Servicing

MGIC Investment Corp., in a new regulatory filing, said that it is delaying by 10 years an interest payment on its 9% convertible junior subordinated debentures. Originally, the interest payment was due Oct. 1 of this year but now will not be paid until Oct. 1, 2019. The bonds do not come due until 2063. In trading Monday, MGIC's shares were down 6% to $9.17. Other publicly traded MIs were either flat, or down slightly. In terms of book-of-business, the MI is the nation's largest with policies-in-force of $223 billion, according to the Quarterly Data Report.

A congressional watchdog agency says loan modification programs Fannie Mae and Freddie Mac are implementing involve "additional risks and costs" for the GSEs and could make it harder for the government to move them out of their conservatorships. "Investors might be unwilling to invest capital in reconstituted enterprises unless the Treasury assumes responsibility for losses incurred during their conservatorship," the General Accountability Office says in a report on the future of the government sponsored enterprises. Under the modification programs, Fannie and Freddie could provide up to $25 billion in incentives for borrowers and servicers. The GSEs also incur additional expenses and studies show 40% of modified loans could become delinquent again. The Federal Housing Finance Agency contends the modifications, refinancings and short sales will help stabilize the housing market and save the GSEs many billions of dollars. "While FFHA's positions are plausible, it is too early to reach any conclusion about the effects that the initiatives will have on the enterprises' financial condition," GAO says.

The Federal Deposit Insurance Corp. will auction off a $788 million portfolio of performing and nonperforming commercial loan participations that belonged to the failed Silverton Bank of Georgia. The sale is being brokered by DebtX. The collateral — located in 27 states — consists of commercial real estate including commercial and industrial loans. The largest loan in the pool is a $20.7 million participation of residential lots in Las Vegas, one of the hardest hit housing markets in the nation. The bid deadline is October 20. DebtX CEO Kingsley Greenland said the sale is generating "strong investor interest, particularly among community banks, which have traditionally been the most active buyers of loan participations."

The Federal Deposit Insurance Corp. is "encouraging" its loss-sharing partners to temporarily reduce mortgage payments for at least six months when borrowers lose their jobs. "With more Americans suffering through unemployment or cuts in the paychecks, we believe it is crucial to offer a helping hand to avoid unnecessary and costly foreclosures," FDIC chairman Sheila Bair said. FDIC provides loss-sharing protection to banks and other acquirers of failed depositories so they will acquire and manage the troubled assets. These acquirers also agree to follow a FDIC loan modification program for struggling borrowers. Now FDIC wants homeowners who lose their job to get immediate relief. "This is simply good business since foreclosure rarely benefits lenders and would cost the FDIC more money, not less," chairman Bair said.

Mountain Funding LLC has appointed Arthur Nevid to be its chief investment officer and to spearhead the national real estate investment company's plans to acquire $1 billion of distressed real estate debt portfolios over the next two to three years. He also will serve as managing director of the Charlotte, N.C., company's special servicing affiliate, which currently manages $1 billion in mortgage debt on 90 commercial properties. Since 1997, Mr. Nevid has served as Mountain's managing director of lending and investment. Prior to joining Mountain Funding, Mr. Nevid was the U.S. executive managing director of a French-owned development company based in New York City, and a real estate investment banker and asset manager at Merrill Lynch Hubbard.

A continuing rise in negative home equity and unemployment has led to rating actions on 581 prime residential mortgage-backed securities transactions issued between 2005 and 2008, according to Fitch Ratings, New York. "While actual loan losses to date remain low on average for the transactions reviewed (36 basis points), average delinquency has almost doubled since the start of the year to 11% and continues to grow due to high average roll-rates from performing to delinquency," Fitch said in a report. About 45% of the borrowers in the private-label MBS reviewed by Fitch owed more on their mortgages than their homes were worth, according to Grant Bailey, a senior director at the rating company.

The Government Accountability Office, in a new report, has entered into the debate over the future of Fannie Mae and Freddie Mac, blistering some of the most widely discussed options for revamping the two. Though the watchdog agency did not take a formal position on what policymakers should do with the GSEs, it essentially declared two ideas unworkable — fully privatizing Fannie and Freddie or turning them into public utilities. Those options could spur inefficiencies, raise mortgage rates and take banks out of the business of offering traditional mortgages, the GAO concluded. The report offered detailed pros and cons of other options including nationalizing Fannie and Freddie, simply restoring the firms to their previous status, breaking them up into multiple entities or turning them into cooperatives. In the year since the federal government seized the GSEs, options for how to deal with them have multiplied, even though the Obama administration has said it will not deal with the issue until 2010. While many Republicans and other conservatives have pushed for years to privatize the GSEs or eliminate them, the GAO found only one benefit to such an approach: enhanced market discipline. But the agency warned that it was not clear if privatized GSEs could support the mortgage market during a crisis.

Final bids are due next week on a $1.7 billion portfolio of non-performing second liens, according to a senior executive who's involved in the auction. He said four bidders have been picked with a finalist set to be chosen by week's end. The portfolio, he said, includes "closed-end, seasoned charge-offs." Depending on the underlying collateral, NPL seconds typically sell for less than 10 cents on the dollar.

Caliber Funding, which is controlled by private equity firm Lone Star Funds, has agreed to acquire what it calls "certain technology and operational assets" from StoneWater Mortgage for an undisclosed sum, according to a source close to the deal. Both non-depository lenders are based in Arizona. Caliber expects to retain most of StoneWater's employees. No further information was available on the deal, including figures on the firms' origination and servicing volumes. A spokesman for Caliber confirmed the transaction. The Dallas-based Lone Star has been bottom fishing in the mortgage market the past year. A year ago the private equity firm made headlines when it paid 22 cents on the dollar ($6.7 billion) for $30.6 billion in mortgage CDOs held by then struggling Merrill Lynch & Co. (This was prior to Merrill's sale to Bank of America.) The PE firm also bought CIT's home lending business.

Investor Wilbur Ross, one of the most active bidders on distressed mortgage assets, is gearing up to make a run at mortgage insurance giant United Guaranty Inc., a unit of American International Group, according to MI and investment banking sources. One investment banker described Mr. Ross — a principal in WL Ross & Co., New York — as the leading bidder on UGI, the nation's fifth largest MI in terms of policies-in-force. (Figures courtesy of the Quarterly Data Report.) However, it's unclear if Mr. Ross is bidding on all or part of the company and whether he has partners on the deal. Spokespersons for both AIG and UGI had no comment. Mr. Ross had not returned a telephone call as National Mortgage News went to press. Over the past 18 months he has acquired two large non-prime residential servicing portfolios. Ross was part of an investor group that bought failed Florida bank BankUnited FSB, a large player in the payment option ARM market. He also recently hired James Lockhart, former director of the Federal Housing Finance Agency, who is familiar with the MI industry and its role in guaranteeing loans sold to Fannie Mae and Freddie Mac. "Ross' interest in the MI business is very important," said one MI executive. "It shows the importance of this business. He can be an important part of the MI business moving forward."