Servicing

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.

GMAC Financial Services has named Jeff Lemieux, a hedge fund executive, senior vice president of fee based servicing. Mr. Lemieux comes to GMAC's mortgage division, Residential Capital Corp., from Cerberus Capital Management, where he oversaw the hedge fund's investment in mortgage and consumer assets. (Cerberus owns part of GMAC.) At ResCap he replaces Tom Donatacci who left a few months ago to work for Clayton Holdings, a due diligence and outsourcing firm. Mr. Lemieux will report to GMAC Mortgage president/ResCap chief operating officer Tony Renzi. He will be based in the firm's Carlsbad, Calif. office. GMAC's fee based servicing unit provides subservicing, private label and other services to third-parties. During Mr. Lemieux's career he also has worked at New Century Financial Corp., Irvine, Calif., a now defunct subprime lender/servicer.

National Asset Direct Inc., San Diego, has acquired United Residential Lending LLC, Scottsdale, Ariz., a Federal Housing Administration, agency and jumbo lender that does business in 18 states. Terms of the deal were not announced. NAD is a service provider to purchasers of performing and distressed residential mortgage loans and assets; among its subsidiaries are iServe Servicing Inc., iServe Real Estate Operations Inc. and iServe Mortgage Co. Inc. United Residential is being renamed iServe Residential Lending LLC, with its co-founder and chief executive Gary Willis remaining onboard as chief operating officer and co-founder Doug Wilson remaining as chief financial officer. A spokeswoman for NAD said United Residential is being integrated as a separate unit to maintain the FHA approvals and state licenses that it holds. Company executives at NAD said the deal takes it from its roots focused on loss mitigation and asset disposition strategies to being able to offer a full spectrum of lending, refinancing, servicing and real estate disposition services.

Servicers participating in the Obama Administration's loan modification program are required to collect "detailed" racial information to make sure the program is reaching minority communities that were targeted by subprime lenders. The 14 servicers participating in the Making Home Affordable program have agreed in their contracts to collect "very detailed information on race and other characteristics," HUD secretary Shaun Donavan told a the National Fair Housing Alliance. The information will allow "us to monitor and ensure that the solution is impacting the communities that were disparately targeted," the secretary said. The Department of Housing and Urban Development secretary noted that 60% of all loans in African-American communities were subprime in 2005.

New mortgage insurance policies written by the nation's seven MI firms fell by 66% in the first quarter to just $25.4 billion, according to figures compiled by National Mortgage News and the Quarterly Data Report. The poor showing, in part, reflects the huge demand for government insured loans, including FHA and VA-backed product. One MI, Triad Guaranty of Winston-Salem, N.C., did not write one new policy during the quarter, but that firm is in self liquidation mode. At the end of March the MI industry had outstanding policies on $1.04 trillion in home mortgages, or 12% of all outstanding mortgages in the U.S. Over the past 12 months there has been no growth in the policies-in-force number, according to NMN/QDR. The PMI Group, San Francisco, ranked first in policies written with $6.47 billion in 1Q.

Two-thirds of the AAA-rated private-label MBS purchased by Fannie Mae and Freddie Mae have been downgraded to "junk," the GSEs' regulator told a congressional panel, and only a small portion is still rated AAA. Federal Housing Finance Agency director James Lockhart told a House Financial Services subcommittee the two government sponsored enterprises have $171.3 billion in PLS backed by Alt-A, subprime and other mortgages in their investment portfolios. Only 3% remain AAA and not on downward watch, Mr. Lockhart said. Another 11% remain AAA-rated but are on downgrade watch as of May 28. Meanwhile, 68% of the private label-MBS has been downgraded below investment grade, which is sometimes referred to as "junk" bonds. An additional 17% has been downgraded but remain investment grade, according to FHFA. "There is no doubt [the credit rating agencies] failed" in rating these securities," Mr. Lockhart said at the June 4 hearing. "We need to reform the rating agencies and we need to get them back to rating and not consulting and getting fees for structuring bonds," he said. Impairments on the MBS resulted in Fannie recognizing $6 billion in losses in the first quarter and Freddie recognizing $7 billion in losses.

Franklin Credit Management Corp., the Jersey City third-party mortgage servicer, has expanded its operations to include Face-to-Face Home Solutions, a door knocking division that tries to reach delinquent borrowers. Gordon Jardin, Franklin Credit's chief executive, said the unit was started from scratch earlier this year as part of a broader repositioning of the company, which now offers underwriting, due diligence and asset valuations. Franklin had been a subprime lender that $54 billion-asset Huntington Bancshares Inc., in Columbus, Ohio, inherited from its 2007 purchase of Sky Financial Group. The company currently services 32,000 loans, most of them second mortgages, worth more than $2 billion. "We are definitely actively involved in trying to find ways to maximize the returns to Huntington on that portfolio," Jardin said in an interview. Franklin's strategy had been "to maximize cash flow," Jardin said, while Huntington's strategy now is to work out the loans. "I think most companies are trying to determine what their strategy should be," he said. "It's too early to determine how well the performance of loans will be if we modify them," under the Obama Administration's Home Affordable Modification Program. Franklin "has had the beginnings of some success" is reaching delinquent borrowers though it is too early to tell if the contact rate is better than the industry average. Roughly 50% of delinquent borrowers have no contact with their servicer before a home goes into foreclosure. "That's frustrating, because you do have a legal contract, you have an agreement with the borrower and why they can't make a payment often is unclear," Jardin said.

Angelo Mozilo, the founder and former chairman/CEO of Countrywide Financial Corp. — and an icon in the industry for many years — was slapped with a massive civil fraud complaint by the Securities and Exchange Commission on Thursday afternoon, accused of deliberately misleading investors in the company's stock and engaging in insider trading. David Siegal, Mr. Mozilo's attorney released a statement calling the SEC charges "baseless," adding that the lender's risks "were well disclosed to and understood by the marketplace." The SEC also sued former CFC executives David Sambol and Eric Sieracki, accusing them and Mr. Mozilo of "falsely assuring investors" that Countrywide was funding "primarily" prime quality loans and had avoided the excesses of its competitors. The two men could not be reached for comment. Last summer Bank of America bought CFC for a few dollars a share compared to a one-time high of $40. The agency released a memo that Mr. Mozilo wrote in April 2006 where he refers to Countrywide's subprime business as "the poison of ours." According to figures compiled by National Mortgage News Countrywide was the nation's largest subprime lender and servicer during its final years of operation, but had not made a serious run at A- to D lending until the early 2000s. The agency accuses him of selling $140 million of stock from November 2006 until August 2007 while "he was aware of material, non-public information concerning Countrywide's increasing credit risk." In past interviews with NMN Mr. Mozilo maintained that his stock sales were legal and followed the rule of law. In March 2007 he told this newspaper that he was selling the stock in question, noting, "I have almost all my personal net worth tied up in the company." He defended the sales, saying "I have created $25 billion in value for the shareholders. It's been one of the best performing stocks on the New York Stock Exchange. I gave them 98% of the value and took 2%. And they [the shareholders] didn't have to do the work. I did it for them."

In charging former Countrywide CEO Angelo Mozilo with fraud, the Securities and Exchange Commission is zeroing in on the lender's payment option ARM business, a controversial product that Mr. Mozilo initially embraced and then later cursed. According to figures collected by National Mortgage News Countrywide Financial Corp. was the nation's largest POA lender in 2006, a year in which Mr. Mozilo wrote several memos cited by the SEC in its complaint. (CFC was also the largest POA funder in 2007, originating a record $86 billion in these notes which eventually can become negatively amortizing.) In one memo Mr. Mozilo laments that CFC has "no way, with reasonable certainty, to assess the real risk of holding" POAs on its balance sheet. He adds that by putting so many loans on CFC's books "we are flying blind on how these loans will perform in a stressed environment." One loan broker who funded POAs for CFC told this newspaper that the loans were hugely profitable for the company because of all the points it charged on them. When CFC was eventually sold to Bank of America last year it had $80 billion in loans on its balance sheet -- including POAs and second liens. The SEC accuses Mr. Mozilo of knowing how risky these products were but without sharing his opinions with investors. "Concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk," said SEC director of enforcement Robert Khuzami. During CFC's last year of operations, the lender began sending out warning letters to borrowers who were choosing the 'neg am' option on POAs, telling them of the risks.