Servicing

Fannie Mae, Freddie Mac and GNMA had a combined "purchase" market share of 98% in the first quarter, according to new figures compiled by National Mortgage News. The share number represents a slight decline from the near monopoly (99%) they had on the business last year. NMN derived its market share numbers by taking the loan purchases of the GSEs (and the bond issue of GNMA, which reflects FHA/VA production) and dividing it by industry-wide originations in a given time frame. It's no secret to seller/servicers that these three entities dominate the secondary market, setting loan standards for 60 million borrowers. The numbers also indicate that very few lenders actually keep whole loans on their balance sheets except for jumbo mortgages, and, perhaps, conventional ARMs. Ten years ago Fannie and Freddie had a combined purchase market share of about 50% with GNMA at a meager 5%. (For the full story see this week's paper edition of NMN.)

Barclays Bank PLC has agreed to sell HomEq, a specialty servicer, to a division of Ocwen Financial for roughly $1.3 billion. Under terms of the agreement, Ocwen Loan Servicing LLC would pay for the U.S. mortgage servicing business in cash at the completion of the deal, with the amount subject to an "adjustment mechanism." The mechanism is based on the unpaid principal balance of HomEq's servicing portfolio and the value of certain other assets at the completion of the transaction, according to Barclays. HomEq's servicing portfolio had a UPB of $28 billion at the end of March. The division is based in North Highlands, Calif., and was once owned by Wachovia Corp., which sold it to Barclays four years ago for $470 million, a year before the subprime meltdown began. The British-based Barclays said it expects the transaction to close in the third quarter, subject to customary conditions that include competition clearance and regulatory approval. The publicly traded Ocwen Financial is based in West Palm Beach, Fla.

Fidelity National Information Services' board this week authorized a $2.5 billion stock repurchase program, offering to buy back its common for between $29 and $31 each. The stock has risen more than 40% this year. The firm, a top vendor to the mortgage industry, now has a market capitalization of roughly $9.8 billion. The news about the stock split comes a week after a leveraged buyout of the company fell apart. Last month, FIS reported that its 1Q profit nearly tripled, thanks to a big jump in processing and service revenue.

The Prestwick Mortgage Group of Virginia will auction off a $19 million package of residential servicing rights tied to Fannie Mae loans. The average loan size is $119,228 with the average note rate at 6.02%. All but one of the loans are on properties in Florida. The package has a delinquency rate of 3.7%. The bid deadline is June 9.

The condition and performance of half the Federal Home Loan Bank system is "less than adequate," according to the nation's government-sponsored enterprise regulator. Federal Housing Finance Agency acting director Edward DeMarco, who cited continuing losses on investments in private-label mortgage-backed securities at six regional GSEs, told a congressional panel that he wants to see a gradual reduction in the FHLBs' investment portfolios. "FHFA is looking for the FHLBs to return to more traditional operations and activities with a focus on advances," DeMarco said. He stressed that the FHLBs have never experienced losses on making advances to their members. The GSE regulator did not mention mortgage purchase programs that several FHLBs engaged in, which caused financial problems at the Seattle and Chicago banks. Separately, FHFA issued a proposed rule to establish affordable housing goals for the mortgage purchase programs. The comment period ends in 45 days.

Investor loans guaranteed by Freddie Mac fell to just 3% of portfolio outstandings in the first quarter, the lowest reading in almost seven years, according to new company figures. In 2007, roughly 7% of Freddie's guarantees were on non-owner occupied homes, a GSE spokesman told National Mortgage News. Investor loans, in general, can differ from "pure" vacation or second homes, in that the owner is trying to cover his payments (full or in part) by renting out the property. Some owners of vacation homes do not rent out the house at all and instead can afford the monthly payments without the help of rent rolls. During the housing boom, some lenders provided low downpayment financing for investor properties and vacation homes but since the market crash of 2008, most mortgage bankers want at least 20% down or more, depending on where the home is located.

FHA single-family originations totaled $22.9 billion in April, basically unchanged from March and February, according to the agency. Nearly 68% of FHA loan endorsements were for borrowers purchasing a home. Of the 36,000 refinancings in April, 68% were conventional borrowers seeking low-downpayment FHA loans. The April report shows that FHA's 'Hope for Homeowners' program helped 23 underwater borrowers. Over the past seven months FHA has approved only 35 H4H refinancings where the lender has to reduce the principal amount of the loan to 97.5% of the current appraised value. Meanwhile, FHA reported that 8.5% of its insured single-family loans are 90 days or more past due, down from 8.8% in March and 9.17% in February.

The Federal Deposit Insurance Corp. next week will begin exploring investor appetite for $1 billion worth of mostly nonperforming whole loans that belonged to the now-defunct AmTrust Bank of Cleveland, market sources told National Mortgage News. Normally, the agency lists asset sales on its website but because this offering is likely a "structured sale" there is presently no information available to the general public. One investment banker familiar with the matter described the offering as "mostly residential, nonperforming whole loans," adding that the actual bidding will commence sometime in mid-June. An FDIC spokesman said he could not comment but advised that when the agency engages in "private placements we just don't want anyone to come in and bid. Some of these are complex transactions." AmTrust, a thrift, failed late last year with most of its branches and assets sold to New York Community Bank. But NYCB did not want the thrift's servicing portfolio or NPLs. The servicing, about $23 billion worth, also is up for bid.

A Miami judge took the extreme action of wiping out the $207,238 mortgage debt of a borrower who was in foreclosure but trying to get a loan modification after HSBC Bank USA ignored a previous court order to post a bond. Miami-Dade Circuit Court Judge Jennifer Bailey cancelled the mortgage debt of a local teacher at a hearing May 6 to determine whether HSBC should be sanctioned for failing to post a $414,000 bond because it had lost the underlying mortgage note. The judge said she hoped to give "a wake-up call" to lawyers handling foreclosure cases that they need to know where the borrower and bank are in the process of loss mitigation. In a contentious exchange with HSBC's lawyers, Judge Bailey lambasted banks for the "chaos and disorganization" that has bombarded courts with foreclosure actions while banks simultaneously pursue loan mods. "Somehow in Foreclosure World everybody thinks that...you can know absolutely nothing about your files and walk in here and ask judges for things left and right without even knowing what's going on." Suzanne Hill, a lawyer who represents Florida Default Law Group in Tampa, the attorneys handling the foreclosure action for HSBC, said it was evaluating whether to appeal or file a motion for a rehearing before the same judge. The Florida Attorney General has identified the Florida Default firm as the subject of a civil investigation.

PennyMac Mortgage Investment Trust is offering a $98 million pool of loans to investors, according to market sources. One bidder who has seen the offering documents said the Calabasas-based vulture fund is marketing the loans as "mostly performing," adding that investors are allowed to buy different portions of the pool. No other details were available at press time. A PennyMac spokesman said the company generally does not discuss its auctions until after a sale actually takes place. He noted that the publicly traded vulture fund and servicer will consider securitizing some of its assets "as a way of exploring leverage" but could not say anything concrete about the matter. PennyMac also is rolling out a conduit to securitize agency quality loans and eventually jumbo mortgages.