Servicing

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.

Wells Fargo & Co. had 523,336 active trial and completed loan modifications as of March 31. Modifications done outside of the Home Affordable Modification program made up nearly 380,000 of that total. As of March 31, Wells Fargo had 144,932 active trial and completed modifications in the HAMP program, including 30,014 permanent modifications and 9,162 pending completion. The company said it had initiated or completed three mods for every one foreclosure on an owner-occupied property between October 2009 and March 2010, and that less than 2% of owner-occupied mortgages serviced by the company went to a foreclosure sale in the past 12 months. Wells also made an analysis of projected HAMP outcomes. Out of the 138,000 borrowers who made three HAMP trial payments as of March 31, 50% are expected to have completed modifications; another 30% will be found not to be eligible for HAMP once their documents have been reviewed; 10% will have some required documents not provided and another 10% would have no required documents provided. Wells has added over 10,000 home retention staff people since the start of 2009 and now has 17,400 people focused on these efforts.

GMAC Financial Services has promoted Jeffrey Lemieux, a former executive at Cerberus Capital, to the position of senior vice president of business lending sales in its mortgage division. In his expanded role he will oversee customer relationships in the firm's correspondent channel and warehouse network under the auspices of the business lending/mortgage capital markets unit. Lemieux's promotion comes in the wake of several recent departures of top managers in the servicing department of Residential Capital Corp., GMAC's mortgage banking affiliate. Earlier this week, National Mortgage News broke the news that servicing executive John Vella had left the company to take a position with another firm. Prior to his promotion, Lemieux was senior vice president of fee based servicing and he retains these responsibilities managing the servicing capabilities that GMAC provides to third-party organizations. A few years back Cerberus paid $14 billion for a 51% stake in GMAC. Today, that stake has been reduced to just under 15%, leaving Cerberus with a massive paper loss on its investment. The U.S. Treasury is the largest stakeholder in GMAC with 56.3%. The company has hired Goldman Sachs to explore a sale of ResCap.

A few months after losing his job during a cost-cutting maneuver at GMAC, industry veteran Tony Renzi has landed at Freddie Mac and will be in charge of the GSE's efforts to minimize losses in its portfolio while dealing with its seller/servicers. Industry sources said Renzi also interviewed over at Fannie Mae. Bruce Witherell, Renzi's new boss at Freddie, said he could not comment on where else the former GMAC servicing executive interviewed but said, "We're happy to have him here at Freddie." The GSE created a new position for Renzi, who worked at GMAC for more than 20 years. He will hold the title of executive vice president, single-family portfolio management. Witherell, Freddie's chief operating officer, said Renzi "will be involved in all aspects of our decisions on the credit and default side," including the disposition of Freddie's REO holdings.

Foreclosure activity increased 7% in the first quarter, following a substantial spike in March, according to the latest data from RealtyTrac. Foreclosure filings were reported on 932,234 properties in the first quarter, a 7% increase from 4Q09 and a 16% increase from the 1Q09. Foreclosure filings were reported on 367,056 properties in March, up 19% from February and up almost 8% from March 2009. REOs hit a record high for the report in the first quarter, with a total of 257,944 properties repossessed by the lender during the quarter, an increase of 9% from the previous quarter and up 35% from the first quarter of 2009. The data in the first quarter of 2010 followed a very similar pattern to what RealtyTrac saw in the first quarter of 2009: a shallow trough in January and February followed by a substantial spike in March, said James J. Saccacio, CEO of RealtyTrac. He said the high amount of bank owned assets may be further evidence that "lenders are starting to make a dent in the backlog of distressed inventory that has built up over the last year as foreclosure prevention programs and processing delays slowed down the normal foreclosure timeline." A total of 304,799 properties received default notices, down 11% from a peak of more than 342,000 in the 3Q09. Foreclosure auctions were scheduled on 369,491 homes, an increase of 12% from the previous quarter and up 21% from a year ago. A total of 257,944 properties became REO during the quarter, up 35% from the first quarter of 2009.

The Senate has broken a filibuster on a bill that provides a short-term extension for unemployment benefits and the National Flood Insurance Program. By a 60-34 vote, the Senate agreed to vote later this week on the bill (H.R. 4851) that extends the flood program until April 30. Democratic leaders are planning to amend the bill, allowing the programs to be extended until May 31. The House passed the extension bill on March 16 with the Federal Emergency Management Agency due to run out of authority to renew or issue new flood insurance policies on March 29. Sen. Tom Coburn, R-Okla., blocked passage just before the Senate left on March 28 for a two-week spring break. The Senate returned on Monday and voted to end the filibuster.

Prior to the mortgage insurance industry reporting its first quarter earnings, Keefe Bruyette & Woods has increased its price target on the four publicly traded companies' common stock, although it did not increase its earnings outlook. According to analyst Nathaniel Otis, "In our opinion, within the last several weeks, the Obama Administration has significantly ratcheted up efforts to prevent lenders from foreclosing on at-risk borrowers. In addition, delinquency trends thus far in 2010 indicate a better-than-expected seasonal improvement for first-quarter 2010. Although any positive impact from (the) Home Affordable Modification Program may be pushed out another quarter or two, we believe the result could be a more sustained positive stretch of quarterly reporting." The risks include changes to HAMP and to the Federal Housing Administration programs aren't successful. Otis said KBW is remaining neutral for the companies in the space, preferring to revisit its outlook after the earnings reports. KBW's price target on MGIC went from $7 to $12, for Old Republic from $11 to $14, for PMI from $3 to $6 and from Radian from $9 to $18. KBW also issued a preview on title company earnings. Otis said, "While origination expectations appear much more rational this year, reflecting the reality that the real estate market is in a more stable position, the bias is slightly negative given weather issues and compliance with new RESPA rules. This is in stark comparison to last year at this time, when low rates and increased refi volumes fostered optimism. With this in mind, we are reducing our industry estimates for (the first quarter) to factor in these trends." Fidelity National Financial's earnings per share estimate for the first quarter was cut from $0.16 to $0.11; for First American it was cut from $0.23 to $0.20; for Stewart it was cut from a loss of $0.13 to a loss of $0.45; and for Investors Title Co., it was cut from $0.34 to $0.21.

Executives from the nation's four largest residential servicers told Congress on Tuesday that their firms will accept "proportional" modifications on second liens but only when a first mortgage is modified and the principal reduced in a similar fashion. The four mega-servicers signing on to the government's second lien modification program (2MP) include Bank of America, Citigroup, JPMorgan Chase and Wells Fargo. Together, these four firms control 60% of the residential servicing market, according to figures compiled by National Mortgage News. The 2MP program will become operational this fall. In testimony before the House Financial Services Committee, Wells Fargo Home Mortgage co-president Michael Heid agreed that his company will make proportional modifications, "especially under the 2MP program." He noted that WFHM last year completed 50,000 principal forgiveness modifications on first liens but "did not condition that based upon on what the second-lien holder did." The 2MP guidelines do not specifically require principal reduction but is part of the program's internal "logic," according to B of A Home Loans president Barbara Desoer. "Our recommendation is to further advance 2MP from principal forbearance on a shared percentage basis across the first and the second-to principal forgiveness," she testified. Besides being the four largest servicers in the nation, the banks also hold an estimated in $425 billion of second liens on their books. Committee chairman Barney Frank, D-Mass., had accused the banks of holding up modifications of first mortgages by refusing to modify their seconds. But on Tuesday Frank seemed pleased by the testimony. He noted that calling a hearing can produce results.