Servicing

Even though JPMorgan Chase posted strong third quarter earnings, the mega bank set aside $4 billion in mortgage-related credit charges, including $1.1 billion tied to Washington Mutual, which it bought a year ago. It also posted a $1 billion loss in its consumer lending division, which includes mortgage banking, a business center that it is scaling back. The charge related to WaMu reflects "deterioration" in its "purchased credit-impared portfolio," JPM said. The bank said it took credit hits on subprime loans ($422 million), prime ($525 million) and home-equity loans ($1.1 billion). All were easily more than double the dollar amount of charge-offs in 3Q 2008. In an analyst report, Credit Suisse notes, "We had expected only nominal reserve increases on the consumer side this quarter." CS analyst Moshe Orenbuch called the WaMu charge a "catch-up" noting that "while there may be one more of these marks" it should not be recurring. Overall, JPM earned $3.6 billion in the quarter, a 583% jump from the same period last year.

Lenders originated nearly $300 billion in Federal Housing Administration single-family loans through August with one more month to go in fiscal year 2009. In August, FHA endorsed $31.8 billion in loans bringing the 11-month total up to $298.6 billion, a 94% increase from the same period in FY 2008. As of Aug. 31, FHA's year-to-date portfolio of insured loans totaled $675.6 billion, an amount greater than what was seen during the full fiscal year ending Sept. 30, 2008 when it was $474.4 billion. Meanwhile, FHA defaults are up, too. The federal mortgage insurance agency had an 8.1% serious delinquency rate as of Aug. 31, compared to 6.9% on Sept. 30, 2008. At the end of August, 430,300 FHA loans were 90 days or more past due or in foreclosure. The agency has managed to keep its inventory of foreclosed houses relatively flat. But sales of real estate-owned totaled 61,900 for the first 11 months of FY 2009, up 48% from the same period in FY 2008. FHA currently has 39,000 in REO with an estimated value of $4.7 billion.

In order to help clients manage the overwhelming number requests for assistance in creating financial packages for review and decisioning, Heart Financial Services LLC is starting a division to assist mortgage loan servicers with preforeclosure or short sales. The new short sales division will field consumer inquiries, guide consumers through the creation of a complete financial and hardship package, and where appropriate delegated authority is granted, make the underwriting decision to approve transactions, the company said. "By leveraging our experience in handling well over one million borrower contacts in traditional loss mitigation, we can free up vital mortgage servicing and investor resources that can be better spent on approving these sales," said Gerald Alt, president and CEO of the Northbrook, Ill.-based company.

Short-sale listings passed the 10,000 mark in the struggling Las Vegas-Henderson housing market in September, even as underwater deals that closed during the month were up 22%, broker Robert Jenson of the Jenson Group reports. There are now almost twice the number of short sales on the market as there are bank-owned listings, the luxury Re/Max broker reports, but REO properties outsell short sales, four-to-one. Short sale offerings account for more than half the 19,366 houses currently listed for sale at $1 million or less with the local multiple listing service. By Mr. Jenson's count, 3,217 houses sold in the Vegas-Henderson market in September. That's an increase of 5.3% from August. But it pales in comparison to the nearly 20,000 houses listed with the MLS. In the $1-million-plus category, 17 properties sold in September, leaving 649 desert palaces still up for grabs. Forty-two of those listings are short sales, 21 are foreclosures. Overall, distressed sales account for four out of every five sales in the region, the broker said.

The Obama administration is set to announce a new program to help troubled borrowers whose mortgages are deemed ineligible for modification. "Maybe this week but certainly next week," said Laurie Maggiano of the Treasury Department's Office of Homeownership Preservation. Speaking at the Mortgage Bankers Association's annual convention, Ms. Maggiano said Treasury would set out the parameters under which servicers can earn financial incentives if they offer borrowers the option of participating in a short sale and deed in lieu of foreclosure. "There's really no magic. We haven't reinvented the wheel," Ms. Maggiano told industry executives in San Diego. To cut down on the paperwork, the program will provide a standardized set of forms. It will also cap the amount of money that can be paid to subordinate lien holders who agree to waive their interest in a property. The government expects that some second mortgage investors will "walk away" from the program because the compensation being offered will be too little. But Ms. Maggiano, who is director of policy in the preservation office, told a standing room only session that by setting a limit, the White House is hoping to eliminate time consuming back-and-forth negotiations between servicers, borrowers and investors. "We are hoping to set an industry standard so investors will know exactly what they can expect," she said.

Lend America, a nonbank mortgage originator, is launching a new correspondent program to buy closed Federal Housing Administration loans from certain lenders on a flow and bulk basis. The Melville, N.Y.-based firm said it hopes to buy its first pool of loans by this Thursday. The mortgage banker will buy pools as small as $1 million. It is calling the new channel its "Mini Ginnie Correspondent" program and the company is a Government National Mortgage Association servicer. However, the program is not related to nor done in conjunction with Ginnie Mae. The effort is part of Lend America's strategy to build servicing volume. The company estimates that by the second quarter of 2010 it will be purchasing $500 million per month in product. Lend America is aiming to compete in the space by offering to small to midsized mortgage bankers what chief business strategist Michael Ashley said will be stronger servicing, fewer credit overlays and more considerate business relationships.

Stewart Lender Services, Houston, has reorganized its operations, removing all of the silos customers had to go through to access its services. The company announced the reorganization at the Mortgage Bankers Association convention in San Diego. Jason Nadeau, president and chief executive of SLS, said in an interview that up until now SLS was organized in such a way that a customer had to contact a different person every time they wanted to use a different service. The new system creates a single point of contact. Given the consolidation in the mortgage industry, it was necessary for SLS to reorganize its approach to match the direction the market is going, he explained. Mr. Nadeau also spoke about the recent growth of SLS, whose revenues have increased 20-fold. The company started with a center in Houston and then added one in Tampa with others following in Dallas, San Diego, Irvine and Phoenix. SLS also has been aggressively recruiting new employees.

Housing starts will jump 38% next year and finally contribute to economic growth as the housing sector breaks out of a three-year spiral, according to a new National Association of Business Economists survey. In the consensus opinion of 44 NABE members, housing starts will hit 800,000 in 2010 compared to 580,000 this year. House prices will rise too. Based on the Federal Housing Finance house price index, prices will increase 2% next year, after falling 3.4% in 2009. "The nascent housing recovery will gather momentum and deliver robust growth in 2010, albeit from a depressed level," NABE said in a summary. The survey results show wide disagreement on the outlook for housing, however. The five most optimistic economists see housing starts hitting 920,000 in 2010 and prices jumping 6.2%. The most pessimistic five see prices falling 5.1% with housing starts essentially flat at 600,000.

Residential servicers using the Obama administration's loan modification program are ramping up to modify 25,000 to 30,000 a week, but it will not be enough to keep pace with rising foreclosures, according to the Congressional Oversight Panel, which watches over the Troubled Asset Relief Program. The Treasury Department's "own projections" show that "fewer than half of the projected foreclosures" will be prevented by the Home Affordable Modification Program, a new COP report says. The oversight panel also warns that HAMP is not designed to address defaults associated with negative equity and the coming wave of resets on interest-only and payment-option mortgages. The authors note that negative equity has become a drag on self cure rates. Historically, "nearly half of all prime defaults would cure on their own," but now it is only 6.6%. The COP also cites research showing that 77% of payment option ARMs are underwater and 25% are seriously delinquent or in foreclosure. "It increasingly appears that HAMP is targeted at the housing crisis that existed six months ago, rather than as it exists right now," the report says. The IO and POA resets will last through 2012.

Although new FHA Commissioner David Stevens denies doomsday predictions that his will be the next mortgage giant to fall, two longtime industry consultants told National Mortgage News at the MBA convention they believe the agency is in big trouble -- bigger even than what a former Fannie Mae executive warned of last week before a House subcommittee. Scott Cooley and Thomas LaMalfa said it is almost a foregone conclusion that the Federal Housing Administration will go under. The agency will be "the next Fannie Mae" and will cave "within two or three years," predicted Mr. LaMalfa, who began saying in 1996 that Fannie Mae and Freddie Mac were accidents waiting to happen. By the agency's own admission, one of four borrowers who took out FHA-insured loans in 2007 are currently behind on their payments, as are one in every five borrowers who obtained their mortgages last year. Mr. Stevens has said the FHA is currently recording its best book of business in years. Both Mr. LaMalfa and Mr. Cooley (a pioneer in mortgage software) also said the mortgage market has much further to tumble before it begins a long, slow climb back from the depths of the housing depression.