Servicing

Clayton Holdings of Connecticut has been hired by the National Credit Union Administration to evaluate the mortgage holdings of two large corporate CUs that are under conservatorship. The CUs are U.S. Central Federal Credit Union, and Western Corporate Federal Credit Union. Clayton will evaluate for the NCUA the two's future loss projections on their respective commercial MBS, and non-prime MBS holdings. The evaluation information will be released publicly but some of it will be redacted.

The Government National Mortgage Association issued a record $43.6 billion in mortgage-backed securities in June, and reported that issuance during the first six months of this year has nearly doubled from a year ago. In May the agency issued $39 billion in MBS, a record at the time. Ginnie Mae issued $207 billion in MBS during the first half of this year, compared to $107 billion in the first half of 2008. The secondary market agency guarantees mostly single-family MBS. It guaranteed only $584 million in multifamily mortgages in June and $319 million in May. The June monthly report shows a 125% jump in the issuance of MBS backed by FHA-insured reverse mortgages, which are called 'home equity conversion mortgages' or HECMs. Ginnie issuers securitized $590 million in HECMs in June — the highest level ever.

LoanMarket.net, a website that serves as an auction platform for non-performing, sub-performing and other residential loan types has ramped up its listings in recent weeks. Jeff Freud, a principal in the Irvine-based company, said that over the past month, it has received $100 million in new listings in California alone. "That's the unpaid principal balance number," he said. LoanMarket's seller-clients include hedge funds and private equity firms, among others.

The proposed Consumer Financial Protection Agency would draw personnel and assessment fees from the existing federal banking agencies to staff and pay for its operations, according to Treasury assistant secretary Michael Barr. Under the legislative proposal, the CFPA would have broad authority to assess fees on consumer lenders, Mr. Barr told a Congressional panel on Tuesday. But he noted that community banks may not see an increase in fees because they already pay assessments to the federal banking agencies for consumer compliance exams and regulation. "We don't anticipate it will result in an increase in fees," he predicted. "It will likely result in a reduction in fees," as the consumer protection functions of the agencies are consolidated into one agency. Senate Banking Committee chairman Christopher Dodd, D-Conn., said he strongly supports the concept of a consumer protection agency that will level the playing field for banks and non-banks when it comes to regulation and enforcement. The chairman stressed that he does not want to see community banks "saddled" with additional costs and fees.

The Obama administration is planning to release a proposal for restructuring Fannie Mae and Freddie Mac in February when the President sends his budget to Congress. "Between now and then, we will be holding a series of public meetings as well as engaging in our own internal deliberations," Treasury assistant secretary Michael Barr told a Senate panel. The Bush administration forced Fannie and Freddie into conservatorships in September 2008 when it became clear the two would not able to finance their operations without government support. Mr. Barr urged the Senate Banking Committee to move ahead and pass the administration's proposals to create Consumer Financial Protection Agency and other financial regulatory reforms before addressing the GSEs. "We could move forward expeditiously on financial reform measures and then turn to government sponsored enterprises in February," he testified. The Treasury assistant secretary also noted that the administration will soon send up a legislative draft of its proposal to create a systemic regulator for the largest financial institutions. The capital and liquidity requirements will take away "any incentive to be large," he said.

U.S. District Judge Roger W. Titus sentenced Kurt Fordham of Ft. Washington, Md., to 10 years in prison, followed by five years of supervised release, for his involvement in the Metropolitan Money Store mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit. Judge Titus also ordered Fordham to pay $13.13 million in restitution and forfeit three residential properties and three vehicles. Fordham aided his wife, Joy Jackson and others with MMS to fraudulently promise to help homeowners avoid foreclosure by convincing them to put title to their homes in the names of straw buyers for a year, during which time MMS promised to improve the homeowners' credit ratings and help them obtain more favorable mortgages. Using the properties, the conspirators applied for mortgages to extract the maximum available equity from the homes and submitted fraudulent loan applications to lenders to obtain inflated loans on the properties. Fordham also served as straw buyer on at least six properties. Nine other defendants have pleaded guilty in this case, including Jackson and McCall.

FBR Capital Markets has raised its ratings on PHH Corp., Mt. Laurel, N.J. to "outperform" because of improvement in its mortgage banking fundamentals and the change to its management team.The leadership change occurred as a result of a successful proxy challenge by Pennant Capital Management LLC, Chatham, N.J. " With respect to mortgage banking, gain-on-sale margins have held up surprisingly well over the first half of 2009 due to less competition in the mortgage origination space; we expect margins to remain strong throughout the year; however, volumes will be significantly lower in the second half of the year due to higher rates," said analysts Paul J. Miller Jr., William Wallace and Jessica Halenda. The analysts at the Arlington, Va., firm said they expect the new management team, led by acting chief executive George Kilroy, to have a focus on creating shareholder value. FBR has assigned a price target of $23 per share for PHH, up from $13. Their valuation for the mortgage banking business is $15, based on the company's first quarter tangible book value of $22.50. The remaining $7.50 is from the fleet management business.

Banks are holding up loan modifications by refusing to subordinate or extinguish second liens that are "virtually worthless," according to two powerful banking committee chairmen who want federal regulators to intervene. House Financial Services Committee chairman Barney Frank, D-Mass., and Senate Banking Committee chairman Christopher Dodd, D-Conn., contend that the banks don't want to recognize their losses on second liens and they are preventing borrowers with underwater first mortgages from refinancing under the FHA Hope for Homeowners program. "Carrying these loans at potentially inflated prices may contribute to resistance on the part of servicers to negotiate the disposition of these liens, and thus stand in the way of increasing participation in the H4H program," the chairmen say in a letter to the banking and thrift regulators. "We urge you and your staff to look into this issue as expeditiously as possible to ensure that we can achieve the vital goal of the H4H to help American families build equity and keep their homes," the July 10 letter says.

Freddie Mac has slashed its origination forecast for the third quarter by $265 billion mainly due to a drop off in refinancings. Freddie's latest housing market forecast shows that loan production in the third quarter coming in at $625 billion, down from its $890 billion estimate a month ago. All of the reduction in loan production comes from conventional loans that Freddie and Fannie Mae purchase. The new forecast shows a slight pickup in originations of Federal Housing Administration and Department of Veterans Affairs-guaranteed loans. The government sponsored enterprise now is forecasting that lenders will originate $2.3 trillion in single-family loans in 2009, down $400 billion from its previous forecast. The Mortgage Bankers Association recently cut its 2009 origination forecast by $700 billion to $2.03 trillion.

Raising the loan-to-value ratio on refinances of underwater mortgages to 125% could help 2.25 million Fannie Mae and Freddie Mac borrowers lower their monthly payments, according to analysts at Amherst Securities Group. The special refinancing program that Obama administration officials unveiled in February originally limited the refinancing option to loans with LTV ratios of 80% to 105%. On July 1, the Federal Housing Finance Agency raised the LTV limit on the GSE Home Affordable Refinance Program (HARP). "We think expanding the HARP's limit to 125 makes the program accessible by an additional 8% of the current outstanding agency mortgage universe," an Amherst Mortgage Insight report says. At today's mortgage rates, "the bulk of borrowers in HARP's expanded LTV range are currently in-the-money," the analysts point out. But any rise in mortgage rates will "immediately begin to reduce the number of borrowers able to take advantage of the program," the July 8 report says. Fannie will start accepting delivery of the higher LTV refinancings on September 1. Freddie says some borrowers can apply now. "The expanded LTV ratios are available now when borrowers apply for Relief Refinance Mortgages through their current servicers and will be become available October 1 when borrowers apply through any lender affiliated with Freddie Mac."