvarez & Marsal Real Estate Advisory Services LLC, said a huge amount of real estate debt is coming due in Europe over the next few years.

Another wave of downgrades has hit U.S. residential mortgage-backed securities transactions as the Fitch ratings on 281 bonds in 267 transactions have dropped to D, indicating a principal writedown. The move followed a review of bonds that had speculative grade ratings ranging from CCC to C, indicating a default was expected. Ninety-eight percent of the bonds had CCC ratings. Ninety-eight percent had an outstanding recovery rating of RR6 indicating that minimal recovery was expected. Only the bonds with writedowns were included in the review. Of the 267 transactions impacted, 143 were prime credit deals and 115 were subprime credit deals. Fitch said the balance were "other" product types.

Fitch Ratings has updated its cash flow criteria for U.S. residential mortgage-backed securities with what it describes as improvements to its new issue analysis. This includes changes to ratings of resecuritizations aimed at accounting for potential variability in expected loss timing and prepayment speeds. It also is incorporating into its analysis "back-loaded" loss timing assumptions for current and delinquent loans, a low prepayment scenario and new structured finance interest rate stresses.

Fannie Mae issued $36.2 billion in mortgage-backed securities in May, only slightly above Ginnie Mae's MBS issuance for the month. Ginnie Mae MBS issuance has been higher than Freddie Mac's for some time. But now it looks as if Ginnie Mae may be catching up to Fannie. Ginnie recently reported that its issuers securitized $33.9 billion in FHA and VA guaranteed loans in May. Meanwhile, the serious delinquency rate on Fannie Mae guaranteed single-family mortgages fell for the second consecutive month. The secondary market agency reported that 5.3% of its loans are 90 days or more past due in April, down 29 basis points since February. Fannie has a one-month delay in its reporting delinquency rates.

Marc Insul, former president/COO of Fidelity National Field Services Inc. and Alan Bunker, president/CEO-Spectrum Field Services Inc., recently started a national property preservation company for abandoned and nearly vacant commercial and industrial real estate. Commercial Asset Preservation LLC provides general maintenance and inspection services for commercial REO. Historically, only a small percentage of the commercial properties in the U.S. have defaulted, or become vacant or abandoned. However, the downturn in the economy has caused a sharp decline in commercial occupancy rates, according to Insul. "CAP meets this growing need through securing unprotected buildings, while ensuring that vacant and abandoned properties retain value and do not further deteriorate, become vandalized, or receive citations for their physical condition," he said. CAP's services include boarding/securing, debris/hazard removal, cleaning/janitorial, extermination, winterization, HVAC maintenance, plumbing, electrical, roof maintenance, grounds keeping, parking lot maintenance, graffiti removal, environmental hazard testing/remediation, property inspections/evaluations, and other specialty services designed to meet specific needs for the property.

Prudential Real Estate Investors, Parsippany, N.J., hired Eric Adler as CEO-Europe, responsible for overseeing its investments and transaction capabilities throughout Western Europe and the emerging markets of Central and Eastern Europe. Adler will be located at the London fund management offices of Pramerica Real Estate Investors Ltd. Before joining Prudential, he co-directed Tishman Speyer's European activities and was a member of its global management and investment committees. Earlier, he worked for Morgan Stanley, where he led MSREF¹s activities in Germany, France, Italy and Spain.

DartAppraisal.com is offering a warranty that guarantees mortgage lenders and investors against potential loss for default and disclosure due to valuation inaccuracy. The product, DartAssurance, is being offered in partnership with an "A" rated insurance company and will provide up to $100,000 in coverage. The warranty covers the appraisal for 60 months and it is fully transferable. To be eligible for coverage, the maximum loan amount is $750,000, the loan-to-value ratio or combined LTV cannot exceed 100% and the minimum credit score is 620. First and second lien mortgages are covered. Darton Case, president of DartAppraisal.com, said the company understands the need for all types of risk mitigation for its clients. "We believe that our product will help stimulate the much needed private investors back into the mortgage market," he said.

Over the past year, the number of states with programs offering foreclosure mediation has nearly doubled, from 11 to 21 states, according to the Center for American Progress. Based on their state-by-state assessment of existing programs, the Washington-based think tank argues that automatic scheduling of mediation at the start of the foreclosure process, as opposed to requiring already stressed homeowners to opt in to the program, significantly increases participation rates without reduction in the rate of successful outcomes. In their report, authors Andrew Jakabovics and Alon Cohen, recommend jurisdictions with opt-in programs adopt automatic scheduling, as Connecticut and Philadelphia, among others, have done. Similarly, they argue that successful pilot programs running at the circuit court, city, or county levels should now be scaled to the state level. During a conference call to discuss the issue, Roberta Palmer, program manager for court operations for Connecticut's judicial branch, said for the majority of foreclosures in her state, conversations between homeowners and representatives for large national servicers "aren't happening." "So, bringing the parties into the room and having someone with authority from the large servicers look over options with the homeowner, has been a great benefit. Loan modifications that we enter into are much more sustainable than those done without a third party present in the mediation," she said.