Servicing

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."

GMAC Financial Services has used a $3.8 billion capital infusion from the Treasury Department to take a $2 billion writedown on its mortgage assets and pursue options that could include the sale of Residential Capital. GMAC also made a $2.7 billion capital contribution to ResCap in the form of mortgage loans, debt forgiveness and cash. "These decisive balance sheet actions and resulting capital infusions are intended to minimize the impact on GMAC and Ally Bank of any future losses related to ResCap's legacy mortgage business," GMAC chief executive Michael Carpenter said. (ResCap was known as a subprime and Alt-A mortgage lender before that market died.) The CEO also noted these actions will allow GMAC to "pursue strategic alternatives" with respect to ResCap and the mortgage business. "We expect to consider various possible options," company spokeswoman Gina Proia said when asked about a possible sale. "There are no special plans at this time," she added. Losses due to ResCap's mortgage operations totaled $3.9 billion for the first three quarters of 2009, including a $747 million loss in the third quarter. In propping up ResCap, GMAC also took a $500 million "repurchase reserve expense" for mortgage buyback demands from investors who claim the loans they purchased from ResCap violate representations and warranties. GMAC took a similar $515 million expense in the third quarter. ResCap and its mortgage affiliates originated $15.4 billion in residential loans in the third quarter - predominantly Fannie Mae, Freddie Mac and Federal Housing Administration product. It is a top-10 mortgage servicer with a $380 billion servicing portfolio.

Fitch Ratings has downgraded 293 classes and affirmed 246 classes in 82 U.S. scratch and dent residential mortgage-backed securities transactions. "Many of these transactions contain collateral that was seasoned and/or seriously delinquent at the time of the transaction's issuance," Fitch said of the transactions, which have issuance dates ranging from 1997 to 2007. The deals were comprised at the time of issuance of some combination of performing, reperforming, subperforming, or nonperforming collateral.