Servicing

Industry veteran Rudy Orman has resigned as vice president of Marathon Asset Management, a New York-based private equity fund that invests in distressed residential whole loans and mortgage-backed securities. At press time Orman and officials at Marathon declined to comment on the situation. His departure became official on Friday. Two weeks ago National Mortgage News reported that an affiliate of Marathon was selling about $90 million in distressed whole loans. During his career in mortgages Orman has worked as a vice president at Goldman Sachs & Co. and at lending firms as well. In a statement Orman would only say that he will become a director and senior vice president of business development at Residential Credit Solutions.

An Ohio man facing eviction from his foreclosed home has gone to extreme lengths to call attention to his plight and that of other homeowners in distress. A few days ago Keith Sadler and five activist friends locked themselves inside his Toledo-area home and are refusing to leave until a moratorium on foreclosures is declared in Wood County, Ohio. "We tried working all these avenues, and we feel like the system is geared toward the banks and not the people, so we felt we needed to take matters into our own hands," Sadler told American Banker. "The only other option for them is to come in and drag us out." Sadler's two-bedroom, one-bath home in Stony Ridge, which is just outside Toledo, was sold to the owner of the mortgage, State Bank and Trust Co., in a January sheriff's sale for $33,333, according to the Wood County sheriff's office. Sheriff Mark Wasylyshyn said he has a court order to hand the house over to the bank, a subsidiary of $653 million-asset Rurban Financial Corp. of Defiance, Ohio. Wasylyshyn said he plans to execute the order but would not say when. Wasylyshyn said he gave Sadler plenty of time to move out and that he had agreed to leave the property by midnight Sunday. "I'm just disappointed in him that he gave me his word that he was going to move out and he didn't," the sheriff said. If Sadler leaves the property without incident, he will not be arrested. However, if he refuses to leave, he will face arrest, the sheriff said. Sadler, a co-founder of the Toledo Foreclosure Defense League, said he and the others in the house are prepared to stay for as long as is necessary.

Clear Capital reports a slowdown in both home price gains and real estate owned saturation rates in April suggesting price trends are only in part dependent on distressed sale volume and "re-enforcing the need to understand local markets." The company's Home Data Index Market Report shows U.S. home prices dropped 5% in April, marking an additional 1.1% decline nationally compared to March. The increase in the nation's real estate owned saturation rate slowed down in April, rising less than one percentage point to 29.6%. Analysts note that while REO saturation rates averaged over 33% during the last quarter, the country's highest performing metro areas saw "relatively flat" prices, a trend that was different from lowest performing areas where REO saturation rates were much lower and prices declined 11.1%. "This paradox" suggests that price trends are not wholly dependent on distressed sale volumes, Clear Capital said. HDI also shows "a marked slowdown in the rate of decline" compared to a 3.9% drop compared to February data and "steady" year-over-year price gains at 5.1% in all four regions. It warns however that the decline is "sufficient enough to halt" the recent growth in year-over-year gains for the center regions of the nation.

Freddie Mac lost $6.7 billion in the first quarter, and after accounting changes tied to guarantees issued on off-balance sheet instruments, saw its net worth plunge by $14.9 billion. With its net worth now clearly in the red (by $10.5 billion) the government controlled mortgage giant is asking the Treasury Department for $10.6 billion in aid. The government's policy is to keep both Freddie Mac and Fannie Mae in a positive net worth position, a move designed to assure investors that the bonds they issue are safe investments. The large drop in Freddie's net worth was caused by an accounting change that forced the company to add $1.5 trillion of assets and liabilities to its consolidated balance sheet, which in turn caused its net worth to plunge. (Fannie Mae, which soon will release its 1Q results, is facing a similar problem.) Although Freddie's loss and decline in net worth was indeed bad news, there were some positives in its report. The GSE established credit reserves of $5.4 billion in 1Q, down from $7 billion in the prior quarter. It also reported lower delinquencies on its single-family loans: 4.13% at March 31, compared to 4.2% at the end of February. Freddie's chief financial officer Ross Kari said its 1Q results "were driven significantly" by the Financial Accounting Standards Board-promulgated changes. He added that the firm is seeing some signs of "modest stabilization" in housing. If Treasury grants Freddie's request for new capital, the government's investment in the GSE will increase to $62.3 billion.

Invesco Mortgage Capital has completed its public offering of 900,000 shares of common stock, raising $187 million -- cash that will be used for mortgage-related investments. Using leverage, the REIT will purchase loans and residential and commercial mortgage-backed securities. The real estate investment trust also plans to use the net proceeds for general corporate purposes. Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. Inc. acted as joint book-running managers for the offering. Keefe Bruyette & Woods, Inc., Stifel, Nicolaus & Company, Incorporated and JMP Securities LLC served as co-managers.

State regulators have issued a cease and desist order against Bay Gulf Credit Union of Florida, forcing the one-time $217 million credit union that has been hit hard by the region's real estate bust to boost its allowance for loan losses. William DeMare, president of Bay Gulf, said the main focus of the supervisory order revolved around a disagreement on ALL calculation on loan modifications, especially with respect to debt restructuring in one of the most troubled real estate markets in the country. As a result, Bay Gulf added $850,000 to its ALL in December and restated its 2009 financials to show a $2.1 million loss for the year. "It's just huge," DeMare told the Credit Union Journal. "Our allowance for loan losses account is just such so significant in terms of the amount of our loans." The supervisory order cites Bay Gulf for operating without adequate polices for accounting for troubled debt restructures and loan modifications. Bay Gulf, which reported an $823,706 loss for the first quarter of 2010, has modified about 700 loans, according to DeMare. Of those 66% are still active, 14% have been paid off and 20% have been charged off. CUJ is an NMN affiliate.

The 30-day delinquency rate on securitized multifamily mortgages fell slightly in April after a 332 basis point spike in March due to the default of the Stuyvesant Town and Peter Cooper Village project in Manhattan. In April, the delinquency rate on securitized multifamily mortgages fell 13 bps to 13.06%. It is the first decline in the multifamily rate since May 2009, according to a Trepp LLC report. The New York firm tracks the performance of commercial mortgage-backed securities. Overall, the 30-day or more past-due rate on CMBS rose 41 bps to 8.02% in April, up from 2.45% a year ago. This marks the first time ever that CMBS delinquencies hit or surpassed 8%, according to Trepp. Office delinquencies rose the most (64 bp) in April followed by retail (41 bp).

Mortgage vulture fund PennyMac Mortgage Investment Trust earned $1.3 million in the first quarter and reported that it's beginning to see more activity in the nonperforming loan market. A publicly traded REIT, the firm said it bought five mostly nonperforming loan portfolios during the quarter. The pools were valued at $115 million based on unpaid principal balances of $208 million. The firm said in early April it agreed to purchase a $141 million pool of nonperformers for $71 million. Company CEO Stan Kurland said, "Market activity for non-performing whole loans accelerated throughout the first quarter, and continues to accelerate into the second quarter of 2010." Meanwhile, the company said it is beginning to gear up its lending conduit by purchasing loans from small and mid-sized banks. The product is then delivered to Fannie Mae and Freddie Mac for securitization. A spokesman noted that, "We're looking at prime agency paper" but added that jumbo lending will be a "natural progression" for the firm.

Mortgage insurer Radian Group posted a first quarter loss of $310 million but signaled its intention to move forward with a $550 million public stock offering. At press time its shares were down 10% to $13.11 with other MI stocks trading down as well. The nation's third largest MI company (in terms of new coverage written) noted that it completed the sale of its remaining equity interest in Sherman Financial, a consumer asset and servicing firm. However, the impact of the sale, which is expected to result in a pre-tax gain of about $70 million, will be reflected in Radian's second-quarter results. The mortgage insurance business at Radian lost $237 million for the first quarter of 2010, compared with a loss of $89 million one year prior. Despite the loss, there was positive news: for the first time in nearly four years Radian had fewer delinquent loans at the end of the quarter compared with the start of the quarter. As of March 31, Radian's book-of-business had delinquencies of 143,914 loans underwritten through the primary channel in default -- or 17.64% of its portfolio. Radian expects to end 2010 with fewer delinquent loans than in 2009.

The Obama administration's bank tax proposal could curtail borrowings from the Federal Home Loan Bank system by large depositories and reduce mortgage liquidity for member institutions, according to the American Bankers Association. The administration's proposal would impose a tax on financial institutions with more than $50 billion in assets --but only for firms that were eligible for emergency assistance programs such as the Troubled Asset Relief Program. ABA chief economist James Chessen told the Senate Finance Committee the 15 basis point tax on non-deposit liabilities (including FHLBank advances) would increase the costs of large banks borrowing from the system, and reduce demand for FHLB advances. This has "important implications for the financial stability" of the 12 regional banks and "could lead to a downward spiral" with fewer advances being made, he warned. The trade group is concerned that members will reduce their holdings of the FHLB stock required to borrow, thus shrinking the system and its ability to provide liquidity to all members. Treasury secretary Timothy Geithner said the bank tax could raise $117 billion over 10 years to cover the government's cost of the financial crisis. He stressed the tax will not affect 99% of depository institutions.