Servicing

GMAC Financial Services has hired Goldman Sachs to start the process of selling the company's money-losing mortgage unit Residential Capital Corp., according to a new published report. In recent weeks spokespersons for GMAC have repeatedly said that a sale is not under consideration at this time but only that the company is considering its "strategic alternatives." Several weeks back, news reports surfaced that GMAC had engaged Goldman and that Berkshire Hathaway was in talks with the company regarding ResCap, the nation's fifth largest residential servicer. As reported by National Mortgage News, over the past two weeks several managers have been let go in ResCap's servicing division, including 24-year veteran Tony Renzi. Investment bankers following ResCap say selling the company could prove difficult because of the representations and warranties the government-owned company would need to provide any buyer. The new report concerning ResCap was published by The New York Post. On Friday a GMAC spokeswoman declined to specifically address the sale issue raised by the Post story.

The Obama administration is working on a national program to address negative equity, but first it wants to test existing programs managed by state housing finance agencies. Finance agencies in Nevada, Arizona, Florida, Michigan and California are expected to submit proposals to the Treasury Department in a few weeks. "Many of these state agencies already have programs up and operational that we could enhance or change -- that could get going very quickly," HUD secretary Shaun Donovan told Senate appropriators. The Treasury Department is offering to divvy up $1.5 billion to state agencies, testing their efforts to assist underwater borrowers in negotiating with lenders to write down their mortgages. The funds also will be used to assist unemployed homeowners. "We want to test models that potentially could be used in other states," the secretary told Sen. Patty Murray, D-Wash., who chairs the Department of Housing and Urban Development appropriations subcommittee. Sen. Murray wanted to know if the 250,000 underwater homeowners in her state would benefit from the $1.5 billion program that President Obama unveiled in Nevada several weeks ago. "We are looking at broader national efforts around negative equity and unemployment that could target the issues that you are talking about in your state," Secretary Donovan said.

The Federal Deposit Insurance Corp. has extended its "safe harbor" policy for six months while its board continues to work toward the adoption of new securitization standards. The safe harbor, which was due to expire March 31, assures investors that the FDIC will not seize or delay payments on securitized assets sold by failed banks and thrifts. The blanket policy applies to all securitized assets. But going forward, FDIC chairman Sheila Bair wants to condition this protection to securitizations that meet certain standards. In November, FDIC issued a proposed rule that outlines new securitization standards, which are designed to prevent a re-occurrence of the originate-to-distribute model that fueled the subprime boom. The standards include risk retention that would require banks to retain 5% of the credit risk when they securitize mortgages and other assets. The comment period on the proposal ended February 22 with the proposal drawing strong opposition from several industry groups. Even FDIC directors are divided on the issue. However, chairman Bair says she cannot ignore the losses FDIC has suffered due to the "misaligned incentives in mortgage finance. We hope to foster a sustainable securitization market that emphasizes transparency, improved clarity in transaction structures and responsibilities," she said. "We appreciate the board's decision to extend the existing Safe Harbor protection to September 30th," said Tom Deutsch of the American Securities Forum. "As our members indicated in our letter to the FDIC last month, the ASF strongly believes the proposals, which include significant preconditions for safe harbor protection, will create substantial uncertainty for investors, thus harming the drive to reopen securitization markets and get credit flowing to Main Street," the AFS executive director said.

Data from Integrated Asset Services LLC, Denver, Colo., show that national home prices fell 2.3% in January, when there was somewhat less variation than usual at micro-market levels. The IAS360 House Price Index said "severe winter weather" in large regions of the country likely lay behind the relatively widespread depressed home prices even in micro-markets. The default management and residential collateral valuations provider found that all four of the U.S. census regions fell in January. The Northeast was down another 0.5% and the South was down 2.2% due to double-digit declines in Georgia and Alabama. The West saw a 2.6% decline and Midwest prices dropped another 2.6% for the month, following a drop in December. The Midwest region, which includes hard-hit states like Illinois (-4.9%), Missouri (-4.4%), and Minnesota (-3.5%) has now given back all of its 2009 gains. In addition, national home prices saw their largest single-month decline in the index in over a year, down 30% from its high in mid-2007.

Most commercial mortgage investor groups saw an increase in their loan delinquency rates in the fourth quarter, according to data gathered by the Mortgage Bankers Association. MBA's Commercial/Multifamily Delinquency Report found between the third and fourth quarters, the 30-plus day delinquency rate on loans held in commercial mortgage-backed securities rose 1.63 percentage points to 5.69%. The 60-plus day delinquency rate on multifamily loans held or insured by Fannie Mae rose 0.01 percentage points to 0.63%. The 90-plus day delinquency rate on multifamily loans held or insured by Freddie Mac increased 0.04 percentage points to 0.15%. The 90-plus day delinquency rate on loans held by banks and thrifts rose 0.49 percentage points to 3.92%. In a rare bit of good news, the 60-plus day delinquency rate on loans held in life company portfolios decreased 0.04 percentage points to 0.19%. Jamie Woodwell, MBA's Vice president of commercial real estate research, said, "Continued job losses, consumer restraint and a lack of household growth all sustained the pressure on commercial real estate operations and mortgages during the fourth quarter."

Foreclosure filings were reported on 308,524 properties during February, according to RealtyTrac's monthly report. This represents a decrease of 2% from January but it is 6% above the level reported in February 2009. "The 6% year-over-year increase we saw in February was the smallest annual increase we've seen since January 2006," said James J. Saccacio, CEO of RealtyTrac. "This leveling of the foreclosure trend is not necessarily evidence that fewer homeowners are in distress and at risk for foreclosure, but rather that foreclosure prevention programs, legislation and other processing delays are in effect capping monthly foreclosure activity-albeit at a historically high level that will likely continue for an extended period." Default notices were reported on 106,208 properties, down 25% from their peak of more than 142,000 in April 2009. Foreclosure auctions were scheduled for the first time on a total of 123,633 properties, down 14% from their peak of more than 144,000 in August 2009. Bank repossessions were reported on 78,683 properties, a 10% decrease from January but an increase of 6% from February 2009. The amount of real estate owned properties was down 15% from its peak of more than 92,000 in December 2009 but was at nearly twice the level reported in February 2006. Six states accounted for 61% of the national foreclosure activity total. California led the way with 68,562 properties receiving a foreclosure filing, down 5% from January and down 15% from February 2009. Foreclosures in Florida increased 15% from January and more than 16% from February 2009. The state reported 54,032 properties received a filing. A total of 20,028 Michigan properties saw filings, up 14% from the previous month and up 59% from a year ago. With 17,312 properties with filings, Illinois posted the fourth highest total, followed by Arizona, with 16,718, and Texas, with 12,638 filings in February.

A scathing report by a Congressional watchdog examining the bailout of GMAC Inc. found that the Treasury Department did not adequately protect taxpayer money. The government should have orchestrated a strategic bankruptcy of the auto finance and mortgage lender last year rather than invest $17.2 billion to save it, according to a draft of the report to be released Thursday by the Congressional Oversight Panel of the Troubled Asset Relief Program. GMAC is the parent company of Residential Capital Corp., an active residential funder and the nation's fifth largest servicer. "The rescue came at great public expense," the 152-page report says. The oversight panel also found that GMAC was treated more favorably than other companies in comparable circumstances, including both General Motors Corp. and Chrysler Group LLC, which were forced into bankruptcy. Last month, the report says, the oversight panel asked for "assurances from witnesses" that no third-party shareholder in GMAC would receive a return on its investment before taxpayers. The government currently owns 56.3% of the company. "The fact remains that the only way to ensure that result would have been through a bankruptcy," the report stated. "The panel remains unconvinced that in 2008 or very early 2009 bankruptcy or a similar restructuring, including a sale of the automotive financing business, was not a real possibility; nor has the panel been convinced that even now a GMAC or ResCap bankruptcy or sale of the automotive financing is impossible." In 2006 a consortium led by Cerberus Capital agreed to pay $14 billion for a 51% stake in GMAC. After the government takeover of the company, Cerberus' position in GMAC has been severely reduced with the value of its investment becoming almost worthless.

ResCap has been working to change a practice involving the netting of cash flows of multiple residential mortgage-backed securities deals serviced by its GMAC Mortgage LLC subsidiary. The practice recently led to Moody's Investors Service to put $5.9 billion in RMBS serviced by GMACM on review for possible downgrade. A call placed to Moody's late Tuesday about whether it might change the rating status of the GMAC-serviced RMBS as a result had not been returned at press time Wednesday. "The practices in question involve commingling and netting of the cash flows of multiple RMBS deals in a shared custodial bank account," Moody's said in its original report explaining the review. "If these competing claims are successful in diverting cash, they could adversely affect the probability that certain of the affected RMBS could be paid in full." In a statement, ResCap said it "is in the process of separating the trusts into individual custodial bank accounts, which it believes it will resolve any issues." ResCap said it "has presented this change to Moody's and is awaiting their review." A call to ResCap about how far along it is in making the change had not been returned at press time.

The sale of commercial mortgage-backed securities servicer Centerline Servicing Inc. to an Island Capital affiliate has reversed the ratings damage caused by its corporate parent's financial woes, according to analysts. Fitch said Wednesday due to CSI's sale to C-III Capital Partners LLC it has upgraded CSI's CMBS servicer ratings, reversing a December 2009 downgrade based on the financial condition of its corporate parent, Centerline Capital Group. Fitch, which noted that its servicer ratings in part are driven by companies' ability to retain staff and their operational strength, said C-III "has indicated that it plans to retain CSI's servicing management and staff, its servicing and asset management systems and policies and procedures."

ICP Capital has agreed to transfer its domestic and international capital markets businesses to PrinceRidge Holdings LP to create an international investment-banking boutique serving investors and issuers in the institutional fixed income markets. The combined firms will operate under the PrinceRidge Holdings name and ICAP will become a partner of PrinceRidge. ICP president and CEO Tom Priore will be advising on the combined firm's continuing international expansion as well as "strategic development initiatives" in the United States. The companies expect integration and closing to be completed in the second quarter, subject to regulatory approvals. PrinceRidge has been working on a capital markets effort targeting the underserved U.S. jumbo mortgage market.