Servicing

The Federal Deposit Insurance Corp. has once again pushed back the bid deadline on the sale of $23 billion in servicing rights that once belonged to AmTrust Bank, Cleveland, according to officials close to the deal. "It's just taking longer to get bidders in to conduct due diligence," said one investment banker who has reviewed the package. Originally, the FDIC had hoped to hold a first round of bidding in early May then pushed it back to later in the month. The new bid deadline is mid June. It's anticipated that the receivables could fetch a decent price: just 3.29% of the underlying loans are delinquent. Milestone Merchant Partners is the FDIC's advisor on the sale. The company declined to comment.

In denying a mortgage application, lenders will have to show the borrower their credit score under an amendment approved by the Senate and attached to the Wall Street Reform bill. Sen. Mark Udall, D-Colo., said his amendment will "empower consumers" by giving them immediate access to their credit score for free. "If you are turned down for credit because you have applied for a loan or you have a higher loan rate, you will have access to your credit score," Sen. Udall said. The Senate approved the Udall amendment Monday evening by a voice vote. The Senate also approved an amendment preserving the Federal Trade Commission's existing consumer protection mandate. The amendment by Sen. John Rockefeller (D-W.Va.) aims at getting the FTC and the new Consumer Financial Protection Bureau created by the reform bill (S. 3217) to work together. "The amendment directs the FTC and the new bureau to enter into a memorandum of understanding and coordinate their regulatory efforts," Rockefeller said. "The bottom line is that businesses will not be subject to multiple layers of regulation and rules," he added.

Ginnie Mae issuers repurchased $15.5 billion of delinquent government-guaranteed mortgages out of MBS pools in the first quarter -- a significant decline from the prior period. In 4Q buybacks approached a staggering $57.6 billion. In 1Q 2009 repurchases came in at almost $5 billion. GNMA issuers can repurchase residential loans out of securities when they become 90 days or more past due. Issuers are required to advance interest and principal payments to investors which make it expensive to leave delinquent Federal Housing Administration, Veterans Affairs, and Rural Housing Service guaranteed mortgages in GNMA pools. Government National Mortgage Association president Ted Tozer attributed the 4Q surge to issuers cleaning house. He also noted that servicers allowed delinquent loans to pile up last year while they focused on implementing new loan modification programs.

Despite aggressive efforts to stay alive, Midwest Bank and Trust Co., was closed late Friday by Illinois regulators. The failure of the $3.2 billion-asset, Chicago-area bank came on a night when the Federal Deposit Insurance Corp. also found buyers for three other institutions, bringing the year's failure total to 72. Midwest's collapse - brought on in part by losses tied to the government-sponsored enterprises - came despite its receiving bailout funds to address its capital needs. The FDIC sold the bank's operations to $12 billion-asset FirstMerit Corp. in Akron, Ohio. The government's losses from the failure were estimated at $216 million. The three other failed banks totaled $342 million of assets. They were: $136 million-asset Satilla Community Bank in Saint Marys, Ga., $109 million-asset New Liberty Bank in Plymouth, Mich., and $97 million-asset Southwest Community Bank in Springfield, Mo. Together, the four failures were estimated to cost the FDIC about $300 million. Like other institutions, Midwest, the bank subsidiary of Midwest Banc Holdings, suffered sharp losses in its preferred stock holdings when the government's 2008 conservatorship of Fannie Mae and Freddie Mac depleted the GSEs' value. Midwest's problems were compounded by rising loan losses.

Moody's Investors Service has downgraded $2.2 billion of securities backed by 'alt-A' mortgages issued in 2005 by Residential Funding Co. LLC, a unit of what is now Ally Financial. According to wire service reports, Moody's has downgraded several hundred billion dollars of MBS since the start of April as falling home prices, high joblessness and the slow economy led credit raters to revise loss expectations. In January Moody's placed $573 billion of alt-A MBS issued from 2005 through 2007 on review for possible downgrade after it revised its loss forecasts. Alt-A loans include mortgages made to borrowers that cannot document assets and/or income.

PHH Corp. on Monday named industry veteran Luke Hayden president of its mortgage division, effective immediately. In a statement PHH said Hayden replaces Mark Danahy, who left the nonbank lender/servicer to "pursue other opportunities." At press time the company had not returned telephone calls concerning Danahy's departure. According to figures compiled by National Mortgage News and the Quarterly Data Report, the Mount Laurel-based PHH Mortgage is the nation's ninth largest servicer with $151 billion in receivables. It ranks eighth among funders. PHH Mortgage also is one of the largest private label lenders in the nation. During his 30-year career in mortgage banking, Hayden has worked at Chase Home Mortgage, GMAC Mortgage, and Renaissance Investment Trust.

Fannie Mae economists expect the second quarter will be the high point for single-family originations this year before fundings fall below the $300 billion mark in the fourth quarter. Fannie chief economist Doug Duncan estimates originations will hit $361 billion in the second quarter boosted by the homebuyer tax credit and low mortgage rates. With rising rates, loan production will drift down to $324 billion in the third quarter and fall to $294 billion in the fourth. "We expect purchase originations to increase and refinance originations to drop off sharply," Duncan says. His forecast calls for refinancings to drop from 45% of originations in the second quarter to 36% on the third quarter and 37% in the fourth quarter. Meanwhile, total home sales will rise from 5.5 million in the first quarter to 6.01 million in the year-end quarter. "The pace of employment growth and confidence in the labor market will be key factors for a pickup in home sales by the end of the year," Duncan said.

With rumors mounting that some USDA offices are running out of money to fund its single-family insurance program, a Senate committee has included a premium increase for the Rural Housing Service in an emergency supplemental appropriations bill. Lenders that fund home mortgages in rural areas hope the measure will pass, placing the RHS program back on solid financial footing. The RHS provision, sponsored by Sen. Michael Bennet, D-Colo., allows the agency to increase its current 2% upfront premium to 3.5%, making the insurance program self-funding and removing it from the congressional appropriations process. The House passed a separate RHS reform bill, sponsored by Rep. Paul Kanjorski, D-Pa., that raises the upfront premium to 4%. House and Senate appropriators want to pass the emergency supplemental before Congress adjourns for the Memorial Day recess. Meanwhile, the Agriculture Department is being tightlipped about the funding status of the RHS program, frustrating many lenders that use it. It's believed the agency has exhausted its loan commitment authority, a belief shared by the Mortgage Bankers Association. "This is affecting independent mortgage bankers," said Tamara King, MBA's director of loan production. Even though the program may have run out of money, RHS has issued "conditional" commitments to some lenders. RHS officials have not responded to numerous requests by this newspaper for information about the status of the lending program.

The former servicing manager of U.S. Mortgage Corp./CU National Mortgage has pleaded guilty to conspiring to defraud credit unions and Fannie Mae in the $140 million mortgage scandal. Leroy Hayden, 47, was convicted of conspiracy to assist U.S. Mortgage/CU National president Michael McGrath in his scheme to fraudulently sell Fannie Mae mortgages that the company was servicing on behalf of credit unions. "Frauds of this magnitude don't happen without someone to cook the books and push the paper," said U.S. Attorney Paul Fishman of Newark, N.J. "Leroy Hayden had to decide whether to go along with his boss' fraud or alert law enforcement to the scheme. Unfortunately, he made the criminal choice." Hayden told authorities he provided numerous reports to credit unions falsely stating that loans that had been sold were still in the credit unions' portfolios, and falsified records, at McGrath's direction, to conceal these fraudulent sales. Hayden also admitted that he modified data in U.S. Mortgage's servicing system to help carry out the scheme. As many as 28 credit unions in the Mid Atlantic states stand to lose as much as $125 million in the case and are frantically negotiating with Fannie Mae for the return of their mortgages. Several of the credit unions are also in litigation with their insurer, CUNA Mutual Group's CUMIS Insurance Society over coverage of the fraud. McGrath pleaded guilty last June and is scheduled to be sentenced in July.

Foreclosure filings in California fell in April for the first time since the beginning of this year, according to a report from ForeclosureRadar.com. Notices of default were down 16% from March and 41% from April a year ago. Notices of trustee sales dropped 10% from the previous month and 3% from March, 2009, according to a report in The Orange County Register. But though filings declined, the number of properties in preforeclosure or scheduled for auctions dropped just slightly as the dip in filings was offset by an increase in the time to foreclose, said Sean O'Toole, CEO of ForeclosureRadar. Cancellations of foreclosure auctions, or trustee sales, also continue to climb, up more than 32% from the beginning of 2010. "The steady rise in cancellations leads us to believe that loan modifications and short sales are gaining traction," he said. "I'd caution, however, that cancellations also occur due to filing errors and extended postponements, which require the Notice of Trustee Sale to be re-filed. In fact, 14.6% of new Notice of Trustee filings in April were on previously cancelled foreclosures." In general, California, historically, accounts for 15% to 20% of the origination market.