Servicing

Freddie Mac reopened its 1.75% three-year Reference Notes security that matures on June 15, 2012. The issue was priced at 99.942046 or approximately 24 basis points more than three-year U.S. Treasury Notes. The bid-to-cover ratio was 3.275 to 1. The stop yield was 1.770%. It will settle on July 16. The $1 billion reopening of the security was conducted via an Internet-based auction. The issue, CUSIP 3137EACC1, is listed on the Euro MTF market of the Luxembourg Stock Exchange. After the reopening, the outstanding size of the 1.75% three-year Reference Notes security will be $7 billion. All auction details can be found on Freddie Mac's Debt Securities Web page. Freddie Mac has issued $40 billion of reference notes securities during 2009 and has approximately $257.5 billion in reference notes and reference bonds securities outstanding.

The mortgage industry is helping 250,000 struggling borrowers a month to stay in the homes, but that is "woefully inadequate," according to an association executive who represents some of the mortgage lenders and servicers. Financial Services Roundtable president and chief executive Steve Bartlett told a House panel that the industry is doing everything it can to double that number to 500,000 a month. "It has to be done for the economy to recover," Mr. Bartlett testified. The Hope Now alliance recently reported that servicers modified 101,000 mortgages in May and completed 148,000 repayment plans. These workouts totaled 249,000, down slightly from 260,500 in April. Separately, the GSE regulator reported the loan modifications completed by Fannie Mae and Freddie Mac fell by 12% from March to April. The Federal Housing Finance Agency noted that the government sponsored enterprises ended their streamlined modification program and began implementing the Obama administration's new Home Affordable Modification program in April. The government sponsored enterprises completed nearly 13,800 loan modifications in April, down from 15,700 in March.

REDC of Irvine, which has been doing a swift business in selling distressed homes, plans to enter the whole loan auction market, focusing on non- and sub-performing mortgages, and other note types. The company also may enter the origination space. A spokesman for REDC - known formally as Real Estate Disposition LLC - confirmed the auction company's loan sale plans. REDC bills itself as the world's largest real estate auction company. A handful of firms have sprung up in the past two years to sell performing and troubled whole loans using the Internet. Other loan auction companies include LoanMarket.net and BigBidder.com. REDC was launched early last decade. At one time it was owned, in part, by Impac Holdings of California, once a top ranked alt-A lender and servicer. Impac is still publicly traded but is listed on the OTC "pink sheets" market. It no longer lends but continues to service a portfolio of mortgage assets.

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.