Servicing

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.

Consumers that are trying to modify their mortgages are carrying, on average, about $19,000 in additional unsecured debt, and this poses a major obstacle to rewriting such loans, according to the Consumer Credit Counseling Service. Speaking at SourceMedia's Mortgage Servicing Conference in Dallas, CCCS president Suzanne Boas said, "Now, consumers are paying their credit cards before other bills." She noted that consumers are essentially using credit cards for such daily living expenses as food and gas. Tom Deutsch of the American Securitization Forum noted that whatever a servicer does in regard to loan mods "it's critical" that any second liens on the title should not be wiped out. North Carolina's deputy banking commissioner Mark Pearce reminded the audience that 70% of seriously delinquent homeowners are not involved in any type of loss mitigation process at all.

The size of Freddie Mac's real estate-owned inventory is being driven by various foreclosure moratoriums which have led to a 32% vacancy rate, said Ingrid Beckles, senior vice president of default asset management. Speaking at the SourceMedia Mortgage Servicing Conference in Dallas, she said Freddie Mac saw 52,000 in real estate-owned inflow in 2008 with 5,400 properties going through disposition last month. Ms. Beckles stressed how imperative it is for servicers to get to borrowers earlier and restructure loans by using operational efficiencies and proper risk management, parallel to what happens in the origination process. "It's a new concept. Think of it more as offerings and fulfillment. We have to collect documents and get the loan package approved." Its loan modifications over the past five years have seen a 22% redefault rate. Ms. Beckles encouraged servicers to know what loans are sitting in their portfolios and to use targeted risk-based dialing to connect with borrowers. Use automated tracking and case management as well as some type of scoring mechanism to get to these folks earlier, she said. "Foreclosure prevention is moving forward to help add some stability to this tumultuous market."

Federal and state authorities announced a new joint effort to stop scam artists who target troubled owners struggling to hold onto their homes. "If you prey on vulnerable homeowners," U.S. attorney general Eric Holder said at a press conference, "we will find you and we will punish you." As part of the initiative, the Treasury Department's Financial Crimes Enforcement Network has issued an advisory to help financial institutions spot questionable loan modification schemes and report that information to the authorities. FinCEN, working with other law enforcement agencies and regulators, will identify possible suspects for civil and criminal investigations. "We will shut down fraudulent companies more quickly than before," said Treasury secretary Timothy Geithner, vowing to target "companies that otherwise would have gone unnoticed under the radar." Calling perpetrators of fraudulent rescue schemes "bottom feeders," Federal Trade Commission chairman Jon Leibowitz said five new cases have been brought against companies who "kick people when they are down, sabotaging" their efforts to save their homes. Four of the cases name outfits which use "copy-cat names and logos" to try to trick homeowners into thinking they are working with legitimate government agencies, while the fifth calls itself the "Federal Loan Modification Center" even though it has no federal connection. The FTC also has sent warning letters to 71 additional possible scam artists who promise to stop foreclosures, save people's houses and claim a 97% success rate of doing so. Such companies "will promise" to do these things "but they don't," said Illinois attorney general Lisa Madigan. "All they do is take your money."

Triad Guarantee recently received a corrective order from the Illinois director of insurance, which would impact its insurance subsidiaries, Triad Guaranty Insurance Corporation and Triad Guaranty Assurance Corporation.Under the order, effective June 1, 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. "Continuing volatility in the housing and mortgage markets, a high incidence of fraud and noncompliance with underwriting programs in the loan origination process make it very difficult to forecast Triad's future financial position and claims," said Triad CEO Ken Jones. The company said "there is more uncertainty today than when we entered run-off in July 2008." The MI, the nation's smallest, is in the process of self-liquidation. Its shares trade for just 29 cents each.

Nearly one third of Federal Housing Administration foreclosures completed in 2008 involved FHA loans with seller-funded downpayment assistance, HUD secretary Shaun Donovan told senators. FHA loans where the downpayment assistance was arranged by non-profit housing groups represented only 12% of all FHA loans at the start of 2008. "Much or our recent loss activities have been attributed to the growth of seller-funded downpayment assistance," the Department of Housing and Urban Development secretary testified. Congress banned such down payment assistance on FHA loans. That ban went into effect October 1, 2008. "The termination of this program should substantially reduce FHA losses in new originations in the years ahead," Mr. Donovan testified.

Federal Housing Administration is experiencing elevated defaults and foreclosures, but FHA loans continue to outperform subprime loans, according to HUD secretary Shaun Donovan. "Although this is a challenging time for all entities in the mortgage market, FHA is unlikely to face the catastrophic losses borne in the subprime sector," the Department of Housing and Urban Development secretary told a Senate appropriations subcommittee. He noted that only 7% of FHA loans are seriously delinquent or in foreclosure, compared to 23% for subprime loans. In addition, FHA is not overexposed in high-cost markets like California because of its loan limits. The Office of Management and Budget is expected to release its fiscal year 2010 budget in a few weeks. It will include re-estimates of FHA's performance and financial strengths. It is unclear if this re-estimate will lead to losses that Congress will have to cover or force FHA to charge higher mortgage insurance premiums. "We should, within a few weeks, be able to present to you our estimates of whether it will be self financing," Mr. Donovan told a Senate appropriations subcommittee. FHA single-family insurance program has always operated without congressional appropriations.