Servicing

By the end of the third quarter the estimated number of homes heading toward foreclosure, but not yet included in "unsold inventory" figures, reached 1.7 million units, up from 1.1 million a year earlier, according to new First American CoreLogic data. The increase in this estimate of real estate-owned by depositories and mortgage firms is affecting home sale rates and is in contrast to the shrinking visible supply of unsold inventory, which decreased from 4.7 million in the third quarter of 2008 to 3.8 units during the same period this year. The visible inventory supply fell to 7.8 months in September 2009, down from 10.1 in 2008. But the supply of REO home estimates, also referred to as "shadow housing inventory," is at 3.3 months, up from 2.4 months a year ago. Combined, the total unsold inventory by September 2009 reached 5.5 million units, down from 5.7 million in 2008. Shadow housing inventory is comprised of mortgages that are 90 days or more delinquent and that are not included in unsold inventory.

Loan Value Group, Rumson, N.J., is close to partnering with a national mortgage lender to begin rolling out a patent-pending program aimed at heading off "strategic defaults," according to industry sources. An LVG representative declined to comment and the lender was not identified. The sources told NMN the program avoids the use of loan modifications or reduction of principal. Instead it provides an alternative way to keep at-risk borrowers who might otherwise be encouraged to default due to negative equity paying on their original mortgage notes. The program is said to be designed to align the interests of lenders, servicers, government-sponsored enterprises and taxpayers while avoiding costs to homeowners or taxpayers. The sources said it is set for roll out and implementation on a private-label basis to eligible homeowners as early as the first quarter of 2010.

Cenlar FSB has leapfrogged over Dovenmuehle to become the nation's largest subservicing vendor thanks to a new contract with Freddie Mac as well as strong growth in its core primary business. Company senior vice president Dave Miller said the New Jersey-based firm has benefited from the GSEs wanting mortgage bankers of all sizes to retain servicing, making these lenders have "more skin in the game." However, many small- to medium-sized nonbanks (and depositories) are opting to use a subservicer instead of building the infrastructure themselves. "Some mortgage bankers used to sell everything they originated 100% servicing-released but that's changing," he said. Also, lenders have complained about the poor premium they receive from aggregators when they sell servicing-released. At June 30, Cenlar ranked third among all subservicers with $46 billion in contracts but saw its business spike to $93 billion in the third quarter. A large chunk of that growth came from 260,000 loans once serviced by Taylor, Bean & Whitaker. When TBW went bankrupt a few months back Freddie Mac — which controls the servicing rights on its loans — looked for a subservicer and eventually decided on Cenlar. For years Dovenmuehle Mortgage of Illinois has ranked first among subservicers. At Sept. 30, Dovenmuehle had roughly $70 billion in contracts, according to figures compiled by National Mortgage News and the Quarterly Data Report.

The Federal Deposit Insurance Corp. is contemplating securitizing at least $10 billion of delinquent and underperforming whole loans belonging to failed banks in the first quarter, according to investment banking sources who have been briefed about the plan. These sources, requesting their names not be used, said the bond issuance could rise to as much as $30 billion. The FDIC will be the issuer of record on the MBS. "Right now it's a prototype they're talking about," said a source. At press time, the agency had not returned telephone calls about the matter. The FDIC has hired former secondary market executives that worked for UBS Securities and Option One Mortgage to advise them on the securitization process, said one advisor. "These are smart guys who know their way around the securitization business," he said.

The closure of ISGN Solutions Inc.'s acquisition of Fiserv Inc.'s loan fulfillment services business is helping the former company move forward with its larger plans to reorganize, according to an ISGN spokeswoman. The deal, slated to close in November, took slightly longer simply because of holiday season delays, the spokeswoman told NMN. The company's larger reorganization refocuses servicing and origination functions for marketing purposes, she said. This was done to mirror the organization structure of the lending industry, the company serves, according to the spokeswoman.

Chase is adding another 24 mortgage counseling centers within the next four months bringing the number of such centers that provide face-to-face assistance to distressed homeowners in 14 states up to 51. These centers are located in Cleveland, Dallas, Houston, Seattle, Boca Raton, Fla., and Fort Lauderdale, Fla. The addition, according to the head of retail financial services at Chase, Charlie Scharf, responds to the unusually high demand for loan modifications and follows the so far successful engagement of its initial 27 centers in providing a complete document packages looking for permanent payment relief. Borrowers can schedule appointments or walk in six days a week. Since they first opened 11 months ago, Chase centers have provided counseling for over 60,000 borrowers, the bank said.

Residential servicers initiated foreclosure proceedings on 1,868 home loans in November in Orange County, Calif., a 55% jump from a year ago but down 13% from October, according to a report in The Orange County Register. The county and surrounding areas are among the hardest hit in the state in terms of home price declines. The big rise in notices of default from a year ago is largely due to a state law enacted in September 2008 that delayed or halted foreclosure filings, at least temporarily. The law requires banks to attempt to talk to borrowers at least 30 days before filing a default notice and discuss options to avoid foreclosure. The law impacts loans made at the tail end of the housing boom, the newspaper reported. Default notices in Orange County have been trending down since July. One reason for the decline is political pressure placed on servicers to help more consumers avoid foreclosure. The largest servicers in California include Bank of America and Wells Fargo.

In setting standards for bank securitizations, the Federal Deposit Insurance Corp. is seeking comment on changing the way residential servicers are compensated and suggesting that depositories should not be obligated to make more than three advances to cover delinquent monthly payments by homeowners. In terms of compensation, the FDIC is asking if servicers should be paid incentives to modify loans as well as actual expenses. The FDIC's proposal also notes that loss mitigation has been a "significant cause of friction" between servicers and RMBS investors. "For RMBS, should contractual provisions in the servicing agreement provide for the authority to modify loans to address reasonably foreseeable defaults and to take such action as necessary or required to maximize the value and minimize losses on securitized financial assets?" the FDIC asks in its advance notice of proposed rulemaking. The receiver of failed banks contends the misalignment of interests in the securitization process has caused significant losses to the Deposit Insurance Fund. The agency wants to fix what it calls these "defects." The proposal is being issued for a 45-day comment period.

Out of an original field of 10 or so bidders, Selene Residential Mortgage Opportunity Fund — which includes MBS co-inventor Lewis Ranieri — has won the auction for roughly 1,000 REO properties that belong to the bankrupt Taylor, Bean & Whitaker of Ocala, Fla. A court is expected to certify the Selene bid on Tuesday, said one official close to the deal. The purchase price is in the range of $80 million but could turn out to be lower with some REO properties falling out of the pool before closing, said the official who requested his name not be used. "This package of properties is not risk free," he said. "Some are practically lots." The single-family properties being purchased are located across the U.S. with a somewhat heavy concentration in California. The Selene RMOF is affiliated with Selene Finance, a Houston-based specialty servicer and REO workout firm. Selene is privately held and does not disclose its servicing or REO portfolio size. A nondepository mortgage banking firm that relied on warehouse lines of credit, TBW filed for bankrupt protection this summer and is in the process of being liquidated.

On Monday, Interactive Mortgage Advisors will officially start the bidding process on an $11.1 billion package of jumbo ARM servicing rights belonging to the bankrupt Thornburg Mortgage, according to officials close to the deal. A jumbo and "super jumbo" lender/servicer, Thornburg Mortgage of Santa Fe filed for bankruptcy protection earlier this year. At Sept. 30, the receivables — which currently are being subserviced — carried a delinquency rate of 3.79% with foreclosures at 2.8%, said one investment banker. "It's their entire servicing portfolio," said the banker. IMA, which is based in Denver, declined to comment.