Servicing

Home prices rose 0.3% in July from the previous month, according to a Federal Housing Finance Agency price index that has registered three straight monthly increases in values. The home price index rose 0.1% on a seasonally adjusted basis in June and 0.6% in May. FHFA previously reported a 0.5% increase in June and revised it downward. The index is based on the purchase price of homes backed by mortgages sold to or guaranteed by Fannie Mae and Freddie Mac. Overall, the July HPI is roughly at the same level as the March 2005 index.

The chairman of a key subcommittee is predicting that the House of Representatives will pass a regulatory reform bill this year, including new standards for securitizing mortgages and other assets. Rep. Paul Kanjorski, D-Pa., chairman of the House Financial Services Subcommittee on Capital Markets, Insurance and GSEs, said, "We're coordinating our efforts with the European Community and the United Kingdom to try and come up with similar responsibilities when it comes to securitization." Speaking to reporters at a National Association of Federal Credit Unions conference, he said securitization became too speculative during the subprime crisis. He thinks the business can be rebuilt with less risk and more security. "I think having skin in the game is a good principle," he said, adding that this is particularly true when it comes to mortgage makers. Separate from regulatory reform, Rep. Kanjorski said there are discussions going on within his subcommittee about how to restructure Fannie Mae and Freddie Mac and "how we can better use the Federal Home Loan Bank System."

Final bids are due later this week on a $1 billion portfolio of mortgage servicing rights that once belonged to Franklin Bank of Texas, Houston. The receivables are being offered by Interactive Mortgage Advisors, Denver, on behalf of the Federal Deposit Insurance Corp. The loans that are being serviced include both performing and delinquent notes. Franklin was taken over by the FDIC in November 2008.

Envoy Mortgage of Houston, a nondepository, expects its loan origination volume will increase to $2 billion this year, a growth rate of almost 200%. The firm, formerly known as First Houston Mortgage, underwent a change of control about 18 months ago. Its CEO and owner is industry veteran Rick Thompson who during his long career in mortgages has managed such nonbanks as Troy & Nichols and Aegis Mortgage. Envoy - which depends on warehouse lines of credit - is in the process of obtaining its Freddie Mac and Government National Mortgage Association servicing approvals. It already has Fannie Mae approvals, said Mr. Thompson in an interview with National Mortgage News.

The mortgage insurance division of Genworth Financial has knocked nine states off its list of declining/distressed markets, leaving its troubled list to just five: Arizona, California, Florida, Michigan and Nevada. Genworth, the nation's fourth largest MI, on Monday liberalized some of its underwriting guidelines, telling its mortgage banking customers that it will insure cash-out refis and second homes in non-declining markets. However, the cash-out refi rule changes apply to loans with maximum LTVs of 85% and minimum credit scores of 700.

The Federal Deposit Insurance Corp. is auctioning off a $2.6 billion pool of performing and nonperforming acquisition, development and construction loans through Keefe, Bruyette & Woods. Offered as a structured transaction, the bid deadline is Nov. 12. The package has been stratified into three different geographic pools: western ($652 million), central ($545 million), and eastern ($1.4 billion). Bidder due diligence starts this week, but final bids are due in mid-November. KBW notes that investors can purchase "sole membership interest in a newly-formed limited liability company" to which the loans are pledged.

Federal Housing Administration chief David Stevens has confirmed that the government's mortgage insurer will see its reserves fall below the 2% minimum level set by Congress but said the agency is tightening its credit standards to bolster the fund. "To be clear, the fund's reserves are sufficient to cover our future losses, so FHA will not require taxpayer assistance or new congressional action," Mr. Stevens said. The commissioner told reporters there is no plan or need to increase FHA mortgage insurance premiums. FHA's auditors see the "capital reserves getting above 2% within a couple of years with absolutely no changes" in FHA policies or underwriting standards, Mr. Stevens said. But the new commissioner wants to accelerate that timetable and he outlined several changes, involving appraisals, refinancings and lender net worth requirements to reduce FHA's risks and defaults going forward. "These are the first steps in what will be an on-going increasing look at risk management within FHA," he said.

The Federal Trade Commission has filed complaints against two loan modification companies for allegedly making false claims that they could obtain a mortgage modification in virtually all cases. One complaint, filed in the U.S. District Court for the District of Columbia, charges Nations Housing Modification Center and its principals, Michael A. Trap, Glenn S. Rosofsky, and Bryan P. Rosenberg, with violating the FTC Act and the FTC's Telemarketing Sales Rule by allegedly misrepresenting themselves as a government agency and falsely claiming to obtain mortgage mods for consumers. The FTC alleges that very few homeowners got mods and the defendants accepted advance fees for their services. The other complaint, filed in the U.S. District Court for the Central District of California's Southern Division, charges Infinity Group Services and its president, Kahram Zamani, with violating the FTC Act by falsely representing that they would obtain a loan modification in all instances and would allegedly obtain loan refinancing for an up-front fee. The FTC alleges that the company often failed to obtain loan mods and either failed to answer or return consumers' telephone calls or update them about their status. The defendants were unavailable for comment.

A few months ago it was a buyer's market for senior tranches of residential mortgage-backed securities, but no more, according to a recent report by Redwood Trust, Mill Valley, Calif. A publicly traded REIT that invests in and services MBS, Redwood said that in the second quarter prices for senior RMBS rose 10% to 15%. "This trend continued early into the third quarter, as prices have moved significantly and steadily higher," it writes. Redwood, which bought RMBS during the market's "nadir," said the negative investment psychology for this asset class has turned positive "and in some cases, is showing signs of animal spirits." The REIT hinted that it may be a selected seller of its positions, noting that "prices could stay at elevated levels for some time."

Thornburg Mortgage, which is operating under bankruptcy protection, soon will auction off $12 billion in jumbo servicing rights — $2 billion more than previous estimates, according to investment banking officials. Sources indicate that an auction of receivables is indeed coming but that the company's managers have to proceed with the bankruptcy court's approval. Thornburg's legal counsel in Baltimore did not return a telephone call about the matter. Even though the once publicly traded company is based in Santa Fe it filed for Chapter 11 in Maryland. Its legal counsel is Venable LLC in Baltimore. A REIT, Thornburg filed in May, listing assets of $24.4 billion and debts of $24.7 billion.