Servicing

Taylor, Bean & Whitaker said it is no longer able to offer online payments capabilities nor can it do automated payment deductions for those consumers whose loans it still services. Customers are asked to send a check by mail to the company to the attention of its cashiering department in Ocala, Fla. Since Aug. 4, a statement from TBW said, it has not taken any automated debit payments. For those who have already received notification that the loan was transferred to a new servicer, the statement said customers are to follow the instructions in the transfer notice. The statement also said TBW would "continue functioning in a reduced capacity until all loans have been transitioned to new servicers."

BB&T Corp., Winston-Salem, N.C., did not acquire any assets and liabilities relating to Taylor, Bean & Whitaker Mortgage Corp., Ocala, Fla., in its acquisition of the banking operations of failed Colonial Bank, Montgomery, Ala. A statement from the company also declared assets and liabilities that the Federal Deposit Insurance Corp. determines are related to fraudulent or criminal activities are excluded from the purchase as well, leaving the future of Colonial's warehouse lines in doubt. Further BB&T said FDIC indemnifies it "for any liabilities not expressly assumed in the transaction, including those related to fraudulent, criminal or inappropriate activities of Colonial." Colonial's Orlando mortgage warehouse business offices and TBW were raided by federal agents recently working under the auspices of the Special Investigator General for the Troubled Asset Relief Program. Colonial later said it was the target of a U.S. Department of Justice criminal investigation relating to its mortgage warehouse lending business. Calls to FDIC and BB&T about Colonial's warehouse lines to about 70 lenders were not returned by deadline.

The first of four participants in a foreclosure fraud scheme that targeted mortgage lenders and homeowners has been sentenced to nearly five years in prison. U.S. District judge Deborah K. Chasanow has sentenced Earnest Lewis of Takoma Park, Md., to 54 months in prison, followed by three years of supervised release. The defendant also agreed to forfeit $2.2 million gained from the scheme. According to Rod J. Rosenstein, U.S. attorney for the District of Maryland, Earnest Lewis' brother, Michael Lewis, aired TV ads claiming he could save financially vulnerable individuals' homes from foreclosure. The Lewis brothers and mortgage loan officer Winston Thomas fraudulently promised to help homeowners keep their homes by temporarily using the "good credit" of Earnest Lewis to refinance their homes after they signed their homes over to Earnest Lewis for roughly one year. In the meantime, they could remain in their homes by paying "rent." The victims' bank accounts were directly debited by an account belonging to co-conspirator Cheryl Brooke's company, In the House Technologies. Michael K. Lewis, Brooke and Thomas have all pleaded guilty and are scheduled for sentencing in September.

Freddie Mac borrowers are increasing their interest in 15-year fixed-rate mortgages but continue to shun adjustable rate loans, according to second quarter loan figures released by the GSE. While the 30-year FRM remains the preferred product of choice — with both 30- and 15-year rates at or near their historical lows — some borrowers are finding 15-year payments more affordable while providing an opportunity to lessen their loan terms as well as their rates. In 2Q borrowers continued to show an increasing preference for FRMs: 99% of Freddie Mac borrowers that had an ARM switched to a FRM. In the first quarter the ratio was 98%.

Every month Fannie Mae and Freddie Mac are paying bondholders about $1 billion to cover seriously delinquent homeowners. Guaranteeing timely payments on MBS and supplying liquidity to the primary mortgage market is the government-sponsored enterprises' main business. But once a loan has been delinquent for four months Fannie and Freddie can buy it out of the pool and stop advancing unpaid interest to investors. Ajay Rajadhyaksha, an analyst with Barclays PLC, said the companies should exercise this right a lot more often than they have been. "Every day that passes," he said, "is another day in which wealth is transferred from the U.S. taxpayer" to bondholders. The problem is that such buyouts would result in staggering hits to the GSEs' capital. Under bondholder agreements, Fannie and Freddie would have to pay 100 cents on the dollar for the loans, but under accounting rules, they would have to then write the mortgages down to their steeply discounted market prices. The paper losses would in turn force the GSEs to accelerate their draws on the $400 billion backstop the Treasury is providing. Analysts said such a course would run counter to the aspiration that at least some part of the companies emerge from conservatorship intact. Fannie and Freddie declined to discuss the issue.

Deutsche Bank is beginning to make a run at non-bank mortgage lenders, offering them warehouse lines of credit but also requesting that they sell their loans to the bank on a correspondent basis, according to investment banking sources. At press time Detusche Bank could not be reached for comment. Meanwhile, there is a new concern among some warehouse managers and consultants that with Government National Mortgage Association president Joe Murin stepping down, the agency's effort to aid the warehouse lending industry could be delayed or even imperiled. "He was definitely the point guy there on the issue," said one warehouse consultant, requesting anonymity. In other warehouse news, there are new reports that BB&T Corporation is the leading bidder to buy Colonial Bancshares of Alabama, the troubled bank that is also the nation's largest warehouse provider. BB&T is already in the warehouse business.

Freddie Mac has refinanced nearly 29,000 loans under the Obama administration's Home Affordable Refinance Program, which is designed to give borrowers with loan-to-value ratios above 80% a chance to refinance and lower their mortgage payments. As previously reported, Fannie Mae has purchased 32,000 HARP refinancings since the program got rolling in April, including 16,000 refinancings in the month of July alone. "Over 60,000 borrowers with mortgage loans that exceed 80% of the house value up to 105% have been refinanced," the Federal Housing Finance Agency said. The agency recently expanded the refinancing program to allow underwater borrowers with loan-to-value ratios of up to 125% to participate. Fannie Mae will start delivery of these loans with LTVs over 105% on Sept. 1 and Freddie Mac will start Oct. 1.

The Federal Reserve said it would continue to support mortgage lending and the housing markets by purchasing agency mortgage-backed securities after concluding a two-day meeting of its Federal Open Market Committee. The FOMC members renewed the Fed's commitment to purchase up to $1.25 trillion in MBS issued by Fannie Mae, Freddie Mac and Ginnie Mae by the end of this year. The Fed has purchased $721.2 billion in agency MBS since last December. "Although economic activity is likely to remain weak for a time, the committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in the context of price stability," according to a FOMC statement. The Federal Reserve also renewed its commitment to purchase $200 billion in Fannie, Freddie and Federal Home Loan Bank debt by yearend. It has already purchased $107.3 billion in agency debt.

Taylor, Bean & Whitaker, the nation's 13th largest residential lender, is expected to file for bankruptcy protection as soon as this week, according to industry sources and published reports. At press time company CEO and part owner Lee Farkas could not be reached for comment. Investment banking sources told National Mortgage News that the Ocala, Fla.-based TBW, a non-bank, had borrowed heavily against its $78 billion residential servicing portfolio. It's unclear how much the non-bank borrowed but the money was part of a $300 million investment that TBW put together to invest in Colonial Bancshares of Alabama, its largest warehouse lender. The money-losing Colonial — also the nation's largest warehouse provider — is expected to eventually be taken over by the Federal Deposit Insurance Corp. TBW shut down its lending operation last week after the Federal Housing Administration suspended it as a lender and seized its Government National Mortgage Association servicing rights. Dow Jones reported that a bankruptcy filing is "imminent" for the lender, saying that an internal e-mail at TBW, dated Aug. 10, referred to a new computer folder "to assemble all of our bankruptcy detailed spreadsheets and support."

Despite legislative efforts to delay foreclosures, in July foreclosure activity in Illinois increased almost 35% from June, boosted by an 86% surge in default notices, according to the latest U.S. Foreclosure Market Report from RealtyTrac. A state law enacted April 5 gave delinquent borrowers an extension of up to 90 days before the start of the foreclosure process resulting in low levels of filings in May and June. The report shows foreclosure filings were reported on 360,149 properties, up 7% from June and an increase of 32% from July 2008. "We're seeing significant growth in both the initial notices of default and in the bank repossessions," said James Saccacio, chief executive officer of RealtyTrac. Nevada documented the nation's highest state foreclosure rate, although initial default notices in Nevada decreased 18% from June. This is likely the result of a new state law requiring lenders to offer mediation to homeowners facing foreclosure, which took effect July 1. Scheduled auctions and real estate owned assets in Nevada both increased more than 20% from June, boosting overall foreclosure activity in the state by 4% on a month-over-month basis. Initial defaults in California spiked 15% from June, and the state registered the nation's second highest state foreclosure rate for the third month in a row. Scheduled auctions in California were down 1% from June, but REO was up 4%. In Arizona, scheduled auctions jumped 25% from June while bank repossessions stayed flat. The top four state foreclosure activity totals in July were reported by California, with 108,104 properties receiving a foreclosure filing; Florida, with 56,486 properties; Arizona, with 19,694 properties; and Nevada, with 19,535 properties. Together these four states accounted for nearly 57% of the nation's total foreclosure activity.