Servicing

The Granite Companies, Denver, Colo., are launching a new division to administer and develop new core business opportunities in public and private commercial construction lending markets. Granite Excell Management will be positioned to provide consulting and other professional services to lenders under the Granite umbrella. "Granite is strategizing for the changes lying ahead," said Bill Cobb, president and co-founder of The Granite Companies. The company said it expects to be in growth mode this year and beyond. Granite's other affiliates include Granite Loan Management, Granite Commercial Management and Granite Construction Inspections. GCM and GLM offer risk mitigation services, including construction REO and workout services, property condition assessment reports, and contractor acceptance. GCI provides residential and commercial property inspection services including construction draw, status/audit, damage assessment, tenant improvement, acquisition and development.

The average age of newly delinquent loans is higher today than in 2007, according to a recent Lender Processing Services report. LPS recently pegged the average age of newly delinquent loans at 46 months, compared to an average of 27 months back in January 2007. The 346,000 borrowers who were delinquent for the first time in January of this year represented 40% of all newly delinquent loans seen during that month, according to LPS.

One third of the streamlined refinanced loans that the Federal Housing Administration insured in 2009 are probably underwater, according to a New York University economics professor. Professor Andrew Caplin and his colleagues at the National Bureau of Economic Research estimate that 33.4% of the 330,000 FHA loans refinanced through the streamlined process during the first nine months of 2009 started out with negative equity. The professor told a congressional panel that the federal mortgage insurance agency and its auditors are underestimating the number of FHA underwater mortgages and the default risk of those loans. FHA doesn't require new appraisals when an existing FHA loan is refinanced, provided borrowers are current on their payments. FHA simply records the value of the property on a streamlined refinancing at the original purchase price, which ignores any decline in home values. In addition, the auditors treat streamlined refinancings as new loans instead of loan modifications. "Misclassification of streamlined refinances not only compromises the [FHA] loss model, but also results in underestimation of underwater mortgages," the professor testified. The NBER economists used the Federal Housing Finance Agency housing price index to estimate the number of underwater loans. "With all other house price indexes, the proportion in negative equity is even higher," Mr. Caplin told the House Financial Services housing subcommittee.

Sales of homes priced above $750,000 are starting to pick up after being frozen at a very low level last year. For most of last year, first time homebuyers were driving sales and they were focused "almost exclusively" on foreclosed properties and other bargains priced under $250,000, according to Walter Moloney, economics spokesman for the National Association of Realtors. "Beginning in October for the first time we started seeing increases in other sales categories," Mr. Maloney said. Sales of homes priced from $750,000 to $1 million jumped 40% in January from a year ago, yet accounted for only 1.3% of total sales. Over 70% of sales in January involved properties priced under $250,000. Sales in all price classes rose in January. "The trade-up market is now beginning to benefit," Mr. Moloney said. Despite this movement in the top tier, foreclosure and short sales are expected to remain at a very high level. Last year, distressed sales comprised 36% of existing home sales. "Maybe it will come down to 33% this year," said NAR chief economist Lawrence Yun. In a normal market, distressed sales make up 15% of sales. "By historical standards, we have never seen anything like this before," Mr. Yun said.

The pace of permanent Home Affordable Mortgage Program loan modifications is now averaging roughly 50,000 a month with the cumbersome government program finally getting its legs. The Treasury Department reported that mortgage servicers completed 54,900 permanent HAMP modifications in February, up from 49,400 the previous month. To date, the Home Affordable Mortgage program has helped 170,200 homeowners secure a permanent modification that reduces the monthly payment on a first mortgage to 31% of income. Another 835,200 borrowers are in HAMP payment trials where their monthly mortgage payment is reduced by more than $500. The Obama administration's signature loan modification program was rolled out one year ago with the first 5,000 permanent modifications completed in October. Housing advocates are critical of the slow start. However, the program is still undergoing changes to simplify and streamline the process, allowing struggling homeowners to move through the three-month payment trials and receive a permanent modification. In addition, Treasury is trying to get banks to modify their second liens. "While we still have some improvements to go, we are making significant progress in terms of home affordable modifications," said HUD secretary Shaun Donovan. As the pace of HAMP modification finally picks up, the monthly activity report is showing more fallout. Treasury reported that 1,473 permanent modifications have been cancelled as of February 28, up from 1,005 in January. In addition, nearly 88,700 borrowers have dropped out of the payment trials, including 28,200 in the month of February.

Milestone Merchant Partners is now officially offering for sale a $20 billion package of residential servicing rights on behalf of the Federal Deposit Insurance Corp. The offering has been rumored for several weeks. The receivables once belonged to AmTrust Bank of Cleveland, which failed late last year. A Milestone official told National Mortgage News that the offering process has now "officially" commenced. At press time no other details were available. The AmTrust portfolio is the largest bulk offering of servicing rights to hit the market this year. Flagstar Bancorp, Troy, Mich., is currently in the market with a $10 billion offering of servicing rights, but to date has declined to talk about the package. In other AmTrust news, Barclays Capital is getting ready to solicit bids for a $2 billion portfolio of loans from AmTrust, according to Asset Securitization Report, a sister publication to NMN.

Morgan Keegan & Co., Memphis, Tenn., will market Farmer Mac loan programs designed specifically for its bank clients which hold agricultural loans in their portfolios. The primary program to be offered under this agreement is Farmer Mac's Long-Term Standby Purchase Commitment, which shifts the credit risk on loan pools from the bank to the government-sponsored enterprise. Michael Gerber, president of Farmer Mac, said the LTSPC program is designed to give banks that lend on agricultural properties "a reasonable price option to improve a major indicator of their financial health and to help restore their ability to grow their balance sheets." Loans in the LTSPC program are expected to receive favorable capital treatment, freeing up the bank's capital to be used for other purposes.

Fitch Ratings, Chicago, believes that the title industry's 2010 revenue decline could range between 10% and 15%, based on the projected fall-off in mortgage origination volume. This level of title revenue deterioration would lead to further pressure on profit margins; three out of the four national title groups were profitable in 2009, and the fourth, Stewart, was profitable in the fourth quarter. But any item that affects profitability will likely lead to further expense initiatives by title underwriters, said the Fitch report, written by Douglas Pawlowski, title sector head and senior director. The report noted the two largest national title companies, Fidelity and First American, reported underwriting results that were markedly better than the competition, Stewart and Old Republic. Because they had better operating margins, Fidelity and First American are in a better position to report profits for 2010, the report said. Right now, Fitch has the title industry on "negative" outlook status. To improve it to "stable," there needs to be evidence of title insurers being able to generate sustainable profits and margins nearer to historical averages. This, Fitch continued, will foster improved capitalization from retained earnings. Mr. Pawlowski added "given expectations for a significant decline in title revenue in 2010, an underwriter that does not demonstrate an ability to modify expenses to match revenues or has insufficient surplus to cushion against another downturn in profitability will be at greater risk for a downgrade in the near term."

The Federal Deposit Insurance Corp. sold $1.37 billion of structured guaranteed notes backed by residential and construction loan assets from Corus Bank. It follows its debut offering from last week. Sources familiar with the deal said the offering was priced into strong demand, according to a report in Structured Finance News, an affiliate of National Mortgage News. The sale included $150 million of 1.62-year notes that priced at 18 basis points over Eurodollar swap futures; $850 million of 2.62-year notes that priced at 21 basis points over interest rate swaps; and $377.35 million of 3.62-year notes that priced at a spread of 24 basis points over swaps, market sources said. Barclays Capital was sole underwriter for the offering, which was the same for last week's deal. The sale follows last week's sale of FDIC's $1.8 billion securitization backed by option ARM mortgages that also priced via underwriter Barclays Capital. That deal was divided into a $1.33 billion floating-rate transaction and a $480 million fixed-rate deal. The transaction saw its floating rate portion priced 10 points tighter than the initial price guidance of 65 basis points over one-month Libor and a portion of the fixed rate tranche priced five to 10 points tighter than the initial price guidance of 90 to 95 basis points over i-swaps. The two deals are part of the total $3.85 billion of securitizations that the FDIC is selling to investors that are guaranteed by the government. All of the deals are backed by residential mortgage loans and construction loan assets from failed banks that the FDIC took over.

Mortgage vendor Lender Processing Services Inc. is requesting nearly $3 million in city and state incentives to add 350 full-time jobs in Jacksonville, Fla., according to a report in the Jacksonville Business Journal. The city is being considered along with three other areas in the nation for the jobs. The newspaper reported that the publicly traded LPS is requesting the incentives from the Jacksonville Economic Development Commission. If the JEDC recommends it, it will then go to the City Council for approval. The 350 jobs would have an average wage of $44,807 plus $11,202 in benefits, totaling an annual payroll of $15.7 million, according to LPS. "The proposed project will increase the visibility of Jacksonville as a financial services center, further strengthening a targeted industry and continue the redevelopment of downtown Jacksonville," the company said in its application to the JEDC. LPS would hire 175 people by the end of 2010 with the rest coming sometime next year.