Servicing

The Mortgage Bankers Association took an $8.6 million loss for the fiscal year ending September 30, 2008 as the mortgage crisis took its toll on MBA members and the trade group's revenues fell by 31% to $39.4 million. In fiscal year 2007, MBA generated a $6.7 million surplus with total revenues of $57.1 million, including $13.9 million in member dues and assessments. In its latest annual filing with the Internal Revenue Service, MBA reported that dues and assessments fell by 20% to $11.1 million. MBA expects to take another loss in FY 2009 and show a positive result in FY 2010, according to MBA spokeswoman Cheryl Crispen. MBA's board of directors has just approved its FY 2010 budget and it shows a "balanced, slightly positive" budget, she said. MBA moved into its newly constructed headquarters in June 2008 that is listed as a $98.6 million asset on the IRS report. MBA planned to lease out 60% of the building but reported no rental income. MBA has leased some of the space and there is "substantial interest" in the remaining office and retail space, Ms. Crispen said.

National housing prices fell 7.8% in June 2009 compared to June 2008 representing the smallest year-over-year decline recorded to date in 2009, according to First American CoreLogic and its LoanPerformance Home Price Index. June's decline was a 0.7% improvement over the 8.5% year-over-year decline in May. First American CoreLogic said a decline in distressed sales, rather than an increase in traditional home sales prices, was responsible for the uptick. If the decline in distressed sales is sustainable, this could be the first step toward recovery, it continued. By state, Nevada (down 25.4%) remained the top-ranked state for annual price depreciation with Florida (down 25.1%) second. Florida, First American CoreLogic said, unlike other hard hit states, is experiencing worsening price declines in 2009. California's depreciation rate is the lowest since October 2007. "Year-over-year and seasonal home price trends continued to move in positive directions in June. However, the economy continues to contract and there is a large overhang of distressed properties that have yet to clear. Until supply and demand imbalances adjust to more normal levels, future home price movements will remain sluggish," said Mark Fleming, chief economist for First American CoreLogic. There were 32.2% of all mortgaged properties in a negative equity position in June, a slight improvement over the 32.5% in May.

Although delinquencies for residential properties continued to climb in the second quarter of 2009, the rate of new foreclosures started was essentially unchanged from last quarter's record high, according to the Mortgage Bankers Association's national delinquency survey. The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a rate of 9.24% of all loans outstanding at the end of the second quarter of 2009, up 12 basis points from the first quarter of this year and up 283 basis points from the second quarter one year ago. According to the MBA, the percentages of loans 90 days or more past due and loans in foreclosure both set new record highs, breaking records set last quarter. The percentage of loans 30 days past due is still well below the record set in the second quarter of 1985. The percentage of loans in the foreclosure process at the end of the second quarter was 4.3%, up 45 basis points from the first quarter of 2009 and 155 basis points from one year ago. The combined percentage of loans in foreclosure and at least one payment past due was 13.16% on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey. The percentage of loans where foreclosure actions were started during the second quarter was 1.36%, down one basis point from last quarter and up 28 basis points from one year ago. "There was a major drop in foreclosures on subprime ARM loans," said MBA's chief economist Jay Brinkmann. "The drop, however, was offset by increases in the foreclosure rates on the other types of loans, with prime fixed-rate loans having the biggest increase." California, Florida, Arizona and Nevada continue to have a disproportionately high share of foreclosure starts, although the share has fallen slightly from last quarter. Those states had 44% of all new foreclosures in the U.S. during the second quarter 2009, down from 46% in the first quarter 2009.

Delinquency levels of residential mortgage- and asset-backed securities transactions in Russia and the Commonwealth of Independent States appear to be trending upward, according to a new Moody's Investors Service report. Delinquency levels have increased over the past two quarters and only one RMBS transaction rated by Moody's has closed in the two markets this year. "The Russian economy is in its worst recession since the 1998 crisis," said Nitesh Shah, a Moody's economist and co-author of the report. "Ruble depreciation has led to higher U.S. dollar mortgage obligations for many obligors, which — combined with falling house prices and the elevated risk of unemployment — does not bode well for obligors or the RMBS transactions in the sector that are exposed to U.S. dollar-denominated mortgages." Maria Divid, a Moody's senior associate and co-author of the report, said delinquencies increased in all RMBS transactions over the first half of the year.

John MacFarland has joined the independent real estate firm of Resource Title as senior vice president, National Commercial Division, to develop and grow certain lines of business at the company. Mr. MacFarland will spearhead the division's growth into the commercial real estate owned and default market segments, and take part in developing and servicing more traditional commercial and investment transactions as well. The company, based in Independence, Ohio, has been servicing the commercial market nationwide for twenty-five years, recently opening a second office in Chicago to serve its commercial customers. Resource Title also offers nontraditional services in the relocation, default and REO fields. Mr. MacFarland's arrival will enhance an already considerable national commercial presence, said Andrew Rennell, executive vice president.

Government-sponsored enterprise regulator James Lockhart is joining Wilbur Ross' firm, which specializes in managing funds that invest in distressed companies such as American Home Mortgage Services and BankUnited. Mr. Ross cited Mr. Lockhart's "unique insights into the U.S. mortgage markets" in the hire, saying this would help the company expand investment opportunities for its institutional and individual clients. Federal Housing Finance Agency director Lockhart — who recently stated his decision to step down — will become the vice chairman of WL Ross & Co. LLC in September. Mr. Lockhart will officially step down as the regulator of Fannie Mae, Freddie Mac and the Federal Home Loan Banks on Friday (Aug. 21) and Edward DeMarco will assume the duties of acting FHFA director on Monday.

Integrated Asset Services, LLC, a Denver-based provider of default management and residential collateral valuation, has launched a new company called Statebridge, which will provide custom, high-touch investor-focused servicing. The risk-based servicing, developed by a team that helped create the market for independent surveillance of mortgage securities, introduces a new adaptive approach designed to optimize investor success through tailored, high-touch servicing that aims to maximize return on performing and nonperforming loans. With the Statebridge launch, the IAS suite of mortgage servicing products — which already includes REO management and disposition, collateral valuation, conditioned valuation, and mortgage due diligence — is aimed at bridging the entire loan lifecycle. In association with IAS's valuation and REO capabilities, Statebridge aims to be the only servicing company providing a "one-stop shop" for mortgage servicing that is intensely focused on the needs of investors, according to Dave McCarthy, president and CEO of Integrated Asset Services. The company was designed to provide custom special servicing of both distressed and nondistressed mortgages. In addition to servicing advice on existing mortgages, Statebridge is equipped to offer collateral analysis, fiduciary review, pool level analysis, and pricing advocacy for new investments in mortgages.

Fitch recorded a decline in commercial real estate loan collateralized debt obligation delinquencies in July but said the figure was misleading and indicated that there may be significant downgrades to all Fitch rated CREL CDOs in the coming months. Fitch said it expects to see high default rates in the sector "as these loans mature into the trough of the current commercial real estate cycle." As a result, the rating agency is finalizing its review methodology for the sector and believes this will result in several downgrades. In July, delinquencies had dropped to 7.6% from 8.2% in June, according to Fitch's CREL CDO Delinquency Index, but the decrease reflected an average of 2.7% of the CDO par balance being lost in distressed asset sales and discounted payoffs. "Had the loans, which were resolved at a loss over the past three months ... remained in the transactions, the CREL DI would have exceeded 9%," Fitch said.

The recent reversal of some positive technical conditions in the CMBS market supports the need for clarification of the Public-Private Investment Program supporting the sector as well the extension of the TALF program, according to a New Oak Capital report. "While I think that the extension of TALF for CMBS into 2010 is a positive, we'll need some more clarity around PPIP in order for the market to get back on track," said Craig Lieberman, managing director and co-head of commercial real estate at NewOak Capital, a New York advisory, asset management, and capital markets firm. He said that contributing to negative technicals seen recently in the market was "news of big CMBS borrowers like Maguire and Moinian handing over the keys on several properties," as well as an earlier announced delay of the PPIP program, followed by a large collateralized debt obligation liquidation.

The Federal Reserve Board has extended the TALF program into next year to see if the special financing facility can finally provide a boost for the commercial mortgage-backed securities market. The Fed noted that the CMBS market is "still impaired" as it extended the Term Asset-Backed Securities Loan Facility for legacy CMBS until March 31 and new CMBS until June 30. The TALF program was due to expire at yearend. But several members of Congress and commercial real estate groups have been urging the Fed to extend the program because of the limited availability of financing for maturing CRE loans. In addition, the TALF program for CMBS has gotten off to a slow start and it has only financed the purchase of $670 million in legacy CMBS so far. The Fed is expected to approve the first new CMBS deals using TALF financing on Thursday (Aug. 20).