Servicing

Freddie Mac said loan delinquencies on its portfolio and guarantee book of business rose to 2.01% in May, an 8% uptick from the previous month, but a 229% increase from the same period last year. The increase in delinquencies is not surprising given the deteriorating condition of home values and the rising unemployment rate. Meanwhile, Freddie Mac said it bought $50.2 billion in mortgages during May, a 13% decline from the previous month, and a 23% drop from May 2008. However, purchases are much improved from January and February of this year. In May it issued $43.7 billion in MBS (participation certificates) compared to $51 billion in April. A year ago in May it issued $47.3 billion in PCs.

The Senate Banking Committee has approved the nomination of David Stevens to be the new Federal Housing Administration commissioner, clearing the way for his confirmation by the full Senate. Mr. Stevens' nomination has been held up for several months due to alleged Real Estate Settlement Procedures Act violations by his former employer, Long & Foster — a mid-Atlantic real estate brokerage firm. The RESPA complaints did not name Mr. Stevens and HUD secretary Shaun Donovan continued to support him, claiming his experience as an executive at Freddie Mac and Wells Fargo Home Loan is really needed at FHA. The committee approved Mr. Steven's nomination by a voice vote late Thursday afternoon. The Senate adjourned a few hours later so his confirmation will be pending when the senators return from their 4th of July recess on July 6.

Doing its part to help promote the aims of the Homeowner Affordability and Stability Plan, Radian Guaranty Inc., Philadelphia, has created a program which helps qualify borrowers for traditional refinances on loans not currently serviced by their present lender, even with today's declining home process and tighter lending standards. The new program enables Radian to transfer a homeowner's existing mortgage insurance policy to any new loan that meets the policy's more flexible eligibility criteria, making it easier for homeowners to refinance their existing mortgage into a more predictable loan type and/or take advantage of today's lower interest rates to lower their monthly payment. This, in turn, helps more borrowers avoid default and/or foreclosure and remain in their homes.

An Ohio man has been charged with mail fraud in connection with a scheme to fraudulently obtain mortgage loans. According to William J. Edwards, U.S. attorney for the Northern District of Ohio, from August 2003 through January 2005, Paul R. Tomko of Middleburg Heights, among others, allegedly executed a scheme to defraud lenders in connection with 12 mortgage loans totaling nearly $1.2 million on properties located in the Cleveland area. Mr. Tomko, who could not be reached for comment, also allegedly caused fraudulent loan applications to be processed through mortgage brokers. He's also alleged to have used straw buyers to purchase properties and to obtain financing in their names and cause fraudulent appraisals to be prepared that artificially inflated the properties' true values. The loan application packages that were submitted to the lenders allegedly included false and fraudulent documentation and information. It is further alleged that the lenders sustained significant losses as these mortgage loans went into default and the properties were sold through foreclosure.

PMI Mortgage Insurance Co., Walnut Creek, Calif. has expanded its refinance-to-modification program so it can be used with all loans it insures, not just Home Affordable Refinance Program eligible loans owned or guaranteed by either Fannie Mae or Freddie Mac. With this program, the coverage percentage and premium rate remain the same and the existing insurance certificate is modified to cover the new refinanced loan. To minimize borrower expenses, PMI is also not charging fees to modify the existing insurance certificate for either the New Lender/Servicer or Same Lender/Servicers Programs. PMI's modification of the existing insurance allows coverage to be extended to the new refinanced loan, even though the property value may be lower than when the original loan was insured and may not be eligible for mortgage insurance coverage today. To be eligible, the borrower must be current on their existing loan and the new loan should improve the borrower's financial position by reducing the payment, interest rate or principal balance; extending the fixed-payment period on an adjustable rate mortgage; an extension of the loan or amortization term; or by giving the borrower a more stable payment product. Additional requirements may apply depending on whether the existing or new lender/servicer is requesting the coverage modification.

Recovery in the economy as a whole appears likely to continue in the second half of this year but parts of the U.S. housing market may remain bogged by roughly 4 million foreclosed or seriously delinquent properties concentrated in certain states, Barclays researchers said as part of a global outlook press briefing in New York. About 1.9 million out homes in the United States are in foreclosure and roughly another 1.9 million are owned by borrowers 90 or more days delinquent on their mortgages, said Ajay Rajadhyaksha, head of U.S. fixed income and securitized products strategy at Barclays. Because these home are concentrated in certain states, this leads to what he calls a housing market in "two parts," in which home prices in some areas such as Texas and Washington state might stabilize in the second half. But in states like California, Florida, Nevada and Michigan prices are likely to continue to be weighed down by foreclosures and subperforming mortgage concerns. In Michigan, about 82 out of every 100 existing home sales have been distressed, Mr. Rajadhyaksha said.

Forty-one defendants, including LaSalle Title Co., are facing federal charges relating to various mortgage fraud schemes in five separate cases in Chicago. In some of the schemes, the defendants face charges that they allegedly falsely inflated the values of dilapidated homes in urban areas. In other schemes, defendants are charged with deals involving million-dollar condominiums in a Chicago high-rise and homes in affluent suburbs. According to Patrick J. Fitzgerald, U.S. attorney for the Northern District of Illinois, 37 individuals and four businesses, including LaSalle, which closed on allegedly fraudulent loans, are facing charges relating to five mortgage fraud cases involving more than $48 million in fraudulently obtained mortgages in the Chicago area, including two in the suburbs of Wheaton and Glenview. The various lending companies suffered millions of dollars in losses after the loans went into default and the properties were foreclosed upon. No one from LaSalle could be reached for comment.

The economy may be recovering, but even in a recovery residential estate's performance is likely to continue to vary by market and commercial real estate's health is likely to lag that of the broader market, two influential portfolio managers said at a New York Society of Security Analysts meeting in New York. "You've really got to make a decision on a market-by-market basis," said Philip J. Orlando, senior vice president, senior portfolio manager and chief equity market strategist at Federated Investors Inc., when asked at the 4th annual Wall Street Forum how residential RE might perform in a recovery. Commenting on the outlook for CRE, TIAA-CREF's managing director and head of global real estate portfolio management Philip J. McAndrews said its recovery is generally unlikely to occur on a broad basis until after the broader economic recovery becomes more established and credit availability improves. "It's going to take awhile for us to get through this," he said.

Recently foreclosed homes, most of them likely being sold by lenders, are taking up a decreasing portion of Orange County real estate transactions, according to a report in The Orange County Register. The newspaper, citing figures compiled by DataQuick, said that in May homes that had been foreclosed upon in the previous 12 months made up 34.2% of homes sold, excluding newly built home sales. That's the lowest percentage since August. Foreclosures' share of the home resale market peaked in January at 46%. Lenders repossessed more than 1,400 Orange County homes last August — the highest number of any month on record. Orange County — once the home of many subprime lenders — has been one of the hardest hit areas in terms of home prices declines in the state.

The Mortgage Bankers Association has slashed its forecast of mortgage production by more than $700 billion, wiping out most of a projected increase made to that forecast in late March. The trade group is now estimating 2009 single-family originations of $2.03 trillion — $737 billion of it "purchase-money" with the balance being refinancings. All but $84 billion of the cut is due to a lower number of rate/term refinancings and very low volumes in the Fannie Mae and Freddie Mac Home Affordable Refinance Program. The March forecast of $2.78 trillion was driven by expected refis as a result of the Treasury's actions to push bond rates lower. MBA chief economist Jay Brinkmann said the group's warning that the March projection could have been too optimistic came true, as investors have shied away from Treasuries. "Given the high issuance volume of Treasuries in June, the Fed is likely approaching its self-imposed ceiling of $300 billion and may be reluctant to increase its current commitment to purchase long-term Treasuries," he said. MBA is forecasting increasing rates through the end of this year and through 2010.