Servicing

Foreclosure filings, including default notices, scheduled auctions and bank repossessions were reported on 315,716 U.S. properties in January, a decrease of 10% from December 2009 but still 15% higher than a year ago, according to RealtyTrac. Real estate owned activity nationwide was down 5% from December but still up a whopping 31% from January 2009 while default notices decreased 12% month-to-month but increased 4% from a year ago. "If history repeats itself we will see a surge in the numbers over the next few months as lenders foreclose on delinquent loans where neither the existing loan modification programs or the new short sale and deed-in-lieu of foreclosure alternatives works," said James J. Saccacio, chief executive of RealtyTrac. Despite a year-over-year decrease in foreclosure activity of 18%, Nevada's foreclosure rate remained highest among the states. RealtyTrac found one in every 95 Nevada housing units was the subject of a filing. California, Florida and Arizona posted the three highest state totals in terms of properties with filings, and together they accounted for more than 44% of the national total. Illinois reported 18,120 properties with a foreclosure filing, a 2% increase from December and a 25% increase from January 2009. Michigan posted the nation's fifth highest total, with 17,574 properties receiving a foreclosure filing, and Texas posted the sixth highest total, with 12,225 properties. Other states with totals among the 10 highest in the country were Nevada (11,854), Georgia (11,274), Ohio (11,105) and New Jersey (6,146).

Treasury Department and bank supervisors must undertake a coordinated effort to address a developing commercial real estate "crisis" that could be very damaging to the economy, according to a Congressional panel that oversees the government's Troubled Asset Relief Program. Nearly half of the $1.4 trillion in commercial real estate loans that need to be refinanced between 2010 and 2014 are under water and this could lead to a "significant wave of CRE defaults" and "prolong an already painful recession" the Congressional Oversight Panel says in a new 190-page report. CRE losses at banks could range as high as $200 billion to $300 billion with small and mid-sized banks facing the greatest exposure to write-downs and losses, the report warns. The banking regulators are encouraging banks to refinance CRE loans if the borrowers have the capacity to make the payments on the restructured loan. This policy allows banks to avoid writedowns of problematic loans for now but its success depends on a quick recovery of the overall economy. "Lenders obviously like" this policy, the COP report says. But investors looking to buy distressed properties warn it will push losses into the future and slow the recovery of the CRE market. "It is critical that bank supervisors fully recognized and are publicly clear about the potential for a CRE crisis and are quick to force loss recognition where necessary," the COP report says.

Consumer Mortgage Audit Center, a due diligence provider based in Florida, has opened a new fulfillment division to process loan modifications and refinancing files. CMAC told National Mortgage News that it is "acquiring talent externally and internally" for this new division but declined to provide a specific head count. CMAC describes itself as a consulting firm that specializes in mortgage forensic research and analysis. The company provides back-end support to lenders and servicers with high caseloads of distressed loans.

Flagstar Bancorp Inc., which controls one of the nation's largest wholesale lenders, came up nearly $200 million shy of its capital-raising goal in a rights offering that expired earlier in the week. The company is also in the process of trying to sell a $10 billion package of mostly Fannie Mae servicing rights. In an interview with American Banker, Flagstar CEO Joseph Campanelli acknowledged that the rights offering did not bring in as much capital as Flagstar desired. But he said the total was still in line with the capital level targeted in its business plan. The $300.6 million raised, he said, "brings us north of 8% capital, which we believe is a good, solid number." As part of a plan to diversify its portfolio this year, Mr. Campanelli noted recently that Flagstar would seek to broaden its revenue stream with ventures outside its national mortgage banking model. According to figures compiled by National Mortgage News and its Quarterly Data Report affiliate, Flagstar ranks eighth among residential wholesale funders with a quarterly run-rate just shy of $3 billion. Flagstar is also an active warehouse lender. In the fourth quarter it lost $72 million, an improvement over its third quarter loss of $298 million. Its shares continue to trade for less than $1 on the New York Stock Exchange.

Agency mortgage-backed securities investor Annaly Capital Management Inc. has priced a public offering of $500 million in an aggregate principal amount of its 4% convertible senior notes due 2015 and plans to use the proceeds, in part, to buy MBS for its investment portfolio. The company said it would also use the proceeds for general corporate purchases. It estimated net proceeds of about $485 million after deducting underwriting discounts and expected offering expenses. The offering is slated to close Friday. Interest on the notes is set to be paid semi-annually at a rate of 4% per year with the notes maturing on Feb. 15, 2015 unless they are repurchased or converted earlier. The notes will be convertible into shares of Annaly's common stock at an initial conversion rate of roughly 46.6 shares per $1,000 principal amount of notes. This is equal to about $21.46 per share of common stock, subject to adjustment in certain circumstances. Credit Suisse Securities (USA) LLC is the sole underwriter for the offering.

PHH Corp., Mt. Laurel, N.J., has rescheduled an investor call on its corporate "transformation initiative" until next Tuesday due to blizzard conditions in the mid-Atlantic. A top-10 ranked lender/servicer, PHH said the transformation initiative is centered on making it a "more successful, more efficient and more customer-focused company." PHH Mortgage is one of the largest private-label lender/servicers in the United States. Jerry Selitto, president and CEO, will host the conference call along with Mark Danahy, EVP in charge of mortgages, and others.

The Federal Deposit Insurance Corp. is pushing back its plan to securitize troubled mortgage assets into the second quarter, according to officials close to the situation. "It's still very much in process," said one source speaking on background, "but it won't happen in the first quarter." The FDIC recently confirmed that it is working on securitizing certain mortgage assets but has offered little guidance to date. The agency and some of its advisors are exploring ways to issue bonds backed by troubled residential loans that are subject to "loss sharing" agreements. There also has been talk in the market place of FDIC doing a "re-REMIC" of outstanding MBS or ABS. At press time, a telephone call to the FDIC's press office had not been returned. The federal government was officially closed for business Wednesday because of a snowstorm.

PHH Corp., Mt. Laurel, N.J., said it will hold an investor call on Wednesday afternoon to provide an update on its previously announced "transformation initiative." No further details were available at press time. PHH's largest corporate share holder is Black Rock Financial, New York. Its mortgage unit ranks among the top ten in both lending and servicing, according to the Quarterly Data Report.

GMAC Financial Services says it remains committed to its Ditech brand, even as it shifts most of its Costa Mesa, Calif. operations to Fort Washington, Pa. GMAC said Ditech, "was not performing up to expectations in its previous configuration." By being moved to Fort Washington, GMAC hopes to gain efficiencies by sharing common infrastructure with Ditech and GMAC Mortgage. A GMAC spokeswoman said there are 269 employees affected by the move, including 119 loan officers that have been let go. All new applications are already being handled in Fort Washington. Another 150 back office employees remain working out of Costa Mesa for the next 60 days to clear the pipeline of loan originations generated before the announcement. There will be approximately 30 employees left at Costa Mesa to support mortgage servicing. During the heyday of subprime and home equity lending, Ditech was known for its marketing prowess and cable TV ads. In a statement GMAC said it would continue to support Ditech "with a dynamic mix of marketing and advertising designed to reach its target customers, and this mix may include direct marketing, digital advertising and more traditional forms of advertising such as television spots."

Wells Fargo & Co. is actively marketing a $416 million portfolio of nonperforming payment option ARMs — legacy loans it inherited when it bought Wachovia Corp. last year. According to one investor familiar with the offering, some of the mortgages have loan-to-value ratios of up to 105%. He also said Wells, initially, is asking 70 cents on the dollar for some of the pools. A hedge fund manager, requesting anonymity, said he is reviewing the Wells offering and thinks eventually it could sell for 40 cents on the dollar. He described the portfolio as "not very good." A spokesman for Wells confirmed to National Mortgage News that the portfolio is out in the market, but declined to provide specifics. (For the full story see the weekly paper edition of NMN.)