Servicing

Nations REO Inc., a division of Foreclosure Management Co., located in Overland Park, Kan., has chosen to use DepotPoint Inc.'s TrackPoint platform to power its REO workflow and property management operations. The TrackPoint platform allows Nations REO to scale on demand, improve its operational efficiency and lower its total cost of managing properties for its clients, the company said. The REO application is one of a set of default management applications offered by DepotPoint. The applications are used for short sales, foreclosure and loan modification. Large mortgage lenders, servicers and private equity firms work with Nations REO to scale their businesses to dispose of the growing number of bank-owned foreclosure properties.

A nonperforming second-lien portfolio with a face value of $365 million is about to change hands, according to an investment banker close to the transaction. Final contracts could be signed by the end of next week. The product includes distressed closed-end second liens and open-end HELOCs that have been frozen. At press time no further details were available. Nonperforming second-lien portfolios tend to trade for just pennies on the dollar.

Loan modifications and payment restructurings by the nation's residential servicers rose 75% in the second quarter to 439,574 units, with a noticeable increase in principal reductions, according to new figures released by the Office of the Comptroller of the Currency. The loan mods were undertaken by the nation's largest servicers including Bank of America, Wells Fargo & Co. and others. The percentage increase reflects gains from the second quarter of 2008. Compared to the first quarter, loan restructurings rose 21.7%. OCC said 10% of modifications involved reductions in the principal amount owed by consumes compared to 3.1% in 1Q. OCC, however, does not know the dollar volume on principal reductions. "We don't collect that information from servicers," said an agency spokesman. The government said the number of "seriously delinquent" mortgages continued to rise but there was a lull in foreclosures initiated because lenders moved to implement the Obama administration's Making Home Affordable modification program. Servicers reported that they engaged in 114,538 MHA trial modifications in the second quarter. According to the Quarterly Data Report, there are 66.5 million residential loans outstanding in the United States.

FHA is giving its servicers a directive to lower mortgage rates on loan modifications after finding too many borrowers ended up with higher payments. In the past, FHA allowed servicers to increase the interest rate when it was appropriate. But now that interest rates have come down, "FHA is not really happy with what they are seeing," said Bob Lyons, a servicing consultant with Lyons and McCloskey in Fairfax Station, Va. A new mortgagee letter (2009-35) directs FHA servicers to reduce the interest rate on newly modified loans to a rate that is not more than 50 basis points above the Freddie Mac Weekly Primary Mortgage Survey rate. The FHA mortgagee letter also directs servicers to extend the term of the new mortgage so the borrower has 30 years to pay it off. To qualify for incentive payments, "the modified loan must meet the term and interest rate requirements prescribed in this mortgagee letter," according to the letter signed by FHA commissioner David Stevens.

The benchmark 10-year Treasury yield slid below 3.30% Tuesday afternoon, putting downward pressure on longer-term rates. A little less than a week ago, the 10-year yield was as high as 3.50%. Some analysts believe long-term mortgage rates could hit record lows again this year but others say the Federal Reserve's phasing out of its rate-lowering MBS purchases will gradually put upward pressure on mortgage rates.

Distressed mortgage investor Kondaur Capital, Santa Ana, Calif., is open to the idea of buying a bank, according to a company spokesman. Earlier in the year Kondaur seriously considered such a move because it would allow the firm to "competitively acquire performing loans with low-cost bank capital," said the spokesman. He said Kondaur is still "exploring the possibilities" but has nothing more specific to report. Launched a few years ago Kondaur is managed by Jon Daurio, its CEO, and John Kontoulis who serves as president. During his career Mr. Daurio has worked for Encore Credit, The Prieston Group, and other firms.

Marshall & Ilsley Corp., a top 40 ranked residential servicer, said it is extending its moratorium on foreclosures by another 90 days. The new moratorium means struggling home owners have until December 31. (The bank first initiated a moratorium in late December 2008.) The Milwaukee-based depository is the parent of M&I Mortgage, Cedarsburg, Wisc., a $10.4 billion residential servicer. The moratorium applies only to owner-occupied residential loans for customers who work to reach a repayment agreement. Loans in all the bank's markets are eligible.

Home prices rose 1.6% in July following a 1.4% increase in June as the Standard & Poor's/Case-Shiller 20-city house price index registered its third monthly increase — the first such increase since mid-2006. The chairman of S&P's index committee David Blitzer noted that prices increased in 18 of the 20 cities in July. Prices declined in Seattle and Las Vegas. In addition, 13 of the cities have seen price increases for least three consecutive months. "These figures continue to support an indication of stabilization in national real estate values, but we do need to be cautious in coming months to assess whether the housing market will weather the expiration of the federal first-time homebuyer tax credit in November, anticipated higher unemployment rates and a possible increase in foreclosures," Mr. Blitzer said. Overall, prices are down 13.3% from a year ago and down 32.6% from the second quarter 2006 peak in home prices. Economists at Moody's Economy.com expect house prices won't bottom out until the second quarter of 2010. By then the peak-to-trough decline in the S&P/Case-Shiller HPI will be 40%.

The serious delinquency rate on Fannie Mae guaranteed single-family loans topped 4% in July, according to mortgage giant's monthly summary report. The percentage of Freddie loans 90 days or more past due and in foreclosure hit 4.17% in July, up 23 basis points from June. A year ago, the government sponsored enterprise had a 1.45% serious delinquency rate. Freddie Mac recently reported that it has a 3.13% serious delinquency rate. In its second quarter financial report, Fannie said default rates are increasing across its entire guaranty book of business and the serious delinquency rate on its $270 billion Alt-A portfolio hit 11.9% as of June 30. The Alt-A portfolio includes $195.9 billion interest-only loans and $15.4 billion of payment option ARMs. Fannie's monthly report also shows that the GSE issued $62.1 billion in mortgage-backed securities in August, down 22% from July. Fannie has a one-month lag in reporting its delinquency rate. Freddie's 3.13% delinquency rate is for August.

Loan Resolution Corp., Scottsdale, Ariz., said it has hired 50 new employees because demand for its short-sale services is skyrocketing. LRC said the new hires were added in the third quarter. The company also said it is relocating its headquarters to a larger 30,000 square foot space in another office building. "The explosive growth of our company is a direct result of the added demands from servicers," said company chief operating officer Travis Olsen.