Servicing

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.

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."