Servicing

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.

A U.S. district court judge has ruled in favor of Wells Fargo Bank NA and dismissed a lawsuit by the City of Baltimore seeking reimbursement for expenses and loss of revenues due to foreclosures and vacant homes. The city alleged that Wells Fargo targeted minority neighborhoods with subprime loans, which lead to foreclosures and deterioration of inner city neighborhoods. Judge Frederick Motz noted in his opinion that the bank is responsible for only a "negligible portion" the city's vacant properties and other factors such as high unemployment, drug use and violence also are factors. The city's allegations of a "casual connection between Wells Fargo's alleged misconduct and the damages the city claims is not plausible," the judge ruled. The opinion says the number of vacant homes in Baltimore range from 16,000 to 33,000 and the city has identified only 401 vacant properties involving Wells Fargo loans. "From the beginning, we have consistently maintained that Baltimore's economic problems could not be attributed to the small number of foreclosures Wells Fargo has done in Baltimore," said Cara Heiden, co-president of Wells Fargo Home Mortgage. "We are pleased the court's decision rejects the city's claim and reflects this point of view." Judge Motz has opened the door for the city to file an amended complaint that seeks damages for "specific houses that became vacant allegedly because of Wells Fargo's lending activities." No comment from the city was available at press time.

Suffolk Federal Credit Union of Long Island, one of the biggest victims in the U.S. Mortgage/CU National Mortgage fraud case, has filed suit against The CUMIS Group Ltd. in federal court, the latest effort by a CU to prevent the credit union insurer from voiding coverage in the $140 million scandal. The $840 million credit union says it lost $42 million when CU National's president Michael McGrath fraudulently sold 189 of the real estate loans it was servicing to Fannie Mae without the credit union's authorization, and CUMIS, a unit of CUNA Mutual Group, has denied its bond claim. "They have directly told us they are not going to pay the claim," said Patrick Boyle, a New York attorney representing Suffolk FCU. The latest suit comes as CUMIS has asked the federal court in Wisconsin for a declaratory judgment voiding bond claims by 26 credit unions in the case. Two other credit union victims of the fraud, Educational Systems FCU, in Greenbelt, Md., and TCT FCU, in Ballston Spa, N.Y., have also filed suit challenging the CUMIS denial of the bond claims. At least two other credit union victims, Picatinny FCU and Sperry Associates FCU, are suing Fannie Mae. In its suit, Suffolk FCU said under its bond CUMIS agreed to indemnify the credit union for "all losses arising from the dishonest acts of employees, officers and directors" and "its servicing contractor, CU National." The credit unions are continuing to negotiate with Fannie Mae over return of the mortgages and of the funds, a source told The Credit Union Journal. Several have petitioned Congress to intervene because Fannie Mae is currently being run under conservatorship by the federal government. CUMIS officials did not immediately respond to a request for comment.

The Clear Capital Home Data Index Market Report shows a 1.7% national quarterly price gain for the 30-day period ended Dec. 24, 2009. Yearly national home prices went from a decline of over 20% on a year-to-year basis for 2008 to a much more modest decline of 1.3% for 2009. On a quarterly basis all four regions showed gains: at 4.1% in the Midwest, 1.2% in the South and the West and a modest 0.4% in the Northeast. What is remarkable about these gains, according to Clear Capital president Kevin Marshall, is that home prices for the nation as a whole were generally flat for 2009 despite yearlong volatility that included record declines early in the year, followed by the gains during the summer and fall. Also, by year-end the annual national real estate owned saturation rate dropped 16 percentage points to 25.5%. Some encouraging results came from several micro markets. For example, the Las Vegas metropolitan statistical area drilldown showed its first positive quarterly price gain in over three years at 1.1%, even though yearly price declines in the area remain high at -27.4%. According to Clear Capital, Las Vegas "is showing signs of transitioning from home-price free-fall, to more traditional trends."