Servicing

The Federal Deposit Insurance Corp. is considering amending its loss-sharing agreements with acquirers of failed banks, allowing certain homeowners who are "under water" on their mortgages to reduce the principal amount owed. "There would be no requirement that they perform principal forgiveness - though there would be financial incentives under the 'loss share,' particularly for deeply underwater loans," said FDIC spokesman Andrew Gray. Under the current loss sharing agreements, FDIC agrees to absorb 80% of the losses on the failed bank's assets. But the acquirer is required to modify residential loans for struggling homeowners and reduce their payments to an affordable level. These agreements cover $44.7 billion in single-family loans. Now, FDIC is "actively considering" making debt forgiveness a modification option. "It would be based upon the use of tools that would maximize the value of the mortgage and provide long-term sustainable mortgage payments for the borrower," Mr. Gray said.

Nuveen Investments, which provides investment services to institutional and high net worth investors, recently completed the initial public offering of a new "opportunity" fund that will buy distressed MBS. The fund, which trades under the stock symbol "JLS," is called Nuveen Mortgage Opportunity Term Fund and its stated goal is to "generate attractive total returns through opportunistic investments in mortgage-backed securities." The IPO raised $400 million. It hopes to participate in the government's Public-Private Investment Program established by the Department of the Treasury. The fund began trading on the New York Stock Exchange earlier in the week.

Bid4Assets, an online real estate auction company in Silver Spring, Md., has added eRealAnalyzer, a browser-based, financial calculator that computes metrics to help bidders determine the investment potential of a property. The service is free to use and is integrated into the auction listings for most improved residential properties on the Bid4Assets website. "It can be extremely time-consuming and complicated for a bidder to accurately calculate a property's potential to meet their financial needs," said Matt Baker, chief executive of Bid4Assets.

The housing recovery is still at a fragile stage, but with inventories of unsold homes receding and home sales and prices rising "we may be finally seeing the light at the end of the tunnel," HUD secretary Shaun Donovan said. The Department of Housing and Urban Development secretary made his remarks at a Consumer Federation of America conference. He stressed to reporters afterwards that it is "far too early to say we are out of the woods." But he noted that completed foreclosures have declined three months in a row and the Obama administration's loan modification program is a contributing factor. Foreclosures are "still too high," he said, and the administration is considering several options to assist unemployed homeowners. "We will make an announcement relatively soon," he added. The HUD secretary noted that a Pennsylvania state mortgage assistance plan does not require lenders or private investors to absorb any of the principal reduction. "I would not support a process where there is no principal reduction by whoever owns the loan," he told reporters.

The bankruptcy court overseeing the liquidation of mortgage lender Taylor Bean & Whitaker has approved a "stalking horse" bid on the nonbank's real estate-owned portfolio which includes almost 2,000 properties, according to a memo obtained by National Mortgage News. The memo notes that the portfolio has been appraised at $330 million. A stalking-horse bid is a strategy used by a bankrupt company (in this case, TBW) whereby it obtains an initial bid on its assets from an interested buyer of their choosing. Even though the REO portfolio has been appraised at $330 million, it's unclear what the stalking-horse bid is. TBW's chief restructuring officer plans to accept competing bids on Dec. 9. Ocala, Fla.-based TBW filed for bankruptcy protection in August after the Department of Housing and Urban Development pulled its FHA credentials.

The mortgage industry continues to shrink in terms of full-time employees as companies rely more on temporary workers to deal with servicing and origination demand. The U.S. Bureau of Labor Statistics reported that mortgage companies cut 3,700 full-time workers from their payrolls in October, including 1,700 mortgage brokers. Overall employment in the mortgage banker/broker sector fell to 255,500 in October from 259,200 in September. "You have a lot of temps being hired," a Mortgage Bankers Association executive said, noting that those figures do not show up in the BLS mortgage sector data. MBA associate vice president of industry analysis Marina Walsh said that mortgage firms are definitely hiring servicing-related workers but it is hard for them to justify hiring full-timers given the volatility in the market. "To forecast what it going to happen with originations and interest rates is very difficult," she said. Meanwhile, Friday's jobs report provided some good news with the national unemployment rate falling to 10% from 10.2% previously. BLS also revised downward the job losses in October and September - by a combined 150,000. (There is a one-month lag in BLS reporting of mortgage industry employment data.)

Foreclosures declined in 68 of the 84 ZIP codes in Orange County, Calif., tracked by MDA DataQuick in the third quarter of this year compared to the same period last year, according to a report in The Orange County Register. Some market watchers say government loan modification programs are the main cause of foreclosure preventions and delays. To put things in perspective, in August 2008 banks seized 1,441 houses and condos from delinquent borrowers - the highest monthly total in the roughly 20 years DataQuick has been keeping track. But foreclosures began falling the next month when California implemented a law requiring banks to try to discuss with borrowers options to avoid foreclosure. Such talks must be held at least 30 days before starting the foreclosure process on loans made during the final years of the housing boom.

MGIC Investment Corp., Milwaukee, has cleared another hurdle in its plan to write new business through a reactivated unit, MGIC Indemnity Corp. The Office of the Commissioner of Insurance for Wisconsin has waived a requirement that MGIC maintain a specific level of minimum regulatory capital; the waiver lasts until Dec. 31, 2011. MIC is a subsidiary of the company's primary operating unit, Mortgage Guaranty Insurance Corp. The regulator also approved a change in the business plan for MIC where the reactivated subsidiary would only write new policies in states which MGIC's primary mortgage underwriting unit no longer met minimum capital requirements. There are 17 states that impose some sort of requirement, including Wisconsin, where MGIC is domiciled. Previously, Fannie Mae had approved MIC as an eligible mortgage insurer through Dec. 31, 2011. However, Freddie Mac has yet to approve MIC. MIC has been capitalized by MGIC with $200 million.

Former New York mayor Rudolph Giuliani and some of his advisors attended talks between Lend America officials and the Department of Housing and Urban Development last week, hoping to find a solution to the lender's problems, according to sources familiar with the matter. A source close to Lend America told National Mortgage News that Mr. Giuliani "was there" at the meetings but at press time it was unclear whether he attended as a representative of his law firm, Bracewell & Giuliani, or in an outside capacity. A spokeswoman for Bracewell said to the best of her knowledge, Lend America and its 'dba,' Ideal Mortgage Bankers, are not clients of the law firm. Also in attendance was Lend America president Michael Primeau. Before going into politics, Mr. Giuliani was U.S. Attorney for the Southern District of New York and made his name by busting junk bond king Michael Milken. On Monday HUD ordered the New York-based Lend America to halt the origination of FHA-backed loans. The next day the company laid off most of its work force - roughly 550 workers. HUD fined the company $512,000, accusing it of underwriting fraud and other misrepresentations.

The House of Representatives is slated to debate and vote on a massive regulatory reform package next week that includes several bills addressing abusive mortgage lending practices and risk retention on sales and securitizations of mortgages. The House Financial Services Committee completed action on the reform package on Wednesday when it approved a bill to set up a resolution process for "too big to fail" institutions. The "systemic risk" bill also gives regulators the discretion to set risk retention requirements as high as 5% on Federal Housing Administration, Fannie Mae and Freddie Mac loans. The regulatory reform package also includes bills that create a Consumer Finance Protection Agency, regulates the trading of derivatives, and a bill (H.R. 1728) the House passed in May that curbs subprime lending practices. The mortgage industry prefers the risk retention provisions in H.R. 1728, which totally exempts lenders and securitizers from retaining a portion of the credit risk on FHA and GSE loans. Some industry lobbyists have been wondering how committee chairman Barney Frank, D-Mass., would deal with the different risk retention provisions. Rep. Frank told reporters he would drop the original provision in H.R. 1728. "The risk retention section of the subprime bill will conform to what we did in the systemic risk bill," the chairman said.