Servicing

Bank loan officers expect to see continued deterioration in their residential and commercial real estate mortgage portfolios for the rest of this year, according to a periodic survey conducted by the Federal Reserve. The survey of senior loan officers shows that 78% of 50 banks expect delinquencies and charge-offs on prime single-family loans will increase "somewhat" and three are bracing for substantial deterioration. Only 14 banks expect loan quality to stabilize and only two expect some improvement. More than 90% of the banks surveyed see continued deterioration in the performance of CRE loans. Only four banks said loan quality should stabilize or improve. Meanwhile, loan officers reported a "substantial" increase in demand for prime mortgages since the last survey in January. However, demand for CRE loans continue to weaken to the lowest level since 1995 when the Fed first started asking survey questions about CRE lending.

The Federal Deposit Insurance Corp. is preparing for a "test sale" of troubled real estate loans under its new 'Legacy Loan Program' and wants to send the mortgage package to investors by next month."We have received initial positive interest from institutions after contacting them to assist us in this pilot and hope to have the first sales package out to investors in June," the agency said in a statement. FDIC has already solicited public comments on the Legacy Loan Program, which could remove $500 billion in high risk mortgages from the banking system if private investors put up $50 billion in capital to invest in public-private investment funds. The public comments have been "useful," the agency said, and it continues to "craft a "workable framework" to sell pools of residential and commercial real estate loans. The test sale will "help guide and build the foundation for the larger program," FDIC said.

The Senate on Tuesday moved closer to passing a housing bill after defeating two amendments that would weaken legal protections for residential servicers engaged in loan modifications and potentially handcuff the Federal Housing Administration's single-family program.The bill (S-896) includes improvements to the FHA Hope for Homeowners program to refinance underwater mortgages and increases Federal Deposit Insurance Corporation's borrowing authority to deal with rising bank failures. The legislation also tries to increase loan modifications by creating a "safe harbor" that protects servicers from investor lawsuits. Sen. Bob Corker, R-Tenn., said the provision goes too far and gives big banks a license to act in their self interest by modifying loans. His amendment would require servicers to "make sure homeowners and investors are both treated fairly," he said. Sen. Mel Martinez, R-Fla., warned that the Corker amendment would weaken the safe harbor and increase the number of foreclosures. The Cocker amendment failed by a 39-63 vote. The Senate also voted down an amendment by Sen. David Vitter, R-La., that could trigger a cut back in FHA lending if the agency is headed toward insolvency. The Vitter amendment was defeated by a 36-56 vote.

Safeguard Properties, a privately held mortgage field services company, has moved to its new Valley View, Ohio, headquarters, doubling the company's office space and staffing capacity. The new facility, with approximately 63,000 square feet of finished space for the company's current 700 employees has expansion capacity to 75,000 square feet. Safeguard added 200 employees in 2008 and plans to add 125 more in 200. Safeguard's investment to purchase, expand and build out the new facility was approximately $6 million, plus approximately $2 million invested in additional IT infrastructure.

The Treasury Department and HUD are providing up to $5 billion in cash assistance and grants to state finance agencies to finance the construction and renovation of 150,000 low-income housing units. Congress allocated the funds in the economy stimulus bill to jumpstart housing projects that where shelved or abandoned after the market for low-income housing tax credits dried up. The Department of Housing and Urban Development is providing grants through the Tax Credit Assistance program to complete the construction of 35,000 low-income housing units. Treasury is providing the cash or equity for affordable housing projects that developers previously raised through the sale of LIHTCs to investors. HUD also is soliciting applications from state/local governments and nonprofit housing groups for $2 billion in funds to acquire and rehabilitate foreclose properties. HUD wants to see collaborations between government units and nonprofits to help stabilize neighborhoods and prevent blight.

After conning thousands of dollars from seniors and homeowners facing foreclosure in a loan modification scam, Anna Santos of Los Angeles County pleaded guilty to mortgage fraud. Santos was arrested in March after using forged documents to convince victims to hand over thousands of dollars for nonexistent loan mod services. According to the California Attorney General's office, Santos obtained a fictitious business permit through Los Angeles for "Payment Processing Department," opened several bank accounts and two post office boxes under that name and then mailed flyers to vulnerable homeowners appearing to be from victims' lenders or a government agency. The flyer advised homeowners that they qualified for a special program to save their home from foreclosure. After signing up for "loan modification services," homeowners then received phony confirmation that their lender had been notified and forged loan mod documents that falsely appeared to be from their lender. The victims were informed they had been placed in a probationary program and their payments should be sent to a given post office box address, none of which were credited to the victims' home loans, but were instead retrieved by Santos and deposited into the bank accounts she had opened. The AG's office believes she scammed more than 100 victims, who lost on average $3,000. "Santos conned thousands of dollars from homeowners trying to save their homes through a cruel and sophisticated scam," said AG Edmund G. Brown, Jr., in a statement. "She held out hope, but in reality did not provide an ounce of loan modification, leaving her victims in far worse straits." Santos, who is currently out on bail, is scheduled for sentencing on May 20 in Los Angeles Superior Court.

ServiceLink, a provider of origination and default services and the national mortgage services platform of Fidelity National Financial, has begun offering loan modification and refinance services for lenders and servicers offering loan products under the Homeowner Affordability and Stability Plan. Fidelity has integrated title data into the company's SmartConneXion title decision engine, providing immediate title decisions to clients at significantly reduced costs, said Jeff Coury, president and CEO of the Pittsburgh, Penn.-based ServiceLink. "Packaged with ServiceLink's Web-based closing solution, iClose and its e-signature feature, the unique product offerings maximize both cost and service efficiencies for customers conforming with recent GSE guidelines for such loans, including DU RefiPlus and Refi Plus Refinance programs." ServiceLink's technology, staffing models and customized processes allow each mortgage lender and servicer to integrate its loan fulfillment services with a customer's existing foreclosure prevention processes. The company offers a full suite of title and HVCC-compliant valuation products, signing services that include mail-away, electronic signing, mobile closings, and centralized disbursement and recordation services.

Financial services executives would like to think the cramdown issue is dead for this year, but it could crop up again - sooner than expected. On Thursday, the Senate killing a cramdown amendment offered by Sen. Richard Durbin, D-Ill. was widely anticipated. (The amendment would have allowed bankruptcy judges to reduce the principal amount of mortgage on a primary residence.) But House leaders want to keep the issue alive and they may attach a cramdown amendment to a conference report on an FDIC/housing bill. The House has already passed the bill that includes improvements to the Federal Housing Administration's 'Hope for Homeowners' program, legal protections for servicers, and more borrowing authority for the Federal Deposit Insurance Corp. The Senate is expected to pass a similar bill in a few days now that the Senate has voted down the Durbin cramdown amendment. On the eve of that vote, Rep. Debbie Wasserman Schultz, D- Fla., told a Mortgage Bankers Association meeting that House leaders plan to attach a cramdown provision to an FDIC/housing bill in conference with the Senate. "We look forward to working with you on a revised bill once the legislation returns to the House side," Rep. Shultz said. Voluntary modifications are not working and "doing nothing is simply not an option," she added. The congresswoman chairs an appropriations subcommittee. The next day, the Senate voted down the Durbin amendment by a 45-51 vote. "Given the resounding vote in the Senate, the conference report probably will not include cramdown," said Scott Talbott, chief lobbyist for the Financial Services Roundtable. "Cramdown appears to be dead for this year," he said.

The American Bankers Association secondary market program has helped its members sell more than $100 billion in single-family mortgages to preferred investors such as Fannie Mae and CitiMortgage. The trade group's 8-year-old 'Mortgage Solutions' program has "passed a milestone when total deliveries of mortgages surpassed the $100 billion mark," ABA said. In 2008, ABA members sold $9.7 billion in mortgages to their secondary market partners, which also include Freddie Mac, Farmer Mac, and Bank of America Home Loans. Participating banks accrued aggregate savings of $11.6 million last year, ABA said.

Thornburg Mortgage of Santa Fe, N.M., filed for bankruptcy protection late last week, listing debts of more than $1 billion. The filing had been anticipated. The company's fate is now in the hands of its bondholders who are expected to liquidate its assets which include on-balance sheet jumbo mortgages and bonds of at least $17 billion. Its lenders include Credit Suisse, JPMorgan Chase, Greenwich Capital, and Royal Bank of Scotland. Up until last year Thornburg was a publicly traded REIT. Its shares now trade on the "pink sheets" for about one penny. It stopped funding loans last year but continued to service jumbo and super jumbo assets held on its balance sheet.