Servicing

DreamBuilder Investments LLC has purchased a $173 million package of nonperforming second liens after the initial winning bidder on the deal failed to close. According Jaymes Financial of Virginia, which brokered the transaction, the privately held DreamBuilder paid less than one penny on the dollar for the loans, which include both secured and unsecured credits. The seller was The Cadle Co., Newton Falls, Ohio. A Texas company had won the bid a few weeks back but could not close on the transaction, said Andy James, a principal in Jaymes Financial. Several weeks back the privately held DreamBuilder bought a $400 million package of nonperforming seconds that belonged to National City Corp., Cleveland. The seller was PNC Financial Services, Pittsburgh, which bought NatCity late last year. No price was disclosed on the NatCity deal. DreamBuilder has been buying nonperforming second liens since 2002.

Although its portfolio is continuing to perform well, PMC Commercial Trust has seen the weakened economy impact some of its borrowers, according to its third quarter financial results. In addition, the Dallas-based commercial real estate investment trust has taken possession of two properties through foreclosure. "We anticipate the weakness to continue for at least several quarters," said PMC chairman Lance Rosemore in a statement, adding, "our loans are typically real estate secured and, in most cases, the value of the underlying collateral should cover our principal exposure." In response to the current economic conditions, PMC Commercial Trust increased its reserves for loan losses during 2009. Income from continuing operations increased to $1.5 million in 3Q09 from $587,000 during the third quarter of 2008. Net income increased to $1.9 million during the third quarter of 2009 compared to $603,000 for the third quarter of 2008.

Fannie Mae is offering a bulk package of 270 REO properties, one of few bulk offerings by the GSE this year, according to a bidder who has seen the offering circular. The package hit the market last week. Over the past two years Fannie has sold many of its real estate-owned properties one or two at a time. Roughly 30% of the bulk package includes homes in the Rust Belt, said the bidder, requesting his name not be used. The homes carry an average BPO (broker price opinion) of $25,000. A Fannie spokeswoman could not provide details at press time but noted that during the first nine months of the year the GSE sold 89,691 REO properties while acquiring title to 98,428. Last year it sold 64,843.

Freddie Mac said the conforming loan limits on the mortgages it purchases from lenders will not change in 2010. Moreover, even the $729,750 loan limit for high cost areas will remain the same since Congress extended it for another year. Otherwise, the loan limits for first mortgages are: $417,000 for mortgages secured by one-unit properties, $533,850 for mortgages secured by two-unit properties, $645,300 for mortgages secured by three-unit properties and $801,950 for mortgages secured by four-unit properties. Fannie Mae is expected to make the same pronouncement shortly.

Milestone Advisors plans to auction off a $275 million package of nonperforming acquisition, development and construction loans, a pool that is heavily weighted toward California. The loans — some of which involve foreclosures and bankruptcies — were used to fund residential and commercial projects. Milestone would not identify the seller but said it is a "western regional financial institution" seeking to liquidate assets. The investment banking and advisory firm said it is now qualifying prospective bidders and hopes to sell the loans by yearend.

Fannie Mae completed 56,816 loan modifications during the first nine months of the year with 46% involving mortgages with current loan-to-value ratios greater than 100%. "A significant portion of our modifications pertain to loans with a mark-to-market LTV ratio greater than 100%," Fannie said in its third quarter financial report. Fannie notes that 20% of its high LTV single-family mortgages are 90-days or more past due, compared to a serious delinquency rate of 4.72% on its entire $2.8 trillion guaranteed mortgage portfolio. In the third quarter, the GSE completed 28,000 loan modifications, including a "limited number" of borrowers who qualified for the Obama administration's Home Affordable Modification Program. However, the GSE said a "large number" of the third quarter modifications involved borrowers "who did not qualify for modifications under the Home Affordable Modification Program."

Fitch Ratings has downgraded 119 bonds in 85 residential mortgage-backed securities transactions to 'D,' saying the securities have suffered writedowns on the underlying principal. All the bonds affected previously had had 'C' ratings that indicated a default was expected. Eighty of the bonds downgraded were from subprime credit deals and 33 of the bonds downgraded were from alternative-A credit deals. The remaining six bonds were from miscellaneous other RMBS transaction types, according to Fitch.

Mortgage banking firms are now servicing a record $843 billion in GNMA securities, a 46% spike from a year ago, reflecting the increasing popularity of both the FHA and VA loan programs. Moreover, when measured against the on-balance sheet portfolios of Fannie Mae and Freddie Mac, GNMA is now larger than both by tens of billions of dollars. According to figures compiled by National Mortgage News and the Quarterly Data Report, Wells Fargo & Co., continues to dominate the GNMA servicing market with a portfolio that has grown to $215 billion. Bank of America is second with $189 billion. (Figures as of September 30.) Combined, Wells and BoA have a GNMA market share of almost 48%, NMN found, dwarfing the rest of the industry.

Over the past two months the Federal Housing Administration has suspended or "eliminated" at least eight mortgage banking firms from using its insurance program, according to Assistant Housing Secretary David Stevens. Mr. Stevens told reporters at a press conference that the eight firms — which were not identified — "were originating a poor quality book of business." He noted that mortgage banking firms that were approved to do business with the agency between 2005 to 2009 account for just 5% of its overall business. "A vast majority" of FHA's $685 billion book of business consists of what Mr. Stevens called "long tendered institutions." One mortgage banking source told National Mortgage News that the government is now looking into a large number of early payment defaults at a New Jersey-based FHA lender. No further details were available. On Thursday HUD released an audit showing that at the end of September the FHA's Mutual Mortgage Insurance fund had a razor thin capital cushion of just $3.6 billion, or 0.53% of its entire coverage universe. HUD is considering raising premiums to bolster the fund. HUD officials say that despite the thin capital base of the MMI, the fund is constantly bringing in new cash through premiums and that almost 30% of borrowers using the program in fiscal 2009 had a credit score of 720 or better, an all-time high. Four years ago just 12.6% of FHA borrowers had a credit score that high.

Outstanding foreclosure auction notices in Orange County, Calif. — one of the hardest hit housing markets in the state — climbed to 8,895 at the end of September, the highest in this housing downturn and probably the highest ever, according to ForeclosureRadar.com. September's total was up 5% from August and 90% from a year ago. An auction notice, also known as a notice of trustee's sale, is a warning that a home will be offered for sale, usually at a local courthouse. According to The Orange County Register, lender/servicers are facing intense political pressure not to foreclose. The newspaper quoted Sean O'Toole, president and founder of ForeclosureRadar, who said that if foreclosures keep rising politicians might move to stop them, possibly granting bankruptcy judges the power to slash outstanding debt on properties to current market value.