Servicing

Delinquencies and losses in the United Kingdom's securitized nonconforming mortgage market are continuing to increase, according to Moody's Investors Service's latest available index data for the sector. Delinquencies and losses continue to rise at a rapid pace, as unemployment continues to rise, said Nitesh Shah, a Moody's economist and co-author of a second quarter report on the index. With only a few exceptions, deterioration can be observed for all U.K. vintages and transaction series, according Georgij Ludmirskij, a Moody's senior associate and also a co-author of the report. According to the report, 54 U.K. nonconforming transactions have more than 20% of 90-plus days delinquent loans in their portfolios, while 22 transactions posted 90-plus days delinquencies higher than 30%. In the second quarter, Moody's placed on review for possible downgrade 133 classes of notes in 13 U.K. nonconforming transactions. Eighty-eight transactions worth £27.3 billion ($44.4 billion) are currently outstanding in this market, according to Moody's.

Equi-Trax Asset-Solutions, Santa Barbara, Calif., is offering a service designed to provide clients with a way to quickly scan their portfolios and identify properties currently on the market that could be potential short sale, loan modification, portfolio retention or origination opportunities. The new Current Listing Search is designed primarily for use by servicers but Equi-Trax chief executive officer Guy Taylor said it also could serve as a source of sales leads for originators if the borrowers involved are moving. He said the search provides information as soon as it is available on multiple listing services. It draws on data from about 72% of multiple listing services in the country, which the company said represent most major Metropolitan Statistical Areas. Data available includes contact information for brokers that can be imported into servicers' contact databases on properties. Mr. Taylor said he believes the new service improves on alternatives such as other services that offer less extensive information, or borrower contact that may involve offering borrowers home valuation data in exchange for information about their future real estate plans.

Wells Fargo & Co. is said to be auctioning off a $65 million portfolio of sub- and non-performing residential loans and is set to take final bids next week. "They've been offering a lot of stuff lately," said one bidder requesting his name not be used. There is more to come, he said. At press time a company spokesman had not returned a telephone call about the auction. In the past the bank has rarely commented on its offerings. A few years back Wells Fargo Home Mortgage was one of the largest correspondent buyers of subprime loans but eventually exited that business.

After six months of gains, the Credit Managers' Index is showing slower progress, according to the National Association of Credit Managers, Columbia, Md. The index climbed inched up to an August score of 48.3 from July's combined index score of 48. While this represented some positive movement in the index as a whole, there also was some weaknesses in terms of credit availability, credit applications and sales. "This suggests that the proposed recovery is a little weaker than some of the indicators reflect, especially in terms of availability of money," NACM said. "There are some shoes left to drop, most notably the commercial property sector," said NACM chief economist Chris Kuehl. "It is mildly encouraging to note that the index has not fallen, but an anemic .3 gain was much less than had been anticipated," he said. The index had been expected to rise to closer to 50 in August.

The Mortgage Bankers Association on Wednesday morning released a working paper on rebuilding the secondary market — a plan that does not include the continued existence of Fannie Mae and Freddie Mac in their present form but instead relies on the creation of a small number of mini-GSEs that could be in co-operative form. Under the plan, the creation of mortgage-backed securities would rely on risk-based premiums paid into a federal insurance fund with loan level guarantees provided by what the trade group calls a "small number of privately-owned government-chartered and regulated mortgage credit-guarantor entities" or MCGEs. MBA wants ownership of at least one of the MCGEs to be in a co-op form with mortgage lenders as shareholders. "A co-op could be attractive to mortgage bankers," said MBA chief executive John Courson. (Ownership of Freddie Mac stock was limited to savings and loan associations under a co-op structure until 1989, when the company first sold shares on the New York Stock Exchange.) Even though Fannie and Freddie would no longer exist under this blueprint for the secondary market their "technology, human capital, standard documents and relationships" could serve as the foundation for the new MCGEs, MBA says. The plan — which played a role in driving down the GSEs' share price on Wednesday morning — was drafted by a special task force of MBA members including top executives in the industry who work for lenders, servicers, mortgage insurance firms, title companies and other players in the business. Fannie and Freddie declined to comment on the proposal. Some members of the task force work for companies that were once part of FM Watch, a lobbying group whose mission was to curtail the powers of Fannie and Freddie.

Mortgage document company DocMagic is suing mortgage software firm Ellie Mae for alleged antitrust violations and, in a second suit, for misuse of intellectual property. DocMagic also is seeking a permanent injunction against Ellie Mae for alleged misuse of DocMagic's intellectual property in the Ellie Mae Docs system. The antitrust suit alleges that DocMagic was provided access to Ellie Mae's ePASS network until Ellie Mae terminated its ePASS agreement and then took steps to prevent its users from accessing DocMagic products through unfair and anti-competitive behavior, including sabotaging clients from accessing DocMagic altogether through alternative web service calls. The filing said Ellie Mae notified ePASS Network users that DocMagic would no longer be available on ePASS or Encompass Closer and that DocMagic users would instead be moved to Ellie Mae's loan document service. It further alleges Ellie Mae began changing the terms of the Encompass user agreements to prohibit the transfer of data from Encompass to any third-party service provider outside of the ePASS network. "We've had a long relationship with Ellie Mae and have also been a long-standing client of ePASS. It has become clear that Ellie Mae wants to replace us as their document provider. They really didn't give us any alternative," said Don Iannitti, president and CEO of DocMagic. "I think they want to save money. I think the client is the victim. It can't be about monopolization." The complaint for injunctive relief DocMagic filed is based on Ellie Mae's alleged unauthorized use of DocMagic's intellectual property, including DocMagic's user interface, workflow, terminology and overall look in Ellie Mae's document system. "When we were working with them, we helped them in creating the workflow in the Encompass project. We recreated our screens and workflow for them. In replacing us, the look remained the same," Mr. Iannitti added. Ellie Mae was unable to comment at deadline but said it plans to release a statement in the future.

FDIC-insured banks had to buy back $1.9 billion of defaulted mortgages during the second quarter after facing heavy repurchase demands from investors during the first and fourth quarters. According to Federal Deposit Insurance Corp. call report information, banks repurchased $3.4 billion of mortgages in the first quarter and another $3.3 billion in the fourth quarter of last year. The two banks repurchasing the most in single-family loans in 2Q were JPMorgan Chase ($380 million) and Bank of America ($252 million). However, in the first quarter JPM had $2.2 billion in buybacks. BoA had $299 million. Both are on the hook for troubled loans they took control of when they purchased two ailing mega-mortgage lenders — Countrywide in the case of BoA, and Washington Mutual in the case of JPM. Secondary market investors like Fannie Mae and Freddie Mac can require lenders to buy back defaulted loans that do not comply with their underwriting requirements. Ginnie Mae and Federal Housing Administration also require buybacks and indemnifications on bad loans.

A leading indicator of future home sales rose 3.2% in July to a level not seen since the summer of 2007, according to the National Association of Realtors. The NAR pending sales index hit 97.6 in July, up from 94.6 in June. The index has risen for six straight months, according to NAR chief economist Lawrence Yun, as homebuyers take advantage of very affordable prices and the $8,000 first homebuyer tax credit. NAR estimates that 1.8 million to 2.0 million first-time homebuyers will use the tax credit before it expires at the end of November. The tax credit, the group believes, will generate approximately 350,000 sales that would not have happened without it. NAR, the National Association of Home Builders and other housing groups are urging Congress to extend and expand the tax credit this fall. "Unless the tax credit is extended no one should be surprised to see home sales drop in the first quarter of next year," Mr. Yun said. However, NAR is forecasting that existing home sales will pick up again in the second quarter and be stronger in 2010 than this year even without the tax credit. The economic recovery appears "fragile," a NAR spokesman said. An extension of the tax credit will provide a sounder footing for the housing market, he said.

Servicers completed 80,170 loan modifications in July, down from 96,000 in the previous month, as more troubled homeowners participated in 90-day trial modifications as part of the President's foreclosure prevention programs, according to the servicer alliance Hope Now. The number of delinquent borrowers that entered into repayment plans also fell in July. "The good news is that in July, over 253,000 borrowers were helped through loan workout solutions," said Hope Now executive director Faith Schwartz. Treasury Department recently reported that servicers initiated 230,000 trial modifications in July. Treasury is expected to report on the first completed loan modifications under the President's Home Affordable Modification Program this month (September). "It is anticipated that modification numbers will increase in the Hope Now industry surveys in the coming months," the servicer alliance said. Participating HAMP servicers have pledged to complete 500,000 loan modifications by November 1.

With PHH Corporation's stock nearing its 52-week high of almost $23 a share, company insiders — including mortgage chief Mark Danahy — have been unloading shares. According to trading records, Mr. Danahy sold 16,120 shares over the past month at a price between $20.10 and $20.49. In total, he grossed $327,000. William F. Brown, an officer of the company, sold 10,000 shares for $21 each, grossing $210,000. The Mt. Laurel, N.J.-based PHH, which underwent a proxy battle and management shakeup earlier this year, is the nation's 11ith largest residential lender, according to the Quarterly Data Report. It services $149 billion in product, ranking 10th nationwide. Its 52-week low is $4.27, reached back in November of last year.