Servicing

Although mortgage insurer Radian Group continued its money losing ways in the fourth quarter, management is looking ahead to what it believes will be a brighter future — with improving liquidity and a stronger capital position. In 4Q, Radian lost $92 million, a marked improvement over the same period last year when it lost $250 million. For all of 2009, Radian lost $148 million vs. $411 million in 2008. S.A. Ibrahim, chief executive, said not only has the MI taken care of any near-term liquidity issues, it anticipates it will have excess liquidity through 2012. Unlike some of its peers, the company's risk-to-capital ratio is trending downward: 15.4-to-1 at the end of 2009 compared to 16.4-to-1 at the end of 2008. Still, in case of the "unexpected event we need it in the first place," Radian has prepared an affiliate, Amerin Guaranty, to write business in states where Radian Guaranty might run afoul of the 25-to-1 standard. The company is prepared to write mortgage insurance business in "an uninterrupted fashion" Mr. Ibrahim said. New insurance written for the fourth quarter 2009 was $2.4 billion, with $17 billion written for the whole year. Radian is looking to grow, having moved into new markets, but this growth will not occur at the expense of loan quality, he noted.

The U.S. Department of Veterans Affairs is reinstating its Vendee Mortgage Trust program in an effort to move real estate that it foreclosed on. The trust was started in 1992 when the VA got full faith and credit. According to StucturedFinanceNews.com, an NMN affiliate, the program is backed by loans that were made to help sell REO properties that the government has acquired. The last deal under the program was done in 2008. The agency plans to begin issuing new deals under this full faith and credit program in April, and to come to market two to three times a year, depending on flow.

Even though home values continued to firm up in December, the man who created the Standard & Poor's/Case-Shiller index is worried that "underwater borrowers" will eventually stop making payments, sending delinquency rates rising again. In a conference call discussing housing prices, Robert Shiller, chief economist for MacroMarkets LLC, noted that 80% of underwater homeowners are continuing to make payments "but I'm worried about what will happen if they stop paying." David Blitzer, chairman of S&P's index committee, cautioned that one of great unknowns for housing is whether "the idea you did whatever it takes" to make the mortgage payment is fading. Still, the new indices released Tuesday show that home values rose for the seventh straight month in December. The S&P/Case 20-city home price index rose 0.3% during the month compared to November. Compared to December 2008, the index fell 3.1%. Five of 20 cities in the index showed declines from November to December. The index is now up more than 3% from its bottom in May, but still 30% below its May 2006 peak. Los Angeles and Phoenix posted the largest price increases. The worst performer was Chicago with a 0.6% decline.

Arch Bay Capital has issued a $57.4 million MBS backed by seasoned performing and delinquent subprime loans, garnering a AAA rating on the bond, a sign that the private-label market could come back but only if issuers are willing to make little money on their deals. The mortgage-backed security was rated by DBRS and the end investor is a bank, said one official familiar with the transaction. Quincy Tang, senior vice president of structured finance/RMBS for DBRS, told National Mortgage News that because of the credit enhancement put on the security by Arch Bay, the investor in the AAA bond will not suffer any losses unless delinquencies on the underlying loans exceed 75%, an astronomical number. The loans — originally funded a few years back by such subprime firms as Accredited Home Loans, NovaStar Mortgage and others — have a 30-day delinquency rate of 21%. The collateral for the bond are loans with a principal balance of $229 million. One NPL investor, requesting anonymity, said based on what he knows of the deal, Arch Bay doesn't stand to make much money, if any, on the transaction. The Irvine, Calif.-based hedge fund could not be reached for comment. Its profit will be determined by how much it paid for the NPLs — which it bought in the secondary market — and the cost of the credit enhancement on the bond. Roughly 19% of the loan pool has been modified, according to DBRS.

Fitch Ratings has downgraded 393 bonds in 254 residential mortgage-backed securities transactions it was reviewing to "D," indicating that the bonds have incurred principal writedowns. Eighty-five of the downgraded bonds were from transactions originally said to have alternative-A credit, 80 were from deals originally considered to be prime credit transactions and 77 were from transactions originally categorized as subprime credit. The remaining 12 bonds were said to come from "other" transaction types. All the downgraded bonds were previously rated "CC" or "C," which indicated defaults were expected.

Mortgage Industry Advisory Corp., a provider of FAS 157 fair market valuations, mortgage risk hedging and accounting solutions, has rolled out phase I of its new corporate website, which is designed to make it easier for mortgage market participants to find information. Valuation experts at MIAC have been publishing a wealth of information and posting it online for over a decade. The new site will make this material more accessible to the industry. Specifically, the new site separates content areas by business channel, making it easier for customers to navigate directly to the content they are interested in. For example, MIAC's Generic Servicing Assets are available for download into MIAC Analytics and viewable on the website.

AssetPlanUSA, a nationwide provider of foreclosure alternative solutions, and DepotPoint, a provider of default management workflow solutions, have joined forces to work with servicers and lenders to help expedite the short sale process. AssetPlanUSA plans to use DepotPoint's technology to help its clients and their borrowers effectively achieve short sales. Starting on April 5, 2010, the U.S. government will begin providing incentives to servicers who help borrowers facing foreclosure exit their homes gracefully outside the foreclosure process, thereby lessening the negative impact on the borrower's credit score compared to a foreclosure. The Home Affordable Foreclosure Alternatives Program provides relocation assistance for borrowers choosing foreclosure alternatives, allows borrowers to receive pre-approved short sale terms before listing their property, and pays servicers cash incentives to cover administration and processing costs. DepotPoint provides default management technology for the distressed property market. The company's TrackPoint Platform incorporates an enterprise-class, Web-based workflow engine and tracking system for managing default transactions, including short sales.

LoanMarket.net, an online auction website specializing in residential and commercial loans, has hired mortgage banking veteran David Akre as a managing director. Mr. Akre co-founded New York Mortgage Trust, a mortgage lending and investing REIT that went public back in 2004. During his career, he also worked in secondary marketing and sales at Thornburg Mortgage, Santa Fe. Based in Irvine, Calif., LoanMarket is privately held. The company has been selling performing, subperforming and delinquent notes for almost a year.

The Obama Administration is providing $1.5 billion to housing finance agencies to develop innovative programs that might prevent foreclosures in some of the most economically hard hit states. HFAs in Nevada, Arizona, Florida, Michigan and California are expected to come up with new programs to help unemployed mortgagors remain in their homes until they find a new job. For borrowers with underwater mortgages, "HFAs may experiment with programs that would assist borrowers to negotiate with lenders to write down mortgages," according to a White House press release. To apply for the funds, HFAs have to submit proposals to the Treasury Department.

Mortgage Contracting Services, a nationwide property preservation and inspection provider, has launched a 24-hour call center service specializing in emergency responses for tenant occupied properties. With inbound and outbound capabilities, the domestically operated call center will enable clients to meet required repair timeframes and perform emergency work orders and service requests at any hour. "With passage of the Protecting Tenants at Foreclosure Act last spring, servicers are now facing the added responsibility of 24-hour maintenance availability," said Caroline Reaves, chief executive of MCS. The company is based in Tampa, Fla.