Servicing

GMAC Financial Services has written down the value of the riskiest mortgage assets of its mortgage division by 41%, a move that could be a precursor to a sale of the unit. To date, GMAC has declined to comment on reports that Berkshire Hathaway has shown an interest in Residential Capital Corp., the nation's fourth largest home lender. (Berkshire also has declined to comment.) The risky mortgage assets that were marked down by 41% once had a face value of $9.2 billion. Company executives said the markdowns came as a way to make these assets attractive to buyers. "The values we have put on these assets would be sellable in the market," said GMAC chief of mortgage operations Thomas Marano. He noted GMAC sells loans on a regular basis and major capital market players have been consulted. "Yes we do believe we can sell those assets in the market," he added in response to an analyst's question. The writedowns, restructuring and recapitalization of ResCap leave the entity with $19.7 billion in mortgage assets, servicing rights and real estate owned. GMAC chief executive Michael Carpenter noted there are "potentially different strategic alternatives" for the mortgage assets and the servicing business. He also said ResCap can be operated as a wholly owned subsidiary for some time. "We are not in a hurry to do anything." GMAC noted that it will take $3.8 billion of mortgage-related charges for the fourth quarter. GMAC said ResCap owns $4.3 billion in assets that have "greater economic exposure." According to the Quarterly Data Report, ResCap ranks fifth among all residential servicers with $380 billion in servicing rights. To date, the government has pumped $15.1 billion of capital into GMAC through preferred stock and other maneuvers.

The Federal Housing Administration is temporarily delaying the effective date of its new policy to shield appraisers from loan officer and mortgage broker pressure until Feb. 15. The new policy would put FHA in synch with Fannie Mae and Freddie Mac and prohibit commission-based staff and brokers from selecting appraisers. FHA officials initially set a Jan. 1 effective date. But they concluded FHA lenders need more time to change to their systems and decided to give them 45 more days, according to sources. Back in September, FHA officials outlined a number of risk management initiatives, including the new appraisal policy. "FHA does not require the use of appraisal management companies or other third party providers, but it does require lenders take responsibility to assure appraiser independence," FHA officials said.

The number of foreclosure filings initiated last year in South Florida's tri-county area failed to hit the 100,000 mark, but it didn't miss by much, according to a new report from CondoVultures.com. At the end of the second quarter of 2009, foreclosure notices were being filed in Miami-Dade, Broward and Palm Beach Counties at an annual rate of 100,000-plus. But momentum slowed "just enough" in the third and fourth quarters to fall just short of that psychologically significant benchmark, according to the report. For the year as a whole, more than 97,000 lis pendens, or notices of default were initiated against properties in the three counties, a 29% increase compared to the nearly 76,000 actions filed in 2008. By comparison, "only" 32,000 notices were filed in 2007. "The newfound willingness of lenders to suddenly work with borrowers to modify mortgages or approve short sales has undoubtedly had an effect on the number of foreclosure filings in South Florida," said Peter Zalewski, a principal in CondoVultures, a Bal Harbour, Fla. real estate consultancy.

American International Group has agreed to sell its Canadian mortgage insurance unit to a private investor group with the Ontario Teachers' Pension Plan as the lead sponsor. Terms of the transaction were not disclosed. With assets of $274 million (Canadian dollars) and total equity of $127 million (Canadian), United Guaranty Canada is that nation's smallest non-government MI firm. (There are only two private MIs operating there.) The Toronto-based UGC commenced operations in 2006. Its chief competitors in Canada include a government-run organization (Canada Mortgage and Housing Corp.) and Genworth MI Canada Inc., whose majority shareholder is Genworth Financial, Richmond, Va. At one time three other U.S.-based mortgage insurers had established or attempted to establish operations in Canada — MGIC, PMI and Triad — but all three are no longer operational. "We believe the mortgage insurance industry in Canada to be an attractive market, and that United Guaranty Canada is well positioned to grow its market position," said Erol Uzumeri, senior vice president of Teachers' Private Capital, the private equity arm of OTPP. A request for comment from United Guaranty was not returned by press time.

The Treasurer of Cuyahoga County, an area that includes the city of Cleveland, has declared a tax foreclosure moratorium on owner occupied homes for all of 2010. In an interview with National Mortgage News county treasurer Jim Rokakis said he is not heard "one complaint or comment" from the mortgage industry about the moratorium. A week ago the moratorium was set for six-months but Mr. Rokakis this week changed his mind and made it for the full year. "I have a year left in office and I refuse to do even one more foreclosure," he told NMN. The moratorium only affects mortgagors who have not paid their real estate taxes. Over the past 10 years more than 100,000 homes in the county have entered foreclosure, said the treasurer. "We have 35,000 vacant properties here," he said. "And 17,000 or so are slated to be demolished." During the height of the housing boom subprime lenders, including Ameriquest and Argent, made thousands of loans in the county, some of which were used by speculators to flip homes for a quick profit.

The Government National Mortgage Association is contemplating selling the $1.3 billion residential servicing portfolio that it recently seized from Lend America of Melville, N.Y. An agency spokeswoman confirmed that GNMA recently took control of the receivables and placed it with a subservicer — Loan Care Servicing Center of Norfolk, Va. "We just completed the transfer and are performing our due diligence," she said, adding that "We cannot make a determination on the sale of servicing rights until that process is completed. Of course any final decision will be made based on what is in the best interest of taxpayers." Investment banking sources say the portfolio is suffering from higher than average delinquencies. GNMA and FHA suspended Lend America last month. The company laid off most of its work force and is no longer funding new loans.

The Federal Deposit Insurance Corp. hopes to complete the sale of AmTrust's $20 billion servicing portfolio some time in the second quarter, according to an agency spokesman. "It will be done through a competitive auction process," he added but could not provide further details because it is too early in the sale process. Interested bidders are expected to include some of the nation's top 10 ranked servicers but also private equity firms that have entered the space the past two years or are looking for an entry point, said investment banking officials. The FDIC spokesman said he had no information regarding the future of AmTrust's servicing platform. The government took control of AmTrust Bank of Cleveland a month ago, selling its branches and some of its assets to New York Community Bank. NYCB, said the spokesman, agreed to service AmTrust's portfolio for "up to a year while we looked for a buyer [of the servicing rights]."

The Federal Reserve must be open to raising rates to pop future asset bubbles, even though stronger regulation remains the best solution to prevent a repeat of the nation's financial crisis, Fed chief Ben Bernanke said over the weekend. The nation's central banker said all efforts should be made to strengthen the U.S. financial regulatory system to prevent a repeat of a crisis that Mr. Bernanke described as perhaps the worst in modern times. "However, if adequate reforms are not made, or if they are made but prove insufficient to prevent dangerous build-ups of financial risks, we must remain open to using monetary policy as a supplementary tool," Mr. Bernanke told an annual meeting of the American Economic Association.

Interactive Mortgage Advisors expects roughly 20 different investors to submit applications to clear them for bidding on an $11 billion jumbo servicing portfolio that belongs to the bankrupt Thornburg Mortgage of Santa Fe. IMA managing member Tom Piercy said interest in the receivables has been strong with potential bidders including hedge funds, private equity money and existing residential servicing firms. "Interest has come from across the board," said Mr. Piercy. To be deemed suitable, investors must submit an application package by Monday afternoon. Each bidder must have a minimum net worth of $15 million. The portfolio has average loan balances of $650,557 and a weighted average FICO score of 740. A subservicing firm is currently doing the paperwork on the loans.

In lieu of cash bonuses for 2009, the board of Wells Fargo & Co., San Francisco, Calif., has approved multimillion-dollar retention performance shares for three key executives, including the head of Wells Fargo Home and Consumer Finance, Mark Oman. Mr. Oman, a senior executive vice president, and Howard Atkins, also a senior EVP as well as well as the company's chief financial officer, both got approved for a target of 189,800 shares having a current value of about $5 million. The board approved for John Stumpf, president and chief executive officer, a target of 379,600 shares having a current value of about $10 million. "These retention performance shares, which are not a form of cash compensation or annual incentive bonus, are forfeited if the executive receiving the shares leaves the company to work for a competitor," Wells said. The shares will vest after three years of service only if the company meets specified performance goals. A portion of all shares earned by executives as compensation must be held for as long as they remain employed by the company. Steve Sanger, chair of the board's human resources committee and retired chairman and CEO of General Mills Inc., said the executives receiving the compensation have been "leading the company through the largest merger integration in U.S. banking history and they have played key roles in generating record profits in the first three quarters of 2009, despite the challenging economy." Commenting on the rationale behind the performance shares, he noted that given those accomplishments and "the current challenges impacting the banking industry, Wells Fargo executives, at all levels, are being increasingly and aggressively recruited by competitors."