Servicing

The number of foreclosure filings in tri-county South Florida declined for the third consecutive month in March, according to the latest figures from CondoVultures, a Bal Harbour-based consulting firm. Although government programs have something to do with the fall off in filings in Miami-Dade, Broward and Palm Beach counties, the trend has more to do with the fact that lenders are coming to grips with the reality of the marketplace, said Peter Zalewski, a CondoVultures principal. "Lenders now know that a foreclosure action will take 18 months and at least $100,000 to complete in South Florida, which is three times longer and twice as expensive as back in 2007 when the crisis first began," Zalewski said. The consultant pointed out that once the bank takes back ownership, a troubled property usually sells for about the same amount as a comparable short sale, which can be completed in a fraction of the time. "Bankers are smart people so it is no surprise to see a change in strategy and the drop in foreclosure filings given the pure economics of the situation," he said. Foreclosure filings in March were off 20% from the month before. In February, they were down 19% from January, and in January down 7% from December, according to the firm.

Two banks have activated assistance plans for customers in parts of southern New England that were impacted by flooding as a result of heavy rains at the beginning of April. Bank of America has set in motion its disaster relief program for customers in Rhode Island and seven Massachusetts counties. Among the parts of the program that helps homeowners specifically is giving them the ability to access a new home equity loan or line increase through B of A's special loan program. They will pay no fees and receive preferential pricing, below the current interest rate. The bank will also modify or extend payments on loans or lines of credit. Waterbury, Conn.-based Webster Bank will provide unsecured home improvement loans to customers in Rhode Island, Connecticut and Massachusetts at a rate 2.5 percentage points below the standard rate. Priority processing will get the check to the borrower within one week of application. It is also offering "payment alternatives," including deferments for existing mortgage and home equity loan customers whose home has suffered flood damage or where the borrower's employment has been disrupted as a result of the flooding.

Lender Processing Services says it has corrected the way it processes assignments of mortgages in foreclosure cases, which has drawn the attention of class action attorneys and a U.S. Attorney in Florida. The Jacksonville, Fla., company said an internal review of its Docx LLC subsidiary "identified a business process that caused an error in notarization of certain documents, some of which were used in foreclosure proceedings in various jurisdictions around the country." The U.S. attorney's office for the middle district of Florida is conducting an inquiry of the matter. LPS is "fully cooperating" with the U.S. Attorney, a spokeswoman said. In February, a class action lawsuit filed against Deutsche Bank (National Trust Bank) and U.S. Bank N.A., LPS and Docx alleged that the practice of creating assignments months and years after the actual date of the transfer from one owner to another is unlawful. The plaintiff's attorneys have dropped the lawsuit. However, the lawsuit pointed out that LPS and Docx assists Deutsche Bank (National Trust Bank) and U.S. Bank N.A., in filing foreclosure actions. LPS also has responded to an inquiry by the Clerk of the Court of Fulton County, Georgia. "LPS has since completed its remedial efforts with respect to all of the affected documents and believes the Clerk of Court has completed its review and closed the matter," LPS said.

The Treasury Department could move faster in modifying second liens, a mortgage securities analyst says, by requiring servicers to conduct their own internal matching of first and second liens. Using their internal systems, Home Affordable Modification Program servicers could "capture approximately half of the second liens backing modified first liens," according to an Amherst Securities Group report. However, Treasury has contracted with Lender Processing Services to build and maintain a database of second liens that may be eligible for the HAMP second lien modification program (2MP). Servicers are required to use LPS to identify eligible matches. The LPS matching project is "far more cumbersome than it needs to be," said ASG senior managing director Laurie Goodman. "This unnecessarily delays the implementation of the 2MP program to the benefit of the second lien investors which are the largest banks," Goodman said.

The Department of Housing and Urban Development has changed the definitions of the terms "foreclosed" and "abandoned" to increase the reach of its Neighborhood Stabilization Program, which helps local communities acquire, reclaim and re-sell distressed properties more quickly and prevent further decline in neighborhoods decimated by such properties. HUD now defines foreclosed to include properties in which their owners are in default on their mortgages and 90 days or more delinquent on their property taxes, and abandoned to include properties that are uninhabitable with lingering building code violations which their owners have failed to correct. The expanded definitions, which became effective as of April 2, will increase the reach of NSP by allowing more properties to qualify and remove existing barriers caused by market conditions, HUD said. The changes also will help state and local grantees meet a Congressional requirement that they obligate all of their NSP1 funding by September. "The rules needed to be more flexible so our local partners can put taxpayer dollars to work quickly to stabilize neighborhoods hard-hit by foreclosure," said HUD Sec. Shaun Donovan. HUD had previously defined foreclosed to apply only to those properties that have been through the foreclosure process and abandoned as those homes which have been foreclosed on and been vacant for at least 90 days.

At a briefing of state housing counselors, Congressman Steny Hoyer and Maryland Department of Housing and Urban Development Secretary Raymond Skinner both expressed their support for HOPE LoanPort, the new counselor Web-based tool that streamlines submission of completed loan modification applications, including those used for the Home Affordable Modification Program. This effectively makes Maryland the first state in the nation to publicly endorse the HOPE LoanPort program. In a room full of Maryland housing counselors, mortgage servicers, state officials and others; Congressman Hoyer praised housing counselors for their efforts and Secretary Skinner discussed the need for improved technology in assisting at-risk homeowners with loan modifications. HOPE LoanPort currently has eight mortgage servicers and more than 100 nonprofit counseling organizations across the country committed to its program.

RoundPoint Mortgage Servicing Corp. has won a 50% equity stake in a $480 million pool of single-family loans from several hard hit states that it will manage for the Federal Deposit Insurance Corp. The Charlotte, N.C., servicer paid $34.4 million in cash to purchase its equity stake in a limited liability company that will own the troubled assets. FDIC retained a 50% equity interest as the receiver of the failed bank assets and it will share in the returns of the LLC with RoundPoint. About 51% of the 3,373 loans are 30-days or more past due and 80% of the loans are from three states-Florida, Georgia and Arizona. FDIC said it conducted a competitive auction for the portfolio on Feb. 24 and the sale was closed on April 1.

While the 2010 outlook for the broader economy is somewhat mixed, lenders were largely in agreement that home prices appear to have stabilized throughout most of the country, according to analysts at Barclays Capital. Residential portfolios continue to constitute a large portion of troubled assets and the degree to which banks have provided for losses related to these portfolios varies widely, based on its new report, "Homebuilding and Building Products." In the report, many management teams pointed to improving credit metrics, believing that the pace with which residential troubled assets grow will continue to decline. Analysts say lenders continue to celebrate reduced exposure to homebuilders (albeit largely due to write-offs and sales), and similar to trends impacting the residential portfolio, and they are currently experiencing lower in-flows of problem assets in this category. "The pace with which land deals are coming to market has accelerated, several banks indicated an aggressive stance towards moving through REO inventory." The company said the sequential rise in banks' troubled debt restructuring balances suggest increasing participation in recent loan modification programs such as the government's HAMP initiative as well as internally-generated company programs.

Commercial lenders throughout the country are becoming increasingly aware of their need to enter into modification agreements with their borrowers, says Kevin Levine, executive vice president of Strategic Asset Services of Woodland Hills, Calif. Levine explained that commercial loan values are falling in most markets, and that the office buildings, retail centers and multifamily residences are losing tenants at an increasing pace due to the economic recession. As a result, borrowers are experiencing compressed cash flow, and are unable to meet their loan payments. "Unless the loan is modified to reduce the payments, the lender inevitably will be forced to commence foreclosure proceedings," he says. "But balance sheets of banks and other lenders are only able to absorb a limited number of foreclosed properties, and that limit is being approached or exceeded by many lenders." When his company first began offering commercial loan modification services in early 2009, many lenders were reluctant to recognize the seriousness of their commercial loan problems and modify the loans, he added. Levine said in the past several months that recognition has increased dramatically. "Commercial lenders are now being compelled to negotiate with their borrowers. It is preferable for them to have a paying asset, even at a reduced return, than to go through the expense of foreclosure and incur property management expenses during a two-three year holding period while attempting to sell the property."

In an effort to support the Federal Neighborhood Stabilization Program, offer eligible buyers downpayment, closing cost assistance, and a two-year home warranty Freddie Mac and New Vista plan to auction hundreds of real estate owned homes in Las Vegas and California. The plan is to auction Freddie Mac-owned homes on April 24 in Las Vegas and April 25 in California, which is before the federal homebuyer tax credit up to $8,000 expires on April 30, 2010. Freddie Mac HomeSteps REO homes in Las Vegas and in Inland Empire properties in California will be available to first time homebuyers and owner occupants in support of the federal Neighborhood Stabilization Program, which makes homebuyers eligible for closing costs and downpayment assistance when they buy foreclosed or abandoned homes in designated communities. This way the federal assistance is combined with the federal tax credit to make purchasing HomeSteps homes more affordable. HomeSteps and New Vista plan to hold separate afternoon auctions for bidders who do not qualify for the NSP program but intend to occupy the homes as their principle residences. Homebuyers also benefit from the SmartBuy program under which HomeSteps will pay up to 3.5% of the closing costs and offer a two-year limited home warranty on homes sold as primary residence when the purchase price is equal to or greater than $25,000.