Servicing

LoanMarket.net, Irvine, Calif., has received more investment capital including a commitment from Bill Cvengross, a founder and former chief executive at bond fund Pimco. According to LoanMarket.net principal Jeff Freud, other recent investors in the loan auction website include Richard Conn, a former equity partner at Latham & Watkins, and Bob Allison, a venture capitalist from Orange County. Mr. Freud declined to say how much money the men invested in LoanMarket.net. "They've invested in the company and are taking an active role in it," said Mr. Freud. The website currently has 600 loans listed for auction with another 1,000 or so ready to board, said Mr. Freud. Buyers of the loans must pay cash.

Three more investment funds — with combined commitments of at least $1.5 billion — have applied for and received approval from the Treasury Department to participate in the 'Public-Private Investment Program' in regard to buying troubled securities. The three are: AllianceBernstein LP and its sub-advisors Greenfield Partners LLC and Rialto Capital Management LLC; BlackRock, Inc.; and Wellington Management Company LLP. Treasury says each has completed initial closings and has at least $500 million of committed equity capital from private investors. To date, at least five funds have been established with total debt capital of $12.27 billion. So far, no PPIP sales have been disclosed publicly. Treasury says more PPIP funds will close and be announced by the end of October.

Freddie Mac is warning potential buyers of its foreclosed properties that they have to submit a bid by Oct. 30 to take advantage of its temporary offer to cover part of the closing costs. Freddie has 34,700 in real estate owned properties. To expedite REO sales the government-sponsored enterprise will put up to 3.5% of the house price toward closing costs. "Every home shopper should know there are only 30 days left to save potentially thousands of dollars in transaction costs when they buy a HomeSteps home," said Freddie vice president Chris Bowden. HomeSteps is Freddie's REO sales unit. Buyers also have to complete the closing by Dec. 31 to get the closing cost discount.

Prestwick Group, Alexandria, Va., said it has sold a $25 million package of Freddie Mac servicing rights which include Florida loans. "The deal was just completed," said company EVP George Christo. The firm declined to name both the buyer and seller. Delinquencies on the package are less than 4%. Prestwick has a $9 million package of Michigan servicing rights out for bid. In one other servicing note, last week was the bid deadline on a $1.04 billion package of GNMA servicing rights offered by MIAC, New York. The advisory firm did not return telephone calls about the transaction. Mr. Christo said there is a growing interest among smaller GNMA lenders about getting involved in servicing the loans they originate instead of selling them servicing-released.

Detecting a change in attitude among both buyers and sellers — not to mention what is now a three-month increase in the benchmark price indices that bear his name — economist Karl Case believes the housing market has hit bottom. Not that housing is ready to bounce back with a vengeance, but at least it is no longer in a free-fall, the co-founder of the S&P Case Shiller indices said at the New England Mortgage Bankers Conference in Providence, R.I. "We're not going to come roaring out of this," said Mr. Case, who has been teaching economics at Wellesley College for more than 30 years. "We'll come out of this slowly. There will be some bad days and good days, but the mood began changing in March." The economics professor cited several signs that a recovery has begun, including a 25% increase in housing starts since April and "the best number of all," a sharp drop in unsold inventory of new homes. The huge number of completed but unsold houses has "been a real drag" on the market, he said. "The building industry has been getting killed like it's never been killed before," he said. But Mr. Case also warned that if he is reading the tealeaves incorrectly, the mortgage market could take another hit. If housing continues to falter, the economist said, "then we are writing bad paper now." To illustrate just how far the housing sector has fallen, the economics professor pointed to housing starts, which nosedived from 2.273 million units at the peak of the cycle in January 2006 to 598,000 units in August. That decline cost the economy roughly $588 billion, or 4.2% of GDP, he said.

Mortgage companies cut their payrolls by 6,100 full-time workers in August as employment in the residential finance industry hit a new low. The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector fell to 261,200 positions in August from 267,300 in July. Jay Brinkmann, chief economist for the Mortgage Bankers Association, said servicers are hiring workers to deal with rising delinquencies and loan modifications. However, that hiring has been offset by reductions in staff due to bank mergers, back-office consolidation and a reliance on temporary workers and contractors, Mr. Brinkman said. He noted that the bankruptcy of Taylor, Bean & Whitaker, Ocala, Fla., will not show up in the BLS mortgage jobs data until next month's report. (Some of TBW's West Coast AEs were recently hired by CMG Mortgage, San Ramon, Calif.) Meanwhile, Friday's national employment report shows a higher-than-expected 263,000 U.S. workers lost their jobs in September. The unemployment rate edged up to 9.8% from 9.7% in August. (There is a one-month lag in BLS reporting of mortgage industry employment data.)

Bank of America chief executive Kenneth Lewis — the man responsible for the bank buying both Countrywide Financial and Merrill Lynch — is stepping down at yearend. Late Wednesday BoA said its board is evaluating successors, with expectations of having the new CEO named by the time Mr. Lewis departs. Thanks to the Countrywide purchase, which closed last summer, BoA is the nation's largest servicer of home mortgages and second largest originator. His departure ends what has been a stormy 12 months for the handpicked successor to Hugh McColl Jr. In regard to the Merrill deal, Mr. Lewis tussled with regulators over the purchase (the bank almost backed out), and drew ire from shareholders and others over disclosure decisions over bonuses and losses at the investment bank late last year. (Merrill was a large player in the subprime ABS, CDO and warehouse lending market.) Mr. Lewis, 62, in his most recent pubic appearance, gave no indication that he might step down, instead using a Sept. 14 speech in Japan to sound a positive tone about the company and the global economy.

Prior to initiating any foreclosure actions, lenders and servicers would have to evaluate the borrower for a loan modification and provide relief for qualified homeowners, according to a bill introduced by Sen. Jack Reed, D-R.I. The bill (S. 1731) indicates that a borrower should be offered a modification plan if the net present value of the modification is greater than foreclosure. "My bill provides targeted relief to qualified homeowners so that more families can keep their homes," Sen. Reed said. The bill is aimed at stopping servicers from pursuing foreclosure actions while borrowers are being considered for modifications or in a trial period. S. 1731 "establishes meaningful penalties by making noncompliance a defense to foreclosure," a summary of the bill says. It also places limits on foreclosure fees and prohibit costly mark-ups of fees. Democrat Sens. Dick Durbin (Ill.), Sheldon Whitehouse (R.I.) and Jeff Merkley (Ore.) are co-sponsors of the "Expand and Improve Loan Modification Programs" bill.

The seasonally adjusted delinquency rate on closed-end home-equity loans jumped 43 basis points to a record high of 4% in the second quarter, according to an American Bankers Association survey. At the same time, the survey shows that 1.92% of home-equity lines of credit are 30 days or more past due, up 3 bps from the first quarter. "Six consecutive quarters of job losses have taken their toll" on the performance of home-equity loans, ABA chief economist James Chessen said. The Federal Deposit Insurance Corp. reported that 1.73% of home-equity lines of credit are 90 days or more pass due or considered uncollectible, down 25 bps from the previous quarter. However, FDIC-insured institutions charged-off $5.1 billion in HELOCs, up from $4 billion in the first quarter.

In August the Government National Mortgage Association had one of its best months ever — while the private mortgage insurance industry continued to see its new policy business skid. According to figures compiled by the Mortgage Insurance Cos. of America, the nation's six active MIs wrote $5.76 billion in new policies, a 43% decline from the same month last year. Actually, the decline could be worse as the August 2008 data did not include Radian Guaranty, which had not yet rejoined MICA. Its book of business (primary insurance in force) fell to $900.7 billion from $906.1 billion in July. However, compared to the same month in 2008, its book of business rose 12% (this comparison is also affected by Radian rejoining MICA). Most of MI firms are capital restrained and have been tightening up their underwriting guidelines the past year. GNMAs are backed by FHA and VA insured mortgages.