Servicing

Foreclosure filings were made on 11,017 properties in New York during the first quarter of 2009, representing a 23% decrease compared to the first quarter of 2008 and a 32% increase over the fourth quarter of 2008, according to data from the New York State Banking Department and RealtyTrac. Driving the increase was an 80% increase in lis pendens filings. The banking department and RealtyTrac said they anticipated the increase as a result of the state's new legislation, which went into effect in September 2008, and required a 90-day pre-foreclosure waiting period. This created a sharp decrease in New York foreclosures in the fourth quarter of 2008, and the first quarter of 2009 numbers represent a bounce from the fourth quarter lows, they said. Suffolk County, with 1,773 filings in the first quarter 2009, replaced Queens as the county with the highest number of filings. On a nationwide basis, New York's overall ranking dropped from 35th at the end of 2008 to 37th at the end of the first quarter. "While New York's overall rank among the other states continues to improve, we must not become complacent. There are still pockets where foreclosure levels continue to rise at alarming rates," said Richard Neiman, superintendent of banks for New York. "Four of our counties alone - Suffolk, Queens, Brooklyn and Nassau - represent 50% of the total foreclosure activity in the state."

Cities in California, Florida, Nevada and Arizona accounted for the 26 highest foreclosure rates in the first quarter among metro areas with a population of 200,000 or more in RealtyTrac's Metropolitan Foreclosure Market Report for the first quarter. Las Vegas posted the highest metro rate, with 4.48% of its housing units receiving a foreclosure filing during the quarter. Merced, Calif., saw the second highest metro foreclosure rate, with 4.21% receiving a foreclosure filing, and Cape Coral-Fort Myers, Fla., recorded the third highest rate, with 3.85% receiving a filing. "Sales activity appears to be increasing in some of these markets as home prices have fallen to levels that are attractive to first-time homebuyers and investors," said CEO James J. Saccacio. "While we expect many of these metro areas to continue to experience high levels of foreclosure activity throughout 2009, we also expect to see other markets rise up the ranks as unemployment rates surge throughout the country." Other metro areas in the top 10 were the California cities of Stockton, Riverside-San Bernardino, Modesto, Bakersfield, and Vallejo-Fairfield, along with Phoenix and Port St. Lucie, Fla.

The industry is looking for a more specific definition of "imminent default" in conjunction with its use in qualifying borrowers for new Treasury-directed agency refinancing and modification programs, according to panelists at the Mortgage Bankers Association's National Secondary Market Conference. Companies refinancing or modifying loans through the programs are concerned about whether they might be liable if the mortgages are found to not have met the definition, said Susanna Konracki, senior vice president of valuation and advisory services at RiskSpan Inc. They also fear exposure to other legal liabilities if they choose not to use the programs. As a result, several industry groups including the MBA have been working with the agencies to develop a consensus definition for the term, Ms. Konracki told this publication.

Wells Fargo & Co., the nation's second largest residential servicer, said Wednesday that 7% of its $1.6 trillion "owned" servicing portfolio was in some stage of delinquency as of March 31, but mortgage funding volumes and overall earnings were strong. Dollar-wise the delinquencies represent $112 billion in mortgages. Releasing its 1Q results, the San Francisco-based bank also announced loan charge-offs on its mortgage portfolio including: second liens ($847 million), one- to four-family ($391 million), and commercial mortgages ($556 million). The charge-offs include the mortgage operations of Wachovia Corp., the troubled bank it bought at year-end. Despite all the bad mortgage servicing news, Wells said it earned $3.05 billion in the first quarter, a record. The bank funded $101 billion in home mortgages during the period, a 55% gain from the same period a year ago. It has a mortgage application pipeline of $101 billion.

Freddie Mac has delayed its pricing of a five-year Reference Note offering expected to be at least $1 billion in size due to the "unattended death" of the government-sponsored enterprise's acting chief financial officer David Kellermann — an employee of the firm for 16 years. Mr. Kellermann was found dead at his Northern Virginia home early Wednesday morning, according to police. A spokeswoman for the Fairfax County Police Department told National Mortgage News that the medical examiner will perform an autopsy on the 41-year-old Mr. Kellermann later today. The police issued a press statement saying, "there was no evidence of foul play." Freddie said it found it "appropriate" to "temporarily postpone" the pricing "at least one day" in response to the death. Mr. Kellermann had been Freddie's CFO since September, when the government placed it and its sister company, Fannie Mae, into a federal conservatorship. As acting CFO, Kellermann was responsible for the GSE's financial controls, financial reporting, tax, capital oversight and related matters. He began his career at the company as a financial analyst/auditor. He also worked in Freddie's securities sales and trading unit. One former Freddie employee who worked at the GSE when Mr. Kellermann was there described him as "a very nice man, a family man." According to his company bio, he was a volunteer board member of the D.C. Coalition for the Homeless. Back in 2003 Freddie was embroiled in an accounting scandal where its top executives were accused of under-reporting income by $5 billion. A criminal investigation ensued but no charges were ever brought. Freddie's CEO (also appointed in September), David Moffett, resigned last month. Mr. Kellermann was promoted to acting CFO when Anthony 'Buddy' Piszel resigned.

David Kellermann, the acting chief financial officer of Freddie Mac -- and an employee of the firm for 16 years -- was found dead at his Northern Virginia home early Wednesday morning in what authorities said was an apparent suicide, according to combined press reports. The 41-year-old Kellermann had been Freddie Mac's chief financial officer since September, when the government placed the mortgage investing giant and its sister company, Fannie Mae, into a federal conservatorship. A spokesman for Freddie Mac had no comment and referred all press inquiries to the Fairfax County police. As acting chief financial officer, Kellermann was responsible for the GSE's financial controls, financial reporting, tax, capital oversight and related matters. He began his career at the company as a financial analyst/auditor. He also worked in Freddie's securities sales and trading unit. Freddie's CEO (also appointed in September), David Moffett, resigned last month. The company's stock trades for 86 cents a share.

Chicago-based @properties, an independent brokerage firm, has formed Institutional Services Group, a new division serving institutional clients that own or invest in REO properties, distressed real estate and foreclosures. ISG named Ralph Cram and John Staib as managing directors of the new division. The startup will offer a full range of services related to REO properties and distressed real estate investment in the Chicago area including brokerage, receivership, asset preservation, property management, consulting, development and investment-advisory services for the disposition or acquisition of mortgage notes, residential property and commercial property.

Trying to cut its losses, Bank of America has changed its policy on "short sales," making it easier for borrowers to sell their homes instead of going into foreclosure, according to a report in American Banker. Until a month ago, BoA's mortgage unit (which includes the old Countrywide franchise) had required that 10% of a home's sale price go toward paying off home-equity lines of credit before they would agree to a short sale. But Terry Francisco, a spokesman for the Charlotte-based lender, confirmed that the bank changed its policy last month, agreeing to accept 5% of the sale price when there is no equity available to holders of the first or second liens. The new policy "is based on the assumption that it is in the best interest of all parties involved to accept a short sale, as opposed to proceeding to a foreclosure," Mr. Francisco said. "We believed that the previous policies set an arbitrary amount that did not take into account the savings derived from proceeding with a short sale." The bank expects the change to increase the number of short sales.

In a sign that the bulk market for servicing rights could be heating up, Interactive Mortgage Advisors is auctioning off a $2.1 billion package of receivables for an undisclosed seller. Over the past few months the bulk market has been virtually dead with few of the mega-buyers willing to consider an investment except at rock bottom prices. The receivables — which include the rights to 18 delinquent loans — have a weighted average coupon of 4.95%. The loans have been purchased by Freddie Mac, which has been operating under a federal conservatorship since early fall. A majority of the loans are collateralized by homes in Illinois, Massachusetts, Michigan and Colorado. Final bids are due April 28.

The Mortgage Bankers Association plans to challenge a proposal that requires originators to have "skin in the game" when it testifies Thursday on Rep. Barney Frank's legislation to curb predatory lending practices. The bill, H.R. 1728, by the chairman of the House Financial Services Committee would require lenders to retain a minimum 5% economic interest in loans they sell on the secondary market. Such a provision would be a "huge call on capital," MBA president John Courson told reporters at the group's National Secondary Market Conference in Chicago. He said that it is unclear whether the Massachusetts Democrat means 5% of the loan amount, a 5% loan cap, a 5% share of the total loss, or 5% of the first loss. But anyway you look it, he said, the requirement represents a "total change of the landscape." Calling the proviso "premature," Mr. Courson said it "seem to be totally out of place with this particular piece of legislation" and should be debated as part of the discussion expected later this year to totally restructure the secondary market. "We will urge as aggressively as we can that this does not belong as part of an anti-predatory lending bill," the MBA president said.