Servicing

Roughly one-quarter of homeowners have no savings to cover their living expenses should they lose their jobs, according to new survey results released by Wells Fargo & Co., the nation's second largest residential servicer. The bank and mortgage lender also found that anxiety over possible job losses increased significantly in the first quarter compared to the previous one. Job losses lead to higher residential loan delinquencies which currently are at levels not seen since the Great Depression. Wells says consumers are taking "drastic actions" to reduce debt and increase their savings. When the bank asked consumers what would boost their confidence in the economy, one-fourth said "an improvement in their personal situation."

Private label MBS — in particular subprime and alt-A loans — continue to be a "significant issue" for all the housing GSEs and have caused $26 billion of losses and impairments at these firms, according to a new report issued by the Federal Housing Finance Agency. In its first ever annual report to Congress, FHFA blames the previous managements of Fannie Mae and Freddie Mac for not requiring originators "to fully assess borrower capacity." It adds that, "Certain decisions, including the underestimation of risk associated with these products, coupled with changes in the economy, led to escalating increases in delinquencies, foreclosures, credit-related expenses and losses." FHFA's assessment also includes the Federal Home Loan Bank system. The government placed Fannie and Freddie into separate conservatorships in September and replaced their CEOs. The regulator says all housing GSEs face significant challenges including buying and guaranteeing mortgages with LTVs north of 80% due to declining home values and "constraints on the availability of private mortgage insurance."

Five Federal Home Loan Banks have delayed reporting their first-quarter financials while they grapple with new accounting rules to help minimize losses. But several of the banks continue to report big losses anyway. The Boston Bank is preparing to report an $83.4 million loss as it struggles with large holdings of private-label mortgage-backed securities. The Seattle Bank, also holding underwater private-label MBS, said Friday it expects to report a $16.2 million loss for the quarter. The FHLB Indianapolis reported a $5.9 million loss for the quarter. And the Atlanta Bank reported a $1.5 million first quarter loss on Friday. The troubles at the 12 FHLBs are similar to those being experienced at many depositories, which are struggling with distressed MBS. Last week, the Federal Housing Finance Agency, which regulates the FHLBs, issued guidance for the banks to adopt new processes for determining 'other than temporary impairment' (OTTI) and the early adoption of recently revised Financial Accounting Standards Board rules aimed at accounting for hard-to-price MBS.

The Federal Housing Administration has endorsed $143.9 billion in single-family loans in the first six months of fiscal year 2009, up 169% from the same period in FY 2008. The Department of Housing and Urban Development expects FHA endorsements will total $290 billion when the 2009 fiscal year ends on September 30. In March, FHA insured $25.4 billion in single-family loans, including $15.3 billion in refinancings, according to an FHA monthly report. The report shows that FHA has a 7.08% serious default rate as of March 31 with 347,500 loans that are 90 days or more past due. FHA had a 6.91% serious default rate back in September. Meanwhile, FHA has a 63% share of the mortgage insurance market, compared to 23% for private mortgage insurers and 13% for the Department of Veterans Affairs' loan guarantee program. This is a complete reversal from first half of FY 2008, when private insurers had a 69% market share and FHA a 24% share.

The Federal Housing Administration has endorsed $143.9 billion in single-family loans in the first six months of fiscal year 2009, up 169% from the same period in FY 2008. The Department of Housing and Urban Development expects FHA endorsements will total $290 billion when the 2009 fiscal year ends on September 30. In March, FHA insured $25.4 billion in single-family loans, including $15.3 billion in refinancings, according to an FHA monthly report. The report shows that FHA has a 7.08% serious default rate as of March 31 with 347,500 loans that are 90 days or more past due. FHA had a 6.91% serious default rate back in September. Meanwhile, FHA has a 63% share of the mortgage insurance market, compared to 23% for private mortgage insurers and 13% for Department of Veterans Affairs' loan guarantee program. This is a complete reversal from first half of FY 2008, when private insurers had a 69% market share and FHA a 24% share.

Wilbur Ballesteros, a licensed real estate agent from Lanham, Md., pleaded guilty to his role in the Metropolitan Money Store mortgage fraud scheme that targeted D.C. area homeowners facing foreclosure. Ballesteros, the ninth defendant to plead guilty in this case, conspired with others at the Lanham-based MMS to fraudulently promise homeowners help with avoiding foreclosure and repairing their credit, according to prosecutors. The homeowners were directed to allow title to their homes to be put in straw buyers' names for a year, during which time MMS promised to improve the homeowners' credit ratings, help them obtain more favorable mortgages, and eventually return title to them. The homeowners were told that the equity withdrawn from the properties would be used to pay the mortgages and expenses on their homes — and to repair their credit. Using the homeowners' properties, the conspirators applied for mortgages to extract the maximum available equity from the homes and submitted fraudulent loan applications to lenders to obtain inflated loans on the properties in the straw buyers' names. At settlements, the conspirators imposed numerous fees for services that weren't performed, disclosed or explained to the homeowners. The conspirators also transferred the sale proceeds out of the escrow accounts into their own bank accounts for personal use. Ballesteros served as a closing agent on more than 60 straw buyer properties, securing title insurance, facilitating the real estate settlements and submitting fraudulent closing documentation to the lenders. He allegedly often altered or created multiple settlement statements for some properties to disburse the homeowners' proceeds to himself and MMS employees and was paid more than $100,000 in kickbacks. The total loss attributable to Ballesteros is said to be $16.9 million. Sentencing is scheduled for December.

Fidelity National Financial Inc. will be picking up another piece of the LandAmerica Financial Group estate, this time acquiring LoanCare Servicing Center Inc. FNF will pay $16.3 million for the company. The deal is subject to the approval of a bankruptcy court. LoanCare was the nation's eighth largest subservicer at the end of 2008, according to the Quarterly Data Report, with contracts totaling $12.7 billion. The Norfolk, Va., company services more than 100,000 loans for 90 companies nationwide. It had revenue of $19 million and adjusted pre-tax earnings of $4.4 million in 2008. FNF chairman William P. Foley said, "We believe that LoanCare and ServiceLink, our national lender platform, can generate substantial ancillary product revenue opportunities through the subservicing and loss mitigation platforms, including additional title and closing revenue, trustee sales guarantees, valuations and a broad range of significant default based revenues." FNF is based in Jacksonville, Fla.

The Federal Deposit Insurance Corp. has extended to Tuesday the bid deadline for all offers on BankUnited Financial Corp., Coral Gables, Fla., a thrift that has roughly $5 billion in payment option ARMs on its books, according to an investment banking source familiar with the transaction. Final bids were originally set for Thursday, May 14 but the deadline was extended. At least three different consortiums are vying for the publicly traded BankUnited (stock symbol: BKUNA) whose shares trade for 80 cents. (Recently, Green Tree Servicing, St. Paul, Minn., bought some of BKUNA's conventional residential servicing rights.) One of the consortiums includes well regarded bottom fisher Wilbur Ross whose American Home Mortgage unit is already a large servicer of POAs. According to documents filed with the Securities and Exchange Commission, Ross' American Holdings recently bought 500,000 shares of BKUNA for 31 cents and then want out and bought 43,818 shares for 30 cents. (American Holdings is headquartered in Tortola.) The "Ross Group" includes the Blackstone Group, Centerbridge Capital, and the Carlyle Group. J.C. Flowers and Toronto Dominion Bank are bidding separately, said one source. The FDIC declined to comment as did BKUNA officials.

Now that the Treasury Department has agreed to bail out certain life insurance companies with TARP money, speculation is that mortgage insurance companies could be next. One MI executive, requesting anonymity, told National Mortgage News that "there are more conversations going on with Treasury that are real and tangible. "He added that, "They know how important we are to Fannie and Freddie." Fannie Mae and Freddie Mac are wards of the government and the nation's seven MI firms have written billions of dollars of coverage that affect loans held in portfolio or guaranteed by the two. If the MI industry collapses, the firms might not be able to make their claim payments which in turn would hurt the GSEs — and the taxpayers which now essentially own the two. (For the full story see the Monday edition of NMN.)

Foreclosure filings were seen on 342,038 U.S. properties during April, an increase of less than 1% from March and an increase of 32% from April 2008, according to the latest data from RealtyTrac. "Much of this activity is at the initial stages of foreclosure while bank repossessions, or REOs, were down on a monthly and annual basis," said CEO James Saccacio. "Many lenders and servicers are beginning foreclosure proceedings on delinquent loans that had been delayed by legislative and industry moratoria. It's likely that we'll see a corresponding spike in REOs as these loans move through the foreclosure process over the next few months." Despite an 18% decrease in foreclosure activity from March, Nevada continued to post the nation's highest state foreclosure rate in April, with one in every 68 housing units receiving a filing. A 37% month-over-month increase in foreclosure activity boosted Florida's foreclosure rate to the second highest. The increase in Florida was due to a spike in default notices and auction notices, but REOs were down 7%. Foreclosure activity in California decreased 10% from March, while it was up 42% from April 2008. The 10 states with the most filings in April accounted for more than 75% of the national total. California documented the highest total (96,560), followed by Florida (64,588), Nevada (16,266) and Arizona (16,245).