Servicing

Even though JPMorgan Chase earned $2.1 billion in the first quarter, its consumer and mortgage lending group lost $389 million during the same period due to loan servicing and credit charges and higher mortgage costs tied to loan modifications.In particular the company singled out higher servicing costs and MSR "risk management results." JPM CEO Jamie Dimon said the banking giant "benefited from underlying growth" in, among other things, higher mortgage refinancing volumes. Mortgage production revenue for JPMorgan Chase was $481 million, as wider margins on new originations were offset partially by an increase in reserves for the repurchase of previously sold loans and lower mortgage origination volumes. Even though the consumer and mortgage unit lost money, net mortgage servicing revenue totaled $1.2 billion, compared to $1 billion a year ago. JPM said it also bought $34 billion in mortgage-backed securities, and has prevented 150,000 foreclosures since October 2008.

Home building permits hit another all-time low in March with the seasonally adjusted rate weighing in at 513,000 applications, another sign that the housing crisis is far from over.According to new government data, single-family (one-unit) housing starts totaled 361,000 sites (seasonally adjusted), a 7.4% decline from February and an ugly 42% decline from the same month last year. Meanwhile, multifamily starts (five-units or more) fell 15.4% to a seasonally adjusted rate of 132,000 units. Year-over-year multifamily starts plunged 52%. According to Weiss Research, "Tighter funding conditions for construction projects, the large overhang of housing inventory, and the broad economic weakness we're seeing are all conspiring to dampen building activity." Weiss notes that any future recovery "will come in fits and starts, and will take time." Even though the figures were horrible, the National Association of Home Builders said its 'Builder Confidence Index' posted its biggest gain in five years. NAHB chief economist David Crowe said, "we are at or near the bottom of the current housing depression."

The Treasury Department is providing $9.9 billion to six major mortgage servicers for successful loan modification incentives that will be paid not only to them but to borrowers and investors. Administration officials asked Citigroup and JPMorgan Chase and the other companies participating in the Obama administration's loan modification program to estimate how many loans in their portfolios can be modified under the new program to determine the possible cost of the incentive payments. One source familiar with the situation told National Mortgage News that these firms have been lobbying Treasury hard for the incentive payments because they realize the fee income at stake is enormous. According to published reports, Chase Home Finance is receiving a $3.6 billion allotment, Wells Fargo Bank $2.87 billion, CitiMortgage $2.1 billion, GMAC Mortgage $633 million, Saxon Mortgage Services $407 million and Select Portfolio Servicing $376 million. Under the Obama plan, the servicer receives a one-time $1,000 incentive for a loan modification, plus an annual $1,000 incentive if the borrower remains current for three years. The borrower can receive an annual incentive of $1,000 that is applied to principal reduction for up to five years. As an incentive to modify the non-GSE loans, there is a one-time payment of $1,500 payment to the investor.

Can Realtors become catalysts for change in the downtrodden market? The answer, according to one industry veteran, founder of The Distressed Property Institute in Austin, Texas, Alex Charfen is: Yes, if they acquire the knowledge to help homeowners avoid foreclosure.Mr. Charfen is calling on thousands of Realtors across the country to do just that. Since seven out of 10 homes go into foreclosure without any professional intervention, he says, Realtors who are certified as distressed property experts must and can help. Realtors skilled at home pricing can help owners avoid foreclosure. CDPE training and certification is a way for Realtors to not feel "painted into a corner."

Retreat Capital Management, Inc., a third-party arbitration services company in Lake Forest, Calif., is collaborating with Ellie Mae to make its mortgage loan modification services available to more than 120,000 mortgage professionals using the Encompass Mortgage Management Solution. Users may either directly upload borrower information through their Encompass systems, or fax the information to RCM. Retreat Capital uses an advanced rules-based loss mitigation technology platform that interfaces with the lender's servicing system. Once a mortgage is submitted, the technology matches that loan against all available loss mitigation options to determine the most suitable solution. At that point, one of the company's negotiation specialists contacts the borrower to present the available options. Once a resolution is reached, Retreat Capital handles all of the required paperwork and closing activities. "In this market, lenders are in dire need of loss mitigation and foreclosure prevention services, but unfortunately, there's such an influx of activity that they don't always have the time to develop a workable solution on their own," said Arvin Wijay, CEO of Retreat Capital Management.

The number of completed foreclosures soared by 44% in March to a record 175,199, according to the U.S. Foreclosure Index. The index, released by ForeclosureS.com, Sacramento, Calif., shows the total number of first quarter 2009 foreclosures "is the highest quarterly total of completed foreclosures" since the crisis began. The number of pre-foreclosure filings also reached a new high: 600,000.

Title insurance giant Fidelity National Financial, Jacksonville, Fla., has increased the size of its planned public offering to 15.8 million shares, pricing the stock at $19.Originally, it was slated to sell 13.3 million shares. The new shares being issued are covered under an existing shelf registration the company has with the Securities and Exchange Commission. Earlier this week Fidelity said it would post a first-quarter loss of 6 to 10 cents a share, compared with a profit of 13 cents a year earlier. In December Fitch downgraded Fidelity's credit rating to junk after it bought LandAmerica, a troubled competitor in the title space. At press time its shares were trading at just over $19 a share compared to a 52-week low of $6.66 and a high of $22. Fidelity said it plans to use the proceeds of the stock sale "for general corporate purposes," including the potential repayment of $1.1 billion in syndicated credits.

UBS AG said Wednesday that it expects to report a first quarter net loss of nearly $1.75 billion and that it plans to reduce its workforce by more than 11%.Three years ago the bank was a top ranked subprime securitizer and warehouse lender. In a speech at the company's annual general meeting in Zurich, Group CEO Oswald J. Grübel said the poor performance stems from continuing credit charges tied to illiquid risk positions, and valuation adjustments — most of which are tied to mortgages. Having cut nearly 11,200 jobs since it began writing down mortgage-related securities, UBS expects to reduce its staff to about 67,500 worldwide in 2010 compared to 76,200 currently employed. In addition, the banking giant announced it will exit high-risk and "unpromising businesses" and is currently reviewing which businesses it will remain active in. "We know where we have to get to work," said Mr. Grübel. "It will be a long road back to success without any quick fixes. Rather, we will move forward step by step in a rigorous and disciplined manner."

The cost to service residential mortgages is rising significantly, according to preliminary research conducted by the Mortgage Bankers Association.Speaking at a recent servicing conference MBA chief economist Jay Brinkmann said "costs per loan are way up," adding that the reason is loan modifications. Mortgage bankers with large portfolios are adding both phone lines and additional employees to rework loans, adding to expenses. MBA is working on its annual cost survey which should be released later this year. On a different topic, Mr. Brinkmann said some portfolio lenders that he's spoken with "are happy as can be" because their cost of funds (deposits) are "so low" right now.

The Senate is expected to vote on a bill next week to expand bank fraud statutes to cover independent mortgage companies and mortgage brokers for the first time.The new definitions for "financial institution" and "mortgage lending business" will ensure that mortgage brokers and mortgage companies are held fully accountable under the federal fraud laws, according to a summary of the bill (S. 386). The Senate Judiciary Committee approved the bill by unanimous vote on March 5. Senate Majority Leader Harry Reid, D-Nev., filed a cloture motion just before Congress left for its two-week spring break to counter any attempt to filibuster or block Senate consideration of the mortgage fraud bill when Congress returns next week. The Fraud Enforcement and Recovery Act also authorizes $165 million in appropriations to fund mortgage fraud investigations by the Justice Department, HUD inspector general and U.S. Secret Service.