Servicing

Freddie Mac late Friday announced a warehouse lending pilot program where it will provide participating firms with standby commitments to purchase qualifying loans in the event a seller/servicer cannot meet its funding obligations or fails. A source close to the situation told National Mortgage News that the GSE has been operating a version of the pilot since June. The participating warehouse provider in that program is Natty Mac of Florida. Freddie said pre-funding reviews are required. Fannie Mae is working on a similar program. "The warehouse lending industry has nearly exited the market making it increasingly difficult for lenders to fund loans," said Freddie CEO Charles E. Haldeman. "We're proud to help bring much-needed additional liquidity to the residential and apartment financing community." The GSE noted that seller/servicers interested and that qualify for the program will need to enter into a separate agreement directly with the participating warehouse lender. The credit line from the warehouse lender that is supported by the standby commitment will fund only the loans the participating seller/servicer intends to sell to Freddie.

A Federal Housing Administration loan modification program that was rolled out in August is gaining traction with larger residential servicers. "We're seeing some surprising activity with that program," FHA commissioner David Stevens told National Mortgage News. The FHA 'Home Affordable Modification Program' (HAMP) allows servicers to reduce the current principal amount of an existing FHA mortgage by up to 30% to make the monthly payments affordable. Servicers can file partial claims for the principal reduction and the borrowers end up carrying a zero-interest lien for the deferred principal. HAMP is a permanent program that also allows servicers to reduce the interest rate, extend the term of the loan and employ all of FHA's loss mitigation tools, said Bob Lyons, a servicing consultant with Lyons and McCloskey in Fairfax Station, Va. "FHA HAMP is all the home retention options rolled into one and supercharged," Mr. Lyons said.

George Schwartz, a former managing director for Bank of America, has been named executive vice president and division president of default services at ServiceLink, a unit of Fidelity National Financial, Jacksonville, Fla. Mr. Schwartz will be responsible for such items as loss mitigation, title, closing and escrow, valuations, asset management and disposition. Mr. Schwartz has more than 25 years' experience in the areas of default administration, loss mitigation and mortgage servicing. Prior to his tenure at Bank of America, Mr. Schwartz served as senior vice president, loan administration at Cenlar FSB, director of servicing management at Fannie Mae and EVP of real estate operations at FNRS Financial Corp. For more information about ServiceLink, visit http://www.servicelinkfnf.com.

Pockets of housing market improvement have been seen regionally and locally but overall there is some concern that prices could soften as the market moves toward the challenging winter months, according to the October Clear Capital Home Data Index Market Report. "As anticipated, the strong gains we've been experiencing this summer are showing signs of softening," said Clear Capital president Kevin Marshall. "But growth remains sufficiently strong, providing hope as we head into a winter that will test the strength of the recovery." As of Sept. 25, on a quarterly basis, prices had appreciated by 6.3% and the saturation rate of national real estate owned properties had fallen to 28.6%. During the 12-month period between Aug. 27, 2008 and Sept. 25, prices fell by -9.9%. This marks the first return of the year-over-year national price decline to a single-digit number since the summer of 2007. "Prices remain low, driving investor activity into the non-REO marketplace across the nation. This is a good sign that the recovery is reaching beyond the distressed segment," said Mr. Marshall. "Historically, investors move in at the bottom which creates confidence for the bargain hunting fair-market buyers to enter the market as well." Regionally, housing prices continue to improve in the West, where they posted a 2.9% gain quarterly and a 1.6% six-month gain. Clear Capital's Metropolitan Statistical Area drilldown and micro market analysis also showed some positive quarterly developments as Riverside, Calif., and Orlando, Fla., generated quarterly gains for the first time in three years, while Baltimore, Md. featured a quarterly price gain of 0.1% after seven consecutive quarters of decline.

Fitch Ratings has downgraded 748 bonds in 479 residential mortgage-backed securities transactions to D, indicating that the bonds have taken principal writedowns. All the bonds in question had ratings of CCC, CC or C, indicating that a default was expected. Three hundred and seventy-five of the bonds downgraded are backed by subprime credit mortgages, 177 are backed by alternative A credit mortgages, 123 are backed by second-lien loans, 72 are scratch and dent transactions and the balance are other types of transactions.

Essent Guaranty, a new mortgage insurance company, has agreed to buy the operating platform and technology systems of Triad Guaranty, the nation's smallest MI, which is in the process of self liquidating. Based in Radnor, Pa., Essent will pay $30 million in cash and assume what it calls "certain software contractual obligations" that the publicly traded Triad is on the hook for. Essent said it would establish its operational and software center in Winston-Salem where Triad is headquartered. Essent CEO Mark Casale said the purchase of the assets from Triad "is the next major step in the formation" of the young company's MI business. Essent has yet to write any coverage but has received $500 million in financial backing from a group of investors that includes Goldman Sachs & Co. In after hours trading Wednesday, after the deal was announced, Triad's share price shot up 11% to $1.37.

Servicers participating in the Obama Administration's Home Affordable Modification Program have placed over 500,000 borrowers in trial modifications, according to government officials, meeting a benchmark goal several weeks before the Nov. 1 deadline. Administration officials and HAMP servicers are meeting in Washington and they are expected to agree on new streamlined documentation requirements for the loan modification process. Preliminary numbers show HAMP servicers have picked up the pace of moving troubled borrowers into 90-day trial modifications. In addition, some of the modifications are being finalized. Wells Fargo Home Mortgage said it has done 63,000 trials and completed modifications in September, up from 33,200 trials in August. "We have remained focused on exceeding our share of the government's goal to reach 500,000 Home Affordable Modifications by Nov. 1," WFHM co-president Mike Heid said. Bank of America said it has close to 95,000 borrowers in trials, up from 59,900 in August.

The Federal Housing Administration's single-family mortgage insurance fund could be sitting on a deficit of at least $40 billion, according to a former Fannie Mae executive who now bills himself as an expert on affordable housing. Testifying before a House subcommittee Thursday morning, Ed Pinto, who served as Fannie's chief credit officer two decades ago, said FHA has $30 billion in reserve funds but at the end of September probably had $70 billion in losses on its $725 billion book of business. Mr. Pinto called the current $30 billion cash cushion at the government's mortgage insurance agency a "bookkeeping entry" that has already been spent by the government to reduce the federal deficit. Today, FHA originations account for about 25% of the market — and growing. According to figures compiled by National Mortgage News, FHA had a market share of just 2.5% back in 2006. (Some of that includes VA-backed loans.) FHA commissioner David Stevens has said repeatedly that the insurance fund would not need a taxpayer bail out. Mr. Stevens told NMN recently that, "I have read so many stories attacking FHA without relevant data." He added that, "We are insuring the best quality book of business we have ever seen in history — bringing in a lot of fresh MI premiums." Mr. Pinto worked at Fannie Mae from 1987 to 1989.

Existing home sales in the Golden State will slow somewhat "to a more sustainable pace" in 2010, according to the latest forecast from the California Association of Realtors. Thanks to a strong market for distressed properties, sales in the Golden State rebounded this year from double-digit declines in 2007 and 2008. But next year will be "the new normal," said CAR president James Liptak, with a steady stream of sales driven by distressed properties at the low end and moderate price appreciation. The group, the country's largest state organization of realty professionals, expects the median price to rise 3.3% next year, from $271,000 to $280,000. But it is calling for sales to dip 2.3%, from a projected 540,000 units in 2009 to 527,500 in 2010. About a third of the projected sales will be foreclosures or short sales. "Housing in California has become a tale of two markets," Mr. Liptak said at CAR's annual convention in San Jose. "The low-end continues to attract first-time buyers and investors, with a resulting shortage in the number of homes for sale. But sellers at the high end continue to be challenged by the ability of homebuyers to secure financing as well as their concerns about where prices are headed." Chief economist Leslie Appleton-Young listed several "wild cards" that could impact the forecast, with distressed properties being paramount. "Although it appears at this time that lenders are closely monitoring the flow of distressed properties onto the market, there could be an exertion of downward pressure on home prices should a heavier than expected wave of foreclosures come to market next year," she said.

Housing prices have finally bottomed out in most parts of the country and a year from now prices could be up by 5%, according to Allen Sinai, chief economist at Decision Economics. "The bursting of the housing price bubble is over now," Mr. Sinai told MortgageWire. The founder of Decision Economics expects prices could be 5% to 7% higher by the end of the third quarter of 2010, based on the Standard & Poor's/Case Shiller house price index. "Despite big inventories, despite foreclosures in lots of areas, generally speaking housing prices are headed up," Mr. Sinai said.