Servicing

Electronic process automation vendor SigniaDocs has expanded its service offerings around electronic loan modifications. With the additional capabilities, Dallas-based SigniaDocs said it is now capable of supporting virtually any loan workout program the industry supports. Most loan modifications negotiated by lenders and servicers are finalized by paper documents sent to defaulting homeowners in a process that is currently taking from 40 to 60 days overall to complete, according to SigniaDocs. With e-modifications, the documents are prepared and posted instantaneously in a secure Web-based environment, where the borrower can be talked through their content and click to sign the documents in minutes, the company said. Data gathered by SigniaDocs is showing that 50% of e-modifications are completed the same day they are approved, and over 80% are executed within two business days.

Based on data collected as of June 30 by Lender Processing Services, Inc., new delinquencies dropped to their second lowest level in the last year and the percentage of loans rolling to a more delinquent status declined across all product types. "At current interest rates there is a lowered risk of increased defaults associated with outstanding hybrid adjustable-rate mortgage resets," LPS said in its report. "Liquidity is becoming increasingly available again to borrowers who are in some stage of delinquency. A dramatic improvement in borrower credit quality has created a significant decline in first payment defaults." In its report, LPS said total loan originations for the first half of 2009 were higher than 2008 levels for the same time. Loan originations for Jan. to June 2009 were 2,333,451 versus 2,211,852 for Jan.- June 2008. These findings from the June LPS Mortgage Monitor could be indicators that the nation's housing market may be turning a corner toward recovery. But according to LPS, foreclosure inventories continued to climb while non-current loans, including defaults and foreclosures, rose to 11.44%. Foreclosure starts in June increased 1.6%, while recidivism rates are not yet showing signs of improvement. Jumbo prime loans continue to experience the highest rates of deterioration with rates up 580% since January 2008. The total U.S. loan delinquency rate was 8.58%, a monthly increase of 1.1% and a year-to-year increase of 44%. June's foreclosure rate was 2.86%, a month-to-month increase of 2.5% and a year-to-year increase of 86.1%. States with the most non-current loans include Florida, Nevada, Mississippi, Arizona, Georgia, California, Indiana, Michigan, Ohio and West Virginia. States with the fewest non-current loans are North Dakota, South Dakota, Wyoming, Montana, Alaska, Vermont, Nebraska, Oregon, Colorado and Washington.

Lending is steady or slower and residential real estate generally remains weak with signs of improvement, according to the Federal Reserve's Beige Book. Residential real estate lending is decreasing in New York, Richmond, and St. Louis, according to the Fed. Dallas' outstanding mortgage volumes are steady but low, while Kansas City's rise in mortgages is slowing. Refinancing activity is dropping dramatically in Richmond, decreasing in New York and Cleveland, and maintaining its pace in Dallas. Credit quality is varying by district with commercial real estate concerns leading to tighter credit in some areas as generally credit standards continue to tighten or remain stable. The only district where residential real estate sales are failing to improve is St. Louis, where they instead are seeing a steep drop. The Fed said the low end of the market, particularly entry-level sales, continues to do relatively well, with some districts attributing this to the first-time homebuyer tax credit. The Boston and New York districts said condominium sales are still far below 2008 levels. Home prices continue to decline in most cases although some districts see possible signs of stabilization. Three districts said foreclosure sales are putting downward pressure on prices. Residential construction appears to remain slow, with three districts noting that financing is difficult, according to the report. Respondents said commercial real estate sales volume is low, or even "non-existent" in some districts, citing a combination of tight credit and weak demand. Tight credit also was cited as a factor in limited or declining commercial construction in most districts, exceptions being health and institutional construction in the St. Louis district, public sector construction in the Chicago district and World Trade Center reconstruction in Manhattan.

A Senate appropriations subcommittee has approved new funding for the Federal Housing Administration to hire additional staff and update its aging information systems as part of the Department of Housing and Urban Development budget for fiscal year 2010. "It provides funds to start modernizing its technology systems in order to track its mortgages and obligations, which — I regret to tell you — it cannot do right now," said Sen. Christopher Bond, R-Mo. Sen. Bond also expressed concerns about the rapid growth of the FHA program and the lack of staff and expertise to manage the FHA single-family program effectively. "It may be at the edge of a meltdown," he warned. Sen. Richard Shelby, R-Ala., expressed similar concerns. "If we don't watch out we could have another Fannie Mae or Freddie Mac," Sen. Shelby said at a subcommittee markup of the HUD appropriations bill.

PennyMac Mortgage Investment Trust, Calabasas Hills, Calif., said its initial public offering of 16 million common shares has been priced at $20 per share, raising $320 million. The amount raised was somewhat below expectations, according to combined news reports. PennyMac Mortgage Investment Trust intends to use the net proceeds from the offerings to purchase residential mortgages and mortgage-related assets, a substantial amount of which may be distressed. Merrill Lynch & Co., Credit Suisse Securities (USA) LLC and Deutsche Bank Securities are the joint book-running managers for the offering. JMP Securities and Stifel Nicolaus are acting as co-managers. PennyMac Mortgage Investment Trust trades on New York Stock Exchange under the ticker symbol "PMT."

Starting August 15, servicers can reduce the principal amount of a troubled Federal Housing Administration-insured mortgage by up to 30% so the homeowners' monthly payments are reduced to 31% of income. "Tens of thousands of FHA borrowers will now be able to modify their mortgages," said HUD secretary Shaun Donovan. Under the new program, borrowers have to be 30-days delinquent to qualify and traditional FHA loss mitigation options would not be effective. "There is no net present value test for eligibility," the guidelines say. However, borrowers have to make timely payments during a three-month trial before the modification is finalized. Mortgage banking consultant Brian Chappelle said the new program should be able to help a high percentage of FHA troubled borrowers because their loans were not underwritten based on stated incomes or second mortgages to avoid paying mortgage insurance. Servicers will receive $1,250 incentive payments for completing these FHA modifications.

Flagstar Bancorp, Inc., Troy, Mich., saw its mortgage banking unit's loan production in the second quarter decline compared to the first quarter, but it was still better than it was during the same period last year. The company's agency-dominated loan production decreased to $9.3 billion for the second quarter, as compared to $9.5 billion in the first quarter, but increased from the $8.2 billion seen in the second quarter of 2008. The company as whole took a $76.6 million net loss, compared to $67.4 million during the same period a year ago. "Although it is always disappointing to lose money, we were able to continue to generate positive income on an operating basis and are encouraged by ... improvement in mortgage delinquency trends that we experienced towards the end of the quarter," said Mark T. Hammond, Flagstar's chief executive officer.

Obama administration officials want servicers to pick up the pace of loan modifications and qualify at least 500,000 homeowners for 90-day trial modifications by Nov. 1, according to Treasury Department and HUD officials. "The administration has established a goal of reaching half a million modifications," HUD secretary Shaun Donovan said after meeting with servicers that are participating in the President's Making Home Affordable program. "I am confident that the best practices shared today, combined with more transparent reporting methods, better communication among all parties, and a strong commitment from servicers, will ensure that we can ramp up the MHA program's pace to meet these ambitious goals," secretary Donovan said. Servicers already have over 200,000 borrowers on trials to see if they can make three monthly payments on time, which is required before a modified loan can be finalized. The July 28 meeting allowed servicers and administration officials to exchange ideas on how to improve the modification program, said Paul Leonard, vice president at the Financial Servicers Roundtable Housing Policy Conference. He noted that servicers suggested the creation of a universal web portal would helpful so homeowners could in-put their information and speed processing for servicers. "That is one of the issues they will keep working on," Mr. Leonard said. "We hope these kind of meetings will continue," he added.

Two-thirds of the 94,000 foreclosure sales in June involved properties previously financed by prime mortgages as the tide of subprime foreclosure sales has declined over the past four quarters, according to the Hope Now alliance. The alliance's monthly report shows the foreclosure sales involving subprime loans crested in the second quarter of 2008 and foreclosure sales involving prime loans have surged since the expiration of several moratoriums in March of this year. Prime foreclosure sales hit 154,000 in the second quarter, up 36% from the first quarter. Prime sales totaled 62,600 in June, up 13% from May and 50% from April. Meanwhile, the Hope Now servicers completed 96,000 loan modifications in June, down 5% from the previous month. This marks the second monthly decline as servicers put more modification candidates through a 90-day trial period as required by the Obama administration's Home Affordable Modification Program. Most of the Hope Now servicers have signed up for President's program but some are waiting for permission from their investors to modify loans.

About 30% of payment option adjustable rate mortgages are already seriously delinquent and a congressional watchdog agency expects defaults and foreclosures will only get worse next year. "We are particularly concerned about payment-option ARMs because so many are recasting and becoming less affordable to those homeowners," said William Shear, a director at the General Accountability Office. Mr. Shear testified before the Joint Economic Committee on a just-released GAO report that shows that 44% of the 837,000 POAs originated from 2000 and 2007 have prepaid and only 30% or 250,000 loans are current. The terms of POAs generally recast after five years but the recast can be moved up because of negative amortization. Louisiana State University finance professor Joseph Mason warned the committee defaults on POA could cause foreclosures to peak in 2010 and keep the foreclosure rate elevated into 2011. Meanwhile, option ARMs are difficult to modify because the borrowers already enjoy very low payments (due to the minimum payment option). However, the re-default rate on option ARMs is "much lower" than modifications on other alt-A mortgages, according to a Bank of America/Merrill Lynch Research report.