Servicing

GMAC Financial Services has tightened standards on a servicing-related program geared toward small- to medium-sized correspondent lenders, according to trade group officials and executives familiar with the effort. Moreover, a top executive who managed the program left the company in recent weeks, National Mortgage News has learned. The effort, known as '3-D,' is a way for GMAC's mortgage division, Residential Capital Corp., to gather servicing rights and grow its portfolio. With 3-D, according to executives familiar with it, the loans are sold to Fannie Mae with ResCap obtaining the underlying servicing rights. "There's certain tax advantages to it," said one servicing broker close to the situation. A trade group official said ResCap eliminated "the bottom tier" firms participating in 3-D "and only wants to deal with high net worth companies." A ResCap spokeswoman stressed that GMAC "has not discontinued" what she called its "rapid delivery program to Fannie Mae, though we may elect to change certain features of the program." She declined to comment further.

The nation's top three processors of residential loans saw their grip on the servicing market decline slightly in the fourth quarter, a sign that ultra low rates are causing more run-off than can be recaptured by these firms. According to new figures compiled by National Mortgage News and the Quarterly Data Report, Bank of America, Wells Fargo & Co., and Chase had a combined servicing market share of 52.79% at yearend, a slight decline from the 53.89% they had at September 30. The three, once again, ranked first, second, and third among all mortgage processors with B of A leading the pack: $2.16 trillion in receivables and a market share of 21.3%. Wells and Chase ranked second and third, respectively, with $1.8 trillion (market share: 17.7%) and $1.4 trillion (13.8% MS). B of A was able to grow its servicing portfolio by 5% year-over-year. Wells had a 1% gain but Chase saw its receivables decline by 7%, according to NMN/QDR.

REA Accelerated Marketing Group, an online bidding platform, is partnering with short sale technology provider National Quick Sale. Short sales have been gaining in popularity but suffer from a delayed approval process. By putting the short sale up for auction the property gets more visibility and true market value can be assessed based on how much borrowers are willing to pay for the property vs. relying solely on a BPO or other type of valuation, the two companies said. At the MBA National Mortgage Servicing Conference in San Diego, Jim Satterwhite, EVP at National Quick Sale, said, "We have created a platform that brings all parties together. This is the type of synergy the industry needs to get things moving."

Triad Guaranty Inc. - which is in the process of liquidating - reported a fourth-quarter loss of $79.1 million, a 35% improvement from the same period a year earlier. The Winston-Salem, N.C., mortgage insurer had a net loss of $595.6 million for the full year, compared to a net loss of $631.1 million for 2008. The MI's book of business is in "run-off" status. Ken Jones, president and chief executive, said, "First-time defaults, while down moderately from earlier 2009 quarters, continued at a high volume. We have seen very little permanent impact to date from the existing loan modification programs and, consequently, the cure rates on existing defaults remain at historic lows and have shown little sign of improvement." Its total insurance-in-force declined to $50.5 billion at Dec. 31, 2009, a 7.5% drop from Sept. 30, 2009 and a 19.3% decline from Dec. 31, 2008.

For mortgage firms that institute foreclosure actions, the key to a successful outcome is in the lawyer selected, according to speakers at the MBA's national servicing conference in San Diego. Executives participating on the judicial activism panel at the trade show said it is important to choose a lawyer who knows how to cut their losses while providing advise on whether the servicer is facing a bad case, especially with so many "foreclosure factory cases" swamping the industry. Speakers worried about uncommunicative attorneys on both sides of the equation especially in regard to requests for information. Judge Ronald Pearson, who works bankruptcy cases in the Southern District of West Virginia, advised servicers to look for attorneys who are available and proactive about workouts. "I see situations most often where the borrower appears in court and the attorney for the lender is not there," he said. "The borrower says he has been calling the lender and getting no response. They bring in returned checks," said Judge Pearson. "If you hire a lawyer to commence legal action, he better have the time to call the borrower who is there." Older borrowers around the country are making appearances in court, he said, sharing stories of how their homes were almost paid for when someone made a telephone call and asked the borrowers to refinance. The refi turned out to be a teaser interest rate with payments that doubled after a three-year period. "If a borrower can prove that and show how they can't make the payment, you are in trouble," said Judge Pearson. "I have yet to see the servicer bring a loan originator to court to counter the elderly debtor's testimony." On the other hand, Cynthia Nierer, a partner with Rosicki, Rosicki & Associates, said there are plenty of borrowers who get "busted" for making claims that they tried to contact their servicer. Many times, they did not make the calls they claimed, she said, and in some cases the judges recognize that argument.

Even though existing-home sales fell 7.2% in January to a seasonally adjusted annual rate of 5.05 million units, the inventory of available homes is continuing to shrink, a sign that housing values might be stabilizing, according to the National Association of Realtors. In January inventory fell 0.5% to 3.27 million existing homes available for sale, which represents a 7.8-month supply at the current sales pace. In December the number was better (a 7.2-month supply) but NAR says "raw unsold inventory" is 9.6% below a year ago, and is at the lowest level since March 2006. "Activity should be picking up strongly in late spring as buyers take advantage of the tax credit, which is critical to absorb distressed properties reaching the market and to continually chip away at inventory," said NAR. The January existing home sale figure compares to a downwardly revised pace of 5.44 million in December. The results, the weakest since June, were worse than many housing economists had forecast. Mr. Yun admitted that the sales numbers are "not good." The trade group hopes that sales will spike this spring as consumers move to take advantage of the $8,000 first-time homebuyer tax credit which is set to expire in late April. The median sales price was $164,700, unchanged from a year earlier and down 3.4% from December.

Freddie Mac said it will stop buying and securitizing interest-only mortgages - a $40 billion a year market - on Sept, 1. Interest-only and alt-A products have been Freddie's downfall: the two loan types accounted for 44% of the mortgage giant's credit losses in 2009. Freddie exited the alt-A market a few years back but the product still accounts for 8% of its portfolio holdings. The GSE currently has $129.9 billion in interest-only mortgages, which comprises 7% of its single-family mortgage portfolio. These loans have an average loan-to-value ratio of 106% and 17.6% are 90 days or more past due. This loan product features interest-only payments for a set period of time before the loan becomes fully amortizing and the borrower has to start making principal and interest payment. Because the initial payments are so low, it is very difficult to modify these loans once the homeowner defaults. Freddie has modified only 0.2% of its interest-only portfolio. Despite these problems, Freddie purchased $800 million in interest-only mortgages in 2009.

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."