Servicing

The House passed by a 367-54 vote a bill that revamps the FHA 'Hope for Homeowners' program and gives the HUD secretary discretion in setting insurance premiums on refinancings of underwater borrowers. The Senate is expected to pass the measure later this week. The bill (S.896) allows the Department of Housing and Urban Development to charge an upfront mortgage insurance premium of up to 3% and an annual premium of up to 1.5%. Previously, Federal Housing Administration had to charge a set premium of 3% and 1.5% respectively. It "requires the HUD secretary to weigh both the financial integrity of the program and the bill's purposes of foreclosure prevention in setting premiums," according to a summary of the legislation Servicers are expected to reduce the principal amount of the existing mortgage to qualify borrowers for the H4H program that Congress enacted last summer. However, the program is so restrictive that FHA had endorsed only one H4H refinancing as of April 30 with 916 applications pending. The Mortgage Bankers Association and other industry groups support Congress' efforts to relax the eligibility requirements and other requirements to make the program user friendly for homeowners, servicers and investors. S.896 also shields mortgage servicers from investor lawsuits and provides the Federal Deposit Insurance Corp. with more borrowing authority to deal with the rising bank failures. House and Senate leaders agreed to keep a temporary increase in the $100,000 deposit insurance limit at $250,000 through 2013.

Mortgage portfolio management services provider Digital Risk, Maitland, Fla., has named former JPMorgan Chase & Co. senior vice president Mark G. Hinshaw its chief financial officer. Separately, Digital disclosed that a private equity fund has taken a stake in the company. The company did not specify the extent of the equity stake that Century Focused Fund II took, but said that it was "significant." The fund is sponsored and managed by the Boston-based Century Capital Management, an institutional and private equity investment manager. At Chase, Mr. Hinshaw oversaw a $20 billion origination unit.

Triad Guaranty, whose MI unit is in a "run-off" mode, lost $55.2 million in the first quarter, compared to a $150 million loss in the same period last year. Company president and CEO Ken Jones said, "risk in default continued to increase as the combination of the recession and declines in home prices impacted our insured portfolio. While there were indications during the quarter that risk in default growth could be slowing on a monthly basis, we expect the challenging environment will continue for the foreseeable future." The publicly traded Triad has insurance-in-force of $60.5 billion, an 11% decline from March 31, 2008. Its shares trade for 89 cents compared to a 52-week high of $4.42 and a low of 12 cents. It is the nation's smallest MI.

Two main business units that used to make up Friedman Billings Ramsey Group Inc., Arlington, Va., are going for the full divorce. Arlington Asset Investment Corp. (the name FBR is using and expects to adopt legally after its annual meeting in June) will sell 16.7 million shares of common stock it holds in FBR Capital Markets Corp. back to that company for $72.5 million. FBR Capital became a separately traded public entity in 2007. The deal reduces Arlington's holdings in FBR Capital from 56% to 39% when it closes on June 2. Furthermore, the two sides will cooperate to facilitate the sale of Arlington's remaining holdings in FBR Capital. They also are terminating intra-company service and governance agreements. Rock Tonkel Jr., president and chief operating officer of Arlington, said the deal gives his company substantial additional liquidity and the ability to utilize its net operating loss carry-forwards and capital loss carry-forwards on a timely basis. The FBR Group was a major player in the subprime REIT IPO business, taking several firms public during the industry's boom.

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."

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.