Servicing

The deteriorating performance of commercial mortgage-backed securities has resulted in a "dramatic jump" in the transfer of commercial real estate loans to special servicers during the first quarter, according to a Fitch Ratings report.The Fitch CMBS report: "What's in Special Servicing?" shows the dollar balance of specially serviced CMBS loans rose to $23.7 billion in the first quarter, up 48% from the previous quarter. Many of the "loans of concern" are jumbo vintage loans originated in 2006-2007 and Fitch said 20 of the largest specially serviced loans have balances ranging from $360 million to $73.5 million. "Later vintage CMBS transactions are backed by loans originated at the height of the market and are thus susceptible to significant income and value declines," said managing director, Mary MacNeill. Fitch said actual delinquencies remained relatively low at 1.53%. But the number of loans transferred to special servicing "due to imminent default" is growing.

Kondaur Capital Corp. of Irvine — an investor in non-performing mortgages — expects its work force to triple to 900 workers by year-end.In an interview with National Mortgage News, company chairman and CEO Jon Daurio described Kondaur's business of buying and selling troubled loans "as very good right now. We're definitely in a growth mode." Indeed, rumors abound that Kondaur is quite active in the market but Mr. Daurio declined to comment on specific deals except to say that his company currently holds about 2,500 loans on its books. (For the full story see the Monday edition of NMN.

A federal bankruptcy court has approved an order selling tens of millions of dollars in mortgage servicing rights held by CU National, a unit of U.S. Mortgage of Pinebrook, N.J., to a mystery company believed to be owned by one of the credit union customers.According to a report in Credit Union Journal, the sale was the subject of a violent dispute between credit union creditors of the failed mortgage company who claim that as much as $160 million of their mortgages were fraudulently sold to Fannie Mae. (The order by the court came late Thursday.) The sale of the servicing rights was opposed by several credit unions, including Suffolk FCU, Treasury Department FCU, First Florida CU, Educational Systems FCU and TCT FCU, all questioning the viability of the winning bidder for the servicing rights, Symbionce Financing Solutions LLC. In motions filed with the bankruptcy court, TCT FCU, which has $6 million of loans being serviced by CU National, claims that Symbionce is really a shell company created by Novartis FCU with no staff, no office, no infrastructure and no insurance that has not been approved by NCUA. The company, said TCT, has not demonstrated it qualifies for bond coverage under CUMIS Insurance and is not licensed to service loans. However, there is no record of Symbionce Financing on any of the Internet search sites.

The U.S. Senate easily defeated an amendment by Sen. Richard Durbin, D-Ill., that would have allowed bankruptcy court judges to cram down a mortgage loan as a way to reduce foreclosures and help stabilize the housing market.The amendment was defeated by a vote of 51-45, with just 45 of the 59 Senate Democrats supporting it. The amendment would have given bankruptcy court judges the authority to reduce the interest rate and principal amount of a mortgage secured by a borrower's principal residence. Citigroup was the only bank to support Sen. Durbin's amendment after months of intense negotiations. Sen. Durbin complained that other banks and industry groups refused to compromise and negotiate in good faith. Sen. Tom Carper, D- Del., noted, however, that he might have voted for the amendment if Sen. Durbin had restricted cramdowns to subprime and nontraditional mortgages and made other changes.

Benefiting from historically low interest rates and a refinancing boom, Fannie Mae issued $87.8 billion in mortgage-backed securities in March, nearly doubling the previous month's volume. The last time MBS issuance was this high was in 2003. The mortgage giant's refinancing volume totaled $77 billion in March, nearly double February's total. And in April, Fannie began accepting refinancings that lenders are originating under the guidelines of President Obama's Making Home Affordable program. "We expect that the MHA program will bolster refinance volumes over time as major lenders adopt necessary system changes and consumer awareness continues to build," Fannie said. Fannie and Freddie are expected to refinance 4 million to 5 million homeowners under the President's program. Despite the surge in new business, Fannie reported that its ratio of "seriously delinquent" loans is continuing to rise. The percentage of loans 90 days or more past due rose 19 basis points during the month of February to 2.96%, compared to 1.1% a year ago. (The delinquency figures lag by a month.) Fannie will report March delinquencies in its next monthly report. Freddie has already reported its serious delinquency rate: 2.29% for March.

Accredited Home Lenders of San Diego, once a top ranked subprime lender, is expected to file for bankruptcy protection in Delaware, perhaps as soon as this afternoon, according to a source close to the matter.According to company notes provided to National Mortgage News it appears that Accredited will go into liquidation and will auction off its servicing platform. The lender, which was bought by Lonestar Funds, a hedge fund company, two years ago, at last check had about $6 billion in servicing rights on its books. The source said that Accredited Home Lenders (a holding company) and "certain affiliates and subsidiaries" will file voluntary petitions under chapter 11 of the bankruptcy code and then "commence an orderly wind-down of operations." Accredited, the source said, decided to liquidate "as a result of extremely challenging market conditions and the desire to conduct an orderly wind-down and disposition of assets." The lender is currently trying to sell its real estate owned (REO) portfolio. The source said the company is promising its borrowers that "there will be no disruption" for them in regard to the servicing of their loans. Accredited's board of directors is prepared to name Meade Monger of AlixPartners as its chief restructuring officer, the source said.

The U.S. Senate easily defeated an amendment that Sen. Richard Durbin, D-Ill., had pushed for the past two years to allow bankruptcy court judges to cram down a mortgage loan as a way to reduce foreclosures and help stabilize the housing market. The amendment was defeated by a vote of 51-45, with just 45 of the 59 Senate Democrats supporting it. The amendment would have given bankruptcy court judges the authority to reduce the interest rate and principal amount of a mortgage secured by a borrower's principal residence. Citigroup was the only bank to support Sen. Durbin's amendment after months of intense negotiations. Sen. Durbin complained the other banks and industry groups refused to compromise and negotiate in good faith. Sen. Tom Carper, D- Del., noted, however, that he might have voted for the amendment if Sen. Durbin had restricted cramdowns to subprime and nontraditional mortgages and made other changes.

Members of the HOPE NOW alliance and the larger mortgage lending industry provided 249,000 homeowner solutions through modifications and repayment plans in March. Modifications were done on 134,000 mortgages during March, the second consecutive month this many modifications have been completed, according to HOPE NOW data. Since September 2008 the industry averaged 116,000 modifications per month. There were 115,000 repayment plans created in March, up slightly from February. The number of completed foreclosure sales declined by 39%, from 87,000 to 53,000 in March, the lowest number since December 2007. Foreclosure starts increased 20%, from 243,000 in February to 290,000 in March. Michael Bright, HOPE NOW's chief statistician, said the sharp reduction in completed foreclosure sales in March may have been because servicers allowed troubled loans to be run through the Obama administration's Homeowner Affordability and Stability Plan. "It's too early to say this is a trend," he said. "But anecdotal reports from servicers do indicate that they are taking this extra step to help homeowners who qualify stay in their homes."

According to a study by Freddie Mac of its own portfolio, refinancings during the first quarter are on track to reduce consumer mortgage payments by $2.5 billion in the coming year. "The payment savings from 'rate-and-term' refinancing done during the quarter is about $160 a month on a $200,000 loan and in aggregate this adds up to about $2.5 billion," said Freddie Mac chief economist and vice president Frank Nothaft. Half of all borrowers who refinanced their loans during the period lowered their interest rate by at least 20%, according to Freddie Mac. The median ratio of new-to-old mortgage rate was 0.80 in the quarter and this marked the lowest ratio since the third quarter of 2003, Freddie Mac said. The government-sponsored enterprise added that this corresponds to a new interest rate that is about 1.25 percentage points below the old rate. Refinances in which the resulting new loan amounts were at least 5% higher than paid-off first-lien mortgage balances fell to a five-year low of 42% during the period. The volume of home equity loans and lines of credit rolled into the first lien during refinance increased during the first quarter to $7 billion in second-lien debt consolidations from $4.7 billion the previous three-month period, according to Freddie deputy chief economist Amy Crews Cutts. "Because second liens generally carry higher interest rates, the consolidation of $11.7 billion into a lower-cost first lien provides about $200 million in interest savings over the next year to these households," she said.

The TransUnion Credit Risk Index reached 124.79 in the last quarter of 2008, the highest-level seen since its inception. The index recorded its biggest change? on a quarter-to-quarter basis (up by 5.99% compared to 3Q08). It increased 5.41% compared to the same quarter in 2007. The index is based on?the calculated average forecast of 90-day or worse delinquencies within a region and uses the fourth quarter of 1998 as a baseline comparison. According to Chet Wiermanski, TransUnion Analytics and Decisioning Services' global chief scientist, the index accounts for "the non-linearity of credit scores" to measure changes in regional risk and to compare regional risk levels over time relative to the nation as a whole at the end of 1998. TransUnion, Chicago, considers index readings above 100 to have a "higher level risk."