Servicing

Federal Deposit Insurance Corp. chairman Sheila Bair said the agency has reduced its projection of the number of bank failures this year. In a cable news interview Friday, Bair said that though closures are still expected to exceed last year's total of 140, the pace is slowing. "We do think things are improving," she said. "We think it will be more than 140" this year "but less than what we were projecting, for instance, three months ago." Bair reiterated a projection that failures would peak "toward the end of this year." She added that it will continue to be predominantly smaller banks that are closed and said some institutions that had been nearing insolvency-and were placed on the agency's "problem" list-have since recovered. "Some of the banks that we thought were going to fail have actually raised capital, and they've come off of our list," she said.

A senator from New York where several credit unions were victims of the $140 million U.S. Mortgage/CU National Mortgage fraud is calling on Fannie Mae's regulator to engineer a settlement on the disputed claims. In a letter to Edward DeMarco, director of the Federal Housing Finance Agency, Democrat Charles Schumer urges the agency and Fannie Mae to "work with the affected credit unions to come to a fair resolution of this dispute that does not threaten the viability of the credit unions." Schumer noted, "Ultimately, I am concerned about the fiscal well-being of thousands of my constituents who may suffer adverse financial impacts" because of U.S. Mortgage Corp. "The magnitude of this potential loss will have a significant adverse impact on these credit unions and their members, some of whom are employees of the U.S. government, as well as state and local governments." Schumer declined requests for further comment. The congressional intervention comes as Fannie Mae has begun mediation with several of the credit unions aimed at settling the dispute. Several New York credit unions, including Suffolk FCU, Sperry Associates FCU and TCT FCU, were among 28 credit unions that had their mortgages fraudulently sold to Fannie Mae by CU National president Michael McGrath. McGrath has pleaded guilty to the fraud and is scheduled to be sentenced next month.

Sen. Richard Shelby, R-Ala., is confident his fellow Republicans will vote "en block" Monday evening, preventing the Senate from starting debate on the financial services reform bill. "I believe the 41 Republicans, for right now, will stand together," Sen. Shelby told a meeting of the Independent Community Bankers of America Monday morning. If the GOP can hang together, Shelby said, it will give him a stronger hand in negotiating with Senate Banking Committee chairman Christopher Dodd, D-Conn., on a compromise bill. To prevent bailouts, Shelby wants tighter limits on Treasury and Federal Reserve lending to failing financial institutions. He also wants prudential banking regulators to have more "say" over the activities of a new independent consumer protection agency, which likely will be given sweeping powers over mortgage lenders. Dodd is now working with Shelby but wants the bill to reach the floor soon, so the amendment process can begin. Negotiations with Republicans have been ongoing for months. Dodd estimates there are only 40 to 50 legislative days left this year to pass a bill. The Republicans are wary of the amendment process, however, and want a compromise hammered out in advance of floor debates. If the reform bill passes the Senate, Shelby warned the bill could be in "peril" if changes are made in a conference with the House. The House passed its reform bill in December. Differences in the two bills are usually worked out in a House-Senate conference.

A Supreme Court decision could make it easier for consumers to sue collectors for sending erroneous collection notices. The high court, in a 7-2 opinion Wednesday, ruled that collectors cannot protect themselves from such lawsuits simply by stating they made a legal error when sending a notice. At issue were the actions of an Ohio law firm, Carlisle, McNellie, Rini, Kramer & Ulrich Co., that mistakenly started foreclosure proceedings on behalf of Countrywide Home Loans Inc. A homeowner later sued the law firm, arguing that it violated the Fair Debt Collection Practices Act by contending in the foreclosure suit that her alleged debt would be assumed to be valid unless she contested it in writing. The case will return to a lower court.

First American Corp. is buying Experian Information Solutions' 20% stake in First American Real Estate Solutions LLC for $314 million. First American, Santa Ana, Calif., is exercising a purchase option it holds. The deal will close at yearend. "Experian has been a valued partner in the FARES joint venture and we look forward to furthering our working relationship with them in the coming years," said Parker Kennedy, chairman and chief executive of First American. "Our exercising of the purchase option, combined with our previously announced transactions for the non-controlling interests in First Advantage Corp. and First American CoreLogic, provide us with control over substantially all of our assets as well as provide the Information Solutions Group with increased financial and operational flexibility as it prepares to be a stand-alone public company."

FCI Lender Services of California, the largest servicer of privately held real estate notes, has launched a new online trading platform designed to match sellers of distressed mortgages with buyers. Company EVP Gordon Albrecht said the site -- dubbed FCI Exchange LLC -- is now operational. "Right now we have 2,500 loans, with about $470 million in principal up there," he said. FCI joins such existing online platforms as BigBidder.com and LoanExchange.com as sites where buyers can hunt for product. "Ours is a trading platform, not an auction site," Albrecht cautioned. "We're the first trading platform run by an actual servicer of loans." Websites that cater to loan trading -- be it nonperforming notes or not -- tend to be marketing tools as opposed to a place where trades actually take place. "The problem with most of these websites is that after you make a bid you need a lot of handholding and that occurs offline, not online," said one investor who has used both LoanExchange and BigBidder. FCI said it will not charge firms to list their loans and will only get paid if an NPL trades, a strategy used by the other two.

The Treasury Department is threatening to deny or even claw back incentive payments to mortgage servicers that are not modifying loans, according to the administration's guidelines. The department would not say how many servicers have broken the rules, let alone which ones. But consumer advocates say noncompliance is rampant in the Home Affordable Modification Program. They have documented cases in which servicers wrongly denied modifications or foreclosed before reviewing a borrower for HAMP. The program is voluntary, so withholding or taking back the incentive payments is the biggest club the Treasury holds over servicers. It pays $1,000 for each completed permanent modification for a delinquent borrower and $500 for each mod given to a current borrower. So far, servicer payments have totaled $68.4 million. (A total of 109 servicers are participating in the program.) At a meeting two weeks ago with consumer advocates and Freddie Mac, the department's compliance agent for HAMP, a Treasury official said the government had privately rebuked "four to six" servicers for "systemic noncompliance" with HAMP guidelines, according to three people who were in the room. "Everyone asked, 'How come we haven't heard about this?' " said Andrew Jakabovics, an associate director for housing and economics at the Center for American Progress. The Treasury has "been doing compliance checks, and they've found systemic problems," he said, "but we don't know what actions have been taken to fix the problems or even if they are working on it."

The Private National Mortgage Acceptance Co. has named former Bank of America executive Steve Bailey as its chief servicing officer, effective immediately. In his new role, Bailey will oversee all mortgage servicing activities at PennyMac Loan Services, the servicing arm of PNMAC and its publicly traded vulture fund parent, Penny Mac Mortgage Investment Trust, Calabasas, Calif. At B of A he oversaw about $2 trillion in receivables. At Penny Mac he will oversee about $2 billion, a figure the company hopes to grow. However, the company hopes to enter the origination market shortly through a new conduit operation. To date, the firm has said little publicly about its conduit plans.

A proper reading of the Standard & Poor's/Case-Shiller 20-city house price index shows that home prices have declined by 0.7% over the past 12 months ending in January. The S&P index committee is advising users of the Case-Shiller HPI not to rely on the seasonally adjusted numbers. "After reviewing the data, the S&P Case-Shiller HPI committee believes that at the present time the unadjusted series is the more reliable indictor of U.S. housing trends," the committee said. In the last 20-city HPI report, prices fell by 0.4% in January, following a decline of 0.2% in December. Prices were up 0.3% in November. On a seasonally adjusted basis, values rose 0.3% in January and then a similar amount in December, which has been highlighted in many news reports. One independent economist said that large inventories of foreclosures and unsold and vacant houses on the market outweighs any seasonal effects. Few housing and mortgage analysts believe there will be any significant improvement in home prices until next year at the earliest.

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.