Servicing

Guaranty Financial Group Inc., the parent company of the recently failed Guaranty Bank, Austin, Texas, has filed for bankruptcy protection, listing assets of $24.3 million and debts of $323.4 million. Guaranty Bank was also a warehouse provider to non-bank mortgage lenders, a business it was in the process of winding down when the Federal Deposit Insurance Corp. seized the lender on August 21. The agency sold Guaranty to Banco Bilbao Vizcaya Argentaria SA, Spain's second-biggest depository. "Beginning in 2007, volatility in the credit and residential housing markets resulted in extensive impairment of existing mortgage-backed securities held by GFG and its subsidiaries," the company said in its bankruptcy court papers.

The performance of home-equity lines of credit took a turn for the better in the second quarter as delinquency rates dropped but net charge-offs spiked up 30%. The Federal Deposit Insurance Corp. reported that 1.73% of HELOCs are 90 days or more past due or considered uncollectible, down 25 basis points from the previous quarter. "Noncurrent home-equity and junior-lien mortgages declined for the first time in six quarters," FDIC chairman Sheila Bair said. The noncurrent rate on closed-end second liens fell to 3.26% in the second quarter from 3.8% in the prior quarter. FDIC-insured institutions charged-off $5.1 billion in HELOCs and $2.7 billion in junior liens in the second quarter.

Next week the Federal Deposit Insurance Corp. could pick a winning bidder on $1 billion in servicing rights belonging to the now-defunct Franklin Bank of Texas. An investment banking source familiar with the transaction told National Mortgage News that "a winner will be picked a week from now." Initially 23 bidders expressed interest in the portfolio of residential servicing rights. Interactive Mortgage Advisors is auctioning the portfolio for the agency. The servicing brokerage declined to comment.

Deutsche Bank Securities is the largest unsecured creditor of Taylor, Bean & Whitaker and is owed at least $42 million, according to a supplemental filing in the bankruptcy case of the nonbank lender. A spokesman for DB had no comment at press time. The claim is labeled as "disputed" in the filing and no additional information is provided. The second largest unsecured creditor is James G. Hicks of Lawrenceville, Ga., who has staked a claim for $9 million. Mr. Hicks, however, is not listed in the telephone directory as a consumer or business. The third largest unsecured creditor is RBC capital Markets, New York, which is owed $2.2 million. Meanwhile, the Office of Thrift Supervision has hit Platinum Community Bank, owned by TBW, with a cease-and-desist order, telling it to stop unsafe and unsound practices. The C&D, which is available on the agency's website, says the depository has failed to maintain accurate books and records, has not operated independently from affiliates and is having liquidity problems. The bank issued a statement saying it's working closely with OTS to address the issues in the order. In July 2008 TBW bought controlling interest in Platinum Bankshares, the holding company of the depository. The parent was based in Rolling Meadows, Ill.

Federal Deposit Insurance Corp. officials are hoping the worst may be over for single-family mortgages but they fully expect the performance of commercial real estate loans will continue to deteriorate. The agency reported that 6.8% of single-family loans held by banks and thrifts are 90 days or more past due or considered uncollectible, a rise of 220 basis points over the past six months. FDIC-insured institutions charged-off $8.6 billion in single-family loans in the second quarter, a 15% increase from the first quarter. However, only $15.4 billion of single-family loans became "noncurrent" (as FDIC calls seriously delinquent) during the second quarter, compared to $27.3 billion in the first quarter. FDIC officials are looking for this decline to become a trend. The noncurrent rate on CRE loans hit 2.88% in second quarter, up from 2.25% in the previous quarter, and $7.1 billion in CRE loans became noncurrent during the quarter. The FDIC expects further deterioration for several more quarters.

Fannie Mae's issuance of mortgage-backed securities fell 39% in July from the previous month, according to the company's new monthly activity report. The mortgage giant issued $79.7 billion in MBS during July, compared to $130 billion in June. At the same time, its commitments to purchase loans jumped 42% in July to $103.6 billion, a sign that residential production could be picking up. Freddie Mac recently reported a 30% decline in July MBS issuance along with a 33% drop in purchases of refinanced mortgages. Freddie said it purchased $34.1 billion in refinancings in July, but Fannie has stopped reporting refinancing volumes. However, their regulator reported that Fannie purchased 264,317 refinanced loans in July and Freddie purchased 158,182 refinancings. Based on Freddie's average loan size, Fannie purchased approximately $57 billion in refinancings. Fannie also said 3.9% of its single-family mortgages in June were 90 days or more past due, up from 1.36% a year ago.

Wells Fargo/Wachovia Bank tops the list of firms in the Mortgage Bankers Association's midyear ranking of commercial and multifamily mortgage servicers, with $476.2 billion in U.S. master and primary servicing. PNC Real Estate/Midland Loan Services follows on the list, with $308.5 billion, followed by Capmark Finance with $248.7 billion, KeyBank Real Estate Capital with $133.1 billion, Bank of America with $132.2 billion and GEMSA Loan Services with $104.8 billion. Wells Fargo/Wachovia Bank, PNC/Midland, Capmark and Bank of America are the largest master and primary servicers of commercial/multifamily loans in U.S. CMBS, CDO and other ABS; GEMSA Loan Services, Prudential Asset Resources, PNC/Midland, and Northwestern Mutual are the largest servicers for life companies; PNC/Midland, Wells Fargo/Wachovia Bank, Deutsche Bank and Capmark are the largest Fannie Mae/Freddie Mac servicers.

The findings of the J.D. Power and Associates 2009 Primary Mortgage Servicer Satisfaction Study suggest that a more proactive customer contact will help servicers improve customer retention rates. It found among those who contacted their mortgage servicer, customer satisfaction averages 613 on a 1,000-point scale, compared with 651 points among those customers whose mortgage servicer initiated contact. "Taking care of customers in their hour of need is critically important, particularly among homeowners with otherwise blemish-free credit histories ... can form lasting positive impressions of servicers and create lifelong customers," says J.D. Power and Associates director of financial services, David Lo. "For example, of customers who say their servicer was helpful in dealing with their current situation, 21% say they definitely will use their servicer again. Only 1% of customers who say their servicer was not helpful plan to use their servicer again." The study is based on the primary mortgage servicer experiences of over 5,000 homeowners and took place during May 2009. The primary mortgage servicers with the highest customer satisfaction rate scores were Regions Mortgage with 780 for its performance in the annual account review/administration and payment processing areas, followed by Branch Banking and Trust with 777 and U.S. Bank with 771. It also found that 18% of customers who contacted their servicer had difficulty understanding the representative. Among this group, contact satisfaction declines dramatically to an average of 353, usually because the representative spoke with an accent, did not speak well or articulate clearly. This is compared with an average of 707 among customers who didn't have any difficulty understanding their representative.

Appraisal management companies are not to blame for real estate deals falling apart, the chief compliance officer for the nation's first AMC said in an interview. Donald Blanchard of Lender Processing Services, the parent of LSI, an AMC which has been in business 25 years, said that while his company is "agnostic" concerning the Home Valuation Code of Conduct, it has decided to get out the word that AMCs are not the source of the problem. He cited statistics that show home values nationwide are down 15% to 20%; consequently property valuations would be lower. Furthermore, we are in a slow recovery process from the tumult of the last few years. Another contributory factor is that about 30% of home sales right now are from real estate-owned or distressed sales, which also bring down values. The company checked its data, he said, and found that 85% of the appraisals last year met the underwriting criteria for the loan to be made. Mr. Blanchard addressed some of the other myths HVCC opponents have been pushing. For example, supposedly AMCs use inexperienced appraisers. LSI has some 20,000 appraisers on its panel, with an average tenure of over 13 years. There is a requirement of three years experience just to get on the panel, he said. The next myth is that AMCs don't pay fair fees. LSI's fees have been stable for five years and its panel appraisers understand the value added by being a member. As for the argument of out-of-area appraisers, the No. 1 criteria used to assign jobs is proximity.

Capital constraints on mortgage insurance companies could impede the ability of Fannie Mae and Freddie Mac to keep up with the demand for mortgage financing during the housing recovery, according to a report by the government-sponsored enterprises' regulator. Former Federal Housing Finance Agency director James Lockhart has been urging the Treasury Department to provide capital assistance for the private MIs since last November. The Mortgage Insurance Cos. of America also is seeking assistance. "We have a request pending and we are waiting for a response," said MICA spokesman Jeff Lubar. The GSEs can purchase single-family mortgages with loan-to-value ratios higher than 80% only if the homebuyer gets mortgage insurance. The FHFA Mortgage Market Note issued a day before Mr. Lockhart's August 21st departure projects that the demand for such high LTV loans could hit $230 billion in 2009. The ability of the MIs to meet that level of demand is "remote," the FHFA report says. "The industry's ability to build and maintain sufficient capital to meet the needs of the enterprises over the short term without some federal assistance or an infusion of private capital is unclear," the report concludes.