Servicing

Foreclosures across the country are expected to drop next year after peaking at approximately 2.75 million this year, according to a University of Michigan researcher. By early 2012, foreclosures should be less than 1.5 million, according to Dennis Capozza, professor of finance and real estate at the University of Michigan's Ross school of business. Mr. Capozza said the expected eventual decrease in foreclosures should result from economic, home price and underwriting improvements. But "for the time being, however, steep increases in unemployment are continuing to mitigate the positive factors, which means that housing markets will continue to take a beating for some time, despite federal stimulus incentives," he said.

The Treasury Department has issued new guidance to expedite short sales and deed-in-lieu transactions for struggling borrowers that cannot qualify for a permanent loan modification under the government's Home Affordable Modification Program. The guidance establishes procedures for HAMP servicers to provide borrowers with pre-approved terms prior to listing the property for a short sale. Once the borrower submits a signed sales contract and all the required attachments - including status of subordinated liens - the servicer has 10 days to approve the sale. Treasury also is providing incentives to make sure that short sales actually happen. Servicers will receive a $1,000 incentive payment for each completed short sale. The former homeowner receives $1,500 for relocation costs. Investors can receive up to $1,000 if they pay $3,000 to subordinated lien holders that relinquish their claims. The investor's reimbursement is based on a one-for-three match. One of the major stumbling blocks in short sale transactions is getting the second lien holders to settle their claims, according to Joe McCloskey, a senior advisor to HomeTelos, a Dallas real estate services firm that specializes in short sales. The incentives may not seem like a lot, Mr. McCloskey said, but the "ability to recoup something is very attractive. Treasury has made a very effective use of incentives," he added.

The Federal Housing Administration is asking for an increase in mortgage insurance premiums to replenish its diminishing capital reserves while hiking credit scores for applicants. Housing secretary Shaun Donovan will ask Congress Wednesday afternoon to raise the 55-basis point cap on annual government MI premiums. Administratively, FHA officials are expected to raise the 1.75% upfront premium and prohibit those points from being rolled into the loan amount. (The agency does not need Congressional approval to raise upfront premiums.) Even though it is hiking loan costs, HUD will allow the upfront premium to be priced into the interest rate. It also will allow home sellers to pay the premium. "The good news is that they are doing this administratively and taking leadership," said Brian Chappelle, a mortgage-banking consultant with Potomac Partners. As the health of the mortgage insurance fund improves, FHA can reduce the premiums and other restrictions, he added.

The Department of Housing and Urban Development is asking Congress for additional authority allowing FHA to require lenders to indemnify the insurer against losses on bad loans. In testimony before the House Financial Services Committee, housing secretary Shaun Donovan said, "We are asking for additional authority for our proposals to hold FHA lenders responsible for fraud and misrepresentations by indemnifying the FHA fund." In his prepared testimony, secretary Donovan also noted that FHA's enforcement actions are presently limited to sanctioning individual lender branches. "We will be asking Congress to expand FHA's ability to hold lenders accountable nationally" across their entire branch network, the HUD secretary said. HUD is developing a "Lender Scorecard" that will summarize each FHA lender's performance. "This scorecard will be posted on our website to ensure transparency and accountability for lenders, borrowers and the market," Mr. Donovan testified.

First American National Default Title Services has named David Tiberio client relations and business development manager for the company's recently launched National Residential Rental Services Division. Mr. Tiberio will report to Tim Bolger, head of NRRS, which is based in Santa Ana, Calif. He joins the existing senior management team of Valerie Clark, director of operations, and Robert Little, director of finance. In this newly created position, Mr. Tiberio will focus on marketing and new business development.

Remax.com visitors can now access more than 1.3 million real estate-owned properties in the U.S. through RealtyTrac, an online marketplace of foreclosure properties. As part of the partnership, agents of the real estate franchise also have access to an advanced subscription of RealtyTrac's service and foreclosure information. The subscription offers agents more detailed information including properties in default and properties scheduled for public foreclosure auction, along with tax assessment information, comprehensive lien and loan history and neighborhood home sale trends. Homebuyers, including those looking to take advantage of the recently enhanced Homebuyer Tax Credit, can search foreclosures by accessing the foreclosure tab in the featured property search box on remax.com.

Fannie Mae is raising its minimum credit score to 620 from 580 and lowering its maximum debt-to-income ratio to 45% to reduce future defaults. The underwriting changes go into effect the weekend of Dec. 12 as part of an update to Desktop Underwriter, the GSE's automated underwriting system. "The adjustments reflect careful analysis of a borrower's ability to repay their mortgage obligation over the life of the loan," said Fannie spokesman Brian Faith. Fannie claims that borrowers with credit scores below 620 are generally nine times more likely to become seriously delinquent than other borrowers. In modifying loans, "we have seen too many borrowers where their other consumer debt has jeopardized their success at homeownership," Mr. Faith said. He noted that none of these changes apply to Fannie's Refi Plus program, which provides a streamlined refinancing option for existing Fannie borrowers that have loan-to-value ratios greater than 80% and up to 125%.

Cadle & Co. of Ohio has agreed to sell a $74 million package of nonperforming second liens to DreamBuilders Investments of New York for an undisclosed sum. The sale is expected to close later this week. The deal was brokered by Jaymes Financial, Reston, Va. No further details were available at press time.

In a month-long campaign to convert 375,000 borrowers in payment trials into permanent loan modifications, Treasury Department and Fannie Mae staffers will be hounding servicers on a daily basis to achieve the highest conversion rate. Starting Wednesday, Treasury/Fannie teams will visit the eight largest servicers for three days to monitor their Home Affordable Modification Program efforts and troubleshoot any problems. In addition, each HAMP participating servicer will report to Treasury twice a day on their conversion progress during the month of December, according to Treasury assistance secretary Michael Barr. One-third of the 375,000 borrowers have submitted all the necessary documentation to qualify for a permanent loan modification and they "deserve" a timely decision from their servicer, Mr. Barr told reporters. Meanwhile, 37% of the borrowers have submitted some documentation and more 20% have not submitted anything. "Borrowers need to submit the necessary information or they could lose their eligibility for a permanent affordable modification," said Phyllis Caldwell, who joined Treasury in November to oversee the conversion campaign. Servicers are expected to continue their outreach efforts while Treasury engages in a "robust" communications and outreach campaign to reach those borrowers. "We are also working with 300 outreach partners — including state, local and community officials as well as homeownership counselors and advocacy groups," Ms. Caldwell said. Several years ago she headed community development banking for Bank of America.

Essent Guaranty of Philadelphia has been greenlighted by 35 states to write mortgage insurance policies and hopes to close its first policy early next year. "Early 2010 is when they'll start writing coverage," said a company spokeswoman. She noted that back in October Essent — which was formed by former Radian executive Mark Casale — had approvals from 24 states. On Tuesday Essent announced that it has closed on its purchase of technology assets and the operating platform of Triad Guaranty, an MI that is in self-liquidation mode.