Servicing

Sales of lower priced homes are doing much better than expensive ones in all parts of the nation, thanks, in part, to the first-time homebuyer tax credit, according to the Federal Reserve's latest "Beige Book" report. However, the central bank notes that home prices have changed little since its last "Beige Book." According to recent stories by National Mortgage News, the jumbo and super jumbo loan markets are suffering from a lack of available credit except for consumers with hefty down payments and large cash balances in their bank or brokerage accounts. Not surprisingly, residential construction activity remained at low levels in most districts with the Fed noting that home building "was reported to have increased in the Chicago and Minneapolis" districts. The $8,000 first-time homebuyer tax credit was extended through the spring but is not expected to be renewed after its current sunset.

The Federal Deposit Insurance Corp. has chosen Milestone Merchant Partners to sell the $20 billion mortgage servicing portfolio that once belonged to AmTrust Bank of Cleveland, according to investment banking officials. At press time, both Milestone and FDIC had not returned telephone calls about the matter. It is unclear what will happen to AmTrust's servicing platform. "It's possible a buyer may just take the servicing rights but we don't know yet," said one source. AmTrust, a thrift, was taken over by the FDIC in early December with most of its assets sold to New York Community Bancorp. NYCB, however, did not want AmTrust's servicing division.

There was a 21% increase in 2009 over 2008 in the number of default notices, scheduled foreclosure actions and repossessions, RealtyTrac declared in its Year-end 2009 Foreclosure Market Report. When the 2009 numbers are compared with 2007, the increase in filings was 120%. But these numbers, insiders said, were in part restrained by the effect of federal intervention. A total of 3,957,643 foreclosure filings were reported on 2,824,674 U.S. properties in 2009. And "as bad as the 2009 numbers are," said James J. Saccacio, chief executive of the Irvine, Cal., based online marketplace, "they probably would have been worse if not for legislative and industry-related delays in processing delinquent loans." During the year the number of delinquencies continued to increase with up to 349,519 foreclosure filings reported in December alone, up by 14% from November, and 15% from December 2008. At the same time, while foreclosure activity in the fourth quarter of 2009 increased by 18% from same period one year prior, it dropped 7% compared to the third quarter 2009. High delinquencies however, represent a long-term supply of potential foreclosures expected to happen this year, said RealtyTrac.

More prime jumbo borrowers are falling behind on their payments and not catching up - with states such as California and Florida driving the trend, according to a new research note from Fitch Ratings. Fitch says MBS backed by loans taken out by these borrowers had a delinquency rate of 9.2% (60-plus days late) in December, almost triple the rate 12 months earlier. The five states with the highest volume of prime jumbo loans outstanding - California, New York, Florida, Virginia, and New Jersey - comprise two-thirds of the loans in question. Prime jumbo borrowers who were current on their payments in November but missed a payment the following month (roll rates) averaged about 1% a month for the last 12 months, reaching a seasonal high of 1.3% in December 2009. "While some of these borrowers caught up, many either remained a payment late or became more delinquent in the succeeding months," said Fitch managing director Vincent Barberio.

Titanium Holdings Inc., a Fort Mill, S.C., firm that contacts troubled homeowners on behalf of mortgage servicers to discuss loan workouts, has started a unit for when such efforts fail. The unit, Excellen REO, helps Titanium clients unload repossessed properties. Its services include premarketing, valuations, marketing and sales negotiation, closing and funding and alternative sales methods. Excellen has "a nationwide network of real estate brokers and local eviction attorneys as well as property preservation companies," Titanium said. Excellen's president, Cary Sternberg, is the former senior vice president of the real estate owned department for American Home Mortgage Servicing, Coppell, Texas, which is owned by the private-equity firm Wilbur Ross & Co. LLC. In that position Mr. Sternberg managed more than 200 employees and 33,000 assets.

The new type of asset-backed security DelphX Capital Markets has created is currently on track to launch later this year with the assistance of its new partner, the Mortgage Industry Advisory Corp. "We're on target to roll out the first part of the second quarter of this year," DelphX chief executive officer Larry Fondren told National Mortgage News. MIAC is integrating its analytics with the market platform through which DelphX's recently renamed Syndicated Investor Guaranteed and Managed Asset securities are traded. The technology is designed to allow subscribers to access online asset-level information regarding a SIGMA portfolio and monitor its monthly performance thereafter. It also was designed to collectively assess the current value of each of these types of portfolios and related SIGMA securities as it anonymously trades all SIGMA issues. SIGMAs are based on American depository receipts, but they are officially considered ABS because, in contrast to the equity shares issued by foreign companies that ADRs issue the rights to, the ownership rights to the loan portfolios in SIGMAs officially are "terminal in nature" and don't persist the way rights to the stock in a company could. They are considered syndicated because they not sliced or diced but rather are participations or shares in the whole portfolio and they are guaranteed and managed by an investor "who holds skin in the game throughout," Mr. Fondren said.

First Catholic Federal Credit Union, Taylor, Mich., has filed suit in federal court to terminate a mortgage servicing contract it has with CUSO Mortgage, claiming CUSO violated its agreement with the credit union by, among other things, failing to file Form 1098s with the Internal Revenue Service for its borrowers. "That's only one of the allegations," said Charles Holzman, a Southfield, Mich., attorney for Holzman Ritter & Corkery, which is representing the credit union in the case. He said the CU hopes to resolve the dispute with a minimum of public attention. In its lawsuit, the $146 million First Catholic claims it should not have to pay a 2% (of outstanding principal balance) termination fee for the servicing contract because the company (a subsidiary of Wescom Central CU of Pasadena, Calif.) failed to live up to the contract. The 2% termination fee is currently being held in an escrow account. Among other things, the suit claims that CUSO Mortgage, which provides servicing for as many as 100 credit unions, has failed to pay delinquent taxes for previous tax years. First Catholic claims its employees have had to perform many of the servicing chores that CUSO was supposed to handle. It is asking the court to release the 2% payment, and to order the transfer of the mortgages to a new servicer hired by the credit union. Representatives from CUSO Mortgage declined to comment.

The Mortgage Bankers Association wants the White House to tone down expectations for the Home Affordable Modification Program and create a forbearance option for borrowers who become unemployed or suffer a loss of income. Delinquent borrowers are facing a tough economic situation and have a difficult time making it through the HAMP payment trials to qualify for a permanent modification, said MBA chairman Robert Story. If they become unemployed and cannot make their mortgage payments, they "can't qualify for HAMP," Mr. Story said. He noted that forbearance or deferred payments should be considered. Once the borrower gets a job, the servicer can "move them" into a HAMP modification, MBA president John Courson said in a press briefing Tuesday. MBA also wants the Obama administration to amend HAMP so servicers can offer borrowers an option to pay only interest on the mortgage and defer principal payments. Offering an interest-only option would help get the "payments down to a level the borrower can afford," said Mr. Courson.

The expansion-minded MetLife Home Loans is eyeing a possible entry into both correspondent residential lending and warehouse financing, a company spokesman confirmed. In an interview with National Mortgage News, the spokesman said MetLife is exploring these sectors for 2010 but could not provide any details at press time. Over the past two months rumors have circulated that MLHL, a subsidiary of MetLife Bank, N.A., was not only entering correspondent and warehouse lending but had hired a manager to spearhead the effort. The spokesman said he could not confirm the hiring of anyone at this time. In mid-2008 MetLife bought the origination and servicing divisions of First Horizon National Corp. of Memphis. The sale was accomplished through an asset purchase that included 230 retail and wholesale offices. Today, MLHL ranks 11th nationwide in both residential lending and servicing, according to the Quarterly Data Report.

The House Financial Services Committee this year will hold hearings on not only restructuring the nation's financial system, but what to do with Fannie Mae and Freddie Mac which together guarantee half of all outstanding home loans in the U.S. Committee chairman Barney Frank (D-Mass.) noted that the GSEs currently operate as public utilities and he has no desire to see them returned to their former "hybrid" status as private companies with a public mission. Talking to reporters, he said he does not know, at this time, what form the two eventually will take. (Fannie and Freddie were taken over by the federal government in September 2008 and continue to draw billions in taxpayer aid to maintain a net worth above zero.) The chairman stressed that the housing finance system, as a whole, must be analyzed, including the Federal Home Loan Bank System, the Government National Mortgage Association and the Federal Housing Administration. In terms of specific legislation, the chairman wants to address mortgage servicing and the decision-making process among investors, trustees, and servicers in regard to modifying loans. He said it seems unclear at this time which entities have the decision-making power on loan mods. "That is something we want to solve," he said.