Servicing

David Stevens' nomination to head the Federal Housing Administration is still in limbo. The Senate — which returns on Monday — left town for the Memorial Day recess without acting on his confirmation. Senate Banking Committee leaders are trying to sort out issues involving alleged RESPA violations by his former employer — the real estate brokerage firm of Long & Foster. Just before the recess, committee leaders were unsure whether they would be able to act on Mr. Stevens' appointment. Mr. Stevens managed Long & Foster's affiliated mortgage, insurance and title company unit. He is a former Freddie Mac and Wells Fargo Home Mortgage executive. Housing secretary Shaun Donovan still wants Mr. Stevens to run FHA and his supporters are hoping the nominee will be confirmed by the July 4th recess.

Hedge fund Pennant Capital Management has ratcheted-up its proxy battle for seats on the board of mortgage banker PHH Corp., with two candidates it hopes will unseat the lender/servicer's chairman and long time CEO. The dissident candidates are Gregory Parseghian, the former head of Freddie Mac, and Allan Loren, former chairman and CEO of Dun & Broadstreet. The two would replace PHH chairman A.B. Krongard, and CEO Terence Edwards, whose director terms expire at the June 10 shareholders meeting. PHH is the nation's fifth largest residential servicer with $150 billion in housing receivables, according to the Quarterly Data Report and National Mortgage News. At last check Pennant was PHH's largest shareholder with a 9.94% stake at the end of March. The hedge fund said its candidates will help reinvigorate the company. However, compared to many of its mortgage banking competitors, PHH's share price has held up rather well: in trading Wednesday, its stock was selling for $16.36, well above its 52-week low of $4.27 and just a few dollars below its high of $19.98. PHH reported net income of $2 million for the first quarter, though it lost $254 million last year. PHH is the nation's largest private label lender/servicer and has a large base of credit union customers.

National housing prices fell 11.5% as of March compared to a year ago, a slight improvement from an 11.7% annual decline as of February, according to new data from First American CoreLogic and its LoanPerformance Home Price Index While declines are slowing in states that have had the highest declines over the past three years, they are accelerating in places that have been experiencing only moderate decreases. "The problems are no longer confined to a handful of 'Sand States,'" said Mark Fleming, chief economist for First American CoreLogic. "Homeowners in many parts of the country are coming under stress from a loss in equity, rising delinquencies and foreclosures. This is particularly pronounced in more expensive neighborhoods where the median value of all properties is over $1 million." Roughly 33 states have exhibited acceleration in the rate of price declines in the last three months, and 14 states exhibited double-digit annual declines as of March - up from seven states a year ago. Nevada (-25.9%) remained the top ranked state for annual price depreciation, followed by California (-24.9%). Price declines in both states appear to be decelerating as California's decline was the smallest since March 2008 and Nevada's was its smallest decline in six months. Rhode Island (-21.2%) jumped to third and is currently the only state among the top five that continues to experience a consistent acceleration in price declines. Florida (-21.1%) and Arizona (-20.7%) round out the top five annual price depreciation states.

Home prices fell 18.7% in March from a year ago, according to Standard & Poor's/Case-Shiller 20-city house price index, which has declined 32.2% since the second quarter of 2006. Despite the plunge, the rate of decline in prices appears to have stabilized in the first quarter at a record 19.1%. The annual decline in January was 19% and 18.6% in February. Freddie Mac economists are forecasting that house price declines will slow in the coming quarters. They expect the S&P Chase-Shiller National HPI will decline by 14% in the second quarter and by 10% in third quarter. Overall, house prices will decline by 12.8% in 2009 and by another 3% in 2010, according to Freddie.

Freddie Mac has begun marketing its first multifamily securitization package as part of an effort to increase liquidity in the apartment loan sector. The first offering of the new Series K-003 structured pass-thru certificates involves 62 highly rated multifamily mortgages totaling $1.06 billion. Deutsche Bank Securities is the lead underwriter for the securities, that will price and be settled during the second week of June. "Freddie Mac is responding to difficult conditions in the multifamily housing finance market by finding innovative ways to link affordable rental housing to the capital markets," said Mike May, senior vice president for multifamily housing. Freddie capital markets vice president David Brickman noted that Deutsche Bank is selling the A-1 through A-5 senior classes to the public with 20% subordination. The senior classes along with A-6 (a subordinated class representing 12.5% of the deal) are guaranteed by Freddie. A subordinated bond (7.5% of the deal) was sold privately. Freddie has another $1 billion of mortgages in the pipeline but the next securitization has not been scheduled. "It is going to be a growing product of ours," Mr. Brickman said, and "people can expect a steady stream of deals."

A vulture firm founded by former Countrywide Financial Corp. president Stanford Kurland filed Friday to raise as much as $750 million in an initial public offering. According to Securities and Exchange Commission documents, the fund is telling investors that there are "unique" market opportunities in the distressed mortgage market whose size it estimates is at least $1 trillion. As a technical matter, the unit going public is called PennyMac Mortgage Investment Trust (a REIT) which will be managed by Private National Mortgage Acceptance Co., a Calabasas-based company that Mr. Kurland formed about two years ago with backing from BlackRock Inc. and Highfields Capital Investments. To date, PennyMac has made only one sizeable investment, a $558 million portfolio of 2,800 residential loans where it has a cash flow sharing arrangement with the government. PennyMac's chief investment officer is David Spector, former co-head of residential mortgages for Morgan Stanley. According to PMMIT's S-11 filing, its business plan is to invest mostly in residential loans and provide "attractive risk-adjusted returns to our investors over the long-term, primarily through dividends and secondarily through capital appreciation." It notes that $750 million is the maximum amount it hopes to raise.

A vulture firm founded by former Countrywide Financial Corp. president Stanford Kurland filed Friday to raise as much as $750 million in stock through an initial public offering. The company, PennyMac Mortgage Investment Trust, is a unit of the Kurland-led Private National Mortgage Acceptance Corp., or PennyMac, which invests in distressed mortgage assets. To date, though, PennyMac had made only one significant investment.

A Taylor, Bean & Whitaker-led rescue of Colonial Bancgroup -- the nation's largest warehouse lender -- was set to be finalized by Friday evening, according to TBW chairman Lee Farkas. In an interview with National Mortgage News Mr. Farkas said "it looks like it's going to go through, yes." TBW is waiting on final signed documents from some of its partners. He noted that Colonial was preparing a press release about the deal and that TBW's other investors in the $300 million capital infusion would be revealed. With the cash infusion finalized, Colonial will then be eligible for $550 million in Troubled Asset Relief Funds from the Treasury Department. At the end of March Colonial was the nation's largest warehouse provider with $4 billion in commitments, according to NMN. Mr. Farkas likely will sit on Colonial's board. He noted that the bank will most definitely continue as a warehouse provider. "It's a good business for them," he said. "They made good money on it last year." Colonial also is a warehouse lender to TBW, the nation's eighth largest residential funder, according to the Quarterly Data Report. Over the past few weeks some analysts that follow the bank raised concerns that the deal might not go through. The Alabama-based bank reported a net loss of $168 million for the quarter ended March 31. Late this past week its shares were trading at $1.36 compared to a 52-week high of $10. It has been burned by a severe downturn in the commercial construction lending, especially in the southeast.

The first quarter financial improvements at U.S. banks, in large part driven by mortgage origination activity, will be difficult to maintain as credit losses continue to rise, a report from Fitch Ratings, New York declared. The increases in what Fitch called "market-driven revenues" that come from mortgage originations and fixed income trading are not likely to persist. "It appears that the industry is poised for another strong quarter in mortgage originations, although revenues from this business are presently expected to slow, possibly materially, in the second half of 2009," Fitch said. The rating agency added banks are likely to see continued increases in loan delinquencies, non-performing assets and net charge-offs for several quarters to come because of the uncertain economy.

A group of private equity investors led by former North Fork Bank chief John Kanas bought ailing payment option ARM investor BankUnited of Florida in a federally assisted transaction where the government could share in losses on up to 84% of its assets. Several different private equity funds are part of the investor group including one headed by Wilbur Ross, who has already bought two large residential servicing companies, both on the cheap. One investment banking source said BU's $4.9 billion in payment option ARMs might eventually be serviced by Mr. Ross' American Home Mortgage in Irving, Texas. Another investor in the consortium is Centerbridge Capital Partners, which owns Green Tree Servicing of Minneapolis. The Kanas group bought the $12.8 billion asset BankUnited FSB of Coral Gables (along with $8.3 billion in non-brokered deposits) Thursday night for $900 million. Other investors in the Kanas group include: Carlyle Investment Management, Blackstone Capital, the LeFrak Organization, The Wellcome Trust, Greenaap Investments, and East Rock Endowment Fund. The Federal Deposit Insurance Corp. had been entertaining bids on BankUnited for several weeks. On Thursday night the Office of Thrift Supervision officially took control of the thrift and handed it over to the FDIC. Its failure will cost the government insurance fund at least $5 billion. Two other investors bidding for the thrift included J.C. Flowers & Co., and Toronto-Dominion Bank of Canada. North Fork Bank was sold to credit card giant Capital One three years ago.