Servicing

The Department of Housing and Urban Development will ask Congress for expanded commitment authority for Ginnie Mae and the Federal Housing Administration single-family program, allowing the government to insure up to $400 billion of new mortgages in fiscal 2010. HUD estimates that FHA will endorse $290 billion of single-family loans in FY 2009, which ends September 30. The government estimates that FHA loan production will continue at a torrid pace until private mortgage markets recover. "For FY 2010, we are asking Congress for the authority to endorse up to $400 billion of loans," HUD secretary Shaun Donovan told the National Association of Realtors at its mid-year legislative conference. The housing secretary stressed that FHA will be able to provide this level of support for the mortgage market without a congressional appropriation and without raising FHA mortgage insurance premiums or changing the premium structure. "FHA will continue to be a source of stable, reasonably priced safe financing in the marketplace." Mr. Donovan said.

Byte Software, Kirkland, Wash., has released the BytePro Loan Modification Edition, designed to help servicers process modifications under the Treasury's Home Affordable Modification Program (HMP). The BytePro Loan Modification Edition allows servicers to process HMP modifications from initial borrower contact through completion of the modification. It automatically calculates the interest rate, term, and balance of the modified loan in accordance with Treasury mandates, and it produces all the documents that must be executed by the borrower and servicer. For loans that do not qualify for the HMP program, the software provides the ability to modify loans according to the lender's own parameters.

Lend America, Melville, N.Y., has launched a new website for institutional investors looking to monetize their distressed residential mortgage portfolios. The company, a Ginnie Mae issuer, has been working to help institutional investors monetize portfolios by using the government's Hope for Homeowners program to handle loans that meet that program's expanding qualifications. The company has been one of the most aggressive in its use of the H4H program and recently said it was one of the first to complete to a "satisfactory" level the Department of Housing and Urban Development's pre-closing review period for direct endorsement of the H4H program. This allows it to underwrite, close and insure H4H deals without prior HUD review. The new website can be found at http://www.refiportfolio.com.

American International Group reported a $4.35 billion ($1.98 per share) loss for the first quarter that included a $1.9 billion charge for restructuring costs at AIG Financial Products Corp. Over the past five quarters, AIGFP has reduced its portfolio of collateralized debt obligations (backed mostly by subprime MBS) by more than 40% to $1.5 trillion. AIG also reported that American General Finance Inc., which originates mortgages, lost $203 million in the first quarter, due to a $186 million increase in the provision for finance receivables. Meanwhile, AIG continues to own mortgage insurer United Guaranty Corp. after the split off of its property/casualty business. UGC, based in Greensboro, N.C., had $483 million in operating losses during the quarter. Overall, the first quarter results mark an improvement, compared to AIG's $7.8 billion ($3.09 per share) loss a year ago.

Massachusetts has reached a multimillion dollar settlement with Goldman Sachs & Co. concerning its role in securitizing risky subprime mortgages that are now at the center of the nation's economic crisis. At deadline state Attorney General Martha Coakley was holding a press conference on the matter. The settlement includes a monetary payment and extensive relief to homeowners. The deal with Goldman is the result of the "Attorney General's ongoing investigation of the role of investment banks in the origination and securitization of subprime mortgage loans," according to a statement issued by the AG's office. Compared to its peers on Wall Street, Goldman was not that large of player in subprime securitization - a business dominated by Bear Stearns, Citigroup, Greenwich Capital, Lehman Brothers, and Merrill Lynch.

The Federal Reserve Bank of New York has invested at least $248.3 billion in MBS and debt issued by Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System, according to a budget addendum released Monday by the White House.The figure represents asset and debt purchases as of March 31. A spokeswoman for the New York Fed was asked to provide an updated figure for the end of April but at press time had not gotten back to National Mortgage News. The MBS (Fannie/Freddie guaranteed) bought by the government total $201.5 billion, with the debt at $46.8 billion. The debt number includes $11.1 billion in bonds issued by various FHLBs. In the new "Analytical Perspectives, Budget of the U.S. Government" the White House also discusses the future of the GSEs, mentioning — as one option — their dissolution.

The U.S. mortgage insurance business of Genworth Financial Inc. had a net operating loss of $135 million for the first quarter, as higher captive reinsurance benefits were more than offset by higher incurred losses. The first quarter loss was substantially higher than the $36 million net operating loss the unit had in the first quarter 2008. Gross losses before the impact of captive reinsurance benefits were $522 million. The Richmond, Va., insurer benefited from $119 million (on a pre-tax basis) of captive reinsurance coverage. Paid claims were $205 million for the quarter, up by $121 million over the first quarter 2008, while average paid claim leaped to $55,500, versus $42,200 one year ago. Genworth approved approximately 5,800 workouts, which resulted in $57 million of reduced loss exposure. New insurance written was substantially down from the previous year, $3.6 billion in the first quarter 2009 ($2.5 billion flow, $1.1 billion bulk), compared with $15.1 billion (all but $0.1 billion flow) one year prior. Genworth chief financial officer Ronald Joelson expects to see an increase in new insurance written during the rest of 2009. "New business levels are expected to trend up from the first quarter as we have the capital flexibility to take advantage of strengthening market conditions," he said. The parent company lost $469 million ($1.08 per share) for the quarter.

In a hypothetical situation in which the economy is worse than expected over the next two years, the 19 bank holding companies participating in federal "stress tests" would find first-lien mortgages to be responsible for about one-sixth of the losses they would cumulatively have to absorb. This category of losses, estimated to represent $102.3 billion of a total $599.2 billion in losses under the "more adverse" scenario for the BHCs, was the largest in the Supervisory Capital Assessment Program report. The next largest category was second/junior lien mortgages, which was estimated in the scenario to potentially account for $83.2 billion of losses. Commercial real estate loans was the fourth largest category of potential losses, behind commercial and industrial loans. Potential losses tied to these categories were respectively estimated at $53 billion and $60.1 billion.

Fannie Mae posted a $23.2 billion loss in the first quarter and is asking the Treasury Department for $19 billion in new assistance so it can maintain a positive net worth position as its real estate owned portfolio continues to grow dramatically. At-year end Fannie Mae owned 62,371 homes, a 44% increase over the past 12 months. It reported that its guaranty book of business has $145 billion in non-performing mortgages — a 12-fold increase from the same period last year. In posting yet another enormous loss, Fannie blamed the poor performance on the nation's housing depression which caused it to take impairments on its MBS holdings, and increased credit reserves. In the same quarter last year the GSE lost $2.5 billion. Even though the industry is in the throes of a refi boom, Fannie's guaranty fee income (money it receives from its seller/servicers) actually fell in the first quarter by 37% to $1.8 billion. In 4Q Fannie had 'g-fee' income of $2.8 billion. It blamed the decline in g-fees on revenue recognition factors, including expected prepayment rates. Fannie has been a ward of the government since early September 2008.

The Mortgage Bankers Association has developed a warehouse lending proposal that could be administrated by Ginnie Mae if the agency receives Treasury Department approval. MBA, which has been working closely with the Government National Mortgage Association in developing the proposal, has sent Treasury Secretary Timothy Geithner an outline of the program along with a term sheet. The proposal calls for Treasury to initiate a temporary lending facility administered by Ginnie Mae to provide warehouse loans to lenders making Federal Housing Administration, Department of Veterans Affairs, and Rural Housing Service guaranteed loans. "MBA would like to meet with you in order to obtain Treasury's input and refine the proposal," MBA chief John Courson says in a letter to secretary Geithner. "Treasury has not made a commitment to the proposed program," an MBA spokesman said.