Servicing

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.

Colonial BancGroup, the holding company for the now-defunct Alabama bank, has filed for Chapter 11 bankruptcy protection, listing assets of just $45 million against debts of $380 million. Up until recently the bank - sold 10 days ago by the Federal Deposit Insurance Corp. to BB&T - was the nation's largest warehouse lender to nonbank mortgage lenders. Its largest unsecured creditor is the Bank of New York Trust Co., which is owed $254 million. The debt is related to the issuance of subordinated notes. A Florida affiliate of the bank is owed an additional $104 million.

Bank of America maintained its perch as the nation's largest residential servicer in the second quarter but its portfolio declined by 2% compared to the first quarter, a sign that the refinancing boom could be wreaking havoc on its ability to recapture its own customers. According to exclusive survey figures collected by National Mortgage News, BoA ranked first at June 30 with $2.062 trillion in housing receivables. Compared to the same period a year ago BoA's portfolio of home loans grew by 281% but most of that growth was due to its purchase of Countrywide Financial Corp., a deal that closed on July 1 of last year. National Mortgage News also found that BoA's market share fell slightly, as did the share for Wells Fargo & Co. and the JPMorgan-owned Chase, the nation's No. 2 and No. 3 ranked servicers, respectively. Wells' servicing portfolio grew slightly from 1Q but Chase's declined. For the full rankings and story see the Monday, Aug. 31 issue of NMN.

Freddie Mac reported a 30% drop in the issuance of mortgage-backed securities in July, compared to the previous month, as refinancing activity slowed dramatically. Freddie said it issued $43 billion in MBS in July, down from $61.1 billion in June when it experienced heavy seasonal deliveries from some of its largest customers. Refinancing activity also dropped off by 33% from the previous month. Purchases of refinanced loans totaled $34.1 billion in July, down from $50.9 billion in June. Freddie has issued $302.7 billion in MBS during the first seven months of this year, compared to $269.8 billion in the same period last year. The government-sponsored enterprise also reported a 17 basis point monthly increase in its single-family delinquency rate. The percentage of Freddie loans 90 days or more past due and in foreclosure rose to 2.95% in July, up from 1.01% a year ago.

House prices rose 1.4% in June following a 0.5% increase in May as the Standard & Poor's/Case-Shiller 20-city house price index registered its first consecutive monthly increase in nearly three years. However, Yale University professor Robert Shiller cautioned that it may not be a turning point due to high unemployment and the large inventories of foreclosed homes weighing on the market. Despite the upward momentum in house prices, "I would express great reluctance in forecasting where we are going from here, because we have conflicting signals right now," Mr. Shiller said. The June HPI shows that house prices are down 15.4% from a year ago and down 30.2% from their peak in the second quarter of 2006. However, only 2 cities, Detroit and Las Vegas, in the 20-city HPI experienced price declines from May to June. "For the second month in a row, we're seeing some positive signs," said David Blitzer, chairman of S&P's index committee.

The increasing number of borrowers "underwater" on their U.S. prime credit mortgages appears to be behind a decrease in private-label securitized loans' delinquency cure rates, according to Fitch Ratings. Fitch said this trend indicates other loan performance problems may be mounting even though the number of U.S. prime RMBS loans rolling into a delinquency status has slowed. Fitch defines delinquency cure rates as the percentage of delinquent loans returning to a current payment status each month. It said these have dropped from an average of 45% during 2000-2006 to the current level of 6.6%.

The mortgage banking firm Taylor, Bean and Whitaker, which recently ceased making mortgages, originated an estimated $22 billion in Federal Housing Administration-insured loans over the past 24 months, which represents 4.5% of the FHA's total business during that period. TBW was FHA's third largest direct endorsement lender and it approved 119,800 loans over the past two years. However, 7.1% of those FHA-insured loans are 90 days or more past due or in foreclosure, according to FHA's Neighborhood Watch System. The average default rate for FHA loans is 4.6%. Based on a higher than average claim rate and loss severity rate of 40%, FHA could face possible losses of $800 million to $900 million due to its exposure to TBW, one source said. As previously reported, the Department of Housing and Urban Development on Aug. 4 suspended the Ocala, Fla., mortgage banking firm from making FHA loans. Freddie Mac also terminated TBW on Aug. 4. In a recent securities filing, Freddie said approximately 5.2% of its mortgage purchase volume in 2008 came from TBW and TBW accounted for 2.7% of its mortgage purchases during the first half of this year.

Single-family existing home sales jumped 6.5% in July from the previous month as "demand for foreclosed and lower-priced homes spiked," according to the National Association of Realtors. NAR reported that sales of previously owned SF homes rose to a seasonally adjusted annual rate of 4.61 million in July, up from 4.33 million in June. "The housing market has decisively turned for the better," said NAR chief economist Lawrence Yun, who noted that sales have increased for four consecutive months. First-time homebuyers who are eligible for an $8,000 tax credit purchased 30% of the homes, and distressed sales made up 31% of transactions. "In some recovering markets like San Diego, Las Vegas, Phoenix, and Orlando, the demand for foreclosed and lower priced homes has spiked, and the lack of inventory is becoming a common complaint," Mr. Yun said. The median existing single-family home price was $178,300 in July, which is 14.6% below the sales price a year ago. The NAR report also shows that the inventory of unsold existing homes fell to an 8.6-month supply in July, down from a 10.4-month supply a year ago.

As a demand for mortgage default services increases, North American Property Preservation, a full service distressed property preservation and management company, is merging with The Property Preservation People. Acting as a one-stop solution to lenders, asset managers and brokers, the new company will continue to deliver responsive customer service and high-quality field services, said Brandy Cutler, NAPPCorp's managing director of national field services operations. Under the terms of the agreement, the combined company will begin joint operations under the name North American Property Preservation effective immediately. All employees of PPP have accepted positions with the new combined entity.