Servicing

Many Federal Reserve district banks are seeing an increase in home sales, according to the Fed's Beige Book. "A number of districts reported an uptick in home sales, and many said that new home construction appeared to be stabilizing at very low levels," the Beige Book says. The reporting district banks cited seasonal factors, low interest rates and declining house prices as well as the tax credit available for certain first-time homebuyers. They noted that, "much of the sales increase was found in the lower-priced end of the market." The New York and Cleveland Federal Reserve banks said they saw "strong demand" for refinancings. But the Richmond bank indicated there has been "waning" demand due to rising interest rates. Commercial real estate markets continued to "weaken," the Beige Books says, as rising vacancy rates have been putting downward pressure on rents.

After pleading guilty to participating in a complex fraud scheme in which he filed and foreclosed on false mortgages in Florida, Sergej Tews was sentenced to 33 months in prison. He also was sentenced to three years of supervised release following the prison term and ordered to pay $636,000 in restitution. According to R. Alexander Acosta, U.S. attorney for the Southern District of Florida, Tews induced homeowners to transfer their properties to him in exchange for his promise to assume their mortgage payments and caused the homeowners to execute warranty deeds, which gave the appearance that the properties were sold to a third party instead of being transferred to Tews. He then fabricated the amount paid for each property, paid the filing taxes based on the false amount and filed fraudulent mortgages on each property. At the foreclosure sales, third-party purchasers were deceived into believing that there were no pre-existing mortgages on the properties and bid on and bought the properties at auction. After the third-party purchasers paid for the properties, the court issued checks to Tews in the names of his purported foreclosing lenders.

New York attorney general Andrew Cuomo is joining other state crime fighters that are going after what they believe are foreclosure rescue scams targeting vulnerable homeowners. The New York AG this week filed a civil complaint against American Modification Agency Inc. and its owner and president, Salvatore Pane Jr., for allegedly charging illegal up-front fees and engaging in consumer fraud. The Uniondale, N.Y.-based firm markets itself as a foreclosure rescue company. It operates in all 50 states. The AG's office says American Modification targets homeowners facing foreclosure by claiming it can save their homes, but often fails to provide the services promised. In a statement released late Tuesday AMA — also known as "Amerimod" — said it is compliant with state foreclosure assistance laws and regulations. "Amerimod has been and will remain a frontrunner for compliance as well as a reliable source for distressed homeowners and consumer advocacy groups," the company said. Meanwhile, the New York AG's office has subpoenaed 14 other loan modification-related firms. Other large states that are investigating and filing charges against loan mod firms include California, Florida, and Georgia.

Citing the uncertainty of its strategic direction, as well as overall concerns about the mortgage insurance business, Fitch Ratings, New York, has assigned United Guaranty Residential Insurance Co., Greensboro, N.C., a negative outlook. Fitch has affirmed the "BBB" insurer financial strength rating of the company, saying it reflects its view on UGRIC's risk profile and capitalization, including existing support agreements and a recently executed reinsurance agreement with MG Reinsurance. The statement from Fitch also noted that Eric Martinez — who United Guranty Corp.'s ultimate corporate parent AIG recently appointed as chief executive of UGC — "is part of the management team tasked with restructuring and/or disposing of businesses and assets as part of AIG's effort to repay U.S. government funds. For the past two months, [Mr.] Martinez has led a comprehensive strategic review for UGC. Should UGC be placed into run-off and/or if steps are taken to reduce current levels of capital and/or capital support, then additional negative rating action may result."

Fitch Ratings has downgraded its rating on Colonial Bancgroup — the nation's largest warehouse provider to non-banks — saying a new federal cease and desist order against the Alabama bank may have a negative impact on a $300 million investment in the company. At press time the bank had not commented on the Fitch note. The C&D order from the Federal Deposit Insurance Corp. and state regulators requires it to increase Colonial Bank's Tier I capital ratio to 8% by the end of September. Recently, mortgage banker Taylor, Bean & Whitaker finalized its commitment to pump $300 million of equity into Colonial. Once Colonial receives the equity it will then be eligible for $550 million in Troubled Asset Relief Funds from the Treasury Department. TBW has several investment partners on the deal. Colonial's stock continues to sell for less than $1 and was down 27% in trading to 88 cents Wednesday afternoon. The Alabama-based bank — stung by large commercial real estate loans — reported a net loss of $168 million for the quarter ended March 31.

National home prices tracked monthly by Integrated Asset Services LLC's IAS360 House Price Index have ceased falling and stabilized for the first time in 10 months. For the nation as a whole, the index found virtually no change in prices between April and March. The index last registered a month-to-month increase in prices in June 2008 when they rose 0.16%. Since that time home prices nationally have dropped by 13.3%. Within the country's four main regions, only the South saw a slight decline of 0.3% in the latest month-to-month period. Prices in the Northeast jumped the most, at 0.6%, while prices in the Midwest inched up by 0.1% and prices in the West remained stable. "It's too soon to call this a turn in the housing market, particularly given all the political and regulatory uncertainties," said Dave McCarthy, president and chief executive officer of Integrated Asset Services, Denver. "I think that we're still in for some difficult spells ahead, but we are seeing a certain kind of pricing equilibrium in several important markets. That's encouraging for the long term."

Sen. Jack Reed, D-R.I., and 14 other Democrats are urging HUD secretary Shaun Donovan to get tough on servicers that are not responsive to troubled homeowners who need assistance. In a letter to the HUD secretary, the senators cite a recent NeighborWorks America study that found homeowners who reach out for help have to wait (on average) 45 to 60 days for a servicer to respond. "What steps are you able to take to address the concerns raised by our constituents who are unable to access answers or adequate help from servicers? Are there further legislative tools that you require to address this problem, or to meet the broader needs of struggling homeowners?" the June 9 letter says. At press time HUD officials had not commented on the Reed letter. However, Treasury deputy assistant secretary Seth Wheeler told a fair housing conference on June 8 that servicers are required to increase their capacity when they sign up to do loan modifications under the Making Home Affordable program. The Treasury will be tracking their results. "We will have a very frank dialogue about what kind of staffing is realistic," Mr. Wheeler said.

Fannie Mae is bringing the servicing of its 'HomeSaver Advance' program in-house — just weeks after it was revealed that re-defaults on HSA loans are nearing 70%. The government-sponsored enterprise has been using Dyck O'Neal Inc., an Arlington, Texas, collection agency, to service the advances, which are unsecured loans of up to $15,000 that cover past-due amounts on a mortgage. But in a notice to lenders last week, Fannie said that beginning June 9, it will take over the certification, billing and collection on these loans. Brian Faith, a spokesman for the GSE, said that it reviewed its "overall approach to implementing the HSA option and has reorganized some functions in-house versus outsourced." Despite the change, Dyck O'Neal will remain "a valued vendor partner" for other programs, Mr. Faith said. Dyck O'Neal did not return a call seeking comment. Fannie launched the advance program in February of last year to help homeowners catch up with mortgage payments and allow the GSE to avoid the expense of purchasing nonperforming loans out of securitized pools.

Francis Creighton, a top lobbyist for the Mortgage Bankers Association, is departing the trade group to take a job on Capital Hill, National Mortgage News has learned. A source familiar with the matter said Mr. Creighton, a vice president who is MBA's top liaison with elected officials, has accepted a chief of staff position with Rep. Chris Murphy, D-Conn. He informed the trade group of his plans last Friday. He will officially depart MBA within a few weeks. Mr. Creighton was promoted to VP in late 2006. He previously served as director of government affairs for MBA. During his career he also worked as a legislative director to Rep. Steve Israel of New York.

Servicing company employees involved in foreclosure prevention and loan modifications are "understaffed and overworked," according to a survey of housing counselors by NeighborWorks America, a quasi-governmental entity that trains counselors. The most common complaint by counselors involves lengthy response times by servicers. After formulating a workout proposal for a troubled homeowner, some counselors (17%) said it can take servicers 45-60 days to respond. Mortgage Bankers Association vice president Michael Fratantoni said servicers are hiring for open positions. "We are hearing they are having trouble getting qualified personnel," he said. Counselors also note in the survey that servicers repeatedly lose faxes or mailed documents and they end up talking with different representatives each time they call. The NeighborWorks semi-annual report to Congress points out that only 6% of homeowners who receive counseling lose their home in a foreclosure — 74% are still in their homes and 20% sold their homes in a short sale or negotiated a deed in lieu that transfers the property to the lender. Nearly 60% of homeowners seeking counseling pay more than 50% of their income toward housing costs. Nearly half (49%) of homeowners seeking help have lost their job, up from 41% in the previous six-month period ending October 31. "Only 7% reported they were in default because their loan payment increased," the semi-annual report says.