Servicing

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.

Fannie Mae and Freddie Mac likely will not need to sell agency MBS to make room in their capped portfolios for massive distressed loan buyouts, although it still could happen, according to a new report from Barclays Capital. If rates fall off sharply, reducing runoff at Fannie Mae, the GSE theoretically might be forced to sell off a significant portion of its MBS holdings, according to Barclays. However, the report says this outcome is unlikely because federal officials would not allow Fannie to sell MBS into a market with high rates and risk pushing rates even higher. As for prepayment speeds, Barclays said it expects Freddie Mac's Gold securities will increase 3- to 5-fold in March with 15-year securities proving most immune to the increase. Fannie Mae speeds after March are expected to increase by a constant prepayment rate of 15-35 and stay there through the June report.

CitiMortgage is offering its distressed borrowers an expanded deed-in-lieu-of-foreclosure option that will allow them to stay in their home for six months if they agree to sign off their property rights to the bank at the end of that period. Initially the Citi Foreclosure Alternative Program will be tested in Texas, Florida, Illinois, Michigan, New Jersey and Ohio as of Feb. 12. The program is a pilot initiative that also will offer a minimum of $1,000 in relocation assistance to facilitate these borrowers' eventual transition to another residence. Relocation counseling by trained professionals will assist with monthly budgeting advice as necessary, Citi said. Executives said it is the newest addition to a series of similar initiatives Citi has been introducing since the foreclosure crisis began. To qualify borrowers first must be eligible for a permanent loan modification. If not, a short-sale option will be considered.

Fannie Mae has set a timetable and released preliminary figures that show tens of billions of dollars worth of unpaid principal balance are involved in its accounting-driven plan for increased purchases of certain delinquent loans from mortgage-backed securities pools. Fannie said the purchases will begin in March with the first ones reflected in MBS pool factors released on the fourth business day in April. "We expect to purchase a significant portion of the current delinquent population within a few-month period, subject to market, servicer capacity and other constraints," Fannie said. The government-sponsored enterprise said that as of Dec. 31, 2009 the total volume of loans delinquent by four or more months — which single-family MBS trust documents allow Fannie to buy out of pools — was about $127 billion. Of this amount, roughly $82 billion worth is backed by outstanding 30-year amortizing fixed-rate MBS. Other types of MBS comprise the rest. A division of the $82 billion by vintage shows the largest percentage of UPB — almost twice that of any other year or the pre-2004 period — is found in 2007 (approximately $30.70 billion). The UPB from the 2006 vintage is about $16.75 billion, for 2008 it is roughly $13.75 billion, for the pre-2004 period it is approximately $10.35 billion, for 2005 it is about $9.36 billion, and for 2009 it is roughly $1.02 billion. Fannie said it would release additional information on the buyouts "within the next two weeks." The buyouts are due to new accounting standards that result in the cost of purchasing most delinquent loans from MBS and holding them in portfolio to be less than the cost of advancing delinquent payments to security holders, according to Fannie. The accounting rules have been in effect since Jan. 1 and Wall Street researchers have been anticipating related increases in government-sponsored enterprise buyouts.

Lennar Corp. late Wednesday purchased $3.05 billion of troubled loans from the Federal Deposit Insurance Corp., through a "structured transaction" deal. By creating limited liability corporations, Lennar is splitting the ownership stake in the loans 40/60 with the government taking the latter share. Overall, the Miami-based homebuilder is buying two pools of notes (5,500 mortgages) including distressed residential and commercial real estate assets. The packages were culled from 22 failed banks. In total, Lennar is putting up just $243 million in cash to acquire its stake with the FDIC providing 0% non-recourse financing of $627 million. Lennar said its subsidiary, Rialto Capital Advisors, would handle "the day-to-day management and workout of the portfolios."