Servicing

Interactive Mortgage Advisors is telling investors they can bid on all, or part, of a $10 billion package of bulk servicing rights that it is selling on behalf of an undisclosed firm. The receivables are tied to mortgages controlled by Fannie Mae. The Denver-based IMA would not comment on the identity of the seller. (On Tuesday National Mortgage News reported that Flagstar Bancorp, Troy, Mich., is selling a $10 billion package of residential bulk servicing rights but the thrift would not comment.) IMA has set a Feb. 4 bid deadline on the package. In a statement the brokerage said, "Prospective purchasers will actually have the option of bidding smaller portions of $2 billion and $8 billion or the entire $10 billion." IMA is also selling an $11 billion package of jumbo servicing rights on behalf of Thornburg Mortgage of Santa Fe. That sale must first be approved by a bankruptcy trustee. Meanwhile, Milestone Merchant Partners is marketing a $20 billion package of rights that once belonged to the now-defunct AmTrust Bancorp, Cleveland.

Fannie Mae recently completed a bulk sale of 260 homes with 10 different investors acquiring the properties, which were classified as real estate owned. "This was the worst of the worst," said one investor, requesting anonymity. The sale of the lots are in the process of closing, said the investor. National Mortgage News first reported on the auction this past fall. No price was disclosed. Sources close to the auction confirmed the sale results. Moreover, the GSE is contemplating a larger bulk sale in coming months. A company spokeswoman declined to comment but stressed that Fannie's preference is to sell its REO inventory to owner occupants and not investors. At the end of September Fannie had an REO inventory of 72,275 homes.

The Obama Administration is finally making headway in its effort to get Bank of America and other large servicers to modify second liens when they modify first mortgages. Bank of America said it is the first to sign an agreement with the Treasury Department to participate in a second lien modification program (2MP), which will become a component of the government's Home Affordable Modification Program. Treasury is expected to issue guidelines for 2MP shortly. "For many homeowners facing severe financial difficulty, decreasing the payment on the first mortgage without a reduction in the payment of the second lien may not produce an affordable combined mortgage payment," said Barbara Desoer, president of Bank of America Home Loans. The 2MP program is designed to address cases where the bank services the first mortgage and owns the second lien. Since last summer Treasury has been working with BoA and several large banks on a second lien modification initiative. Four banks with $441 billion in second liens also service 55% of all first mortgages, according to some estimates.

Orange County prosecutors arrested two Ladera Ranch men - and issued a warrant for a third - accusing them of defrauding more than 400 homeowners in an alleged $1.25 million loan modification scam, according to a report in The Orange County Register. Christopher Lee Diener, 42, Terrence Green Sr. 43, and Stefano Joseph Marrero, 40, are each charged with a felony count of conspiracy and 97 felony grand theft counts, according to the Orange County District Attorney's office. Messrs. Diener and Green were taken into custody and are each being held on $1.5 million bail. They will be arraigned by midweek, at the latest. The business partners are accused of getting upfront fees from homeowners, and falsely promising they can get them loans with cheaper payments in less than 90 days and offering a 100 percent money-back guarantee, prosecutors said.

Farmer Mac raised $250 million in additional capital in a private offering of shares of non-cumulative perpetual preferred stock of Farmer Mac II LLC, a Delaware limited liability company in which it owns all of the common equity. Farmer Mac II LLC is now operating the Farmer Mac II business that has operated since 1992 purchasing and holding U.S. Department of Agriculture-guaranteed loans. Farmer Mac is using the proceeds from the sale to repurchase and retire $150 million of Farmer Mac's currently outstanding Series B preferred stock and to further enhance its regulatory capital position. Farmer Mac's president and chief executive Michael Gerber said, "Today's transaction further strengthens Farmer Mac's financial position in support of our core business. It provides Farmer Mac with additional capital at a significantly lower cost."

MGIC Investment Corp., the largest mortgage insurer in the nation, lost $280 million in the fourth quarter, its tenth straight quarterly loss. In the same period a year earlier, the Milwaukee-based firm lost slightly less, $275.6 million. At Dec. 31, the percentage of loans it guarantees that were delinquent, excluding bulk loans, was 15.46% compared with 9.51% a year ago. Curt S. Culver, chairman and chief executive, said in a statement that the weak economy, higher levels of unemployment and lower home prices have led to an increase in the delinquent inventory and elevated incurred losses. But there was some good news: MGIC has seen a sequential decline in the number of new notices received and its book of business written since implementing tighter underwriting guidelines in 2008 has improved the credit risk profile of its insurance-in-force. Total revenue fell 1% to $405.5 million in the quarter, but beat analysts' view of $393.8 million. Despite the bad news, its stock was up as much as 14% on Tuesday.

Flagstar Bancorp, Troy, Mich., is selling a $10 billion package of residential bulk servicing rights, according to investment banking sources. The offering could hit the market as early as Tuesday afternoon. A company spokesman declined to comment. The thrift, which raised fresh capital last year, is also one of the nation's top wholesale lenders, according to figures compiled by National Mortgage News and the Quarterly Data Report. If the servicing sale is successful it would help the lender raise cash. Besides the Flagstar offering, two other large bulk deals are on the market: a roughly $20 billion package of rights from AmTrust Bancorp, Cleveland, and $11 billion from Thornburg Mortgage of Santa Fe. AmTrust's servicing is controlled by the FDIC. Thornburg is in bankruptcy.

Prestwick Mortgage Group is auctioning off a $228 million portfolio of bulk Government National Mortgage Association servicing rights for an undisclosed seller. Prestwick would not disclose details but the client is believed to be a nonbank. The delinquency rate on the portfolio is 3.97%, including foreclosures. The bid deadline is February 4. Prestwick is based in Alexandria, Va. Over the past quarter, the value of servicing rights has increased somewhat thanks to rising mortgage rates.

The outlook for the performance of residential mortgage-backed securities and asset-backed securities in Europe, the Middle East and Africa is negative for 2010, according to a recent Moody's Investors Service report. "Rating migrations are still expected, especially on the 492 tranches currently on review for downgrade and which include significant exposures to Spanish and U.K. nonconforming RMBS," said Mehdi Ababou, a Moody's vice president-senior analyst. The report, which reviews the past year as well as a forecast for the current one, notes that in 2009 the number of RMBS and ABS downgrades jumped to 741 compared to 408 in 2008. In 2009, "over two-thirds of the downgrades for RMBS were in Spain and the U.K. nonconforming sectors," said Mr. Ababou.

On average, it takes more than six months to complete a loan modification, which is "unacceptable," according to the State Foreclosure Prevention Working Group. The group, which includes state attorney generals and banking lawyers, notes in its fourth-quarter report that servicers have steadily increased the number of employees dedicated to loss mitigation. The report says that, on average, one full-time employee is handling 133 modification cases, down from 246 cases back in June. "However, the increase in loss mitigation staff has not prevented an increase in the backlog of loss mitigation resolutions," the January report says. State officials point out that the ratio of modifications "in process" to completed modifications has "ballooned" from 3-to-1 in October 2008 to 7-to-1 in October 2009. The working group is concerned that 72% of completed modifications result in an increase in the principal amount of the mortgage. "Servicers routinely capitalize delinquent interest, corporate advances, escrow advances and attorney fees and other foreclosure-related fees and expenses into the loan balance when completing a loan modification," the report says. With so many underwater mortgages, increasing the loan balance "only adds to the likelihood of ultimate default."