Servicing

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."

The Federal Reserve, in its new Beige Book report, says home sales are increasing somewhat in the Boston, Chicago, Richmond and San Francisco districts but the housing sector in general is not out of the woods yet. The St. Louis area has seen no noticeable improvement in housing conditions and most Fed districts reported that sales were "below the levels of a year earlier." The central bank noted that housing demand "remained stronger at the low-end of the housing market." As for home construction, the news is bleak with only Chicago and Dallas reporting small increases in housing activity. In the commercial real estate market, construction remained at low levels overall, "although Chicago and Dallas reported a small increase in activity" the Fed said. Overall, the central bank said economic activity is stabilizing or improving in the vast majority of the country and that the worst recession since the 1930s may be over.

Fitch has revised the status of Capmark Finance Inc.'s commercial mortgage-backed securities servicing ratings to Rating Watch Evolving from Rating Watch Negative, citing a put option agreement to sell its servicing and origination operations to Berkadia III LLC. Fitch also said the rating may change "depending upon whether the transaction is completed." The company's CMBS servicing ratings are as follows: primary servicer, CPS2-; master servicer, CMS2-; special servicer, CSS2-. Fitch said it is closely monitoring Capmark. As of June 30, its total servicing portfolio consisted of 35,507 loans with an unpaid principal balance of $270.1 billion, of which $131.1 billion were CMBS.

Delinquency rates are continuing to increase for all commercial/multifamily mortgage investor groups, according to the most recent Commercial/Multifamily Delinquency Report from the Mortgage Bankers Association. The economic recession drove the latest surge in commercial and multifamily delinquency rates during the second quarter, said Jamie Woodwell, MBA's vice president of commercial real estate research. Between the first and second quarters, the 30-plus day delinquency rate on loans held in commercial mortgage-backed securities rose 2.04 percentage points to 3.89%. The 60-plus day delinquency rate on loans held in life company portfolios rose 0.03 percentage points to 0.15%. The 60-plus day delinquency rate on multifamily loans held or insured by Fannie Mae rose 0.17 percentage points to 0.51%. The 90-plus day delinquency rate on multifamily loans held or insured by Freddie Mac rose 0.02 percentage points to 0.11%. The 90-plus day delinquency rate on loans held by FDIC-insured banks and thrifts rose 0.64 percentage points to 2.92%. "Lower levels of employment, the pullback by consumers and other aspects of the slowdown translated into a difficult operating environment for many income-producing properties. That in turn has led to increased stress on the loans those properties support," Mr. Woodwell added.