Servicing

California's real estate professionals are putting their money where their collective mouths are. The California Association of Realtors is dedicating $1 million to back a mortgage protection plan for first-time buyers. Under the group's Housing Affordability Fund, should buyers who haven't owned a home within the last three years lose their jobs, they will receive up to $1,500 a month to cover their house payments for six months. A qualified co-buyer also can participate in the program, and receive an additional monthly benefit of $750 per month for up to six months. The plan is for W-2 employees only, self-employed persons need not apply. "The Mortgage Protection Program was developed to help ease the anxiety of consumers who are concerned about potential job loss," said CAR President James Liptak, who estimated that as many as 3,000 families will benefit from the plan. There are some other requirements. A CAR member must be involved in the transaction. And the property must be located in the Golden State. The program, which will be open to rookie buyers who close by the end of the year, also includes coverage for accidental disability and a $10,000 death benefit. With 180,000 members, CAR is the largest state affiliate of the National Association of Realtors.

Mortgage companies pared their payrolls by only 200 full-time employees in February and it appears employment is finally stabilizing with the increasing demand for refinancings and loan modifications. The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector fell from 271,300 in January to 271,100 in February, down 18% from a year ago. Orawin Velz, director for economic forecasting at the Mortgage Bankers Association, expects the refinancing boom will be sustainable and mortgage executives will have to begin hiring. "We should see some pickup in the coming months," Ms. Velz said. But she cautioned industry employment will rise very slowly, possibly to 300,000 by the end of the year.

Fannie Mae has warned its servicers that they face a new wave of mortgage buyback requests — this time for defects on unsecured loans that were extended to delinquent mortgage borrowers. According to a report in American Banker, the GSE last week cited six errors that servicers frequently make as it issued new guidelines for its HomeSaver Advance program, under which an unsecured loan for up to $15,000 is given to the borrower to cover arrears. These range from clerical mistakes, such as filling out the wrong form, to more significant problems like using the program on mortgages that are ineligible. Such errors can put a servicer on the hook to repurchase the unsecured loans, Fannie said. The new guidelines apply retroactively, meaning the GSE can make a servicer buy back any of the 71,000 advances Fannie has bought since it started the program last year, if they are found to be defective. "Everybody gets the sense that there's going to be a big 'gotcha' because delinquencies are rising and they want to put the risk on somebody else," said Cheryl Lang, the president of Integrated Mortgage Solutions, a Houston consulting firm.

Wells Fargo & Company plans to expand its presence in warehouse lending using a platform it acquired when it bought Wachovia Corp. at year-end, according to industry officials familiar with the matter. Two sources at Wells confirmed the move but at press time a spokesman could not be reached for official comment. "The good news is that not only are they going to stay in it but they're going to expand it out," said one warehouse advisor. It's believed that at year-end Wachovia had commitments of about $1 billion. Non-depositories depend on warehouse credit to make loans in the primary market. Warehouse lending has been severely restricted because many banks and Wall Street firms have left the sector because of losses, failures, or capital restraints.

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.