Servicing

Several medium-sized nonbanks are exploring the possibility of buying depository institutions using cash from stellar residential profits enjoyed over the past 18 months, according to investment banking officials. In interviews with National Mortgage News this week, three active mortgage advisors noted that "the play" for these nonbank acquirors is to solidify warehouse financing. "Even though the warehouse situation has improved in recent months it's still not great," noted one New York-based advisor. "The idea here is to self-fund." These investment bankers did not want to be identified because they are currently working on transactions that haven't closed. One noted that a Midwestern-based wholesaler he's been working with earned $29 million on originations of $1.6 billion last year. He called such a profit performance "unheard of." One risk for nonbank buyers is dealing with delinquent commercial real estate loans of troubled banks. Another challenge is gaining approval from the Federal Deposit Insurance Corp. "In the end will the government accept their business plan?" asked one investment banker.

Reverse Mortgage Solutions Inc. promoted chief operating officer Marc Helm to president. Helm, a founding partner of the Spring, Texas-based firm, replaces Ken Austin, who is leaving the company to pursue personal interests, a company statement said. Helm joined RMS after a career of 30 years in the mortgage-servicing sector. He is a former senior officer at Washington Mutual, where he was responsible for helping WaMu integrate all loan servicing acquisitions into its system. In addition, RMS hired Michael Clendennen as chief financial officer and Michael Kent as senior vice president of portfolio retention. Clendennen has served the past eight years as vice president and controller at Allied Home Mortgage Capital Corp., Houston. Kent has over 28 years of experience with regional and national lending institutions, including several senior management and executive positions. For the past eight years, he has owned and operated mortgage and real estate sales companies in Los Gatos, Calif.

Generation Mortgage Co., Atlanta, has introduced a new fixed-rate Home Equity Conversion Mortgage product with no origination fee and no servicing fee to provide senior clients more upfront loan proceeds at a lower cost. This Federal Housing Administration-insured reverse mortgage product is available through the company's retail and wholesale production channels. It allows qualified borrowers to receive additional, upfront loan proceeds of up to $10,000 or more, depending on the equity in their home. "We are in the business of helping clients put as much money as possible back into their pockets, and the best way to do that is by regularly evaluating how we can maximize each client's reverse mortgage," said Scott Peters, president and chief executive of Generation Mortgage. "This attractive option is a function of positive market conditions. It makes sense for seniors to investigate this option now as these conditions can change at any time."

The 30-day-and-more past due rate on home equity lines of credit fell 8 basis points to 2.04% in the fourth quarter, the first quarter-to-quarter decline in six quarters, according to an American Bankers Association survey. The seasonally adjusted delinquency rate on closed-end home equity loans edged up only 2 bps to a record high of 4.32 in the fourth quarter. "The first sign of improvement has been a long time coming and is finally some positive indication that the housing market is stabilizing," ABA chief economist James Chessen said. The Federal Deposit Insurance Corp. reported that banks and thrifts charged-off $5.2 billion in HELOCs in the fourth quarter, which is a 3.13% net charge-off rate. Charge-offs on closed-end home equity loans totaled $2.9 billion, which is a 6.27% net charge off rate.

The Center for Responsible Lending applauded the approval by the California Senate Banking, Finance and Insurance Committee of a proposal that would apply part of the Home Affordable Modification Program rules to all servicers who do business in the state, whether they participate in HAMP or not. The bill, SB 1275, would require all servicers to complete an evaluation of the borrower's eligibility for a loan modification before they begin the foreclosure process. In addition homeowners who have been erroneously foreclosed upon could receive a financial remedy of up to $10,000. Paul Leonard, director of CRL's California office, said, "It's a modest proposal, but it could do a world of good for Californians who are faced with losing their homes. Bill co-sponsor Sen. Mark Leno, D-San Francisco, explained, "Laws are not being broken. That's why we need laws. The vote to approve the bill was 7-1, and the Senate Judiciary Committee will now take up the legislation."

Home prices could decline on a nationwide basis this year, with a "prolonged" recovery starting next year although some locales could see a quick revival, according to the chief economist of Fiserv. "Nationally, Fiserv Case-Shiller data points to a further 7% decline in home prices through the end of this year, with a prolonged recovery beginning early in 2011. In many markets, the emphasis is on the word 'prolonged,'" said chief economist David Stiff. Some markets, such as Pittsburgh, Columbia, S.C., and certain metropolitan areas in Texas, Washington state and upstate New York are poised for a relatively fast recovery. But in areas such as California, Florida, Arizona and Nevada, it may take 15 or more years for home prices to climb back to their peak as several powerful forces in the market will severely hinder housing recoveries, Mr. Stiff said.

Federal Reserve officials are worried that serious delinquency and foreclosure rates are moving higher and house prices are still under downward pressure. "We have yet to see evidence of a sustained recovery for the housing market. Mortgage delinquencies for both subprime and prime loans continue to rise as do foreclosures," Fed chairman Ben Bernanke told the Dallas Regional Chamber on Thursday. The minutes of the March 16 Federal Open Market Committee reveal that Fed officials are not impressed by the improvement in home sales in the second half of last year. It may largely reflect "transitory effects from the first-time homebuyer tax credit rather than a fundamental strengthening of housing activity," the minutes say.

Distressed home sales, classified as short sales and real estate-owned sales, accounted for 29% of all sales in the U.S. in January, the highest level since April 2009, a report from First American CoreLogic found. The REO share of sales increased to 22% in January, up from 19% in December but down from a year ago when it was 27%. Short sales accounted for 8% of all sales in January, up from 7% in December and 5% a year ago. During the last 12 months, there were 974,000 distressed sales: 740,000 were REO sales and 234,000 were short sales. By markets, Riverside, Calif., had 62% of its home sales in January come from the distressed category, followed by Las Vegas at 59% and Sacramento at 58%. Sales of REO made up 48% of the home sales in Detroit, while the leader in share of sales in the short sales category is San Diego at 19%. First American CoreLogic also noted that the average nondistressed market sale price in January was $247,700 but the distressed average price was $161,600. The average REO price was $141,900, compared to $215,300 for short sales. The discount between market sales and distressed sales is currently about one-third and has been running at the low-to-mid 30s during the last 12 months.

The latest monthly data from Fitch on U.S. jumbo, prime-credit residential mortgage-backed securities show serious delinquencies continue to rise while the much higher subprime credit delinquency rate has dropped slightly. In March, late payments of 60-plus days on prime jumbo RMBS rose for 34 consecutive months and passed the 10% mark while subprime delinquencies of this type have dropped slightly month-to-month to 46.3% from 46.9% but remained far above the 39.8% rate seen a year ago. "The improvement in subprime delinquencies may be nothing more than a seasonal anomaly of tax refunds being utilized to help borrowers catch up on mortgage payments," said Fitch managing director Vincent Barberio in the rating agency's Performance Metrics report. In the jumbo sector, California continues to have the highest volume of prime loans outstanding and its 60-plus-day delinquencies during the month were 11.8%, up from 11.6% the previous month. This represents about 44% of the outstanding jumbo market, according to Fitch.

Flagstar Bank, Troy, Mich., is offering a program to those borrowers who will have their mortgages insured with Genworth that will cover their mortgage payments if they lose their job involuntarily. It is available at no charge on new loans and will cover the borrower's principal and interest, as well as tax and insurance, payments for up to $2,000 a month for up to six months during the benefit period, with a maximum of three monthly payments per job loss occurrence. The benefits are paid directly to Flagstar. The borrower's vesting period is 60 days after the loan closes and payments begin 30 days from the date of unemployment. The coverage is in place for up to three years after the loan closes, as long as MI coverage remains in place. Not covered under the program are seasonal, temporary or voluntary jobs, nor are those who are self-employed. A spokeswoman for Flagstar said Genworth is the only MI company the lender has this program, called Job Loss Protection, with.