Servicing

RealtyTrac, Irvine, Calif., is launching a new service called RealtyTrac Renter Alert, which gives tenants advance notice when the property they are renting enters into default or is about to be foreclosed by a lender. Over 30% of homes where the mortgagor has defaulted or the property has gone into foreclosure are not owned by the occupant. Thus, hundreds of thousands of renters are at risk of being evicted, even though many have never missed a rent payment. The new monitoring service sends e-mail alerts to subscribers warning them immediately of any foreclosure activity on a specific property. For more information, visit www.realtytrac.com.

A New Jersey nonprofit organization said it will pay $5.4 million to buy mortgages from JPMorgan Chase that originally were part of a fraud scheme. The Orange, N.J. nonprofit, Housing and Neighborhood Development Services Inc., is buying the mortgages on 47 vacant homes in the greater Newark area. HANDS plans to renovate the homes — many of which are run down — and turn them into affordable housing. The loans, which HANDS bought in bulk, were part of a fraud scheme involving one real estate investor who received financing from Washington Mutual. JPMorgan Chase bought WaMu with federal aid.

Triad Guaranty Inc., Winston-Salem, N.C., has received a corrective order from the Illinois Director of Insurance that declares all valid claims under Triad's mortgage guaranty insurance policies will be paid 60% in cash and 40% by the creation of a deferred payment obligation. The order is expected to take effect on June 1. Ken Jones, president and chief executive, said, "While Triad continues to believe that it has sufficient resources to pay all current and future valid claims, there is more uncertainty today than when we entered run-off in July 2008. Because of this uncertainty, the Illinois Director has determined that it is in the best interests of Triad's policyholders to require Triad to settle claims with a combination of cash and deferred payment obligations, and has issued an Order to that effect." Triad has over $2 billion in claims-paying resources, but given the uncertain economy and decline in the company's capital, he said there is an increase in the possibility the mortgage insurer many not be able to meet future claims obligations. The DPO will be represented by a separate entry in Triad's financial statements and will accrue a carrying charge based on the investment yield earned by Triad's investment portfolio. Payments of the carrying charge and the DPO will be subject to Triad's future financial performance and will require approval of the Illinois Director.

Huntington Bancshares Inc. in Columbus, Ohio, has restructured its relationship with Franklin Credit Management Corp., allowing Huntington to take control of the mortgages and other real estate owned assets that previously served as collateral for the company's commercial loans to Franklin. Four hundred and ninety-four million dollars of fair value first- and second-lien mortgages and $80 million of fair value OREO assets were acquired by Huntington in the restructuring. These OREO assets could be disposed of over the next several quarters. This transaction immediately adds 29 basis points to Huntington's tangible common equity ratio, and the restructuring resulted in a one-time $160 million after-tax benefit. "We can accelerate the resolution and recovery of the value embedded in these assets as this relieves Franklin from the ownership of these assets," said Stephen D. Steinour, Huntington's chairman, president, and chief executive officer. He said the new servicing contract would allow Franklin to pursue the acquisition of third-party servicing arrangements. Huntington noted that it acquired control of the approximately 30,000 mortgages in the restructuring. Through this change, for Huntington, $615 million of existing non-accrual commercial loans to Franklin are eliminated. These balances at year-end were $650 million, with the reduction since then reflecting 2009 first quarter cash payments to date. A $130 million Franklin-specific allowance for credit losses was eliminated in the restructuring.

Concerned that "bad actors" may be originating or brokering Federal Housing Administration-insured loans, Housing secretary Shaun Donovan said the government is sending out "SWAT teams" unannounced to check up on problem lenders. In Senate testimony on April 2, Mr. Donovan acknowledged that the number of FHA-approved brokers now stands at 36,000 compared to just 16,000 in mid-2007. The number of FHA approved lenders has grown by 525% since 2006 to 3,300. Senators serving on a HUD subcommittee fear that FHA delinquency rates are rising rapidly and that problem lenders that used to fund subprime mortgages are now facilitating FHA products. Mr. Donovan admitted that early payment defaults on FHA loans "have increased substantially" but said the growth in problem loans is slower than the overall growth in FHA fundings. He blamed rising EPDs on the economy and job losses.

Irwin Financial Corp. said Wednesday it will be able to remove $690 million in home equity loan assets from its balance sheet in the first quarter and improve its capital ratios as a result of an asset sale that closed Tuesday. The company also said Wednesday it posted a $340 million loss ($11.60 earnings per share loss) for 2008 and a $104 million ($3.54 EPS loss) in the fourth quarter alone. Chairman and chief executive office Will Miller said the improvement in capital ratios slated for the first quarter stems from the sale of mortgage servicing rights and certain platform assets. The MSRs and assets are related to securitized home equity loans sold to Green Tree Servicing LLC, he said. As a result of the sale and Securities and Exchange Commission guidance, Irwin said it reclassified the home equity loans as held-for-sale as of the third quarter of 2008 and restated 3Q08 earnings. The sale is part of the company's exit from national mortgage and home equity lending in favor of a shift to small business lending and community banking that began last April.

Lend America, Melville, N.Y., is further expanding its growing servicing efforts by launching a Fannie Mae servicing initiative. The retail lender, which produced over $450 million in new originations during the first quarter of this year, now expects it will be a $1 billion servicer by the end of the second quarter and a $2 billion servicer by year-end. Chief business strategist Michael Ashley said the $2 billion figure represents a 33% increase from the company's previous forecast. Lend America also is a Ginnie Mae servicer and already more than doubled its servicing portfolio in the first quarter 2009 to over $500 million compared to $223 million as of Dec. 31, 2008.

Home values will continue to suffer through year-end 2010 with most metropolitan statistical areas facing an increased risk of lower prices, according to a new report issued by PMI Mortgage Insurance, Walnut Creek, Calif. PMI says 21 of the nation's 50 largest MSAs "are now in the highest risk category, signifying the highest probability of lower house prices by the end of the fourth quarter of 2010" relative to year-end 2008. But there could be some good news, PMI says: 212 MSAs have a "minimal-to-low risk of lower prices in two years." (The U.S. is divided into 381 MSAs.) PMI, the nation's second largest MI as measured by policies-in-force, published its findings in its "First Quarter 2009 Economic and Real Estate Trends Report."

A slight pickup in non-agency residential mortgage-backed securities prices has been seen in response to the government's latest Public-Private Investment Plan and Term Asset-Backed Securities Loan Facility initiatives, but a fair amount of pessimism linked to other issues persists in the market. There has been a pickup in nonagency RMBS and commercial MBS prices as a result of the PPIP and TALF moves that has been more muted on the RMBS side, said Ron D'Vari, chief executive officer and founder of the New York-based New Oak Capital, confirmed on Tuesday. But the gains have not reversed recent declines from uncertainty about government modification and cramdown plans, he said. Non-agency MBS have risen on average about two to four points in price over the last few days due to some optimism that the government is working to bring transparency and liquidity back to the market, Frank Pallotta, executive vice president at Loan Value Group, Rumson, N.J. said Tuesday. However, economic concerns persist, he said. "Nothing is fundamentally different [economically]," said Mr. Pallotta. "I don't think this is a bottoming out."

Thornburg Mortgage Inc., Santa Fe, N.M., has made plans to discontinue operations after winding down through a bankruptcy filing and a series of asset sales and liquidations, ending a struggle to survive the non-agency liquidity crisis that started in 2007. Remaining assets are slated to be sold or liquidated with the assistance of Houlihan Lokey Howard & Zukin Capital Inc. The company already has agreed to transfer its mortgage servicing rights, which were granted to certain Wall Street firm counterparties as security for TM's obligations under their respective financing agreements. The counterparties are JPMorgan Chase Funding Inc. (formerly Bear Stearns Investment Products Inc.), Citigroup Global Markets Ltd., Credit Suisse Securities (USA) LLC, Credit Suisse International, Greenwich Capital Markets Inc., Greenwich Capital Derivatives Inc., The Royal Bank of Scotland plc and UBS AG. The counterparties have agreed to grant the company additional forbearance from demanding payment on deficiency claims under their various financing agreements through April 30, or earlier if certain events occur. But in exchange for the continued forbearance TM has agreed that the remaining counterparties who have not previously taken possession of their collateral under their respective financing agreements may do so at their discretion. The company said it will not be able to make certain senior subordinated notes payments but has a 30-day grace period before it defaults on these. It does not expect to file its 10-K annual report with the Securities and Exchange Commission. Thornburg Investment Management, which is co-located with TM and has the same chairman as TM, is a separate legal entity and said it would not be affected by TM's situation.