Servicing

In his first major initiative since taking the helm at PHH Corp., Jerome Selitto laid out his strategy for transforming the nation's largest private label lender/servicer into a leaner, more profitable company — including a major cut in expenses. On a conference call Tuesday, Mr. Selitto, who became chief executive in October, said he plans to slash expenses by $100 million to $120 million annually. The effort will include combining back offices and upgrading technology. Selitto came to PHH "with a mandate from the board to turn this underperforming company into a high performer," said Steve DeLaney, a managing director and mortgage finance research analyst at JMP Securities. "He's sending the message that he's cleaning up and that he's going to do whatever it takes to make the company profitable." According to figures compiled by National Mortgage News and the Quarterly Data Report, PHH Mortgage ranks eighth among lenders nationwide, and ninth among servicers.

Tony Renzi, a 24-year veteran of GMAC Mortgage and its affiliates, has been forced out of his position as chief operating officer and president, according to company employees who work under him. A spokeswoman confirmed to National Mortgage News that Mr. Renzi is departing effective March 2 due to "streamlining efforts" and that his duties have been given to others at GMAC, which oversees Residential Capital Corp. The company declined to elaborate but issued a statement saying, "Tony has made valuable contributions in the mortgage lending and servicing business during his tenure with the company and we thank him for his many years of service." One employee said he and others at GMAC/ResCap were informed of his departure early in the morning "and even though they said his last day" will be in early March, he has not been at the company since Feb. 5 or so. Over the years, Mr. Renzi helped build GMAC's servicing business into one of the largest in the nation.

Educational Systems Federal Credit Union became the first victim of the massive fraud at CU National Corp. to settle claims with Fannie Mae, setting the stage for other CUs hurt by the $140 million scandal to come to terms with the government-sponsored enterprise. "We've been negotiating with them [Fannie Mae] since July and August of last year," said Chris Conway, president of the Greenbelt, Md.-based ESFCU. Mr. Conway has now turned his eye toward a settlement with CUMIS Insurance Society, which holds a bond with the $340 million Greenbelt, Md., credit union. Mr. Conway said he is prevented from discussing the terms of the settlement under the agreement, but said ESFCU has received all payments and the return of the 32 mortgages Fannie Mae had bought from CU National under false pretenses. He also expressed optimism that the combination of the Fannie Mae payment and an insurance payout will help his credit union recover most, if not all of the $5 million exposure they have in the case. Representatives of nearly two dozens CUs are expected to meet with Fannie in mediation over the next few months to hammer out a settlement of claims. Michael McGrath, who founded U.S. Mortgage — the parent of CU National — pleaded guilty last year to selling $140 million worth of mortgages issued by 28 credit unions to Fannie Me without the CU's authorization and pocketing the money. He will be sentenced next month.

While second liens are stumbling blocks in many modifications, when the interests of the first and second mortgages are aligned it often results in a principal reduction, according to Laura Goodman, senior managing director at Amherst Securities Group. "When a bank owns and services the first and second, 37% of those modifications have gotten some kind of principal reduction," she told an American Securitization Forum conference in Washington recently. In an interview she noted these principal reductions occurred on loans on the balance sheets of banks, not securities. Ms. Goodman noted that negative equity is a major problem and it is particularly true for borrowers with second liens. "You can't solve the negative equity problem without writing down the seconds before the firsts," she said. In the nonagency universe, 51% of option ARM borrowers have second liens and 56% of alt-A borrowers have seconds, Ms. Goodman told the ASF conference. Amherst Securities does not have data on Fannie Mae and Freddie Mac guaranteed mortgages with seconds.

Home-Free USA, a Maryland-based, HUD-approved nonprofit counseling organization, will team with Chase Home Mortgage February 18-19 in a face-to-face modification event for borrowers struggling to make their house payment. Home-Free counselors will discuss each individual borrower's financial and employment situation, obtain a credit report for them, establish a budget that includes a potentially modified mortgage payment, and help them prepare a mortgage-modification application. The owners will then meet with Chase counselors, who will review their applications to ensure they have all the information needed for a loan modification review under the government's Home Affordable Modification Program or Chase's own loan-mod program. The applications will be sent for an accelerated review that averages just 30 to 45 days. Chase already has reached out by phone and mail to borrowers who may be eligible for either program. The sessions, scheduled for 10 hours each day, will be held at Home-Free's headquarters in Hyattsville, a D.C. suburb. "Together with Chase," said the agency's president, Marcia Griffin, "we are putting homeowners on the road to preventing foreclosure."

More than a third of the existing homes sold last year in the seven-county Chicago area were distressed properties, according to the RE/MAX Northern Illinois network. Nearly 38% of last year's sales in the Chicago suburbs were made under duress, as were 31% of the sales in the city itself. The RE/MAX report is based on transactions tracked by Midwest Real Estate Data, the region's multiple listing service, for the counties of Cook, DuPage, Kane, Kendall, Lake, McHenry and Will. "In the last two to three years, distressed properties have gone from being a small portion of the residential marketplace to a significant one," said Jim Merrion, regional director of the RE/MAX brokerages in Northern Illinois. Of the 248 suburban Chicago submarkets, distressed properties accounted for 50% or more of all 2009 sales in 66 areas, with 44 of those areas in Cook County alone. In the city, distressed sales accounted for half or more of all transactions in 37 of the city's 77 neighborhoods. In Winnetka, Kenilworth and the city's Lincoln Park, however, distressed sales accounted for less than 5% of total sales in '09. Foreclosures accounted for 70% of distressed deals, while 28% were short sales, according to RE/MAX. "We continue to see problems with securing lender approval and processing of short sales, even though these transactions typically bring more money for a property than can be obtained after foreclosure," Mr. Merrion also reported.

The mortgage insurance division of The PMI Group saw its risk-to-capital ratio fall to 22:1 at yearend, perilously close to the 25:1 ratio that could halt it from writing new business in several states. However, insurance regulators in Arizona, where PMI Mortgage Insurance Co. is domiciled, have granted the MI unit a waiver from having to meet that state's minimum policyholder position requirement. "Based on information obtained from the examination, the Department concluded that PMI currently has sufficient capital and resources to fulfill its current and projected policyholder obligations," according to a letter sent by insurance regulators. Furthermore, Fannie Mae has given conditional approval for another PMI Group subsidiary, PMI Mortgage Assurance Co. (currently called Commercial Loan Insurance Corp.) to issue new policies in states where PMI Mortgage Insurance Co. can no longer write new business. PMAC, following certain internal restructuring and capital initiatives, including a $10 million investment from PMI Mortgage Insurance Co., will hold approximately $28 million of capital. PMAC is also in negotiations with Freddie Mac about becoming an eligible insurer. Both announcements came out a day before PMI Group said it lost $228 million in the fourth quarter, compared with a loss of $179 million one year prior. Its U.S. MI business had a net loss of $242 million in the fourth quarter of 2009 vs. a net loss of $174 million in the fourth quarter of 2008. For the full year 2009, the parent company lost $659 million, an improvement on a net loss of $887 million in 2008.

Milestone Merchant Partners has begun a pre-marketing tour to sell a $20 billion package of mortgage servicing rights that belonged to the now-defunct AmTrust Bank of Cleveland, according to investment banking officials. "They're meeting with prospective buyers but the sale likely won't happen until the second quarter," said one advisor familiar with the situation. Milestone did not return a telephone call about the matter. The $20 billion package of receivables is the property of the Federal Deposit Insurance Corp. which seized control of AmTrust in December. Most of its assets were sold to New York Community Bank.

Creditors of Taylor Bean & Whitaker are seeking permission from a bankruptcy judge for authority to sue former company insiders, including president Lee Farkas, who founded the company and made it into a top 10 ranked lender. According to a report on Dow Jones, the committee representing Taylor Bean's unsecured creditors in the bankruptcy case wants to sue Farkas and other insiders for money the company loaned them that allegedly hasn't been paid back. The creditors committee said in court filings this week that TBW's lawyers have "conflicts or other concerns that make it unable or unwilling" to pursue the suits, but the committee said the company is backing its efforts. The committee is also planning to go after Bank of America for money the bank allegedly held back after selling securities backed by TBW mortgages. Pursuit of claims against the bank's insiders could well represent the unsecured creditors' best shot at seeing a significant recovery in the bankruptcy case. Judge Jerry Funk of the Bankruptcy Court in Jacksonville, Fla., has scheduled a Feb. 19 hearing to consider the committee's request. TBW filed for bankruptcy protection last summer after trying to buy a controlling stake in its chief warehouse provider, Colonial Bank. Colonial failed shortly thereafter.

The average size of commercial MBS loans moved into 'special servicing' has more than doubled over the past 12 months, according to Fitch Ratings. Five of the loans newly transferred into special servicing in January had balances of more than $100 million, the rating agency said. In total, 248 loans totaling $4.27 billion moved into special servicing during the month. This is more than four times the balance transferred during the same month a year ago.