Servicing

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 The homeowners were told that the equity withdrawn from the properties would be used to pay the mortgages and expenses on their homes — and to repair their credit.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).

A temporary restraining order has been issued by the Supreme Court of South Carolina involving loans subject to modification under the Home Affordable Modification Program. In a nutshell, the order issued by Chief Justice Jean Hoefer has shut down foreclosure sales in South Carolina, according to William LeRoy, president and chief executive, American Legal Financial Network. Under the order, the lender, investor or plaintiff will have to execute an affidavit by May 15 indicating that the loan does not qualify for any government programs or that it did qualify but the lender has exhausted all loss mitigation efforts required under the programs. The TRO applies to loans owned or guaranteed by Fannie Mae or Freddie Mac, or a servicer participating in the HMP. Larry Platt, a partner with the Washington law firm of K&L Gates, says Fannie is wearing two hats here. The first is as either the owner of mortgage loans in foreclosure or the guarantor of the related mortgage-backed securities. "It essentially is saying that it wants to postpone foreclosures until it is clear that the borrower has realized his or her right to be considered for a loan modification under Fannie's eligibility guidelines. Any owner has a right to postpone a home loan foreclosure that is being pursued on its behalf," he said. Second, Mr. Platt says Fannie is acting as agent of the Department of Treasury in cases where a servicer has signed a Servicer Participation Agreement. "That agreement obligates participating servicers to delay the finalization of foreclosures until after the servicer has determined whether the borrower qualifies for a modification. In this case, Fannie is using the courts to enforce compliance with the contracts that it is administering on behalf of Treasury."

The Treasury Department has expanded its loan modification program by providing incentives for short sales and insurance to "partially offset" price declines on modified loans during the first two years. The "Home Price Declines Protection incentives are designed to address investor concerns that recent home price declines may persist," according to a Treasury fact sheet. And it provides cash payments based on average local price declines. The incentives accumulate each month the modified loan is current and payments are made at the end of the first and second year. "It's just an additional incentive to participate in the program," Treasury secretary Timothy Geithner told reporters. For homeowners that are eligible for a Home Affordable Modification but can't keep up with the payments, Treasury is providing incentives for servicers, investors and homeowners to try a short sale or deed-in-lieu if the property is not sold in 90 days. Secretary Geithner noted 14 servicers have signed up for the modification program and they have made modification offers to 55,000 borrowers so far. "This is just the beginning," the secretary said. Treasury is prepared to expand and improve the program to "reach as many Americans as we can," he added. Treasury also reported that Fannie Mae has purchased 2,150 Home Affordable Refinance loans so far. The mortgage giant has received over 51,000 eligible refinance applications where the loan-to-value ratios are between 80% and 105%. Freddie Mac has purchased 1,500 of these refinanced loans that do not require new mortgage insurance.

The attorney for Countrywide Financial Corp. founder and former CEO Angelo Mozilo acknowledged that civil SEC charges could be brought against his client but said there is no "fair basis" for them. As reported by The Wall Street Journal late Wednesday, staff at the Securities and Exchange Commission has recommend filing civil fraud charges against Mr. Mozilo, but it is unclear what those charges might entail. The SEC has been investigating his insider stock sales which totaled more than $300 million during his last three years as head of the company. In the past Mr. Mozilo has stated that his sales were disclosed publicly and made in accordance with SEC rules. Mr. Mozilo's attorney David Siegel issued a statement that said, "We do not believe there is any fair basis for allegations to be made against Mr. Mozilo. All of Mr. Mozilo's stock sales were made in compliance with properly prepared and approved trading plans and reflected recommendations by his financial advisor over a long period of time. The persistent innuendo in the media and political circles that Mr. Mozilo was selling Countrywide stock because he was aware of some supposedly 'secret' adverse information about the Company is scandalous and inconsistent with even a cursory examination of the facts surrounding the history of his stock holdings." Mr. Mozilo retired from the company on July 1 when it was sold to Bank of America for about $4 billion. Its shares once traded as high as $45 but by the time BoA bought the company it was only selling for a few dollars a share. Mr. Mozilo co-founded the lender in the 1960s with then partner David Loeb. CFC was once the nation's largest overall residential lender/servicer and the largest funder and servicer in the subprime sector.

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. This was driven by a 44% drop in bank repossessions from March. 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).

Staff at the Securities and Exchange Commission have recommended filing civil fraud charges against Angelo Mozilo, the co-founder of Countrywide Financial Corp., The Wall Street Journal reported Wednesday afternoon. The newspaper quoted sources "familiar with the investigation." Mr. Mozilo, who lives in Granada Hills, Calif., not too far from the old Countywide headquarters, could not be reached for comment. His telephone number is not listed. It was widely known that the agency was investigating his insider stock sales over a three-year period. He retired from the company on July 1 when it was sold to Bank of America for about $4 billion. Its shares once traded as high as $45 but by the time BoA bought the company it was only selling for a few dollars a share. Mr. Mozilo co-founded the lender in the 1960s with then-partner David Loeb. His stock sales, which were publicly disclosed, totaled more than $300 million. CFC was once the nation's largest overall residential lender/servicer and the largest funder and servicer in the subprime sector.