Servicing

Almost one in three mortgaged homes in the U.S. — representing 15.2 million loans — now has negative equity, according to a new report issued by First American CoreLogic. FACL says 32.2% of mortgages have negative equity (under water loans) compared to 32.5% in March. However, just because a loan is under water that doesn't necessarily mean it will go into default. The improvement, the company said, reflects, "the recent flattening of monthly home price changes." The homes that are underwater have an aggregate property value of $3.4 trillion, which represents the total property value at risk of default. California leads the nation in at-risk negative equity ($969 billion in home values), followed by Florida ($432 billion), New Jersey ($146 billion), Illinois ($146 billion) and Arizona ($140 billion).

First American Flood Data Services, Austin, has launched a new website dubbed FAFlood.com designed to give users efficient access to a range of flood determination services, products and information from a single source. The site introduces features and functions that include streamlined navigation, and aims to provide more useful tools and more detailed information about services offered. Features on the website, such as event schedules, legislative updates and upcoming map revisions are designed to make it easier for customers to track developments at First American Flood Data Services and within the flood risk management industry. Additional upgrades include a virtual tour of the First American Flood Data Services facilities.

All Risks Ltd. has joined the REO Asset Alliance and it plans to help the partnership offer its first insurance product. All Risks, a wholesale brokerage firm based in Hunt Valley, Md., joins the initial five Alliance partners - Avalar Network, Inc., DDN Services, ECJ Asset Management, TrustTitle and TT Lender Solutions. Through its membership in the REO Asset Alliance the firm will make its customizable "REO and Lender Placed Insurance Program" available to lenders and investors with REO property holdings. The program combines property and liability insurance for residential dwellings, manufactured homes, commercial property and vacant land. The program also provides web-based administration, enabling policyholders to monitor their coverage amounts, run their own monthly reports, apply daily prorated premiums and delete properties when they are sold in a timely manner to help contain costs. According to Tom Elder, financial institutions underwriter at AllRisks, timely portfolio management can reduce a lender's insurance costs by 20% and in some cases by as much as 50%. All Risks insures commercial banks, credit unions, savings and loans, mortgage banks, and financial institutions that service and/or invest in mortgages. The alliance is a collaborative effort to help lenders and investors manage and maximize the value of their distressed real property assets.

Standard & Poor's is considering offering "stressed recovery ratings" for all senior tranches of certain residential mortgage-backed securities that originally received S&P's top rating but subsequently saw severe downgrades. The new ratings would be offered on U.S. prime, alternative-A and subprime RMBS that originally carried a AAA rating but later slipped to a speculative grade rating of BB+ or below. They would be designed to complement a security's current credit rating by providing S&P's opinion of the projected principal recovery on a security if it defaults. The rating agency is currently planning to express this as a percentage of the security's initial par amount but is seeking input on, among other things, whether market participants might want to see this expressed in another way.

GMAC-ResCap has entered into an arrangement with Mountain Funding LLC to provide asset servicing and consulting advice for some of the REO assets in GMAC-ResCap's Business Capital Group portfolio in a deal that will put a former ResCap-BCG executive at the head of a Mountain unit. The arrangement, which was completed through Mountain's asset management affiliate, the Charlotte, N.C.-based Mountain Special Servicing LLC, has been in process for several months. "There were no layoffs associated with this transaction. A small group of employees left ResCap to immediately join Mountain Funding as per agreement between both firms," said a spokesperson for GMAC-ResCap. Mountain Funding has absorbed 14 members of senior management from the REO asset management group. Joining Mountain Special Servicing as managing director will be GMAC-ResCap's former head of ResCap-BCG REO management, Joel Kaul, who will head up the company's residential asset management group. Combined with its existing portfolio, Mountain Special Servicing now has 90 assets under management, totaling $1 billion in unpaid principal balance. The assets are diversified over 20 states and include residential land development, residential lot development/sale, housing construction/sale, commercial land development, subperforming retail centers, fractured condos, apartments, and resort development. ResCap, the fifth largest mortgage servicer, said it continues to provide mortgage servicing and subservicing for a portfolio of approximately 2.6 million mortgage loans.

Ocwen Loan Servicing LLC has inked a deal to be the interim servicer for Freddie Mac on 24,000 nonperforming single-family loans with a principal balance of $4.4 billion. The deal, effective Aug. 10, was revealed in a recent Securities and Commission filing by Ocwen's parent, the publicly traded Ocwen Financial Corp. of West Palm Beach, Fla. No further details were available at press time. Ocwen is the nation's ninth largest subprime/scratch and dent servicer, according to the Quarterly Data Report. Meanwhile, Ocwen executives are on a road show, promoting an additional common stock offering which could raise up to $250 million. J.P. Morgan Securities, Barclays Capital, and Wells Fargo Securities are the joint book running managers on the deal.

Freddie Mac forced its seller/servicers to buy back $951 million of bad mortgages during the second quarter, a 21% increase from the first quarter. Fannie Mae also saw its outstanding buyback requests continue to increase in the second half of 2009 - but the GSE, unlike Freddie, does not disclose the dollar amount in its securities filings. Lenders that sell loans to Freddie and Fannie are required to make "representations and warranties" that the loans comply with the GSEs' underwriting requirements. If the loans do not perform as expected and underwriting deficiencies are flagged, the lender is obligated to buy back the loans. The GSEs are concerned that their credit losses will grow if lenders cannot muster the financial wherewithal to meet their buyback obligations. Freddie recently noted that it terminated Taylor Bean & Whitaker's status as a seller/servicer on Aug. 4. "We are in the process of determining our total exposure to TBW in the event it cannot perform its contractual obligations to us. The amount of our losses in such an event could be significant," Freddie said in its second-quarter securities filing. The Federal Housing Administration recently suspended TBW as a lender.

Weak house prices are likely to continue in the Netherlands due to a high degree of leverage in households and a continuing economic recession, according to a Moody's Investors Service report on Dutch RMBS trends. Delinquencies of more than 60 days in Dutch residential mortgage-backed securities increased slightly to 0.42% in the second quarter compared to 0.35% during the same period a year ago, Moody's said. Weighted average cumulative foreclosures during the same two comparative periods jumped to 0.42% from 0.35%. The rating agency said it did not rate any new Dutch RMBS during the second quarter.

First American CoreLogic, Santa Ana, Calif., has launched a free Apple iPhone application that enables individuals to view market data on over 140 million residential properties in the United States using their iPhone. The product, called RealQuest Home Value Pro, provides mobile access to First American's database of property data. Users of RealQuest Home Value Pro can view property values, foreclosure information and housing trends. Specifically, RealQuest Home Value Pro features include estimated home values for a given subject property and neighboring properties, nearby foreclosure data including pre-foreclosures, auctions and real estate owned (REO) properties; graphs of 12-month median home price trends, foreclosure rates and home sales trend activity; interactive maps to view estimated home values in a neighborhood; and sharing tools that enable real estate agents and homebuyers to save, organize and share properties in real time.

Marshall & Ilsley Corp. has sold a pool of troubled residential loans in a move that bodes well for the Milwaukee company and for other depositories looking to sell problem assets. Even though the bank announced the sale publicly it would not name the investor. The sale of 800 mortgages — mostly on single-family homes in Arizona — is a boon for M&I, as it clears its books of about $297 million of housing loans that could continue to sour as unemployment rises. It's good for the industry because it shows that demand might be picking up for the kinds of troubled assets that banks, for the most part, have had a hard time unloading. "There are buyers out there," said Dennis Klaeser, an analyst with Raymond James & Associates. "That would confirm that the real estate market is reaching a bottom."