Servicing

The mortgage industry shed 3,500 full-time workers in January, after shedding 1,900 jobs the previous month, according to new government figures. The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector fell to 250,000 from 253,500 in December. Overall, the mortgage industry reduced its workforce by 9% over the past 12 months. Major lenders have relied on outsourcing and temporary workers to deal with fluctuating loan demand. BLS reported that 48,000 temporary jobs were created in February. Since September 2009, "temporary help services employment has risen by 284,000," BLS said. The nation's unemployment rate held steady at 9.7% in February and only 36,000 workers lost their jobs despite severe winter weather in parts of the country. It also may be a good sign for servicers that the number of long-term unemployed persons has been holding steady for the past three months, but still remains at a high level. The new jobs report shows the number of persons that have been unemployed for more than 27 weeks was 6.1 million. (There is a one-month lag in BLS reporting of mortgage industry employment data.)

The 30-day delinquency rate on securitized multifamily mortgages hit 9.87% in February, up 16 basis points from January, according to Trepp LLC. The expected default on the Stuyvesant Town and Peter Cooper Village apartments in Manhattan could push the delinquency rate close to 13%, according to the New York firm, which tracks the performance of commercial mortgage-backed securities. The owners are still current on the $3 billion in mortgage debt. But they have nearly depleted the 11,000-unit complex's reserves in making the last payment, according to Trepp analysts. The Trepp report shows that the 30-day or more past due delinquency on all securitized multifamily and commercial mortgages hit 6.72% in February, up from 1.67% a year ago. The serious delinquency rate (60-days or more past) on CMBS is 5.97%, up from 1.3% a year ago. The Federal Deposit Insurance Corp. recently reported that 1.2% of multifamily mortgages held by banks and thrifts are 30-89 days past due. The delinquency rate on other commercial mortgages is 1.24% as of December 31.

There are flat quarter-over-quarter price changes against year-over-year home price gains of 5% said the latest Clear Capital Home Data Index Market Report. This is based on data through February 2010. According to the Truckee, Calif.-based data provider all four regions posted very consistent 1.4% quarterly price changes, which company analysts called encouraging. Despite the slowdown due to negative economic news and the threat of more real estate owned properties hitting the market "prices have remained positive through the first two months of the year," said Alex Villacorta, senior statistician at Clear Capital. Providence, R.I., rose to the top of the highest performing markets list with a 6.1% quarterly price change. In Los Angeles, prices gained 2.2% for the quarter, giving California five of the 15 highest performing markets. REO saturation edged up in 11 of 15 of these markets this month by an average of 1.3%. At the same time REO saturation is expected to increase this month, while traditional non-distressed sales wait to be listed in the spring and summer months, the report says. An increase in demand may precede the end of the April tax credit deadline when home prices may dip slightly into negative territory before getting an added boost back. The Boston area, one of the first to see prices drop at the beginning of the downturn, saw yearly home prices recover 6.9%.

Mortgage loan servicer Ocwen Financial Corp. will be a buyer of mortgage servicing rights portfolios in 2010. The company had net income of $9.4 million for the fourth quarter of 2009. This compares to a net loss of $4.3 million for the fourth quarter of 2008. For the full year, West Palm Beach, Fla.-based Ocwen had net income of $272 million, down from net income of $13.2 billion for 2008. Chairman and chief executive William Erbey said "Strategic priorities for 2010 are: establish predictable and sustainable revenue growth in our servicing operations, improve process efficiencies to further reduce costs, improve quality, and reduce asset intensity and, therefore, enhance return on equity." As part of its revenue growth plan, Ocwen is actively seeking servicing rights portfolios to purchase. Mr. Erbey said "we are evaluating four servicing acquisitions, two of which, totaling $35 billion, are nearing final decisions." During the fourth quarter 2009, its servicing portfolio grew $9.7 billion or 24% from the end of the third quarter to $50 billion. Income from operations grew by 21% over the third quarter of 2009 principally due to an increase in revenues in the servicing segment of $9.4 million. The company completed modifications for the fourth quarter of 15,677 exceeding the top end of its previous guidance of 10,000 to 15,000. The 124% increase over third quarter modifications included 4,296 HAMP modifications. Full year profitability at the company was affected by a $50.6 million one-time tax expense arising from the separation of Altisource Portfolio Solutions S.A. (formerly Ocwen Solutions) in August, and the fourth quarter valuation allowance related to a non-cash deferred tax asset arising from deductibility of losses in a finance vehicle.

Fannie Mae purchased $54.9 billion of mortgages from its seller/servicers during January, a 23% drop from December but a significant improvement over the same month last year. In December the GSE bought $71.8 billion in loans, while in January 2009 - with the credit markets still reeling - it purchased just $28.8 billion. Fannie's purchase volume is a reflection of origination activity in the primary market. Mortgage and housing economists anticipate that residential loan volume will total anywhere from $1.2 trillion to $1.7 trillion this year, depending on where interest rates and employment wind up. Meanwhile, in its most recent activity report, Fannie noted that the serious delinquency rate on its single-family loans rose only 9 basis points in December to 5.38%, after jumping 135 bps over the previous five months. (The GSE's delinquency figures lag by one month.) It is the smallest monthly increase since July 2008 when the percentage of Fannie loans 90 days or more past stood at 1.45%. The GSE expects its serious delinquency rate will remain high in 2010, but the growth of that rate will moderate. "We anticipate that the pace of loans transitioning out of serious delinquency status will increase as the number of foreclosures and problem loan workouts that we complete increases," Fannie said in a recent earnings statement. The monthly activity report also shows that delinquency rates on Fannie multifamily loans fell 3 bps in December to 0.63%. Fannie issued $47.6 billion in mortgage-backed securities in January, down from $55.4 billion in the previous month. In 2009, Fannie MBS issuance totaled $807.9 billion, compared to $542.8 billion in 2008.

One series of a Freddie Mac index based on purchase transactions shows conventional home prices ended 2009 with a much smaller small year-to-year decline than was seen in 2008. Freddie's purchase-only series of its conventional home price index inched down 0.4% from the fourth quarter of 2009 from the same period in 2008, compared to a 9.5% drop in home prices during 2008. Between the third and fourth quarter of 2009, the U.S. index registered a 1.4% decline on an unadjusted basis. "We normally see a seasonal effect in the fourth quarter price index that reduces its value. A year-over-year comparison largely controls for this," said Freddie Mac chief economist Frank Nothaft. During 2009, "four-of-nine regions posted price gains, with the Pacific region showing a third consecutive quarterly gain as well as an annual increase in prices," he said. Another series of Freddie's conventional home price index that also includes data from appraisals from refinance deals shows typical U.S. home values depreciated 2.3% during 2009. This "classic" series shows average home values falling 0.7% in the fourth quarter of last year. "Generally, because appraisals are backwards looking through the use of recent comparable property transactions, the classic series will typically lag changes in the purchase-only series," Freddie Mac said.

Industry groups are urging Senate Banking Committee members to consider a proposal that would exempt mortgages with strong underwriting standards from the risk retention requirements of a financial regulatory reform bill. The backers of a "qualified mortgage" exemption are concerned the current language in the bill treats securitizations of risky and non-risky mortgages the same, which will increase costs for creditworthy borrowers using low-risk mortgages. An early version of the Senate bill required securitizers to retain 10% of the credit risk when they sell loans into the secondary market. A new study commissioned by mortgage insurer Genworth Financial shows that nonprime mortgages originated between 2002 and 2008 performed 2.9-times worse than traditionally underwritten mortgages that had full documentation and safe product designs. "This study demonstrates why Congress should not impose an arbitrary risk retention requirement on all loans sold in the secondary market," said Glen Corso, managing director of the Community Mortgage Banking Project. Committee members are still trying to reach a bi-partisan agreement on a reform bill. CMBP, the Mortgage Bankers Association, and the Financial Services Roundtable Housing Policy Council are hoping the committee will totally exempt qualified mortgages from the risk retention requirements.

Barclays Capital is taking orders from investors on at least one Federal Deposit Insurance Corp. structured note deal with two others on the way as the government moves to monetize at least $4 billion worth of product, according to hedge fund and investment bankers familiar with the matter. Two offerings by Barclays - both private placements - are actively being discussed in the market: a $1.33 billion floating rate deal, and a $480 million fixed-rate transaction. "The FDIC is putting a 100% guarantee on these," said one investment-banking source. The collateral includes residential and construction loans culled from failed banks. The buyer will pay a fraction of the assets' value, work the underlying loans, and share some of the upside with the government. But by selling structured notes, the agency will receive some cash upfront. At least one of the deals could close this week. The FDIC and Barclays declined to comment.

Specialized Asset Management, a national provider of asset marketing and disposition services, is partnering with RealtyTrac to market its foreclosed property listings. The move will help SAM display its assets to RealtyTrac's customers. "Marketing our REO assets to RealtyTrac's visitors provides us with additional marketing visibility to help liquidate our REO assets," said Rudy Krupka, vice president of REO at Specialized Asset Management. "Our strategic partnership with RealtyTrac will assist our agents in promoting the properties to interested buyers across the country." RealtyTrac says the number of foreclosures is expected to increase significantly in 2010 as millions of payment option ARMs and alt-A mortgages reset in the next 12 to 18 months and double-digit unemployment plagues the national economy this year.

The Eleventh Federal Home Loan District Cost of Funds Index declined by four basis points between December 2009 and January 2010 as it continues to seek its new normal level following the disruption in the November calculation. For January, COFI is 1.786%, compared with December's 1.828%, according to the Federal Home Loan Bank of San Francisco. In November, Wachovia Mortgage FSB was removed as a contributor to the Index, which is calculated using data from the eligible thrift members of the FHLB-SF. As a result, there was a spike in COFI for November. The total average funds for the January calculation is $34.7 billion, while the total interest expense is $55.7 million. Both figures are in line with the data used to make the November and December calculations. When compared with January 2009, COFI is 67 basis points lower; at its lowest point during 2009 in October, the Index was 120 bps lower than in January. For comparative purposes, the Freddie Mac Primary Mortgage Market survey found the average 30-year fixed rate mortgage rate for January 2010 is only 2 bps under January 2009 and the lowest it fell to for the year was only 24 bps below the start of the year in April. For the one-year adjustable, the January 2010 rate is 59 bps lower than one year prior, a 2 bps increase over the lowest point recorded in 2009, for December.