Servicing

Nine mortgage industry groups along with the U.S. Chamber of Commerce are urging the Department of Labor to reconsider and withdraw its recent ruling that requires residential lenders to pay overtime to certain loan officers. "The interpretation constitutes a sharp break from existing law that will result in both very considerable costs to, and adverse effects on, employers and employees alike," the industry groups say in a letter to DOL's director of Wage and Hour Division. On March 24, DOL issued an interpretation that requires lenders to pay overtime to retail loan officers that work in an office. There are currently 110,000 retail mortgage loan officers and they are "well compensated by commissions and frequently work irregular hours," the May 19 letter states. The trade groups contend DOL made the new interpretation without notice and it represents a "sharp break" with the department's 2004 interpretation. "The interpretation should be withdrawn and the department should embark on a new rulemaking with notice and comment if it wishes to change policy or implement new requirements in this area," the joint letter says.

Banks and thrifts posted their best earnings in two years during the first quarter due to an improvement in mortgage buybacks and lower loan losses, according to new figures compiled by the Federal Deposit Insurance Corp. A key contributor to the bottom line was a steep, 50% drop in mortgage buybacks from the first to the fourth quarter. Overall, banks and thrifts repurchased $9.3 billion of home mortgages, after being slapped with claims from secondary market investors including Fannie Mae and Freddie Mac. Net charge-offs on residential and construction loans both declined in the first quarter, a sign that charge-offs may be peaking. Overall, the industry earned $18 billion. FDIC-insured institutions charged off $13.5 billion of one-to-four family loans, down 13% from fourth quarter. However, the serious delinquency rate rose to 7.98%, up 57 basis points from the previous quarter. Part of the rise may be due to banks shrinking their holdings of residential mortgage loans and loan modification efforts. On construction loans, the percentage of loans 90 days or more past due fell to 22.8% in the first quarter, down nearly 300 bps. But net charge-offs totaled $1.7 billion down from $2.5 billion in the previous quarter.

Sovereign Bank and M&T Bank Corp.--two midsized players in mortgages--have ended their merger talks, according to combined news reports. A report by Dow Jones said the two banks were in advanced merger discussions in recent weeks. The deal would have catapulted Sovereign's owner--Spain's Banco Santander SA--into the upper ranks of U.S. banking along with such other foreign banks as HSBC and ING. Sovereign is also an active player in providing warehouse credit to nonbank mortgage firms. According to figures compiled by National Mortgage News and the Quarterly Data Report, Sovereign ranks 25th nationwide among residential funders, M&T 28th.

Impac Mortgage Holdings said its real estate and mortgage services unit earned $1.3 million in the first quarter from an array of vendor activities, including loss mitigation and REO services. In a new filing with the Securities and Exchange Commission, the Irvine, Calif.-based nonbank notes that it would like to begin funding loans again but remains relegated to being a loan broker only. (In the filing it provides no volume figures.) It also reveals that most of its revenue stems from services performed on its own portfolio. A former alt-A lender, Impac is trying to reinvent itself in a variety of field and REO services. Its stock recently began trading on the American Stock Exchange after being on the OTS pink sheets.

An increase in distressed sales later this year will drag home prices down before the market hits bottom in the first half of 2011, according to Moody's Economy.com chief economist Mark Zandi. The West Chester, Pa., forecasting firm expects prices will fall 5% from the start of this year into 2011, based on the Standard & Poor's/Case-Shiller house price index. A key statistic for housing prices is the proportion of distressed sales to nondistressed sales. If foreclosure and short sales are increasing, "house prices will fall," Zandi told the National Association of Home Builders at its construction forecast conference on Tuesday. "We will see the number of problem loans going into foreclosure or short sales increase later this year," he said. He noted that 4.3 million first mortgages are 90 days or more past due and likely will default. The Treasury Department this week reported that 122,500 borrowers in trial loan modifications dropped out of the HAMP program in April. Economy.com forecasters expect 1.89 million foreclosure and short sales this year, down slightly from 1.97 million in 2009.

Residential delinquencies climbed to yet another new high at March 31 with 10.06% of all mortgagors behind on their payments, according to new figures released by the Mortgage Bankers Association. According to calculations made by National Mortgage News using MBA's findings, that means $1 trillion in both first and second liens are now in arrears. Compared to the same period a year ago, late payments rose 10%. Late payments worsened in all delinquency categories, but there was a slight respite in the "seriously delinquent" bucket which includes loans that are 90 days or more late or in foreclosure. The trade group found that 9.54% of all mortgages were seriously delinquent at March 31, a slight improvement from the 9.67% number recorded at yearend. At March 31, 2009, 7.24% of all loans were seriously delinquent.

Bank of America completed more permanent HAMP loan modifications in April than CitiMortgage, JPMorgan Chase, and Wells Fargo & Co. combined. A new tally of the Home Affordable Modification Program released by the Treasury Department shows that B of A completed 23,500 HAMP modifications, compared to 8050 for Chase, 6100 for CitiMortgage and 6080 by Wells Fargo. Overall, HAMP servicers completed 68,300 permanent modifications in April, compared to 60,600 in the previous month. Roughly 97,000 permanent modifications are pending that have not yet been signed by borrowers. Over the past several quarters, Treasury has pressured servicers to expedite the approval process which has dramatically forced more homeowners out of the payment trials. Overall, 277,640 borrowers have dropped out of the HAMP payment trials, including 122,170 in April. Herb Allison, Treasury Assistant Secretary for Financial Stability, noted that many of the trials were started based on the borrower's stated income -- but servicers have had a hard time verifying such information. Now HAMP servicers are requiring borrowers to verify their income upfront before starting the three-month payment trials. "We expect a much lower rate of cancellations going forward," Allison said. The Association of Mortgage Investors noted that the number of homeowners who have failed a trial modification is nearly as large as the 295,350 active permanent modifications. AMI has been critical of the HAMP's reliance on interest rate and term modifications. It supports Treasury's new emphasis on principal reductions of first and second mortgages.

Fidelity National Information Services, which manages the largest residential servicing bureau in the nation, confirmed that buyout talks with Blackstone Group and two of its partners have ended. A leveraged buyout for the payment processing company could have reached $15 billion. The consortium bidding for FNIS pulled out because of a disagreement over price, according to combined press reports. FNIS' servicing platform has a market share approaching 70%, according to past research conducted by National Mortgage News and MortgageStats.com. The publicly traded FNIS, which was spun off by Fidelity National Financial, the title insurance giant, saw its share price fall 5% Tuesday to $27.50.

Cash buyers - spell that i-n-v-e-s-t-o-r-s - purchased more than four out of every five new condominium units in the Greater Downtown Miami area in the first quarter, according to the latest figures from the Bal Harbour-based CondoVultures consulting firm. Of the some 700 apartments sold during the three-month period in the 60-square-block area, financing was used to acquire less than 120. "Even though the U.S. government is encouraging lenders to once again finance condo purchases, the results have not been impressive in South Florida," says consultant Peter Zalewski. "Many lenders claim to be willing to consider writing loans for buyers of condominiums, but the end results simply do not support that." Meanwhile, The Miami Herald reports that the developer of the opulent ICON Brickell condominium complex in Greater Downtown Miami has deeded back two of the three luxury towers that make up the complex to a group of construction lenders led by HSBC. The Related Group relinquished ownership of the 57-story North and South towers in the three-building, 1.793-unit complex after selling just a fourth of the apartments in the two structures, the newspaper said.

Single-family housing starts jumped 10% in April as builders rushed to meet demand from buyers seeking to take advantage of the expiring Federal homebuyer tax credit. The U.S. Census Bureau reported that single-family housing starts rose to a seasonally adjusted annual rate of 593,000 in April, up from a 538,000 rate in March. On a sequential basis, construction activity rose 18% in the Midwest, 15% in the South, 5% in the Northeast but fell 5% in the West. Overall, single family housing starts rose 54% from April 2009. The spike in activity caused the National Association of Home Builders/Wells Fargo Housing Market Index to rise three points to a reading of 22 in May -- its highest showing since August 2007. "Builders are hopeful that the solid momentum that the tax credits initiated will continue even now that those incentives are gone," said NAHB chairman Bob Jones. The homebuyer tax credit expired April 30, but buyers have until June 30 to close and qualify for the credit. (A California tax credit for $10,000 for new home purchases is on the verge of expiration.) Builders broke ground on 68,000 multifamily units in April, down 24% from March.