Servicing

Freddie Mac reported that 4% of its single-family mortgages are 90 days or more past due, up from 2% in January of 2008. The serious delinquency rate edged up 16 basis points in January to 4.03%, according to the GSE's monthly activity report. The secondary market agency's report also provides investors with an update on the delinquent mortgages the GSE is buying out of its existing mortgage backed securities. On Feb. 10, Freddie said it will purchase all loans that are 120 days or more past due out of its MBS. The update on MBS coupons affected shows that $71.5 billion in loans were eligible for purchase as of Jan. 31. Freddie will disclose its initial purchases in a March 4 report. Meanwhile, Freddie purchased $22.6 billion in refinanced loans in January, down from $27.3 billion in the previous month. MBS issuance totaled $36.6 billion, down from $44 billion in December. For all of 2009, Freddie issued $475.4 billion in MBS, compared to $357.9 billion in 2008.

Two-thirds of the households that sold their homes in California last year did so because they couldn't make their mortgage payments, as changes in family and employment status took hold, according to the state's brokerage community. California is the largest mortgage market in the nation. Tighter loan underwriting standards and a decline in equity also continued to impact the market in 2009, leaving owners with little equity and making it difficult, if not impossible, to refinance, the California Association of Realtors said in its latest survey of home sellers in the Golden State. "Many homeowners chose to sell last year because their adjustable-rate mortgage reset at the same time home prices were experiencing an unprecedented decline," said CAR president Steve Goddard. Financial difficulties also impacted the ability of sales to close on time, with 63% of all deals falling out of escrow prior to closing. Nearly seven out of 10 of sellers cited "buyer could not get an acceptable mortgage" and more than six of 10 said "buyer backed out" as the primary reasons the sale fell through. Other reasons included "buyer's remorse," 26%; "lender withdrew and did not fund," 24%; and "home prices continued to decline," 18%. Once a deal made it to the closing tables, half the sellers reported that escrow did not close on time. The median difference between the selling and listing price was $32,315, but the list-to-sold-price ratio was significantly larger for first-time sellers ($30,000 below list price) than those who had previously sold a home ($8,000 below list).

GMAC Financial Services has forced out six managers in the servicing division of Residential Capital Corp. as part of a belt-tightening effort at the company. A GMAC official confirmed the layoffs to National Mortgage News but would not provide any further details. (For the full story including who was let go see the Monday paper edition of NMN.) Meanwhile, GMAC is quietly shopping around more than $2 billion in troubled loans to investment banking companies and hedge funds, according to officials familiar with the talks. "There's no offering circular yet," said one New York hedge fund executive "but there are plenty of conversations." A GMAC spokesman declined to comment about the troubled loan talks. The cutbacks at ResCap came a few days before GMAC CEO Michael Carpenter told a Congressional panel that the company is planning an initial public offering in the next two years. Elected officials pressed Mr. Carpenter on his plans for ResCap and once again he repeated that GMAC, which is 56% owned by the government, is exploring its strategic options. He noted that ResCap has been successfully walled off from the rest of the organization. "I look at ResCap as a problem to be solved, not an opportunity," he said. A spokeswoman added that GMAC wants to minimize risk at the company but wants to "support our role as the fifth largest servicer serving three million homeowners."

At least 1,000 victims have lost more than $100 million in cases of real estate fraud — including loan modification scams — referred to a special unit of the Orange County District Attorney's office, according to a new report. "The number of referrals has been overwhelming, with more than 346 referrals to date," says a report issued by the DA's office. (The unit that investigates RE fraud was launched last year.) The report's findings were first published by The Orange County Register. The DA says a "vast majority" of referrals have come directly from victims of real estate fraud directly to its office. A "significant number" of cases involve loan modification schemes, it said. Several cases were cited, including one in which three men were charged with 101 counts of fraud in a loan modification scheme.

Mortgage Bankers Association leaders speaking at the opening session of this year's national servicing conference in San Diego said that current challenges are resulting in a greater spirit of cooperation within the industry and with the government that will continue throughout the year. Addressing 2,200 people, the MBA's president and CEO John Courson said that this year will be the year of dynamic strategic planning to create processes that bring the organization to assist the industry into an "Apollo 13" type of safe landing, alluding to the troubled space mission during which astronauts faced life-threatening challenges coming back to earth but ultimately prevailed. Despite challenges such as capacity shortages and a flood of regulations, Mr. Courson said servicers have done a good job with modifications. These also have been complicated by other challenges such as the fact that up to 60% of borrowers do not file complete loan-mod packages, a situation that has required multiple contacts and exhausted servicer resources, he said. Expectations do not fit the reality of things so the MBA is proposing specific programs to assist both servicers and borrowers especially those forced into unemployment. MBA's chairman Rob Story said that the organization is now focusing on putting together suggestions and tools that will help servicers deal with sometimes "unnecessary" regulatory requirements that "undermine" their efforts to complete more loan modifications. Cooperation is very important, he said, noting that there should not be competition over foreclosures. "Every good idea should be considered," said Mr. Story.

House prices fell 1.6% in December and wiped out price gains in November and October, according to the Federal Housing Finance Agency. On a seasonally adjusted basis, the FHFA house price index fell 0.1% in the fourth quarter and it is down 1.2% for 2009 after dropping 8.2% in 2008. The GSE regulator originally reported that house prices rose 0.7% in November and 0.4% in October. But the increases were revised downward to 0.4% in November and 0.2% in October. "The decline in prices in the fourth quarter was much more significant when measured without seasonal adjustment. The unadjusted national decline was 1.5%, a much larger drop than the 0.1% decline measured on a seasonally adjusted basis," FHFA said.

Freddie Mac could lose up to $700 million because of the failure of Taylor Bean & Whitaker — $200 million more than previously disclosed. The Florida-based nonbank sold mortgages to Freddie and as recently as 2008 accounted for 5% of its total purchase business. In a new filing with the Securities and Exchange Commission, the GSE says the bankrupt TBW owes it money for loan buybacks and on servicing-related charges. In November, Freddie said it might lose $500 million on TBW but has since updated that estimate. The government-controlled mortgage giant said its seller/servicers are not honoring buyback requests in a timely manner with $4 billion of loan repurchase requests unfulfilled at yearend. TBW failed in August of last year.

PacWest Bancorp, San Diego, sold $323.6 million of problem loans to an unnamed institutional buyer for $200.6 million in cash. Included in the sale were $144 million of real estate construction loans, $117 million of commercial mortgages (consisting of loans secured by owner-occupied properties, retail properties and hotel properties), $25 million of multifamily mortgages and $30 million of single-family mortgages. PacWest said the total balance of the loans sold was as of Feb. 23; the balances given in the breakout by loan type was as of Dec. 31, 2009. None of the loans sold were "covered loans" obtained when PacWest acquired Affinity Bank, Ventura, Calif., in a Federal Deposit Insurance Corp. transaction last August. There were a total of 61 loans sold. Approximately $108 million was on nonaccural status. The expected after-tax loss related to the sale is expected to be $41 million. PacWest chief executive Matt Wagner said, "Removing almost $324 million of problem loans from our portfolio in a single transaction creates tremendous opportunity for the company. We remain cautious and vigilant with respect to credit, and our existing loan portfolio is subject to uncertainty and volatility given the fragile economic environment. Without these problem loans, however, and given the significant earnings power of our company, we believe PacWest is well-positioned to grow, both organically and through acquisition."

The pace of existing home sales decreased year-to-year in January in California, but the inventory of unsold units sitting on the market waiting for buyers dropped as well, according to the California Association of Realtors. Sales were off 10.6% from the same month a year ago, CAR said. Nevertheless, the pace of sales remained above the half-a-million-units-a-year threshold for the 17th consecutive month. In that regard, the sales pace is "holding steady at prepeak levels from early in the last decade," said CAR president Steve Goddard. At a seasonally adjusted rate, sales were running at a 539,040-unit-a-year pace in January, according to data collected from more than 90 local Realtor associations statewide. The median price of an existing, single-family detached house in January was $287,440, a 15% jump from the revised median for January 2009 of $259,960. But the January median was down 6.3% compared with $306,820 in December 2009. The year-over-year gain was the largest since December 2005, said CAR's chief economist, Leslie Appleton-Young. And though the month-to-month decline was large, it was not as great as the dropoffs in the same time period in both 2008 and 2009, when the median fell by more than 11%. Better yet, according to the economist, "the median price still is 17.2% ahead of the trough in this cycle."

MGIC Investment Corp., the nation's largest mortgage insurer, is cutting premiums to better compete with the Federal Housing Administration. In a new filing with the Securities and Exchange Commission, the Milwaukee insurer said that beginning May 1 it will offer lower rates for borrowers with credit scores of 720 or greater, and higher rates for borrowers with credit scores between 620 and 679. There will be no change in rates for borrowers with scores between 680 and 719, MGIC said. Previously, MGIC did not include a borrower's credit score in its pricing model. Lenders that find the transition difficult have the option of continuing to use the insurer's old rate structure, MGIC said. Since the housing bubble burst, the FHA has become a more formidable contender in the mortgage insurance business, gaining market share in the coverage of loans with small downpayments as private insurers tightened their underwriting standards. In fact, MGIC said in the filing that it did not consider the FHA a significant competitor until 2008. Over the past few months — in an effort to improve the quality of its loans and protect its reserve fund — FHA has hiked downpayments for borrowers with lower credit scores and raised its upfront mortgage insurance premium.