Servicing

Andrea Goode-James, a closing attorney from Roxbury, Mass., pleaded guilty before U.S. District Judge Douglas P. Woodlock to mortgage fraud for pocketing more than $1 million in proceeds of loan closing transactions. According to Michael K. Loucks, acting U.S. attorney for the District of Massachusetts, Goode-James performed closings on three different properties between 2005 and 2007 and pocketed more than $1 million in lender proceeds rather than using those funds to pay off pre-existing mortgages as directed by the lenders. To conceal her fraud, Goode-James made some monthly payments on the pre-existing mortgage loans. She also issued title insurance commitments to the new lenders, which bound the title insurance company for title defects and misled lenders to believe that she had in fact cleared title by paying off prior loans and obtaining discharges of those mortgages. Judge Woodlock scheduled sentencing for Oct. 29.

Sorrento Capital, a private asset management firm in Irvine, Calif., has acquired Irvine, Calif.-based REO.com, a consumer service portal for bank owned real estate and provider of customized disposition solutions. This acquisition adds to the depth of the strategically aligned businesses that make up the Sorrento Capital portfolio. This now includes InformationLogix and its MOS Group, Inc. (MOSGroupInc.com), which provides loss mitigation services; Revise My Loan (ReviseMyLoan.com), a consumer service that assists borrowers with options to improve their debt profiles; and MortgageOutreach.org, an education and information resource for consumers seeking to improve their financial condition and wellbeing. The company plans to expand further into the financial services segment by organically developing and acquiring organizations that service the varied financial needs of a wide spectrum of consumers.

The mortgage insurance industry should survive, declared analysts at Keefe, Bruyette & Woods, but any fundamental recovery is still well down the road. Meanwhile, the second quarter spike in interest rates has made estimated volumes for the rest of the year at the title insurers "more tenuous" and as a result, KBW is lowering its earnings estimates and price targets for those companies. For Fidelity National Financial, it lowered its second quarter 2009 earnings estimate to $0.37 per share from $0.48 per share primarily due to lower fee-per-file expectations, slightly higher expenses and reduced commercial activity. The EPS estimate for First American Corp. was cut from $0.87 to $0.73 and for Stewart Information Services Corp. from $0.52 to $0.39 for the same reasons. As for the mortgage insurers, the KBW analysts "expect the second quarter will see an increase in the sequential growth rate in delinquencies, likely returning to the mid-teens percent range rather than the single-digit growth rates seen in the first quarter." The analysts increased their estimates for the loss at Old Republic (which operates in both segments, but which was grouped with the MI companies) to $0.18 per share from 0.13 per share on lower orders and lower fee per file in the title segment. For MGIC, KBW's second-quarter operating EPS estimate was increased to a loss of $1.28 from a loss of $0.74 primarily on the elimination of the tax benefit from operating losses due to the establishment of a valuation allowance. PMI had its loss estimate increased by $0.01 per share to $1.62, while KBW held its estimates for Radian at a loss of $1.19 per share. For the mortgage insurance segment at Genworth, analysts Nathaniel Otis and William Clark predict it will lose $23.0 million or $0.05 per share for the second quarter.

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.