Servicing

A.M. Best Inc., Oldwick, N.J. has cut by one notch the financial strength ratings of Fidelity National Financial Inc., Jacksonville, Fla., and its title insurance units. The New Jersey-based rating agency said the downgrades were due to the adverse implications of FNF's acquisition of the title insurance underwriting subsidiaries of LandAmerica Financial Group Inc., Richmond, Va. The deal made FNF the nation's largest title insurer with a 45% market share, but it also resulted in an increase in underwriting leverage. "While Fidelity in the past has shown an ability to manage large acquisitions, such as its acquisition of Chicago Title in 2000, the current negative business environment poses a greater challenge as it proceeds with the integration of its newly acquired underwriters," A.M. Best said.

According to the Center for Responsible Lending a new foreclosure starts every 13 seconds, equaling nearly 6,500 a day. CRL data show the number of new foreclosure starts for the first five months of 2009 has reached one million. CRL is projecting 2.4 million foreclosure starts by the end of the year, which it says will reduce property values of some 70 million households by $502 billion, or at an average of $7,200 per homeowner. Last week the Mortgage Bankers Association reported that 12% of all home mortgages are delinquent. CRL estimates that by 2012 at least 9 million new foreclosures will cost $1.9 trillion in lost home equity to 92 million families.

The weakening economy and continued credit crunch led to increases in commercial/multifamily mortgage delinquencies during the first quarter of 2009, according to new figures released by the Mortgage Bankers Association. Between the fourth quarter of 2008 and first quarter of 2009, the 30-plus day delinquency rate on loans held in CMBS rose 68 basis points to 1.85%. The 60-plus day delinquency rate on loans held in life insurance company portfolios rose 5 basis points to 0.12%. The 60-plus day delinquency rate on multifamily loans held or insured by Fannie Mae rose 4 bps to 0.34%. According to the MBA, the 90-plus day delinquency rate on multifamily loans held or insured by Freddie Mac rose 8 bps to 0.09%. The 90-plus day delinquency rate on loans held by FDIC-insured banks and thrifts rose 66 bps to 2.28%. "Delinquency rates on commercial and multifamily mortgages held by banks and thrifts, by Fannie Mae and in commercial mortgage-backed securities are all now at levels higher than at any time since the 2001 recession," said Jamie Woodwell, vice president of commercial real estate research at the MBA. Mr. Woodwell added that delinquency rates on commercial mortgages held by life insurance companies during 1Q09 remained below the 2001 recession levels.

A mix of non-depository mortgage banking companies and private individuals make up a majority of the private investment group led by Taylor, Bean & Whitaker that will inject $300 million into warehouse giant Colonial BancGroup, Montgomery, Ala., according to a new public filing. Mortgage firms cited in the Securities and Exchange Commission filing include Allied Mortgage Group, American Home Equity Corp., Atlantic Bay Mortgage, Envoy Mortgage, Myers Park Mortgage, Provident Funding Associates, WR Starkey Mortgage and others. Sources say most of these lenders are warehouse clients of the bank. Former Friedman, Billings, Ramsey executive Henry Fan is also part of the investor group, as is Florida developer Tibor Hollo.

A $240 million portfolio of non-performing loans offered for auction by H&R Block has failed to sell, according to participants with knowledge of the deal. At press time, H&R Block's media department had not returned a telephone call about the auction. The mortgages offered belonged to its now defunct subprime division, Option One Mortgage. Those familiar with the transaction declined to be quoted, citing confidentiality agreements. One observer noted that there was strong interest in the portfolio but "the bid price was a little low." Also, professionals who play in the NPL space say very few large NPL deals are getting done these days, citing changes to market-to-market accounting rules promulgated by the Financial Accounting Standards Board. "Banks are less inclined to sell because they don't have to write it down as much," said one investment banker.

GMAC Financial Services — which controls the nation's fifth largest residential servicer — says it's "business as usual" at the company even though one of its owners, General Motors, filed for bankruptcy protection on Monday. A GMAC spokeswoman stressed that "we have no intention of filing for bankruptcy," adding that GM owns only 10% of the financial services company. GMAC is a bank holding company that a few months ago completed a large restructuring with its bondholders. Hedge fund giant Cerberus Capital owns 22% of GMAC with the U.S. Treasury owning a large piece as well because of a $5 billion TARP investment. Asked if GM might sell its stake in GMAC, the spokeswoman declined to comment.

Habitat for Humanity's Greater San Francisco chapter has launched a $500,000 Neighborhood Revitalization Program to acquire bank-owned houses. After rehabbing the properties, the faith-based non-profit will sell them to local working families under the same requirements as its famous new construction program. Participants must take part in the reconstruction or refurbishment of the house and go through extensive ownership counseling and education. Participants also will have access to interest-free financing. The Bay Area chapter also has entered into an agreement with the city of Menlo Park, which is investing another half-a-million dollars in the program. Using the combined funds, Habitat plans to acquire and rehab five bank-owned houses in the Belle Haven neighborhood. "I have seen first-hand the impact of foreclosures on Menlo Park and know that we must take immediate action to address the problem," said Mayor Heyward Robinson. With the NRP program, Habitat said it hopes to acquire and rehabilitate at least 15 additional homes over the next two years to help put local neighborhoods that are at risk of decline on the path to recovery. Habitat plans to establish more partnerships in the community to bring in additional funding sources, and is "especially eager" to see banks and lending institutions join in the effort.

The Federal Trade Commission is seeking public comments on how it should address foreclosure and loan modification scams and whether it needs to engage in further rule making with regard to unfair and deceptive mortgage lending and servicing practices. FTC has taken legal actions to stop several foreclosure rescue scams where consumers have paid fees up-front for bonus services. The consumer protection agency is considering drafting regulations that would ban advance fees for loan modification and foreclosure rescue services. The comment period ends July 15. In a separate "Mortgage Act and Practices Rulemaking," the FTC is soliciting comments on whether it needs to issue regulations to stop deceptive practices dealing with mortgage advertising and marketing, loan underwriting and terms, appraisals and servicing. "The FTC is particularly interested in receiving comments about mortgage servicing," the agency said. The advance notice of proposal rulemaking specially asks if FTC should prohibit or restrict servicers from charging fees that are not authorized under the mortgage contract or servicing agreement, such as late fees. Or charging "estimated" attorney fees or other fees for services not rendered. The comment period ends July 30.

Mortgage insurance stocks rallied on Monday as newly released figures showed insurance default rates and "cures" improving. According to the Mortgage Insurance Companies of America, primary insurance cures fell to 58,587 units in April, the lowest monthly reading since January. A loan is considered "cured" when after being declared in arrears the payments become current again. The default ratio (60 days or more late) fell to 81,171 units in April, the lowest reading since October. Even though these were positive indicators for the struggling MI industry, private mortgage insurance applications fell to 60,947 in April, the weakest reading since November (39,098). Traditional MI written fell to $7.8 billion, a 20% sequential decline, and a 60% tumble from April 2008. Still, MI stocks soared Monday - along with the rest of the Dow. Winston-Salem, N.C.-based Triad Guaranty saw its stock price shoot up 36% to 83 cents per share. The PMI Group Inc., Walnut Creek, Calif., experienced a 29% leap in stock price, trading at $2.25 per share. Both Philadelphia-based Radian Group Inc. and Richmond, Va.-based Genworth Financial saw upticks of 10% in their stock prices. And MGIC Investment Corp., Milwaukee, saw its stock price go up by 7%. Old Republic, the healthiest of the nation's MIs, saw its share price increase by 2%.

Thirteen New York state residents have been charged with conducting a subprime mortgage fraud scheme involving loans on residential properties in Long Island and the New York City area, totaling more than $10 million. The defendants are: Micah Meyers, Stephen Caputo, Dawn Hughes, Fnu Lnu, Jakob Gearwar, Brian Urraro, Michael Didio, Daniel Hampton, Jennifer Moschitta, Victor Avendano, Adrian Avendano, Janet McGuinness and Liam Leavey. According to the indictment, from 2005 through 2007, the defendants — many of whom were worked at Bridgewater Funding, an Islip-based brokerage firm — targeted residential properties in Long Island and the New York City area that could be flipped or the homeowners were facing foreclosure. Bridgewater says the defendants are former employees who have not worked with the company for three years. The defendants were unavailable for comment. The defendants allegedly convinced troubled homeowners that selling their properties to the defendants would pay off their debts and "save" their homes. To purchase the properties, the defendants allegedly submitted mortgage loan applications that contained false information. The loans exceeded the actual purchase price of the property, producing a "spread" from which the defendants profited.