Servicing

The 12 Federal Home Loan Banks reported combined earnings of $345 million in the first quarter, down 50% from a year ago, as six banks took a net loss for the quarter primarily due to impairment charges on private-label mortgage-backed securities. "Other than temporary impairment" charges on the $61.2 billion in private-label MBS held by the FHLBanks reduced earnings by $516 million. The banks also recognized $4.7 billion in private-label MBS valuation losses in "accumulated other comprehensive income." Federal Housing Finance Agency director James Lockhart recently told Congress that the credit quality of the FHLBanks' investments in private-label securities has proven to be "much worse" than expected. "With ongoing uncertainty surrounding the true economic value of PLS, those investments will continue to raise safety and soundness concerns," the GSE regulator said. As of March 31, combined retained earnings totaled $5 billion while losses recognized in accumulated other comprehensive income totaled $7.4 billion. Half of the FHLBanks have suspended dividend payments to rebuild retained earnings. The 12 banks have $1.2 trillion in assets and $60 billion in regulatory capital, according to the combined first quarter report issued by the FHLBank Office of Finance.

The California State Teachers' Retirement System is searching for a master servicer for its home loan program. The selected firm will assist CalSTRS employees in daily operations, record keeping and in the development of execution strategies. The contract is for three years with the possibility of two one-year extensions. Servicers will have to show how they will assist CalSTRS with loan origination, underwriting and approval; loan delivery and servicing; data reporting; technology tools and support; marketing assistance and support; and customer service and client support. The CalSTRS Home Loan Program provides the pension fund's members with mortgage loans at a reasonable market rate. The program offers down payment assistance options and reverse mortgages. Funding through the program grew by $281 million and more than 1,500 in 2008. At the end of last year, the program had a total of $4.6 billion, representing more than 35,000 mortgages. The final filing date for proposals is July 30, 2009, with the selection expected in the fall of 2009. The request for proposal is available for viewing on the CalSTRS Web site at http://www.calstrs.com/rfp.

Fannie Mae and Freddie Mac have received the green light from their regulator to refinance underwater homeowners with loan-to value ratios as high as 125%. The special refinancing plan that Obama administration officials unveiled in February limited the refinancing option to loans with LTV ratios of 80% to 105%. But the 105% LTV limit would not offer any relief for borrowers who have seen the values of their home erode by 15% to 30%. "The higher LTV refinancings will allow more homeowners to strengthen their finances by taking advantage of lower mortgage rates," Federal Housing Finance Agency director James Lockhart said. Fannie Mae said it would accept delivery of the higher LTV loans starting Sept. 1. A Freddie Mac spokesman said it would start accepting the loans "now." The GSE financing program is only available to borrowers with loans that are owned or guaranteed by Fannie and Freddie. They also have to be current on their mortgage payments. "On the 105%-125% LTV loans, lenders can either sell us the loans for cash or deliver them into an MBS execution to be sold to other investors," a Fannie spokesman said.

Less than three in 10 mortgages that were modified by servicers in the first quarter of 2008 are still current, according to a new "mortgage metrics" report released by the Comptroller of the Currency. The report indicates that as loan modifications age the chance of a mortgage going delinquent again increases significantly. The OCC found that just 29.5% of loans modified in 1Q08 are still "current and performing" while 48.2% of those modified in the fourth quarter were current. As for mortgages modified in the first quarter of this year — with the stated goal being home retention by the mortgagor — almost 36% are already in some stage of delinquency, the OCC found. Even though the relapse rate is poor, mortgage servicers are under increasing pressure to help consumers. Loan modifications by mortgage companies increased by 172% in the first quarter compared to the same period last year. Servicers initiated 185,156 new loan modifications in 1Q — a 55% jump from the previous quarter. The report also shows that foreclosure actions in the first quarter totaled 290,900, up only 4% since the first quarter of 2008.

The number of completed loan modifications has fallen in April and May as servicers put more loans through a 90-day trial period as required by the Obama administration's Home Affordable Modification program. "Many of these trial modifications will result in formal reporting of modifications after 90 days," according to Hope Now, an alliance of mortgage servicers. Hope Now servicers reported that they modified 101,000 mortgages in May, down from 121,000 in April and 134,000 in March. Meanwhile, foreclosure sales jumped to 82,600 in May, up from 62,800 the previous month. Nearly two thirds of the foreclosure sales in May and April involved prime mortgages.

Freddie Mac's board of directors has selected Charles E. Haldeman Jr., a top executive at Putnam Investments, to be its next chief executive, according to a source familiar with the matter. "He's the leading candidate," said the source. The nomination has been sent to its regulator, the Federal Housing Finance Agency, which has yet to act on the pick. Mr. Haldeman would replace John Koskinen, a former Clinton Administration official. Mr. Koskinen replaced David Moffett who took control of the GSE when the government placed it into conservatorship this past fall. In other company news, the GSE said in a new regulatory filing that it received $6.1 billion in new funds from the Treasury Department to help offset its mounting liabilities. Counting the new infusion, the Treasury Department, to date, has given the GSE $51.7 billion to keep its net worth above zero.

First American Valuation and Property Solutions, Dallas, has released a new property listing verification report that confirms and tracks real estate-owned listing activity of individual properties. The company says the report has applications in REO marketing, fraud prevention, due diligence and portfolio valuation. The service gives lenders and investors access to local real estate market information on a national basis with rapid turnaround. The new report confirms that a specific property is currently listed and provides the listing price and days on the market. If a property is not currently listed, the report displays up to 12 months of listing history, time on the market and past listing prices. The report is designed for use by quality control and fraud prevention staffers in the REO and servicing arenas to identify potential cases of collusion, and by investors who perform due diligence as part of the portfolio acquisition process.

Genworth Financial Inc., Richmond, Va., has priced the initial public offering of its Canadian mortgage insurance subsidiary, revealing that it hopes to raise up to $730 million (U.S.) The IPO has been priced at $19 per share, Canadian, which translates into $16.45. U.S. Genworth hopes to complete the IPO by July 7. The stock will trade on the Toronto Stock Exchange under the symbol MIC. "This IPO reinforces our already sound financial foundation and provides additional capital flexibility to Genworth," said Michael D. Fraizer, chairman and chief executive of Genworth Financial. "At the same time, we will continue to benefit from the earnings associated with our majority position in Genworth MI Canada as it plays an important role in providing solutions to the housing finance market in Canada." The Canadian business had first quarter 2009 net operating income of $66 million, compared with $75 million for the same period one year prior. The unit had $2.4 billion of flow insurance sales and $0.4 billion of bulk sales for the first quarter 2009.

Reverse mortgage subservicer Celink of Lansing is adding between 1,500 to 2,000 new loans per month to its platform, according to company CEO John LaRose. The privately held company — of which Mr. LaRose is the owner — subservices about $4 billion in product. Celink is celebrating its 40th anniversary this year. The company has retained a third-party company to conduct a client satisfaction survey for it.

The deterioration of the mortgage market and rising foreclosures and delinquencies is expected to cause increasing losses on billions of dollars of mortgage-backed securities being held by corporate credit unions, according to the National Credit Union Administration. The prediction comes as NCUA revealed it has pumped almost $20 billion into U.S. Central FCU and WesCorp FCU over the last six months to keep these two corporate CUs afloat. Scott Hunt, director of NCUA's Office of Corporate CUs, said current estimates are that U.S. Central will have a loss of $1.7 billion and WesCorp a loss of $5.7 billion on their mortgage securities, but agency officials expect those numbers to be even higher because of the ongoing deterioration in the market.