Servicing

The percentage of CMBS loans delinquent by 30 or more days in April skyrocketed to roughly five times its level a year ago, according to Trepp LLC. Thirty-plus day CMBS delinquencies have not ever seen a year-to-year spike like this in the history of the CMBS market, Trepp senior managing director Manus Clancy told MortgageWire. He added that CMBS delinquencies have been accelerating month-by-month since January. Delinquencies during the past two months have been at highs not seen since February 2004 and April's month-to-month jump in delinquencies was the largest seen since November 2001. When asked whether CMBS delinquencies may continue to ramp up, Mr. Clancy said he could not provide a forecast. However, he noted that, "It's a bad sign the fact that they're accelerating. In other parts of the economy people are looking for floors, but this seems to be accelerating." Despite the high delinquency rates, spreads on AAA CMBS eligible for the government's TALF program under new terms added Friday have been tightening, Mr. Clancy said.

Loans with five-year maturities will be available for June funding through the government's Term Asset-Backed Securities Loan Facility to finance purchases of AAA-rated commercial mortgage-backed securities. Previous to this expansion of the program, TALF had only allowed maturities of three years. The Federal Reserve had said in February it could broaden eligible collateral for TALF to encompass other types of newly issued AAA-rated asset-backed securities such as commercial mortgage-backed securities and private-label residential MBS.

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 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 percentage of CMBS loans delinquent by 30 or more days in April skyrocketed to roughly five times its level a year ago, according to Trepp LLC.Thirty-plus day CMBS delinquencies have not ever seen a year-to-year spike like this in the history of the CMBS market, Trepp senior managing director Manus Clancy told MortgageWire. He added that CMBS delinquencies have been accelerating month-by-month since January. Delinquencies during the past two months have been at highs not seen since February 2004 and April's month-to-month jump in delinquencies was the largest seen since November 2001. When asked whether CMBS delinquencies may continue to ramp up, Mr. Clancy said he could not provide a forecast. However, he noted that, "It's a bad sign the fact that they're accelerating. In other parts of the economy people are looking for floors, but this seems to be accelerating." Despite the high delinquency rates, spreads on AAA CMBS eligible for the government's TALF program under new terms added Friday have been tightening, Mr. Clancy said.

PHH Corp. recorded a $71 million write-down on its mortgage servicing assets for the first quarter, which crimped profits.The Mt. Laurel, N.J., mortgage company reported a decline in net income at the company to $2 million ($0.04 per share) from $30 million ($0.55 per share) for the first quarter of 2008. By segment, mortgage servicing had a loss of $118 million, canceling out the $113 million profit of the mortgage production segment. PHH originated $8.9 billion in the first quarter 2009, down from $10 billion in the same period one year prior. Terry Edwards, president and chief executive, said the mortgage production segment "had its strongest quarter since the spin-off, as we experienced increased refinance volumes" adding that PHH expects this to continue through the summer months. Only 29% of PHH's first quarter 2009 volume was from home purchases. But refinancings drove PHH to the servicing asset write-down as well as forcing it to take a $92 million reduction in the value of its MSRs. The company does not hedge its MSRs.

The deteriorating performance of commercial mortgage-backed securities has resulted in a "dramatic jump" in the transfer of commercial real estate loans to special servicers during the first quarter, according to a Fitch Ratings report.The Fitch CMBS report: "What's in Special Servicing?" shows the dollar balance of specially serviced CMBS loans rose to $23.7 billion in the first quarter, up 48% from the previous quarter. Many of the "loans of concern" are jumbo vintage loans originated in 2006-2007 and Fitch said 20 of the largest specially serviced loans have balances ranging from $360 million to $73.5 million. "Later vintage CMBS transactions are backed by loans originated at the height of the market and are thus susceptible to significant income and value declines," said managing director, Mary MacNeill. Fitch said actual delinquencies remained relatively low at 1.53%. But the number of loans transferred to special servicing "due to imminent default" is growing.

Kondaur Capital Corp. of Irvine — an investor in non-performing mortgages — expects its work force to triple to 900 workers by year-end.In an interview with National Mortgage News, company chairman and CEO Jon Daurio described Kondaur's business of buying and selling troubled loans "as very good right now. We're definitely in a growth mode." Indeed, rumors abound that Kondaur is quite active in the market but Mr. Daurio declined to comment on specific deals except to say that his company currently holds about 2,500 loans on its books. (For the full story see the Monday edition of NMN.

A federal bankruptcy court has approved an order selling tens of millions of dollars in mortgage servicing rights held by CU National, a unit of U.S. Mortgage of Pinebrook, N.J., to a mystery company believed to be owned by one of the credit union customers.According to a report in Credit Union Journal, the sale was the subject of a violent dispute between credit union creditors of the failed mortgage company who claim that as much as $160 million of their mortgages were fraudulently sold to Fannie Mae. (The order by the court came late Thursday.) The sale of the servicing rights was opposed by several credit unions, including Suffolk FCU, Treasury Department FCU, First Florida CU, Educational Systems FCU and TCT FCU, all questioning the viability of the winning bidder for the servicing rights, Symbionce Financing Solutions LLC. In motions filed with the bankruptcy court, TCT FCU, which has $6 million of loans being serviced by CU National, claims that Symbionce is really a shell company created by Novartis FCU with no staff, no office, no infrastructure and no insurance that has not been approved by NCUA. The company, said TCT, has not demonstrated it qualifies for bond coverage under CUMIS Insurance and is not licensed to service loans. However, there is no record of Symbionce Financing on any of the Internet search sites.

The U.S. Senate easily defeated an amendment by Sen. Richard Durbin, D-Ill., that would have allowed bankruptcy court judges to cram down a mortgage loan as a way to reduce foreclosures and help stabilize the housing market.The amendment was defeated by a vote of 51-45, with just 45 of the 59 Senate Democrats supporting it. The amendment would have given bankruptcy court judges the authority to reduce the interest rate and principal amount of a mortgage secured by a borrower's principal residence. Citigroup was the only bank to support Sen. Durbin's amendment after months of intense negotiations. Sen. Durbin complained that other banks and industry groups refused to compromise and negotiate in good faith. Sen. Tom Carper, D- Del., noted, however, that he might have voted for the amendment if Sen. Durbin had restricted cramdowns to subprime and nontraditional mortgages and made other changes.

Benefiting from historically low interest rates and a refinancing boom, Fannie Mae issued $87.8 billion in mortgage-backed securities in March, nearly doubling the previous month's volume. The last time MBS issuance was this high was in 2003. The mortgage giant's refinancing volume totaled $77 billion in March, nearly double February's total. And in April, Fannie began accepting refinancings that lenders are originating under the guidelines of President Obama's Making Home Affordable program. "We expect that the MHA program will bolster refinance volumes over time as major lenders adopt necessary system changes and consumer awareness continues to build," Fannie said. Fannie and Freddie are expected to refinance 4 million to 5 million homeowners under the President's program. Despite the surge in new business, Fannie reported that its ratio of "seriously delinquent" loans is continuing to rise. The percentage of loans 90 days or more past due rose 19 basis points during the month of February to 2.96%, compared to 1.1% a year ago. (The delinquency figures lag by a month.) Fannie will report March delinquencies in its next monthly report. Freddie has already reported its serious delinquency rate: 2.29% for March.