Servicing

First American CoreLogic, a provider of advanced property and ownership information, analytics and services, is partnering with The Prieston Group to offer a comprehensive fraud prevention and insurance solution to mortgage lenders. The solution combines First American CoreLogic's pattern-recognition fraud tool with TPG's risk management services, indemnity programs and training. Through this partnership, TPG will help lenders establish business rules and guidelines and employ the First American CoreLogic LoanSafe Fraud Manager tool to enforce those policies in the lender's daily operations. Lenders who use this joint solution will be insured against fraud losses by Lloyd's of London, which has a special relationship with TPG. The anti-fraud tool integrates patented pattern-recognition technology with a national property and fraud database. Tim Grace, senior vice president of fraud solutions at First American CoreLogic, said fraud is a $13 billion problem for the lending and investor communities. "This partnership will help lenders focus on best practices, products and processes and provide enterprise- and loan-level metrics to measure results. Our new joint effort will improve loan quality and rebuild confidence levels among lenders and investors," added Arthur Prieston, TPG's chairman.

Loan defaults will continue to escalate for United States commercial mortgage-backed securities, with the overall rate to exceed 11% among Fitch-rated deals by the end of the year, according to Fitch Ratings. New CMBS loan defaults increased more than five-fold last year (1,464 conduit loans totaling $17.75 billion), with 34% taking place in the fourth quarter alone. "Fourth-quarter default rates reached their highest ever levels both in principal balance and number of loans with no clear signs of stabilization," said managing director Mary MacNeill. In fact, 2009 defaults on their own surpassed the cumulative number from the inception of the CMBS market through 2008 ($17.74 billion). Another area of concern is large loan defaults, which increased dramatically last year. In 2009, 56 loans over $50 million in size defaulted compared to just five in 2008. Not surprisingly, most of the defaulted loans came from 2006-2008 vintages. Retail was the property type with the most new defaults at 32.3% last year. It was followed by former category leader multifamily at 22.1% new defaults, office (20.2%) and hotel (17.8%). Fitch projects sizeable default increases for each property type, with rates likely to increase at accelerated rates for office and hotel loans. "Office defaults spiked in the fourth quarter last year, with further rental and net operating income declines likely through next year before a rebound takes place," said senior director Richard Carlson. "Larger concentrations of hotel loans in recent vintages will translate to higher defaults, particularly among luxury properties, resort destinations and those hotels heavily reliant on group and convention business."

Freddie Mac's full menu of relief policies for borrowers affected by disasters is being extended to families whose homes were damaged or destroyed by the recent floods in Rhode Island, Massachusetts, New Jersey and West Virginia and are located in federally declared major disaster areas. "We are instructing our servicers to work with borrowers with Freddie Mac-owned mortgages to receive forbearance on their mortgage payments for up to one year," said Ingrid Beckles, senior vice president of default asset management at Freddie Mac. The GSE gives servicers the discretion to reduce or suspend mortgage payments for up to 12 months for borrowers. Each case must be individually assessed to determine, however, Freddie Mac also strongly encourages servicers to help affected borrowers by waiving assessments of penalties or late fees against borrowers with disaster-damaged homes; not reporting forbearance or delinquencies caused by the disaster to the nation's credit bureaus; and suspending foreclosure and eviction proceedings for up to 12 months. The U.S. Department of Housing and Urban Development is also stepping up to help borrowers. HUD said it will speed federal disaster assistance to six counties in New York State, including Nassau, Orange, Richmond, Rockland, Suffolk and Westchester, and provide support to homeowners and low-income renters forced from their homes. HUD has granted a 90-day moratorium on foreclosures and forbearance on foreclosures of Federal Housing Administration-insured home mortgages. HUD's Section 203(h) program provides FHA insurance to disaster victims who have lost their homes and are facing the daunting task of rebuilding or buying another home. Borrowers from participating FHA-approved lenders are eligible for 100% financing, including closing costs. HUD's Section 203(k) loan program enables those who have lost their homes to finance the purchase or refinance of a house along with its repair through a single mortgage.

Wells Fargo & Co. on Wednesday promised that it soon would begin modifying second mortgages under a new wrinkle to the government's Home Affordable Modification Program. Wells noted that it would modify second liens when the corresponding first mortgage also is modified. During a conference call regarding the bank's earnings, chief financial officer Howard Atkins said the HAMP second lien program (2MP) would be up and running before the end of the second quarter. "We expect to begin offering the second lien program to customers who have both a Wells Fargo first and second lien in the next couple of weeks," Atkins said. Wells will offer 2MP to "other customers later in the second quarter," he said. The CFO told analysts and investors that the bank's $125 billion home equity loan portfolio "demonstrated some positive credit trends in the first quarter." The 60-day or more delinquency rate declined to 3.4% down from 3.58% in the fourth quarter. For HELs with LTV's above 100%, only 5.2% are delinquent. "The vast majority of customers with negative equity continue to make their payments," Atkins said.

Wells Fargo & Co. earned $2.5 billion from its residential mortgage business in the first quarter-a 26% decline from the prior period-due to lower originations and a reduction in hedging results. The nation's largest residential funder originated $76 billion in single-family loans, down 19% from the fourth quarter of 2009. Mortgage hedging results fell $983 million in the first quarter due to a change in the composition of hedge instruments to "maintain ongoing hedge effectiveness," the company said. Chief financial officer Howard Atkins said the performance of credit card, auto and commercial real estate has turned up, but it will take a "little longer" for residential real estate loans. The first quarter report shows the early delinquency rates on prime mortgages, home equity loans, and pick-a-pay loans crested in the first quarter. But one- to four-family loans in the non-accrual category-including charge-offs and foreclosures-increased significantly.

MGIC Investment Corp. has priced the sale of 65.1 million shares of its common stock at $10.75 per share, for gross proceeds of approximately $700 million. The Milwaukee-based company also priced a $300 million offering of 5% convertible senior notes. Goldman Sachs & Co. is the sole book-running manager for both offerings. A report by FBR Capital Markets analysts Steve Stelmach and Amy DeBone commented, "We generally view the capital raise as a positive as it will bolster capital ratios and should remove liquidity risk at the holding company. Nonetheless, it does limit the potential upside in shares had MGIC been able to manage the current crisis and reach a point where it could have harvested future premiums on the existing book without the added share count." They added the new funds would allow MGIC to write more business and to withstand expected losses. FBR said it expected $700 million to be allocated to writing new business, giving MGIC $900 million for this purpose when adding in the $200 million set aside to write business at MGIC Indemnity Corp. As of midday on Wednesday, MGIC's common stock was trading at $11.58 per share, up $0.52 from the previous close.

Technology provider ISGN Corp. is partnering with EquityRock, a company with experience in residential real estate equity sharing, to create RESET, a loss mitigation solution for lenders. The product's creators say they can help lenders reduce losses from properties in imminent danger of foreclosure, while also keeping the borrower in the property. RESET (Real Estate Shared Equity Transaction) gives a borrower who is qualified for a loan modification a principal reduction in exchange for a share in equity with their lender. With RESET, in addition to modifying or refinancing the borrower's mortgage, the lender writes down the borrower's principal balance so that the borrower no longer owes more than the property is worth, ensuring they have equity in their property, says ISGN. As part of the transaction, the lender will gain a stake in any future appreciation should the property be sold or refinanced. When the transaction is complete, the borrower gets to stay in the home and keeps a monetary stake in the property. A key feature of RESET is a fair, debt-for-equity exchange that benefits both the lender and the homeowner. The service can be used by lenders and investors, as well as by housing finance agencies in support of the Treasury Department's Help for the Hardest-Hit Housing Markets (4HM) program. An estimated 3.7 million homeowners across the five states targeted by 4HM have negative equity with loan to value ratios that exceed 125%.

Carlton Advisors Services has been hired by a Florida bank to help the depository unload $400 million worth of real estate owned assets and commercial mortgages. Carlton declined to name the bank. The auction firm said the assets are collateralized by certain Florida cash-flowing apartment buildings, retail and hospitality properties. The assets up for bid include a 39,515 square foot shopping center in Miami, unpurchased condominium units, and a motel, among other assets. Carlton says investors can view the assets and bid on selected properties "on a first come, first serve basis" through its web platform.

The auction of nonperforming loans will remain strong for six more years, with hedge funds and private investors continuing to drive the market, according to specialty servicer FCI Lender Services, Anaheim Hills, Calif. Gordon Albrecht, an FCI executive vice president, and other executives who play in the NPL space said over the past several weeks they have seen a definite pickup in loan auctions of troubled residential loans. (FCI claims it is the largest servicer of privately held mortgages with a portfolio in excess of $2 billion.) "There was a huge disconnect in the market between buyers and sellers," said Mr. Albrecht, a sentiment echoed by other players in the market, "but all that's changed." Jon Daurio of Kondaur Capital, a buyer and seller of NPLs, told National Mortgage News that the first quarter was one of the busiest he's seen in terms of offerings. "Billions were available for sale," he said. "I think we'll see even more in the second quarter."

MGIC Investment Corp., the nation's largest mortgage insurer, saw a slight improvement in its first quarter results, losing $150 million compared to a loss of $185 million for the same period last year. However its volume of new business continues to slide, with only $1.8 billion of new insurance written in the first quarter versus $6.4 billion for the first quarter of 2009. (The 1Q10 total, however, does not include nearly $685 million of insurance written on loans modified under the Home Affordable Refinance Program.) MGIC had total loan delinquencies of 18.14% compared to 13.51% a year ago. In the safe harbor portion of its earnings release, MGIC said it expects to incur substantial losses for this year and cannot assure investors when it will return to profitability. During the first quarter, rescissions mitigated MGIC's paid losses by $373 million. (For the full year 2009, rescissions mitigated paid losses by $1.2 billion.) The lawsuit Bank of America filed over the rescission policy has been moved back to California Superior Court in San Francisco from the U.S. District Court for the Northern District of California. MGIC also started an arbitration action against B of A and Countrywide on the rescission matter. Countrywide filed a response objecting to the arbitrator's jurisdiction over the matter. In its response, the lender said it is seeking damages of at least $150 million. MGIC also has commenced a public offering of $700 million of common stock and $300 million of convertible senior notes due 2017. Proceeds will be used to pay off at maturity or purchase prior to maturity $78.4 million in debt due in 2011 and for general corporate purposes, including increasing capital at its mortgage insurance subsidiary.