Servicing

Fannie Mae beat Freddie Mac by a country mile in the loan modification race by moving borrowers who do not qualify for the government's Home Affordable Modification Program into alternative restructuring plans. Not counting HAMP modifications, Fannie completed 27,700 loan modifications in the third quarter, up 66% from the second quarter. Freddie completed only 9,000 alternative modifications, a 42% decline from the previous quarter. "Freddie has instructed its servicers to fully support HAMP as the primary modification program," said the Federal Housing Finance Agency in its quarterly Foreclosure Prevention and Refinance Report. "While Fannie Mae's primary modification solution is HAMP, it has also focused on putting borrowers who do not qualify for HAMP modifications into other modifications leading to most of this increase in the quarter," said FHFA. The agency's quarterly report does show that Freddie, relative to its size, is more efficient at completing HAMP modifications than its larger competitor. Fannie has completed 11,700 HAMP modifications as of Nov. 30, compared to 10,300 for Freddie.

Approximately 38% of existing home sales in 2009 were distressed sales and 12% were short sales, according to the National Association of Realtors. Foreclosure sales accounted for two-out-of-three distressed sales and the rest were short sales, NAR spokesman Walter Maloney said. The NAR began tracking short sales in October 2008 and by February and March short sales peaked at 18% of sales. Lately, short sales have been averaging 12% to 13% of sales on a monthly basis. In a short sale, the lender or servicer allows the defaulted homeowner to sell the property to avoid a foreclosure. Fannie Mae and Freddie Mac completed 17,400 short sale transactions in the third quarter, up from 4,900 in the same period a year ago. Fannie alone completed 11,100 short sales in the third quarter, compared to 10,400 for all of 2008.

Fannie Mae beat Freddie Mac by a country mile in the loan modification race by moving borrowers who do not qualify for the government's Home Affordable Modification Program into alternative restructuring plans. Not counting HAMP modifications, Fannie completed 27,700 loan modifications in the third quarter, up 66% from the second quarter. Freddie completed only 9,000 alternative modifications, a 42% decline from the previous quarter. "Freddie has instructed its servicers to fully support HAMP as the primary modification program," said the Federal Housing Finance Agency in its quarterly Foreclosure Prevention and Refinance Report. "While Fannie Mae's primary modification solution is HAMP, it has also focused on putting borrowers who do not qualify for HAMP modifications into other modifications leading to most of this increase in the quarter," said FHFA. The agency's quarterly report does show that Freddie, relative to its size, is more efficient at completing HAMP modifications than its larger competitor. Fannie has completed 11,700 HAMP modifications as of November 30, compared to 10,300 for Freddie.

Celink, the nation's largest reverse mortgage subservicer, has been approved by the Government National Mortgage Association to be an issuer of securities backed by home equity conversion mortgages or HECMs. Celink says the approval will allow it to function as a subcontract servicer on any HECM MBS. Celink's reverse mortgage servicing portfolio exceeds $5.8 billion. The company already had approvals to be a HECM participation agent.

Investment funds controlled by Colony Capital, LLC of Los Angeles have agreed to purchase $1.02 billion in troubled commercial loans from the Federal Deposit Insurance Corp., paying just $90.5 million while receiving government funding of $233 million. The sale, a "structured transaction," will give Colony a 40% managing member equity stake in a newly formed limited liability company created to hold the acquired loans. The FDIC will retain the remaining 60%. In total, Colony will gain access to 1,200 commercial real estate loans. Deutsche Bank served as advisor to the FDIC on the sale. Even though Colony is private, it controls Colony Financial, Inc., a publicly traded company. Colony Capital is in the business of acquiring, originating and managing commercial mortgages. As reported by National Mortgage News, the FDIC is contemplating issuing a large security in the first or second quarter backed by delinquent and subperforming residential mortgage assets. Some of these assets could include subprime and/or alt-A MBS, said a source familiar with the plan.

PennyMac may have found a buyer for two different pools of loans it put out for bid in December, according to investment banking sources who work in the nonperforming loan market. The publicly traded REIT declined to comment but acknowledged that it has been trying to sell two loan pools -- a $20 million nonperforming loan package, and a $17 million performing pool. A source said Kondaur Capital of California may have been a bidder on the nonperforming package. Kondaur did not return telephone calls on the matter.

More than 6% of securitized commercial real estate mortgages are 30 days or more past due, according to a new report issued by Trepp LLC. It marks the first time in the history of commercial mortgage-backed securities that the delinquency rate is above 6%, said Trepp. The New York firm tracks CMBS and issues monthly reports. The delinquency rate jumped to 6.07% in December, up 171 basis points from the end of the third quarter. A year ago, the 30-day or more delinquency rate was 1.21%. The December report also shows that multifamily delinquencies reached 9.27%, a 49 bps increase from November. A year ago, the delinquency rate on multifamily CMBS was 2.82%.

Prepayment speeds for Fannie Mae 30-year fixed-rate MBS jumped 26% to 31% in December, surprising some MBS trackers, according to a sample of Wall Street reports published Friday morning. Freddie speeds jumped by 16% to 19%. Some reports, but not all, said the ramp-up in 30-year Fannie speeds exceeded their expectations. Barclays said the increase in Fannie 30-year paydowns was surprising only in securities with 6.5% and 7% coupons and that speeds on those coupons came in slower than they had expected. Credit Suisse researchers attributed the jump in Fannie speeds to completions of modifications done under the federal Home Affordable Modification Program that were more aggressive than it anticipated. Deutsche Bank researchers said they believe the ramp-up in high premium Fannie coupon speeds reflects an amendment to Fannie's servicing guide that suspended loan repurchases of HAMP modifications in November but permitted them in December. Barclays also said the return in HAMP-related buyouts contributed to the acceleration in Fannie Mae speeds.

The residential mortgage industry added 200 full-time employees to their payrolls in November, the first uptick in industry employment since July. The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector rose to 255,700, compared to 255,500 in October. The BLS data shows the increase is entirely due to more mortgage brokers having jobs. Employment at mortgage banking firms was flat in November. Overall, the mortgage industry experienced a 10% drop in its workforce over the past 12 months. Major lenders have relied on outsourcing and temporary workers to deal with fluctuating demand. Meanwhile, the nation's unemployment rate held steady at 10% in December, but 85,000 workers were laid off, according to the new jobs report. This disappointed analysts who were looking for a sign that the job market had finally turned the corner. It is also the second disappointing economic report this week. On Tuesday, the National Association of Realtors reported that its index of pending sales plunged 16% in November. (There is a one-month lag in BLS reporting of mortgage industry employment data.)

An expected fourth quarter 2009 write-up of $80 million in the mortgage servicing rights asset of PHH Corp., Mt. Laurel, N.J., is leading FBR Capital Markets analysts to increase their earnings per share projections at the company. The report, authored by Paul J. Miller Jr., William Wallace and Jessica Halenda, said PHH should have EPS of $0.86 for the fourth quarter, compared with their original estimate of $0.79. The anticipated write-up in MSR valuation is because of rising interest rates in recent weeks. FBR Capital Markets noted that PHH is the rare mortgage banking company that does not hedge its mortgage servicing rights portfolio, which can lead to volatility in earnings. In the third quarter, PHH wrote down the MSR asset by $89 million. "We would note that there are a lot of moving parts to MSR valuation, and, in our view, we believe that the stock will be positively impacted if PHH posts a fourth quarter headline number in the $0.60 to $0.90 range. We reiterate our Outperform rating on PHH shares, which continue to trade at an attractive discount to tangible book value," the analysts said.