Servicing

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.

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.