Servicing

Mortgage moratoriums, HAMP and other loan modification programs will continue to create a trailing effect on the overall number of foreclosures, MBA's chief economist Jay Brinkmann said during a press conference regarding the group's National Delinquency Survey. Now there is a longer time line before a loan actually goes into foreclosure, he said. For example, it will be six months before we see foreclosures essentially from delinquencies that occurred in the first part of 2009. For those loans which will go south in 2010, perhaps by the end of 2010 or in 2011 they will go into foreclosure, thus creating the trailing effect. This crisis is different, he said. Normally any kind of economic pick up would help avoid this trailing effect as improvements in home prices would offset some of the foreclosure rate. "The problem is that if you're in an area where prices dropped 30% and you're under water, just because prices come back up 2%-3% it does not help much." The economist noted however that "the trailing effect" is more of a symptom of the economic crisis than a driver of foreclosures. It will have a certain effect on prices in certain markets, but it will have more to do with what is happening in job creation, and jobs creation really won't be impacted by the foreclosure rate."

Even though the recession ended some time this summer, late payments and foreclosures on residential loans continued on an upward course in the third quarter with delinquencies reaching a record 9.64% — a 40% spike from a year ago. According to the Mortgage Bankers Association's National Delinquency Survey, no loan type was spared: delinquencies on prime and subprime mortgages as well as FHA loans all rose during the quarter, reaching new highs. According to figures compiled by National Mortgage News, consumers owe $9.8 trillion on their homes, which means (based on the MBA's late payment rate) that $944.7 billion in mortgages are 30- 60-, or 90 days late or in foreclosure. Roughly $238 billion in subprime mortgages are delinquent as well. The national foreclosure rate rose to 4.47% at the end of September, a record, and a 50% jump from a year ago. The MBA reports delinquencies separate from foreclosures which means 14.11% of all home owners with a mortgage are either in arrears or in some stage of being foreclosed on. Given the national unemployment rate of 10.2%, MBA's findings were not unexpected.

REDC Auction.com said its 2009 sales of foreclosed properties has topped the $2 billion mark with successful weekend auctions in Dallas, Houston and Seattle. The Irvine, Calif.-based company said it sold just shy of $15 million of REO properties in those three cities. The company has conducted 298 auctions this year, selling 34,600 properties since January.

Triad Guaranty Inc., a mortgage insurer that is in self-liquidation mode, has received a delisting notice from the NASDAQ. The exchange told the nation's smallest MI that it is no longer in compliance with a rule requiring it to maintain a minimum market capitalization (based on common stock value) of $15 million. NASDAQ is giving the Winston-Salem company 90 calendar days, or until Feb. 9, 2010, to regain compliance. Triad, whose shares trade for about 50 cents, lost $102 million in the third quarter. In October Triad agreed to sell its MI platform, including its technology, to Essent Guaranty, a new MI company that hopes to begin writing policies next year. Triad has outstanding coverage on about $57 billion worth of home mortgages, according to the Quarterly Data Report.

Technology Credit Union of San Jose has introduced a new five-year jumbo ARM and is willing to fund mortgages up to $1 million in the high-priced San Francisco Bay Area. Introduction of the new product comes as area homebuyers are having a hard time finding affordable loans over the Fannie Mae/Freddie Mac limit, mainly because the secondary market for these nonconforming mortgages has dried up along with the securitization market. For now, most jumbo loans being funded are held in portfolio at depositories with Bank of America and Wells Fargo being two of the largest players in that market. Technology CU is a $1 billion credit union serving several hundred companies in Silicon Valley. A few months back Kinecta Federal Credit Union of Manhattan Beach, Calif., stepped up its jumbo lending.

The National Association of Insurance Commissioners has selected PIMCO as a third-party modeler that will help state regulators determine the risk-based capital requirements for residential mortgage-backed securities. The new NAIC model is slated to produce expected security-level losses for about 18,000 RMBS owned by U.S. insurers at the end of 2009 so insurers can map their holdings to designations set by the group and those designations' accompanying risk-based capital requirements. The designations in this case will apply only to yearend 2009 reporting.

Green Tree Servicing, St. Paul, Minn., was the winning bidder on a $1 billion package of mortgage servicing rights recently auctioned off by the Federal Deposit Insurance Corp. The agency and company could not be reached for comment at press time. Sources close to the deal confirmed to National Mortgage News that Green Tree was the winning bidder. "The sale has closed," said one source, requesting he not be identified. The servicing rights belonged to Franklin Bank of Texas, which the agency took control of a year ago. Green Tree is a subservicing and specialty servicer.

Residential delinquencies increased for the 11th straight quarter, hitting an all-time high of 6.25% for the period ending Sept. 30, according to new figures released by TransUnion. Basing its findings on a random sample of 27 million credit files, the company found that Nevada leads the nation in delinquencies (14.5%) with Florida a somewhat close second with 13.3%. Year-over-year, mortgage delinquencies are up 58% and are expected to continue rising until the national job picture improves. The credit report agency defines delinquent as any loan where the borrower is 60 or more days past due. The Mortgage Bankers Association, which releases its delinquency figures on Thursday, defines delinquent as 30 days past due or more. According to National Mortgage News and the Quarterly Data Report, there are 60.5 million outstanding residential loans in the U.S. with a face value of $9.86 trillion.

The first new issue of commercial mortgage-backed securities completed under the government's Term Asset-Backed Securities Lending Facility is a step forward on what may be a long journey toward that market's recovery, according to Moody's Investors Service. The first CMBS deal done under TALF is collateralized by a $400 million loan to subsidiaries of Developers Diversified Realty Corp., a retail real estate investment trust. According to combined news reports, the security came to market this week but Moody's notes in a new report that, "significant issues affecting the broader CMBS securitization sector remain unresolved." The rating agency adds, "not all CMBS loan financings will benefit from the program, which has stringent rules."

The yield on the benchmark 10-year Treasury continued its drop Tuesday, suggesting that the recent downward drift in mortgage rates might continue. At press time, the 10-year was yielding 3.3% compared to 3.5% less than a week ago. Rates began to fall after Federal Reserve chairman Ben Bernanke spoke Monday, reaffirming the government's intervention policies in the mortgage market. The Fed is set to end its MBS liquidity program by the spring but the Fed chairman said the central bank might adjust the program, depending on what market conditions call for.