Servicing

GMAC Financial Services has come to market with a $22 million package of nonperforming residential loans that were culled from securitizations. A company spokeswoman noted, "The vast majority of these loans are not part of ResCap's owned loan portfolio. This type of transaction is something we have done and continue to do in the normal course (of business)." GMAC's mortgage affiliate, Residential Capital Corp., is the servicer of the underlying loans. A few weeks back it put out for bid a $250 million package of NPLs. It said the offering went well but has not released any information on which firm was the winning bidder or the price paid.

The Federal Open Market Committee issued a statement Tuesday indicating that the Federal Reserve will follow through with its plans to end its purchases of agency mortgage-backed securities this month as well as with plans to end a program supporting loans backed by new-issue commercial MBS in June. The agency MBS and debt purchases "are nearing completion, and the remaining transactions will be executed by the end of this month," the FOMC said. However, the committee also noted that it will "continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability." The FOMC also said in its statement that the Fed plans to follow through with its plans to close its Term Asset-Backed Securities Lending Facility program for loans backed by new-issue commercial mortgage-backed securities on June 30 and close the TALF program for loans backed by other types of collateral by March 31.

While delinquency rates in the U.S. have risen to historic highs, the pace of deterioration has slowed, according to the February 2010 Mortgage Monitor report by Lender Processing Services Inc. in Jacksonville, Fla. Nearly 7.5 million loans are in some stage of delinquency or foreclosure, with an additional 1 million properties in REO or post-sale foreclosure. Approximately 2.5 million loans that were current on Jan. 1, 2009, were 60 or more days delinquent (including foreclosures) as of Jan. 31, 2010. Despite extraordinary loss mitigation efforts that have resulted in the execution of approximately 2 million loan modifications, including the federal government's Home Affordable Modification Program trial periods, LPS said the number of new delinquencies since Jan. 1, 2009, still exceeds this number by 25%. More than 31% of loans that have been delinquent for six months are not yet in foreclosure, while 22.8% of loans delinquent for 12 months have not been moved to foreclosure status (up from 9% in 2008). While the total loan delinquency rate was 10.2%, the foreclosure inventory rate was 3.3%. The total noncurrent loan rate was 13.5%, and states with the most noncurrent loans included Florida, Nevada, Mississippi, Arizona, Georgia, California, Indiana, Illinois, Michigan and Ohio. States with fewest noncurrent loans included North Dakota, South Dakota, Alaska, Wyoming, Montana, Nebraska, Vermont, Colorado, Oregon and Washington.

First American Corp., Santa Ana, Calif., in preparation for the split of its title and information services businesses into separate publicly traded companies, has named Anand K. Nallathambi as chief executive and Buddy Piszel as chief financial officer of its information solutions group. Mr. Nallathambi, who was appointed president and chief operating officer of the ISG in December, will continue to serve in those capacities. Mr. Piszel will continue to serve as the parent company's chief financial officer. The company's Financial Services Group will commence a search for Mr. Piszel's replacement as its chief financial officer. The target date for the split is June 1. Mr. Nallathambi previously served as chief executive and president of First Advantage Corp., which, until November 2009, was a majority-owned public subsidiary of the company and a business segment within the Information Solutions Group. Mr. Piszel joined the company as chief financial officer in January 2009. Prior to that, he was executive vice president and chief financial officer for Freddie Mac. In a separate announcement, First American said it would purchase the remaining 18% of First American CoreLogic that it does not already own. Parker S. Kennedy, chairman and chief executive of First American, said the purchase of the outstanding shares will simplify the structure as the information solutions group, which First American CoreLogic is a part of, moves toward being spun off. "This acquisition will result in an extra measure of flexibility and operational efficiency that will be beneficial as we develop our next-generation analytic capabilities for the financial services and capital markets industries," he added.

A new Consumer Financial Protection Bureau could examine any mortgage banking company, servicer or mortgage brokerage and take enforcement actions against those entities if the Senate passes a bill crafted by Banking Committee chairman Christopher Dodd, D-Conn. The CFPB would be housed at the Federal Reserve Board but operate as an autonomous unit when writing rules to curb abusive mortgage lending and credit card practices at banks and nonbanks. If a banking regulator objects to a CFPB rule, it would take a two-thirds vote of the members of the new Systemic Risk Council to kill the rule. The CFPB's authority over banks and credit unions depends on size. Institutions with assets over $10 billion could be subject to the bureau's exams and enforcement actions. The primary regulators of smaller institutions would retain that authority. Sen. Dodd said he wants the banking committee to markup and vote on his "Restoring American Financial Stability" bill next week. The massive bill merges the Office of Thrift Supervision into the Office of the Comptroller of the Currency, regulates derivatives, increases oversight of credit rating agencies and establishes risk retention for mortgage-backed securities.

The number of apartment units under construction at the end of February plunged to 180,000 dwellings on a seasonally adjusted annual basis, according to new figures released by the Commerce Department. The government found that construction of buildings with five or more rental units fell 51.4% compared to February 2009. The sequential decline was less startling: down 6.7%. (The numbers represents dwellings that are "under construction" at month's end, not necessarily started.) The poor performance is being blamed, in part, on severe snowstorms in the mid-Atlantic and Northeast. Construction of one-unit dwellings fared better in February: 301,000 (seasonally adjusted), a slight increase from the January rate but an 18% decline from February 2008. Total housing starts-which include both one-to-four family and multifamily construction-fell by almost 6% in February from January but posted a small gain compared to the same month a year ago. The government's report on housing comes a day after the National Association of Home Builders said builder confidence in the market is falling due to poor weather conditions and distressed property sales, the latter of which is suppressing housing prices. Also, there are concerns among both builders and lenders that the government's departure from the MBS market as a buyer could cause mortgage rates to rise in the coming weeks.

PennyMac Mortgage Investment Trust, a publicly traded vulture fund, says in a new public filing that it is exploring the idea of purchasing distressed condominium construction loans and growing its residential servicing business. In a filing with the Securities and Exchange Commission, the Calabasas, Calif.-based company says it would like to buy condo construction loans at a discount and then finance the completion of projects. "This solution creates the opportunity to effectively repackage distressed developer loans into high-quality residential loans." As for the MSR market, PennyMac thinks it can buy servicing rights from "liquidating and other institutions." PennyMac is currently subservicing more than $2 billion in troubled loans for outside parties.

Kondaur Capital Corp., an Irvine, Calif.-based mortgage vulture fund, recently laid off 44 asset managers as part of what the company calls a purging of "underperforming" personnel. Company CEO Jon Daurio said the mortgage investor laid off the workers on March 5, but then on Monday, March 8, hired eight new asset managers, bringing its total AM staff to 160. He downplayed the layoffs, adding that it's the "normal course" of business to let go asset managers that do not perform well. "We normally let 10 to 15 people go a month." Competitors in the mortgage space took notice of the cutbacks, and at least two firms located in the same vicinity received inquiries from some of those who were let go.

Over the past 12 months consumers have seen the paper value of their homes rise by $1.1 trillion, the first year-over-year increase in almost four years, according to a new report by Deutsche Bank. DB analysts write that the "upshot" is that household buying power in the first quarter "will show a meaningful improvement relative to recent history." Basing its estimate on figures compiled by the Federal Reserve, DB says home equity grew by $540 billion and $420 billion in the second and third quarters of last year, respectively, and less slowly in the fourth quarter. Even though DB seems somewhat bullish on home values, the housing and mortgage markets fear that when the government halts its MBS buying program on March 31 that rates could rise on 30-year fixed-rate loans, snuffing out an improvement in housing values. Concerns remain on delinquencies and an anticipated wave of foreclosures if both employment and values do not improve over the next two quarters.

The mortgage industry is becoming increasingly worried that if risk retention language for MBS in a new bill from Sen. Chris Dodd is not clarified, nonbanks could disappear, the nation's megabanks will get even larger, and consumers will have fewer retail choices. In particular, mortgage bankers fear that a 5% risk retention requirement will apply to all loans, particularly "A" paper credits guaranteed by Fannie Mae and Freddie Mac, which currently account for 70% of all fundings. The capital requirement could force small- to medium-sized lenders to either exit mortgage lending/servicing entirely or become correspondents for Wells Fargo, Bank of America and JPMorgan Chase, the three largest players in residential finance. "This will cause a huge rollup of mortgage bankers," one former MBS trader said. "At a time when the government wants to prevent 'too-big-to-fail' they will be creating more of it. The big banks will be in charge." The Community Mortgage Banking Project, a trade group headed by former mortgage insurance executive Glen Corso, says the new Dodd bill "needs a clear exemption for well underwritten, lower-risk traditional loans." The senator's financial regulatory overhaul bill requires securitizers to retain at least 5% of the credit risk when loans are packaged into bonds. The legislation that Sen. Dodd will mark up next week allows federal banking regulators and the Securities and Exchange Commission to reduce the risk retention on loans that exhibit high-quality underwriting. However, the direction given the regulators seems to be very vague when clarity is needed, one source said. Industry groups are urging the lawmakers to create an exemption for 30-year fixed-rate mortgages and other "qualified" loans. But the Dodd bill does not provide such a blanket exemption. The regulators also have the discretion to require originators to retain a portion of the credit risk.