Servicing

EverBank, Jacksonville, Fla., is negotiating to buy a $10 billion package of residential servicing rights from Flagstar Bancorp, according to investment banking sources familiar with the matter. A spokesman for Flagstar said the company does not comment on rumors. EverBank did not return a call about the matter. The bid price is in the range of 75 basis points, said one official, but that figure could not be confirmed. According to the Quarterly Data Report, EverBank services roughly $46 billion in residential loans, ranking 22nd nationwide. If it winds up with Flagstar it would move up in the rankings to No. 20. Troy, Mich.-based Flagstar is one of the largest thrifts in the nation. In 2009 it lost $513.8 million compared to $275.4 million the year before. Despite its problems, its depository is considered "well capitalized" for regulatory purposes, with capital ratios of 6.19% for Tier 1 capital and 11.68% for total risk-based capital.

Major banks "rebooked" $19 billion in seriously delinquent Ginnie Mae loans in the fourth quarter and pushed the percentage of single-family loans held by FDIC-insured institution that are 90 days or more past due up to 9.3%, from 8.1% in the previous quarter. The Federal Deposit Insurance Corp. reported that banks and thrifts held $178.5 billion in single-family loans that are seriously delinquent or "noncurrent" as of Dec. 31, up $23.2 billion or 15% from the third quarter. "Most of this increase — $19.1 billion — consisted of rebooked GNMA loans that have government guarantees," the FDIC says in its fourth-quarter report on bank performance and earnings. FDIC economists have never seen such a jump in rebooked Ginnie Mae loans before. Rebooking is an accounting convention that requires banks to recognize loans that are seriously delinquent even though it is not an indicator of significant losses. Ginnie Mae securities are mostly back by Federal Housing Administration-guaranteed loans. The FDIC also reported that banks and thrifts charged off $10.1 billion in single-family loans in the fourth quarter, up 6.8% from the previous quarter and 48% from the fourth quarter of 2008.

Bucking traditional beliefs regarding secured and unsecured credit, the risk of consumers with high credit scores defaulting on their mortgage is higher than the risk of this group defaulting on their credit cards, according to the FICO Score Trends Service. In 2009, 0.3% of consumers whose scores were between 760 and 789 defaulted on their real estate loan, compared with 0.1% who defaulted on their credit card. For the entire credit spectrum, in 2008-09, credit card accounts were just 1.6 times more likely to become 90 days delinquent; in 2005, they were over three times more likely. Mark Greene, chief executive of Minneapolis-based FICO, said, "Economic instability is creating unknown risk in lenders' credit portfolios as well as counter-intuitive trends in consumer behavior." On the originations side, FICO statistically showed that lenders tightened their credit criteria for giving new loans. In 2005, nearly 46% of consumers who got a new mortgage had a credit score under 700. In 2008, this fell to 25%.

Mortgage rates will rise no more than 50 basis points after the Federal Reserve stops purchasing agency MBS in March, according to a new survey of business economists. "Three-quarters of the panelists believe mortgage interest rates will increase 50 basis points or less," a summary of the survey results says. The 48 professional forecasters surveyed by the National Association of Business Economics generally say economic expansion is on a "firm track" and the rebound in the housing market is "ongoing and sustainable." The economists expect housing starts will hit 730,000 this year, up from 550,000 in 2009. And starts will jump to 1 million units in 2011. House prices will rise 1.6% this year and 2.6% in 2011, based on the Federal Housing Finance Agency housing price index. "Such increases would barely keep up with inflation," the survey says. The February survey does not include a forecast for mortgage rates. However, the economists see the 10-year Treasury rate drifting upward to 4.25% by yearend and 4.5% by the second quarter of 2011.

A handful of smaller servicing portfolios totaling about $300 million in receivables are now out for bid. Interactive Mortgage Advisors, Denver, is selling $60 million of Fannie Mae bulk rights, and a $196 million portfolio of Fannie Mae/Freddie Mac receivables. Bids are due in early March. Meanwhile, the Prestwick Group, Alexandria, is offering a $35 million package of receivables backed by Fannie Mae and private investor loans in Florida. The Prestwick portfolio has a 9.21% delinquency rate. The IMA packages have late payments of 2.78% or less.

California attorney general Jerry Brown and others are warning homeowners that are late on their loans to avoid the latest ploy to grab their money: services charging upfront fees for a forensic review of a lender's practices. According to a report in The Orange County Register a forensic review does not necessarily help in avoiding foreclosure. The warning comes from AG Brown, the California Department of Real Estate and the State Bar of California. "Forensic loan audits are yet another phony foreclosure-relief service hawked by loan-modification consultants trying to cash in on the desperation of homeowners facing foreclosure," Mr. Brown said. "The foreclosure-relief industry continues to be long on promises, but short on results."

DebtMarket of Los Angeles is coming to market with a $100 million portfolio of nonperforming multifamily loans. Stuart McFarland, a newly appointed advisor to the online auction company, said the offering will be available "shortly." A former executive for both G.E. Capital and Fannie Mae, Mr. McFarland said the company is starting to see more sellers of NPLs but noted that the market is waiting for some truly big sellers to appear: "Some day Fannie and Freddie will start selling," he said.

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.