Servicing

Commercial banks will be big buyers of agency MBS this year and help keep mortgage rates in check after the Federal Reserve withdraws from the market, according to the head of securitization strategy at Barclays Capital. Managing director Ajay Rajadhyaksha said the banking sector is flush with cash and it normally starts buying securities as the economy comes out of recession. "I would expect $400 billion to $500 billion of buying from banks in securities -- primarily agency MBS in 2010," he told reporters. "I am not worried about mortgage-backed securities being bought," he added. After buying $1.25 trillion in Fannie Mae, Freddie Mac and Ginnie Mae MBS over the past 15 months, the Fed is slated to exit the market at the end of this month. Speaking at a National Association of Business Economics conference in Washington, the Barclay's MBS strategist said mortgage rates could rise 50 basis points in the second quarter and another 50 bps by yearend. However, pension funds, mutual funds and insurance companies were big sellers of MBS in 2009 and they will probably be buyers this year. "Mortgage rates will rise but the backstop will come from the private sector," Mr. Rajadhyaksha said.

Two top officers in charge of the fast growing MetLife Home Loans, Memphis, have departed the bank-owned residential lender/servicer, National Mortgage News has learned. Leaving the company is Peter Makowiecki, a senior vice president at MetLife Bank who had responsibility for MLHL, and Jeffrey Brown, a vice president at the bank who played a key role in the firm's originations. Both men were on board at First Horizon Mortgage when its parent bank, First Tennessee Corp., sold most of the lender to MetLife almost two years ago. At the end of September, MLHL ranked 11th nationwide in originations with a growth rate of 456%, according to the Quarterly Data Report. A spokesman for MetLife in Rhode Island confirmed to NMN that the two men resigned from the company "effective immediately to pursue other interests." He declined to elaborate. The two men, who were based in Texas, could not be reached for comment. Mr. Brown is the son of Carl Brown who ran Carl I. Brown & Co. for many years before that nonbank was sold to First Tennessee back in 1995. "Jeff has been with them a long time," said one business associate. "At one point he was the head of all production."

Wolters Kluwer Financial Services is moving to help financial institutions rapidly comply with the Federal Reserve Board's upcoming changes to Regulation E with the launch of a new online resource center. The Reg E changes require institutions like mortgage servicers for example, to gain approval from consumers before charging overdraft fees on one-time debit card or ATM transactions. Wolters Kluwer Financial Services has created an online resource center to help institutions comply with Reg E revisions that take effect July 1 for new accounts and Aug. 15 for existing ones. The company has also launched Reg E Opt-in Manager, a solution that allows institutions to expedite generation and electronic delivery of opt-in notices to consumers for consent.

House Financial Services Committee chairman Barney Frank, D-Mass., is calling on the CEOs of four major banks to work with the Treasury Department and banking regulators to deal with second mortgages that have become an obstacle to modifying troubled first liens. The four banks - Bank of America, Citigroup, JPMorgan Chase and Wells Fargo - hold $452 billion of seconds on their books. In a letter to the CEOs, Rep. Frank says many investors are willing to accept losses on principal writedowns of underwater first mortgages to prevent foreclosures. However, second-lien holders have become a "principal obstacle" to many modifications. "The problem of second lien-lien mortgages standing in the way of successful principal reduction modifications has reached a critical stage and requires immediate attention from your institutions," the March 4 letter says. Rep. Frank told a joint conference of minority real estate professionals that banks are reluctant to take writedowns because of accounting and regulatory capital issues. "The second liens in many cases are not worth anything," Rep. Frank said, adding that banks have not acknowledged it under the accounting rules. "At the point at which they acknowledge it, the bank's capital could be negatively affected," the chairman said. Rep. Frank said officials at Treasury, FDIC and HUD are trying to figure out how to deal with the accounting issues. They also are exploring incentives - such as giving second-lien holders a stake in the future appreciation of a property.

The Federal Deposit Insurance Corp., in an effort to liquidate residential and construction loans from failed banks, has priced two note offerings totaling $1.8 billion to "robust market demand," according to a source familiar with the transaction. Existence of the deals was revealed earlier in the week but the transactions had not yet closed. This is the first in a series of three deals - all private placements - totaling roughly $4 billion. The notes carry a 100% FDIC guarantee. Barclays Capital was the sole book runner on the $1.8 billion offering. It was divided into a $1.33 billion floating-rate transaction and a $480 million fixed-rate deal. Asset Securitization Report, a sister publication to National Mortgage News, said the floating-rate portion priced at 55 basis points over one-month LIBOR, which is 10 points tighter than the initial price guidance of 65 basis points over one-month LIBOR. Meanwhile, the fixed-rate portion priced at 85 basis points over i-swaps, or 5 to 10 points tighter than the initial price guidance of 90 to 95 basis points over i-swaps. The fixed-rate portion priced at a slight discount at 99.61019 with a coupon of 3.25% and a yield of 3.367%. One source said the FDIC went the private route because it saved time. If these deals were not privately placed it "could take too long to get the public disclosure together, and on a greater level, to get Securities and Exchange Commission approval. But then again, does the FDIC need SEC approval to do a public offering?" asked the source.

Restructuring Fannie Mae and Freddie Mac-and the political compromises that must occur to make it happen-could render the passage of such legislation next to impossible, according to a new report from Keefe, Bruyette & Woods. Commenting on remarks made late last week by Rep. Barney Frank that investors in Fannie/Freddie securities should not assume that their holdings are guaranteed by the Treasury Department, KBW noted that the chairman of the House Financial Services Committee "had a busy day." Treasury quickly issued a statement, reiterating its financial commitment to the two. But in its report, KBW predicts that Democrats will lose more seats in the fall election, forcing Rep. Frank to compromise on GSE legislation next year. Several weeks ago the committee chairman said he wants to start from scratch on revamping the nation's housing finance system. KBW analyst Bruce Gardner notes that the undertaking is "monumental when one considers that such an effort would affect Fannie and Freddie, the capital markets, the banking system, mortgage bankers, mortgage insurers, Realtors, homebuilders and others."

Mortgage servicing employees who help troubled borrowers with loan modifications should be exempt from the licensing and registration requirements of the SAFE Act, according to a comment letter by three industry groups. The trade groups note that the Department of Housing and Urban Development is considering bringing certain servicing personnel under the Safe and Fair Enforcement for Mortgage Licensing Act (SAFE), which is intended to ensure uniform licensing and registration of loan officers and mortgage brokers. The American Financial Services Association, American Bankers Association, and Mortgage Bankers Association argue that there is no basis to impose SAFE requirements on mortgage servicing employees. Such an "undue expansion" of SAFE, the trade groups warn, could hamper the process of serving troubled borrowers.

Stephen Staid has joined Saxon Mortgage Services Inc., Irving, Texas, as executive vice president of customer relationship management. The Morgan Stanley-owned Saxon is repositioning itself into the residential subservicing space, specializing in distressed asset servicing. In this role, Mr. Staid will be responsible for financial transaction management, early stage delinquency, modification fulfillment, command center, call monitoring and customer service. He also will serve as a member of the Saxon executive committee, reporting directly to chief executive Anthony Meola. Mr. Staid has more than 15 years of mortgage servicing management experience. He specializes in customer service operations and has a deep knowledge of servicing technology.

LoanMarket.net, an online seller of nonperforming loans, is seeing an increase in its commercial business. The Irvine-based auction company said over the past two months it has closed between $30 million and $50 million of commercial mortgage deals. Jeff Freud, a principal in the company, noted that LMN is continuing to hire and now employs 13 full-timers. The company began holding live online auctions about a year ago. He added that buyer demand has picked up this year, adding that most of the winning bids are placed by private equity firms and hedge funds.

With perhaps one exception, the MBS market Friday did not have much of a reaction to an acceleration in Freddie Mac's prepayment speeds which reflected buyouts of a large number of delinquent loans. By staging the massive buyout of loans delinquent by 120-days-plus in a single month, Freddie Mac saw a "colossal" spike in its speeds, according to a Barclays Capital report. But there were "no surprises" there, the report indicated. "The only surprise for the market was some of the lower coupons came in faster than expected," said Walter Schmidt, senior vice president, manager, structured product strategies at FTN Financial Capital Markets. He said Friday morning that as a result swaps between Freddie Mac Gold securities and Fannie Mae securities "have underperformed a little, not by huge amounts."