Servicing

Freddie Mac has issued guidance to assure lenders they can continue to originate loans on flood-prone properties despite a temporary shutdown of the National Flood Insurance Program. Freddie requires lenders to continue to perform flood zone determinations and follow normal flood insurance policies, according to the March 29 guidance. The secondary market agency said it will purchase loans if borrowers have completed an application for flood insurance and evidence shows they paid the insurance premium. The Federal Management Emergency Agency's authority to issue and renew flood insurance polices expired March 28 after the Senate failed to pass a NFIP extension. Congress is now on recess until April 12. During this hiatus, FEMA cannot write new flood insurance policies, renew policies or increase coverage. However, it is not a violation of law to originate loans when flood insurance is not available. "You can go ahead and originate and close a loan," said Vicky Vidal of the Mortgage Bankers Association. The MBA associate vice president indicated it is pretty much business as usual. "If the servicer and homeowner have received a renewal notice and pay it, it will be honored and the policy will not lapse," she said.

The National Foundation for Credit Counseling is celebrating April as Financial Literacy Month with the launch of termineconsudeuda.org, designed to educate Spanish speakers about financial challenges related to job loss, foreclosure, and consumer debt obligations. Education tools available on the site include a consumer tips section, a budget worksheet, multiple calculators and consumer tips articles, credit counseling process information, answers to frequently asked questions, and information on how to locate an NFCC Member Agency to set an appointment for counseling. It adds to previous NFCC products available in Spanish such as: Claves Para Ser Propietario (Keys to Homeownership), Mejore su Suerte (Better Fortunes), Hay Mas de Una Salida (More than One Way Out), Viva Una Vida Mas Plena (Live a Richer Life), a financial recovery roadmap post-bankruptcy, and a free DVD about foreclosure. The NFCC network of member agencies includes hundreds of trained and certified Spanish-speaking counselors.

The Association of Mortgage Investors has put together a white paper for Congress and regulators as they consider ways to revitalize private sector demand for mortgage asset-backed securities. The association of institutional investors and asset managers offers a set of "guiding principles" that according to a representative are based on lessons learned over the last three years. It includes providing loan-level information investors, rating agencies and regulators can use to evaluate collateral both at pool underwriting and over the life of a securitization; it requires an after securitization "cooling off" period that gives investors time to review and analyze loan-level information; it makes deal documents for all asset-backed securities and structured finance securities publicly available; it directly addresses conflicts of interest between servicers and investors.

The Veros quarterly forecast shows improvements in some hard-hit markets such as California, while continued bad news is reported for Florida.For example, a growing number of coastal areas in California are showing modest signs of appreciation, along with San Diego's Carlsbad and San Marcos sections, which are leading with an expected appreciation of +3.4%. Los Angeles and San Francisco are close behind, even though they were not among the top five in the last quarter. Meanwhile, "The Great Plains region including Texas remains steady." Veros Real Estate Solutions' Eric Fox reports that although there are no overwhelmingly strong appreciating forecasts among the larger metropolitan areas, "the depreciating forecasts are noticeably milder than a year ago." The Santa Ana, Cal., based risk management and collateral valuation services provider also reports its forecast update for March 2010 through March 2011 indicates gradual improvement of property value trends in some markets of key interest.

Home prices in most metro areas will continue to fall before they stabilize at real prices below the lowest levels of the last 20 years, according to the House Price Forecast Index by University Financial Associates of Ann Arbor, Mich. One of the worst examples is Detroit, where 10 years of real price gains were erased in just four years. The report describes the Detroit metro area as "the canary in the coal mine this cycle," where falling house prices arrived earlier than in other areas. Further researchers note that other metros that have already or will soon converge to pre-bubble real prices include Las Vegas, Phoenix, inland California, and many south Florida metros.

According to February 2010 data from the Hope Now alliance and the Treasury's Home Affordable Modification Program a total of 148,000 loan modifications were provided to homeowners, of which 52,905 were HAMP modifications. Hope Now estimates 95,586 homeowners received proprietary loan modifications for the month. Approximately 78% of the proprietary loan modifications completed in February included reduction of principal and interest, and a lower monthly payment for at-risk homeowners. Data also showed that foreclosure starts and sales dropped 17% for the month, along with a 4% decrease in the number of 60+ day delinquencies. The total number of loan workout plans provided to homeowners (including repayment plans) in February was 279,831.

The Mortgage Partnership Finance program developed by the Chicago Federal Home Loan Bank has morphed into a mortgage conduit program that has delivered nearly $3.4 billion in single-family loans to Fannie Mae. The Chicago bank launched the controversial MPF program in 1997 to purchase loans from FHLBank members and compete with Fannie and Freddie Mac. Other FHLBanks participated in the MPF program. Under financial and supervisory restraints, the Chicago FHLBank stopped purchasing MPF loans in August 2008 and introduced a MPF Xtra loan product that it could sell to Fannie. Since its introduction in the fourth quarter of 2008, the Chicago bank has sold $3.4 billion in MPF Xtra loans to Fannie, according to the 12 Federal Home Loan Banks' annual combined financial report. The Boston, Des Moines, New York, Pittsburgh and Topeka FHLBanks also offer the MPF Xtra product to their members.

Fannie Mae issued $44 billion in mortgage-backed securities in February, down 7.6% from the previous month. The government sponsored enterprise also reported that its holdings of Fannie guaranteed MBS fell 4.3% to $318.8 billion in February. The monthly activity report shows that Fannie's serious delinquency continued to rise. The percentage of Fannie single-family loans 90-days or more past due hit 5.52 in January, up 14 basis points from December. Fannie's serious delinquency rate has doubled since January 2008 when it was 2.77%. Unlike Freddie Mac, Fannie does not report on its purchases of refinanced loans in its monthly summary. However, the GSE regulator reported recently that Fannie purchased 141,200 refinanced loans in January, down from 170,600 in December. Over 15,000 of those loans were refinanced through the Home Affordable Refinancing Program, which involves mortgages with loan-to-value ratios above 80%. Federal Housing Finance Agency data show that Fannie completed HARP refinancings on 626 loans with LTVs between 105% and 125%, compared to 521 in December.

The Obama administration is funding foreclosure prevention programs in five more states that are suffering from high rates of unemployment and home foreclosures. The five states -- North Carolina, Ohio, Oregon, Rhode Island and South Carolina --will share in $600 million that will be funneled though state housing finance agencies. To gain access to the "Hardest Hit Fund," the housing agencies will have to submit "innovative" plans to the Treasury Department for assisting unemployed homeowners and providing incentives for servicers/investors to modify loans and reduce principal. In the first round, California, Arizona, Florida, Michigan and Nevada were selected as the hardest hit states. Housing finance agencies in those states are in line to share $1.5 billion in funds when Treasury approves their foreclosure prevention plans. "We want to test models that potentially could be used in other states," HUD secretary Shaun Donovan recently told a Senate committee.

Lenders participating in a new Federal Housing Administration refinancing program to help homeowners with underwater mortgages can pool those FHA loans in standard Ginnie Mae mortgage-backed securities. In reducing the principal to a 97.75% loan-to-value ratio, the "FHA Short" refinancings will be treated like standard FHA refinancings and placed in Ginnie Mae I and Ginnie Mae II pools, according to sources. A previous FHA principal reduction program, known as Hope for Homeowners, had more restricted pooling options. Ginnie Mae only allowed pooling of H4H refinanced loans in multiple-issuer MBS. The Obama administration unveiled its new FHA Short Refinancing program last Friday and it requires principal reductions of at least 10%. FHA officials said claim and default rates on these refinancings won't be counted toward the lender's Credit Watch score.