Servicing

Javid Jaberi, a former senior vice president of servicing in charge of loss mitigation for Residential Capital Corp., has joined Fannie Mae, industry sources told National Mortgage News. At deadline Mr. Jaberi and Fannie officials could not be reached for comment. Late last year Mr. Jaberi left ResCap, which is 51% owned by hedge fund giant Cerberus Capital. One associate of Mr. Jaberi's said part of his new job will include oversight of the nation's "mega servicers" which sell loans to, and service them for Fannie. One of those servicers might possibly include ResCap.

Wells Fargo & Co. hit a residential home run in the first quarter with originations soaring by 51% to $100 billion, and mortgage-related commitments topping $175 billion.Released early Thursday morning, the figures were preliminary and included an earnings estimate of $3 billion, which could prove to be a record for the bank. Final numbers will be released when it discloses earnings on April 22. Wells' strong residential quarter was aided by historically low interest rates and its 2008 acquisition of Wachovia Corp., a bank with a strong (but somewhat troubled) mortgage operation. The results also indicate that the San Francisco-based bank is poised to gain a huge amount of market share in the mortgage space as other lenders either fail or sell out to stronger competitors. In the fourth quarter Wells had a loan production market share of 18.37% and a servicing share of 18.58%, according to National Mortgage News and the Quarterly Data Report. Late last year Wells received a $25 billion capital injection via the government's TARP program.

Some consumers who do not need help with their mortgages are clogging up the loan modification efforts of servicing companies, according to participants at SourceMedia's annual servicing show. One mortgage executive, requesting anonymity, said her shop currently has 4,000 loan modification cases in the pipeline but "1,700 are for people who are current. We're seeing people who don't need the help." Servicing professionals attending the show relayed stories of mortgagors who attempt to get their loans modified because friends and family are doing the same. Meanwhile, Jay Brinkmann, chief economist for the Mortgage Bankers Association, told attendees that loan modification efforts are driving servicing costs "way up," resulting in a reduction in productivity. MBA is working on a new servicing cost study but has not finalized its findings.

The key to successful loan modifications is a more robust data exchange and feedback between all parties involved before and after the modification, the president of Consumer Credit Counseling Service of Atlanta said during a foreclosure panel at the SourceMedia Mortgage Servicing Conference in Dallas. Suzanne Boas sees a developing trend in the fact that more and more servicers are now interested in consistent data feedback between counseling agencies and servicers, a step that helps loss mitigators ensure data transparency for all parties including investors. "We need more information on how the loan is performing after the modification," she said, adding industry interest to that end is growing. A more robust data exchange between foreclosure counselors like CCCS who are directly involved in achieving a loan modification agreement and servicers has proven to benefit borrowers as much as servicer efficiency in loss mitigation, she said. Following that path CCCS is expanding its Early Resolution Counseling Portal platform it has pilot tested in partnership with Bank of America and Wells Fargo. Another eight counseling agencies are joining CCCS into the program, which helps reduce processing and approval time for workouts on BoA and Wells Fargo loans. After counseling is completed the portal (created by Computer Sciences Corp.) analyzes the data servicers have included in the portal's database for counselor's review. It screens specific lender and investor requirements, so by the time a counseling session ends the borrower is presented with accurate workout options. If an agreement is reached it is immediately sent to the servicer for a quick decision.

Tension is evident in the mortgage servicing industry as federal regulators along with state lawmakers and consumer protection groups are coming after servicers, according to speakers on the legislative roundup panel at the SourceMedia Mortgage Servicing Conference in Dallas. "The rules are all being changed," said David M. Bizar, a partner with McCarter & English. The attorneys general of New York and Connecticut are enforcing federal law and claiming suitability violations under the Truth In Lending Act, he said. The speakers described how there is an increased demand for transparency in data for servicers, but they do not have the resources to provide it and run the risk of providing conflicting data. The industry needs to see uniformity in data reporting, they said. Robert Power, senior vice president, Bank of America, said there is a lot of talk of across the board about foreclosure moratoriums and foreclosure counseling/mediation. Local government ordinances are mirroring this. These laws can have unintended consequences, he said. If a borrower waits 30-60 days until mediation they can fall further behind in their payments and into more debt. They may have fewer options by the time of mediation or lose their best option for a loan modification by this time, Mr. Power said. A whopping 125 cities have local ordinances dealing with vacant properties and the number is growing. A national system is being formed to gather information for cities to identify the servicer, property preservation company and local real estate agent connection to the REO properties in each community.

A housing recovery isn't likely to begin until the middle of next year at the earliest, according to the chief economist for the trade group representing U.S. and Canadian cement makers. Edward Sullivan of the Portland Cement Association, Skokie, Ill., said for the market to begin rebounding, there must be a "meaningful recovery" in sales and a corresponding reduction in unsold inventory. "Housing construction activity cannot begin until sales recover," Mr. Sullivan said in PCA's latest Economic Research report. "Increased foreclosures, coupled with deteriorating labor markets and tight credit conditions, will delay significant sales activity until mid-2010. Improvements in housing starts are not expected to be significant until 2011." The economist said that be expects the housing recovery bill, along with bank efforts to rewrite toxic mortgages, will help slow foreclosures over the next 18 months. But he also predicted that the weak labor market and declining house prices will lead to a net increase in repossessions, which will be added to the housing inventory. Furthermore, Mr. Sullivan said, unless Uncle Sam injects more cash into the banking system, tighter credit standards will serve as another drag on housing. "Under such a scenario, the housing recovery and overall economic recovery could be delayed significantly," he said.

LenderLive Network Inc., a Denver-based company that provides business process outsourcing and technology, said it has launched the first large-scale Home Affordable Modification Program campaign with one of the nation's top four servicers. It did not identify the servicer it was working with. HMP is part of the recently passed Making Home Affordable program, which will allow up to nine million Americans to refinance or modify their home loans. With this campaign, LenderLive plans to manage all of the inbound and outgoing documents required under HMP, including certain fulfillment processes. "At launch, we anticipate processing nearly 2,000 transactions per day," said Rick Seehausen, chief executive of LenderLive Network. The company has another five servicers in the queue for which they are preparing to initiate services.

Fannie Mae said its refinancing volume totaled $77 billion in March, up from $41 billion in the previous month, as borrowers took advantage of lower mortgage rates and a new flexible refinancing program. The mortgage giant it has not seen this level of activity since refinancing boom of 2003. "We anticipate that volumes will increase even more as millions of additional homeowners become eligible to refinance" under the Home Affordable Refinance initiative, according to Fannie executive vice president Tom Lund. Under that initiative, Fannie and Freddie Mac are expected to use flexible underwriting to refinance mortgages they already own or guarantee. Borrowers with loan-to-value ratios between 80% and 105% can refinance at current market rates under this initiative. Mortgage insurance requirements have been waived on those refinancing transactions. Existing insurance policies will be transferred to the new loan, however. Lenders and brokers can use Fannie's Desktop Underwriter to process those refinancing applications.

Sales were up 40% in the Las Vegas and Henderson housing markets in March, according to the latest Las Vegas Real Estate Market Report, but 86% of the 2,842 units that were sold were distressed sales. The majority of the sales (2,252) were properties that were foreclosed upon. The number of units listed for sale in Las Vegas and nearby Henderson in March was down slightly from February to 21,332. But 9,160 are listed as foreclosures and 7,781 are listed as short sales. The average selling price last month was $167,436, down 6.6% from February, the second largest decline in more than a year, and 31% from July 2008. "March was the strongest sales month in more than a year," said luxury real estate broker Robert Jenson of the Jenson Group, who produces the monthly report. "March showed a strong improvement over the last two months, showing gains in almost every category except average sales price.

Federal bank and thrift regulators are warning servicers the redefault rate on loan modifications where the homeowner's monthly payment is unchanged or increased is "unacceptably high." They said servicers should strive to reduce and make the payments more affordable. The Office of the Comptroller of the Currency and Office of Thrift Supervision have discovered through their quarterly Mortgage Metrics Report that redefaults are cut in half to 23% if the monthly payment is reduced by at least 10%. "By contrast, about 51% of the loans in which payments remained unchanged were seriously delinquent after six months. The comparable number for loan modifications in which payments increased was 46%," the OCC/OTS report says. Only 42% of loan modifications in 2008 resulted in lower monthly payments, although that percentage rose to 50% in the fourth quarter. Modifications that increase payments or leave then unchanged "should only be used on a case-by-case basis where borrowers and servicers can have confidence that the modification is likely to be sustainable," comptroller John Dugan said. Separately, FDIC chairman Sheila Bair told bankers that the streamlined modification program FDIC introduced at IndyMac Bank last October has an 8% redefault rate. The IndyMac program modified 13,000 loans by reducing the homeowners' monthly payments to a mortgage debt-to-income ratio of 38%. After a few months in operation, FDIC adopted a 31% DTI ratio.