Servicing

Servicer guidance along with the net present value (NPV) test for the Obama administration's new loan modification program will be issued "very soon," according to Federal Housing Finance Agency director James Lockhart."I'm hopeful we can get this kicked up very fast," Mr. Lockhart said in an interview with National Mortgage News Online. Fannie Mae and Freddie Mae have already issued servicer guidance for modifying loans they own or guarantee. The NPV test will be used to determine which non-agency loans qualify for a loan modification. "That is being finalized," the FHFA director said. Under the new modification program servicers are expected to reduce the homeowner's monthly mortgage payments to a 38% debt-to-income level at their own expense. To achieve a 31% DTI ratio, the government will share in the cost and reimburse the servicer. Fannie and Freddie are using an existing NPV test because they are not being reimbursed by the government, Mr. Lockhart said.

Wingspan Portfolio Advisors LLC, a Dallas-based mortgage servicer specializing in highly delinquent loans, has formed a professional network of attorneys to assist in efforts to help borrowers avoid foreclosure and stay in their homes. These law firms are normally more involved in seeing foreclosure actions through to their conclusions, but membership in the Wingspan Professional Attorney Network (WPAN) signifies their interest in seeking other ways to help their lender and servicer clients. Membership in the Wingspan Preferred Attorney Network is organized along the lines of a professional designation, said Tom Force, legal services manager for Wingspan Portfolio Advisors. Each member attorney receives a level designation among three available, based on experience initially, and later upon loan resolution success. The three levels are "Select," "Eagle," and "Angel," which is the top among the three.

Genworth Financial, which controls the nation's fourth largest mortgage insurance company, said it failed to meet requirements to receive a large capital infusion under the Treasury Department's Troubled Asset Relief Program. The revelation came late last week, but on Monday Genworth's shares were hammered, falling 21% to just over $2. In a statement company CEO Michael Frazier said TARP money is only one of Genworth's options for surviving in the current economic climate. A spokesman could not be reached for comment at press time. The Richmond, Va.-based Genworth has abandoned plans to buy a small Minnesota depository, which would have served as its conduit to getting TARP money. In 2008 Genworth posted a net loss of $572 million. For years it had garnered a reputation for being the most conservative of the nation's seven MI firms.

Mortgage stocks went up across the board at the end of trading on Thursday as the Dow closed up 246 points. In particular, Bank of America Corporation's stock went up 35.27%. Additionally, Wells Fargo saw its stock price go up 31.7% at the end of the day Thursday. Earlier today, the banking giant announced that it expects a $3 billion profit from the first quarter. SunTrust Banks also saw a huge surge at 30.56%. US Bancorp ended trading on Thursday at $17.64 a share, up 22.84% from the last trade. Government sponsored enterprises Fannie Mae and Freddie Mac also ended the trading day Thursday on up notes, up 8.82% and 10%, respectively.

The global law firm Morrison & Foerster LLP has created an interdisciplinary team of attorneys to represent clients in the accelerating wave of dealmaking, as real estate companies worldwide seek to deleverage, recapitalize, restructure and otherwise seek liquidity. The newly formed Real Estate Companies Solutions Group brings together experts with expertise from the firm's real estate, corporate, capital markets, tax, fund formation, bankruptcy, restructuring and litigation groups. The group will provide targeted advice to real estate companies, investors and other capital sources in entity-level transactions resulting from the current unprecedented real property and finance sector dislocations. It will represent clients to implement a broad range of options, such as M&A, tender offers, spin-offs, joint ventures, or bankruptcy including "prepackaged" bankruptcies. "The current 'perfect storm' affecting the real estate industry is creating both risks and opportunities for our clients," said Michael Cohen, a Los Angeles partner in the Corporate Finance Practice Group. Among the categories of transactions involving real estate companies, including REITs, the group expects to execute mergers and acquisitions, restructuring and workout transactions, and representing new equity in bankruptcies.

Terence Mayfield of Phoenixille, Pa., pleaded guilty before U.S. District Judge Joseph H. Rodriguez to charges stemming from his role in operating two ponzi schemes upon members of a Toms River church. The first defrauded members of the Church of Grace and Peace of more than $1 million through a phony real estate investment scheme. In this scheme, Mayfield spoke to church members about an investment opportunity he had developed through investments in income-generating real estate. He required each potential investor to pay between approximately $1,000 and $1,500 as an "entry fee" to the program and that they provide the investment funds directly to him. Mayfield neither maintained the funds in escrow accounts nor purchased investment properties, but rather used the investors' funds to repay earlier investors and to pay his personal expenses. The second scheme defrauded three sets of homeowners, who participated in three "foreclosure bailouts" purportedly involving two properties in Georgia and one in Pennsylvania, of more than $75,000. In this scheme, Mayfield solicited potential investors to buy homes facing foreclosure and lease the homes back to the homeowners for a two-year period. The homeowners would place two years' worth of rent payments into an escrow account maintained by Mayfield as a security deposit. At the closing of the foreclosure bailout transactions, Mayfield directed the homeowners to directly deposit funds intended for an escrow account into his company's bank account. He again used these funds for his own benefit. Judge Rodriguez released the defendant on a $100,000 bond pending sentencing, which is scheduled for July 14.

The Pennsylvania Department of Banking is seeing growth in advertising for companies offering to help people modify their mortgages for a fee. The reality is that some of these offers are scams intended to prey upon people who are in financial distress, said Secretary of Banking Steve Kaplan. "At the very least, they are charging consumers for a service they can get for free or do by themselves," said Mr. Kaplan. The department is urging borrowers with questions about modifications to seek out professional housing counseling agencies that are certified by the Pennsylvania Housing Finance Agency. There is never a cost to the consumer for using these certified professionals, he said. Consumers should be wary of marketing techniques and come-ons that can mislead people into believing a company is associated with the federal government or the federal stimulus package, added Mr. Kaplan. In addition, he urged that consumers study carefully use of the words "law," "legal" and "attorney" in advertising as well as any guarantees or claims of extraordinary success rates.

The securitization process that led to the subprime meltdown has been "absolutely discredited" and retention of a portion of the credit risk is one way to reform the mortgage market, according to a Senate Banking Committee staffer. Requiring lenders to retain 5% of the credit risk on nonprime loans, as proposed under a House bill, is "one way to get at the issue," said Jonathan Miller, a professional staff member. He works closely with committee chairman Christopher Dodd, D-Conn., on housing issues. He stressed that mortgage reform also should give consumers a way to get relief if mortgage lenders violate the rules. Mr. Miller spoke at a Washington meeting of Real Estate Services Providers Council and he noted his views should not be interpreted as Sen. Dodd's views. But he said the Federal Reserve Board has resisted using its consumer protection authority until recently. And the Fed could lose that authority by the time Congress passes a regulatory modernization bill.

Ginnie Mae's growing mortgage-backed securities issuance has hit a record monthly high of $34.5 billion. The record was set in March. Total single-family issuance was $34.1 billion with the balance coming from multifamily issuance during the month. Within the single-family category, Ginnie I s represented $28.2 billion of the total and Ginnie II s represented the remaining $5.9 billion.

Standard & Poor's on Thursday downgraded the entire mortgage insurance industry, saying it will continue to post operating losses through 2010.S&P based the downgrade on falling home prices, rising unemployment and increasing loan delinquencies. Despite the downgrades, the rating agency said it is "comfortable" that insurers have the resources to pay their claims and other obligations — even though the industry ultimately will have to absorb $34 billion to $54 billion in losses. "We expect most of these companies will continue to report operating losses at least through 2010," said S&P senior analyst Rodney Clark. Genworth Mortgage Insurance Corp., Republic Mortgage Insurance Corp. and United Guaranty Residential Insurance Corp. retained their investment grade ratings, mainly because they have lower risk profiles and stronger diversified parent companies. But S&P dropped the ratings of the monoline insurers — Mortgage Guaranty Insurance Corp., PMI Mortgage Insurance Co. and Radian Guaranty Inc. — to slightly below investment grade.