Servicing

Data from ForeclosureListings.com comparing February to January show that Texas has witnessed the highest increase in statewide foreclosures with a rise of 35.3%, followed by Michigan at 17.54%, California at 11.93%, and Florida at 4.71%. Georgia showed a decline of 5.55% and Arkansas showed the largest drop in foreclosures at 28.6%. Atlanta and Denver saw decreases in foreclosures from January, yet the number of actual foreclosures in February was still relatively high at 1,039 and 2,056, respectively. "The foreclosure trend continues. We found it interesting that the larger cities as above had [better performance in term of relative month-to-month percentages] than the comparatively smaller cities of Spring, Texas, and of Garland, Texas, with 165 and 167 total foreclosures at 46% and 43% increases over January, respectively," said Kevin Simpson, a sales manager with ForeclosureListings.com. Larger cities such as Houston which showed an increase from January of over 37% with 1,192 homes foreclosed, and Phoenix, Ariz., with an over 34% increase and 1,645 homes foreclosed continue to demonstrate the plight of unemployment and abandonment in search of locations for people to live where they can find jobs. "But there were some signs of improvement, for lack of a better word," he said. Little Rock, Ark., showed a monthly drop of 35.34% with only 75 foreclosures from the previous month, and Riverdale, Ga., showed a decrease of 25% with only 956 homes foreclosed. Likewise, in two large cities of note: Washington reported 169 foreclosures, a difference of 19.9% less than January, and Atlanta saw a drop of 6.98% in the same time period.

New government figures show that home prices fell 0.6% in January after a 2% drop in December, a sign that the housing market is far from being on a steady road to recovery. According to a home price index compiled by the Federal Housing Finance Agency, prices fell in six geographic regions but rose in two: a 2% gain for the Mountain region, and a 0.4% improvement in the West North Central. Prices in the Pacific region remained unchanged. Over a 12 month-period ending in January, home prices are down 3.3% based on residential loans purchased in the secondary market by Fannie Mae and Freddie Mac. The December drop was revised downward from 1.6%, the GSE regulator said. Since January 2009, prices have dropped 3.3% to a seasonally adjusted 194 index value. The FHFA HPI is down 13.2% from the peak in April 2007.

New home sales fell for the fourth consecutive month in February but sales were down by only 2.2%, despite severe winter weather in many parts of the country. The U.S. Census Bureau reported that sales of newly constructed homes fell to a seasonally adjusted annual rate of 308,000 in February from a 315,000 rate in January. The January rate was revised upward from 309,000, which means the drop in sales from December to January was 8.9%, as opposed to 11% as originally reported. The Census Bureau report shows that sales in February fell 20% in the Northeast and 18% in the Midwest. Sales were up 20% in the West. New home sales have slumped to the lowest level since 1963, according to Weiss Research analyst Mike Larson. "The market remains stuck in the doldrums," he said. But he expects some pick up in sales in March and April with the homebuyer tax credit due to expire at the end of April. "The credit-fueled pop won't be anything like what we saw the first time around, however," Larson said.

A new TARP IG report on servicer performance under the Home Affordable Mortgage Program says that even though loan restructuring efforts improved in recent months, mortgage firms will not be able to sustain the pace. In January and February, residential servicers approved roughly 50,000 permanent loan modifications per month, a vast improvement over earlier efforts. (Roughly 168,700 permanent modifications have been written since August.) However, the Troubled Asset Relief Program IG notes that the number of troubled homeowners starting the three-month HAMP payment trials is declining while at the same time servicers are tightening standards for new entrants. In addition, servicers are concerned that the 835,200 borrowers currently in payment trials include a sizeable number of homeowners who are unable-or unwilling-to make the required payments. Also, it appears that some homeowners are using the HAMP trials to forestall foreclosure. "Several of the servicers interviewed reported concerns about homeowners trying to game the system in this fashion," the report says.

Bank of America, which controls 21% of the servicing market, Wednesday unveiled a plan to consider principal writedowns for certain struggling mortgagors instead of cutting their note rates. In some cases principal will be reduced to 31% of a consumer's household income. At press time Bank of America was unveiling details of the plan, which falls under its National Homeownership Retention Program, its in-house proprietary loan modification effort. However, Bank of America mortgage chief Barbara Desoer warned that the new principal reduction effort would be "limited in scope" and will only be available to "certain eligible borrowers." The bank stressed that only "certain NHRP-eligible loans" will be subject to principal reductions. The mega-servicer is targeting troubled loans it inherited via its 2008 acquisition of Countrywide Financial. Bank of America said it would consider principal reductions on certain negative amortizing payment option ARMs and will convert some of these loans to fully amortizing products.

Architects are the first to feel the pain of a sagging housing market and the first to see the beginnings of an upswing. So if the recent uptick in project inquiries received by the Dallas- based Humphries and Partners is any indication, the apartment business is starting to look up. The highly-regarded design firm, which last year submitted the largest number of new FHA 221(d)(4) financed market rate projects of any architect in the country, hasn't been overwhelmed by requests from multi-family developers, but "we are encouraged by positive signs in the market," said Mark Humphries. "Not a deluge, but strong," Humphries said of the inquiries. "The wise apartment developers recognize that interest rates will never be this low, construction volume will never be this low, construction costs will never be this low, and the pending demand is going to be the largest growth in apartments ever seen."

The California Attorney General over the weekend closed two companies engaged in what it calls "fraudulent foreclosure-assistance" scams that gave consumers "false hope after paying upfront fees for nonexistent loan-modification services." In closing U.S. Foreclosure Relief Corp. and H.E. Servicing, Inc., AG Edmund Brown secured $1 million in court ordered restitution against the firms and officers George Escalante and Cesar Lopez. The state had filed suit against the firms in a joint action brought with the Federal Trade Commission. The AG's office said an investigation found that "the defendants used aggressive telemarketing tactics to convince distressed homeowners to pay $1,800 to $2,800 in upfront fees for loan-modification services that included reductions in principal and lower interest rates." The AG claims that in sales calls, H.E. Servicing claimed it had successfully negotiated 10,000 loan modifications. However, a full review of internal records found the company opened only 2,960 loan-modification files and completed only 311. The state says California homeowners accounted for 15% to 20% of the company's opened loan-modification files. The two men could not be reached for comment at press time.

The Senate Banking Committee late Monday passed a financial services regulatory reform bill as Republicans agreed to let the measure go through committee and work with Democrats on a possible compromise before it hits the Senate floor. The panel passed the 1,300-page bill by a 13 to 10 vote along party lines. The legislation -- which includes language on MBS risk retention -- largely resembles the bill that Senate Banking Committee chairman Chris Dodd (D-Conn.) introduced last week. The mortgage industry is lobbying against risk retention language that could crimp a revival of the private label MBS market. Sen. Dodd thanked Sen. Shelby (R-Ala.) for allowing the bill to clear committee this week which was Dodd's major goal in calling the markup. Sen. Shelby said he did not want to turn the markup process into a "long march" by offering hundreds of amendments. "Although I have raised a number of serious concerns I remain optimistic that we can, over time, reach an agreement that will garner bipartisan support," said Sen. Shelby. "I just don't think we are quite there yet."

Refinancings are becoming a higher proportion of Federal Housing Administration early defaults, as the performance of FHA purchase mortgages improves, according to Potomac Partners, a consulting firm. "Refinancings are 44% of FHA originations and 70% of its early defaults and claims," said Potomac partner Brian Chappelle. Historically, refinancings have performed much better than purchase mortgages. But that changed in the fourth quarter of 2008, according to FHA Neighborhood Watch data, when the percentage of defaults and claims (two years after origination) on refinancings hit 4.38%. At year end 2009, it was up to 5.9%, compared to 5.05% for all FHA single-family loans. The good news is that purchase mortgages are performing well and FHA experienced a 24 basis point decline in the total default and claim rate to 4.81% as of February 2010. "To have early defaults decreasing is really encouraging," Mr. Chappelle said.

Freddie Mac on Tuesday approved a reactivated subsidiary of The PMI Group Inc., Walnut Creek, Calif., as an eligible mortgage insurer, sending the MI's stock soaring. PMI has effectively created a "good bank" MI unit which allows it to continue writing policies in states where there is a risk-to-capital ratio requirement or a minimum policyholder position requirement. The unit, which is called PMI Mortgage Assurance Co., or PMAC, has $28 million in capital. A PMI spokesman said the company has not determined when PMAC will be implemented. In trading, PMI's shares were up 17%. Several MI firms have used the "good bank" strategy to segregate out the risk inherit in their "legacy" coverage.