Servicing

A California law prohibiting home foreclosures for 90 days went into effect this week, but some residential servicers can earn an exemption if they can prove they are modifying loans. According to a report in The Orange County Register, several companies have already filed for an exemption. The state has 30 days to grant an exemption but during this time the servicer does not have to comply with the moratorium. Only mortgages originated between 2003 and 2007 are eligible. According to the California Foreclosure Prevention Bill, the law does not require a servicer to provide a modification to a borrower who is not willing or able to pay under the modification. According to the Register, it's unclear what "able to pay" means. California represents about 20% of all residential debt outstanding in the U.S.

The Federal Reserve Bank of New York has chosen commercial real estate information and technology provider Trepp LLC as collateral monitor for commercial mortgage-backed securities as part of the Term Asset-Backed Securities Lending Facility. TALF's monthly subscription window for new issue CMBS was set to open for the first time Tuesday afternoon. At press time midday Tuesday Trepp senior vice president Andy Liebman and Tom Sink said to their knowledge there was nothing pending for it, but they were already at work on aspects of the program that are being finalized, and said next month they anticipate the program will be underway for both new issue and legacy CMBS. Trepp said in its role as monitor it would assist the New York Fed in providing valuation, modeling, analytics and reporting as well as advise on matters involving newly issued and "legacy" CMBS in the program. The New York-based company said it would not establish policies or make decisions for the New York Fed, including decisions on whether to reject a CMBS as collateral for a TALF loan or exclude loans from mortgage pools. Trepp said it would use the analytics and forecasting services of its subcontractor and sister company, the Boston-based Property and Portfolio Research, in conjunction with its work as a TALF CMBS collateral monitor.

Overdues on securities backed by multifamily and retail commercial loans climbed 29 basis points in May to 2.07%, according to Fitch Ratings Agency — the highest percentage of delinquencies since the company created a tracking index back in 2001. Fitch cited "large loan defaults coupled with declining performance on multifamily and retail properties" as a reason for the increase. Even though the late payment rate might appear alarming to some, it is much smaller than the residential delinquency rate, which is in the double-digits. Also, outstanding commercial mortgage debt is much smaller, in terms of dollars, than residential debt. Fitch noted "Defaults on larger loans continue to drive delinquency increases because later vintage transactions have larger loans, many underwritten with now unrealized pro forma income, as well as now-depleted debt service reserves and high leverage."

Southern California-based REOTrans has launched the RT Certified Agent Program, an online training regimen that educates agents in the REO-sales process. REOTrans has been providing basic training on the use of the workstation free of charge at various industry meetings, but the sessions were constantly overbooked, so the company decided to create an online series of courses. The company offers three levels of certification.

The National Credit Union Administration has approved 'shared appreciation' loan modifications in which a credit union can share in the appreciation of any property for which it refinances a loan. The ruling — which came in a recently issued legal opinion — comes as millions of CU borrowers are at risk of foreclosure and are seeking to refinance their mortgages. Under a proposal emanating out of the Michigan Credit Union League, a member would agree to share any future increase in the home's appreciation with the credit union, in exchange for a reduction of the principal balance of the troubled borrower's outstanding loan. Shared appreciation would be based on a predetermined calculation and occur upon the sale of the property at a future date.

Kondaur Capital of Irvine, CA is working on a deal to buy "several thousand" non-performing mortgages, said company president Jon Daurio. In an interview with National Mortgage News Mr. Daurio declined to say who the seller or sellers might be. The NPL (non-performing loan) investor currently holds about 2,000 mortgages and has the financial capacity to increase its portfolio to 10,000 loans. Even though one of Kondaur's backers (hedge fund Pequot Capital) is closing down some of its funds, Mr. Daurio said Kondaur will not be affected financially. (For the full story see the Monday print version of NMN.)

Because of inaccurate information provided by a Fannie Mae spokesman, a June 9 news brief misstated Fannie's plans for the HomeSaver Advance program. It is only taking on certification and custodial duties; collection agency Dyck O'Neal Inc., Arlington, Texas, will continue to service the unsecured loans.

The newly released Home Data Index from Clear Capital, Truckee, Calif., shows small local areas of price stabilization are appearing even within largely troubled markets such as Cleveland. According to Clear Capital president Kevin Marshall, these data are fueling expectations that there will be more neighborhood-by-neighborhood-based pricing recovery that will renew strategic investor interest in these areas. For example, a specific segment within Cleveland in the index has "returned the first quarter-over-quarter gain since its downturn began in mid-2005, signaling some very specific investment activity," Mr. Marshall said. Another example is Sacramento, one of the hardest hit areas in California, where several of its MSAs are now outperforming not just that region but the national trend as well. In addition, Clear Capital said that although price declines continue across the country, they appear to be slowing down — especially in the Midwest and South. Clear Capital's index report includes a national and regional overview and ranking of the country's 15 highest and lowest performing metropolitan statistical areas. Highlights include quarter-over-quarter price gains of 8.9% in Birmingham, Ala., and 6.7% in Cleveland. The biggest losses were seen in Phoenix, Ariz., (17%) and Las Vegas, Nev. (15.5%).

The downward slide in new home sales in California lessened in April for the third consecutive month, a sign that the state's home builders say is an indication that the market is stabilizing. According to the monthly report from the California Building Industry Association, sales in projects of 10 or more units in April were still 31% below what they were a year earlier. But that's an improvement from the 44% decline registered in March and the third month in a row for that trend. "We're definitely headed in the right direction," said Jonathan Dienhart of Hanley Wood Market Intelligence, Costa Mesa, which compiles the figures for CBIA. "Aggressive pricing by builders and tax incentives seem to be helping stabilize the pace of new home sales despite substantial competition from the resale market in the form of foreclosures." In April, 2,771 new houses and condominiums were sold in the subdivisions tracked by HWMI compared to 3,989 in April 2008. CBIA President Robert Rivinius attributed much of the gain to California's $10,000 tax credit, which is on top of the $8,000 federal tax credit for first-time buyers. More than 8,500 buyers have taken advantage of the state credit since it went into effect March 1, with applications for the credit totaling more than $82.5 million. To date, the state has allocated $100 million for the credit, but the builder group is trying to persuade lawmakers to triple the original outlay.

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.