Servicing

The Seattle-based law firm of Perkins Coie has opened an office in Dallas, Texas, and former Greenberg Traurig shareholder, Steven R. Smith, has joined the firm and will be partner in charge of the office. Smith will focus his practice on real estate workouts and lending, adding to the firm's growing national practice. The addition of Smith helps Perkins expand its representation of commercial mortgage-backed securities special servicer clients, many of which have offices in Dallas. Smith has experience working with defeasance transactions, assumptions, loan modifications, REMIC tax issues, pooling and servicing agreement compliance and review, foreclosure, bankruptcies, asset dispositions, litigation, and loan sales. Since 2005 the firm has added over 200 lateral attorneys in a variety of practice groups.

Equator, a provider of automated default servicing, REO and short sale technology in Los Angles, has hired John Vella to serve as its chief operating officer. Vella will be leading efforts to further expand the scope of the company's EQ Workstation, an online system that provides financial institutions with tools for managing default servicing and the EQ Marketplace, which acts as an ecommerce forum where these institutions connect with asset management vendors and real estate agents. Vella has more than 27 years in the mortgage industry. Previously, he worked as executive vice president of GMAC/Rescap, which is responsible for special servicing; president and chief executive officer of EMC Mortgage, a subsidiary of JPMorgan Chase; CEO of Household Automotive; chief administrative officer of Option One Mortgage and director at Freddie Mac and the FDIC.

GMAC Mortgage Servicer Advance Funding Co. Ltd. has issued a new series of notes rated by DBRS. A review for possible downgrade on an earlier series by Moody's Investors Service based on operational issues GMAC has been working on correcting is still pending. Responding to GMAC's request for an opinion on whether the new series would have an effect on the older series' ratings, Moody's said the new issuance and related amendments alone wouldn't hurt them. However, it would not opine on "whether the new issuance or amendments could have other, credit-related effects." The amendments remove pooling and servicing agreements that include Fannie Mae/Freddie Mac collateral from the transactions eligible for funding by the servicing advance facility and establish cash flow allocations between the earlier notes and the later notes aimed at ensuring credit support for the former is not diluted by the latter. In addition, the amendments increase the size of the reserve fund, enhance third party verification of the facility's operations and revise discount rates that set the limit of the amount of notes that can be issued for each type of advance receivable. Moody's previously put the earlier servicing advance facility series on review due to a concern involving the netting of cash flows. It subsequently said GMAC had corrected this by setting up "segregated trust-specific custodial accounts," something it had planned to monitor through March. A similar netting issue that prompted a review of GMAC residential mortgage-backed securities ratings for possible downgrade got underway later and was slated to take longer.

The second half of this year will bring continued challenges for the housing market, according to two Wells Fargo Securities economists, who expect higher mortgage rates and new home price declines. "The housing market will not return to a position of strength until late next year or in 2012," said Mark Vitner and Adam York. In their April "Housing Chartbook," they note that the housing recovery so far has been based on tax incentives, artificially low mortgage rates and "unprecedented" assistance for struggling homeowners. The Federal Reserve stopped buying agency MBS at the end of March and the homebuyer tax credit is set to expire late in the Spring. "We have significant concerns about the sustainability of the housing recovery once the stimulus is removed from the marketplace," the economists say, adding that an excess supply of 2 million unsold homes will continue to exert downward pressure on prices. "We estimate housing prices could fall an additional 6% to 8% from their current levels before they ultimately bottom out," York told National Mortgage News. But he noted that most of the drop in prices will come from sales of higher-end homes.

Citigroup executives say they are seeing better performance in the bank's $152 billion North America residential mortgage portfolio, thanks in part to asset sales and loan modifications. The serious delinquency rate (90 days or more past due) on its $96.4 billion portfolio of first liens fell to 10% in the first quarter, down 115 basis points from the previous quarter. It is the first quarterly drop in a long time. "Net credit losses on first mortgages declined 24% to $819 million in the first quarter driven by HAMP loan conversions and improvement in loan loss severity and $1 billion in assets sales during the quarter," Citi said during a conference call. In the first quarter, Citigroup converted more than $2 billion of delinquent mortgages into permanent modifications under the Home Affordable Modification Program. The bank said HAMP modifications are performing better than other loan restructurings and "early results indicate the re-default rates are likely to be lower." The bank did not break out the results of its CitiMortgage subsidy in reporting a first quarter profit of $4.4 billion. However, the company said it originated $31.5 billion of single-family loans in the first quarter down slightly from the previous quarter. As reported by National Mortgage News recently, CitiMortgage has shown some interest in growing its wholesale division again, contacting certain high performance brokers that once sourced loans to the firm.

ServiceLink, provider of origination and default services based in Pittsburgh, Pa., and Fidelity National Financial's national lending platform are opening a new office in Rancho Cucamonga, Calif. and are expanding an existing operation in Buffalo, NY to support their growing loss mitigation operations. Outfitted with ServiceLink's technology, both locations aim to provide loss mitigation services to ServiceLink's lending clients. The new office in Rancho Cucamonga, Calif., opens today and will occupy over 19,000 square feet. The expanded Buffalo, NY, office will officially open on April 26 in a 15,000 square foot facility. "This expansion has doubled our loss mitigation capacity and allows ServiceLink to focus on assisting its clients in managing their troubled assets as the market continues to stress the capacity of lenders and servicers," said Jeff Coury, ServiceLink President and CEO. The company also has existing loss mitigation operations in Kansas and Virginia that provide outsource loss mitigation services including HAMP processing, HAFA, short sales, and deeds in lieu.

U.S. investors still consider real estate as a good investment, according to a survey released by Citi. When asked to rate whether it was a good or excellent time to invest in a specific type of investment, the real estate sector-which for this survey was defined as property, investment properties and/or real estate investment trusts-came back with a positive response from 47% of all investors and 50% of large investors, tops among both groups. "Real estate may have been badly battered in recent years. Still, it has an enduring appeal for Americans, who find it far easier to grasp the value of a house than the value of a stock or stock fund," said Jonathan Clements, director of financial education for Citi Personal Wealth Management. Hart Research Associates conducted the survey for Citi, with the respondents consisting of 756 investors with at least $100,000 of investible assets with 317 of those have more than $500,000 of assets.

Moody's Investors Service on Friday placed 3,000 pre-2005 jumbo prime residential mortgage-backed securities with an outstanding balance of $43.4 billion on review for possible downgrade. While the loan pools backing these securities have paid off to a significant degree, there has been continued performance deterioration due to declining home values, according to Moody's. The rating agency's Economy.com unit expects declines to continue another 5% to 7% this year, adding up to total declines of about 17% to 20% from mid-2004 levels and 5% to 10% from mid-2003 levels. Moody's is working on updating its loss projections methodology for seasoned RMBS.

Bank of America reported a $2.1 billion loss for its home loan and insurance business in the first quarter due to lower originations and increased provisions for credit losses totaling $3.6 billion. In the fourth quarter those provisions totaled $1.35 billion. The giant bank originated $69.5 billion of single-family homes during the quarter, down 20% from the fourth quarter. "Production income remains impacted from expenses associated with reps and warranties," B of A said. In 1Q, reps and warrants on loan buybacks cost the bank roughly $500 million. The $3.6 billion for credit losses includes $2.3 billion of net charge-offs. Of that amount, $813 million was for home equity loans. It also added $1.3 billion to its loan loss reserves.

Mission Capital Advisors is marketing two nonperforming CMBS loans with an aggregate outstanding balance of $50.7 million. The CMBS special servicer loan sale offers prospective bidders the chance to buy two large-balance, nonperforming loans secured by different collateral types. The biggest loan in the sale, with a principal balance of $25.6 million, is secured by 24 office buildings and a retail center. Collateral securing the respective loan is mostly located in Okemos, Mich. with two parcels in East Lansing and Grand Ledge, Mich. The sale's second loan is secured by 20 property parcels with a mixture of asset classes such as retail, industrial, office, medical office, multifamily and mixed-use assets. The respective loans are being sold out of separate CMBS trusts. The buyers must provide individual, loan-level bid pricing for each asset. Investors are allowed to bid for one or both of the assets.