Servicing

Foreclosures increased in February across all regions despite temporary halts by major banks and Fannie Mae and Freddie Mac, according to the latest U.S. Foreclosure Index released by Foreclosures.com. The company, based in Sacramento, Calif., said the increase was seen primarily in the second half of the month. Completed foreclosures in February reached the highest monthly total since the foreclosure crisis began, soaring by more than 67% over January's reduced foreclosures. In February, 121,756 new foreclosures were completed, up from 72,694 in January, which had seen a 26% drop from December's 97,841 foreclosures. The index found the number of pre-foreclosure filings also increased, hitting 207,703 in February, up more than 24% from 166,860 in January. Alexis McGee, president of Foreclosures.com, said many homeowners are in trouble and rising unemployment continues to intensify the problem. "Nearly all the bank moratoria have since expired or are about to expire," she said. "Annualizing the first two months of this year, if foreclosures were to continue unabated, we could end up with another 1.2 million homes back in lenders' hands by year-end." Regionally, the index of real estate owned showed completed foreclosures in the Southwest for February were up more that 63% from January. In the Midwest, REO went up nearly 90%; in the Southeast, REO increased more than 46%; in the Northeast, REO grew by 138%. REO in Alaska and Hawaii went up nearly 68% from January, and up 28.6% from September 2008.

Foreclosure filings were reported on 290,631 properties during February, an increase of nearly 6% from January and up almost 30% from February 2008, RealtyTrac's February 2009 U.S. Foreclosure Market Report shows. The increase is somewhat surprising, given that many of the foreclosure prevention efforts and moratoria in place in January were extended through most of February as well, said James J. Saccacio, chief executive officer of RealtyTrac. "There were some notable exceptions to this: a 45-day voluntary moratorium in Florida expired at the end of January, and foreclosure activity there was up 14%; and many New York foreclosure proceedings delayed by a new law for an extra 90 days appear to have hit the system in February, when the state's foreclosure activity increased 23 percent from January." Nevada continued to document the nation's top state foreclosure rate. Foreclosure filings were reported on 15,783 properties, a 9& increase from January and a 156% increase from February 2008. Arizona posted second highest rate with one in every 147 housing units receiving a filing, and California was third with one in every 165 housing units receiving a foreclosure filing. Foreclosure filings were reported on 80,775 California properties in February, the most of any state and a 5% increase from January. The state's foreclosure activity increased 51% from February 2008, with auction sale notices increasing nearly 179%.

The weakening economy and continued credit crunch contributed to increases in commercial/multifamily mortgage delinquencies during the fourth quarter of 2008, according to a report from the Mortgage Bankers Association. "As expected, the weakening economy continues to take a toll on the performance of commercial and multifamily mortgages," said Jamie Woodwell, vice president of commercial real estate research. "But commercial and multifamily mortgages are actually performing better than just about every other type of loan. Of more than 35,000 commercial/multifamily mortgages held by life insurance companies, only 33 loans were delinquent at the end of 2008, and commercial/multifamily mortgages ended 2008 as some of the best performing loans held by commercial banks and thrifts." In addition to the Commercial/Multifamily Delinquency Report, the MBA released a research data note reviewing the performance of commercial/multifamily mortgages held by banks and thrifts. The note finds that commercial mortgages and multifamily mortgages are the best performing loans, ranking lowest among bank loans in terms of charge-off rates, second and third lowest in terms of 30-day plus delinquency rates and second and third lowest in terms of increases in delinquency rates between the third and fourth quarter. Between the third and fourth quarters, the 30-day plus delinquency rate on loans held in commercial mortgage-backed securities rose 0.54 percentage points to 1.17%. The 60-day plus delinquency rate on multifamily loans held or insured by Fannie Mae rose 0.14 percentage points to 0.30%. The 90-day plus delinquency rate on multifamily loans held or insured by Freddie Mac stayed the same at 0.01%. The 90-day plus delinquency rate on loans held by FDIC-insured banks and thrifts rose 0.24 percentage points to 1.62%.

Ocwen Financial Corp.'s net loss narrowed 46% from a year earlier to $3.7 million ($0.06 per share) last quarter as the servicer of subprime mortgages cut operating expenses. The West Palm Beach, Fla., company said it incurred $14.7 million of paper losses, after taxes, on trading securities and investments. Income from the core servicing business jumped 44% to $18 million, as the unit's operating expenses fell 16% to $40 million. However, revenues from the business declined 6.7% to $75.7 million as faster prepayment speeds caused the servicing portfolio to contract 24%, to $40 billion of loans. William Erbey, Ocwen's chairman and chief executive, said that in December and January it renewed $500 million of credit lines that finance servicing advances. The company is "developing advance financing facilities with new private sector providers," he said. Ocwen has also joined an industry coalition that is seeking to have the government-sponsored enterprises guarantee such advances and the Federal Reserve Board's Term Asset-Backed Securities Loan Facility finance them, Mr. Erbey said.

PNC Bank has decided to pull the plug on National City's warehouse lending operation, giving non-banks that borrowed from the unit 12 to 18 months to find new lenders, National Mortgage News has learned. At press time a spokesman for the Pittsburgh-based PNC confirmed that the bank was indeed exiting the warehouse sector but would not comment on a time frame or how many jobs will be lost at NatCity's unit. (PNC bought the Cleveland-based bank earlier this year.) According to exclusive survey figures compiled by NMN, National City ranks second, nationwide, in terms of warehouse commitments to non-bank mortgage lenders. At year-end NatCity's warehouse group had agreed (or committed) to lend $2.2 billion to non-bank mortgage firms. "This is really going to hurt," said one advisor who works on warehouse issues. "NatCity is a big provider." The advisor, who requested his name not be used, said five non-bank borrowers received word of the pull out today. At year-end the largest warehouse provider, in terms of commitments, was Colonial Bancgroup, Montgomery, Ala. In trading Wednesday Colonial's shares ended at 36 cents. The depository has applied for government backing under the Troubled Asset Relief Program. A few weeks ago JPMorgan Chase exited the warehouse lending arena.

MGIC Investment Corp., the nation's largest mortgage insurer, said it would defer by 10 years an interest payment on $390 million worth of subordinated debentures, igniting a steep selloff in its stock during the morning of March 12. Originally, MGIC was scheduled to make an interest payment on April 1. The convertible debentures carry a yield of 9%. In a new public filing MGIC said, "During this 10-year deferral period interest on the debentures will not be due and payable but will continue to accrue and compound semi-annually to the extent permitted by applicable law at an annual rate of 9%." The payment delay was cited by Fitch Ratings, which promptly placed the ratings of the MI and its parent on its "Rating Watch Negative" list. However, Fitch noted that MGIC's liquidity remains "adequate to meet intermediate term needs." It noted that the company has $394 million of cash which mitigates "the risk of breaching certain covenants on the company's $200 million bank line." At midday on March 12, MGIC shares were trading down 37% to $0.78. Its 52-week high is $15.

Freddie Mac posted a $23.9 billion loss in the fourth quarter, noting that its regulator has filed a request with the U.S. Treasury for $30.8 billion in new funding to maintain the GSE's net worth position above zero. For the full year, Freddie lost a stunning $50.8 billion, a record for the company which has been operating under a federal conservatorship since last summer. Two weeks ago Freddie's fellow GSE, Fannie Mae — also a ward of the government — reported a 4Q net loss of $25.2 billion and full year loss of $58.7 billion. Freddie's new CEO John Koskinen blamed the quarterly loss on mark-to-market accounting adjustments of $13.3 billion, and problems in its derivatives portfolio, among other items. The mortgage investing giant also cited credit-related charges on its residential portfolio. The firm cited rising delinquencies, weak labor markets, and "steeper" declines in home prices. Freddie and Fannie together invested in well over $200 billion in subprime-related securities during the height of the nonprime boom.

Freddie Mac posted a $23.9 billion loss in the fourth quarter, noting that its regulator has filed a request with the U.S. Treasury for $30.8 billion in new funding to maintain the GSE's net worth position above zero. For the full year, Freddie lost a stunning $50.8 billion, a record for the company which has been operating under a federal conservatorship since early January. Two weeks ago Freddie's fellow GSE, Fannie Mae -- also a ward of the government -- reported a 4Q net loss of $25.2 billion and full year loss of $58.7 billion. Freddie's new CEO John Koskinen blamed the quarterly loss on mark-to-market accounting adjustments of $13.3 billion, and problems in its derivatives portfolio, among other items. The mortgage investing giant also cited credit related charges on its residential portfolio. The firm cited rising delinquencies, weak labor markets, and "steeper" declines in home prices. Freddie and Fannie together invested well over $200 billion in subprime-related securities during the height of the nonprime boom.

PNC Bank has decided to pull the plug on National City's warehouse lending operation, giving non-banks that borrowed from the unit 12 to 18 months to find new lenders, National Mortgage News has learned.At press time a spokesman for the Pittsburgh-based PNC confirmed that the bank was indeed exiting the warehouse sector but would not comment on a time frame or how many jobs will be lost at NatCity's unit. (PNC bought the Cleveland-based bank earlier this year.) According to exclusive survey figures compiled by NMN, National City ranks second, nationwide, in terms of warehouse commitments to non-bank mortgage lenders. At year-end NatCity's warehouse group had agreed (or committed) to lend $2.2 billion to non-bank mortgage firms. "This is really going to hurt," said one advisor who works on warehouse issues. "NatCity is a big provider." The advisor, who requested his name not be used, said five non-bank borrowers received word of the pull out today. At year end the largest warehouse provider, in terms of commitments, was Colonial Bancgroup, Montgomery, Ala. In trading Wednesday Colonial's shares ended at 36 cents. The depository has applied for government backing under the Troubled Asset Relief Program. A few weeks ago JPMorgan Chase exited the warehouse lending arena.

Fitch Ratings, Chicago, has downgraded the issuer default rating of Stewart Information Services Corp., Houston, to 'BBB' from 'BBB+'. Fitch has also downgraded the insurer financial strength ratings of Stewart Title Guaranty Co., to A- from A. The Rating Outlook has been revised to Negative from Stable. This action was driven by deterioration in Stewart's absolute and risk adjusted capital levels in the fourth quarter of 2008. "An area of concern is Stewart's debt structure whereby the $107.6 million of unsecured debt may be called for any reason by the issuing banks. This constraint places an additional liquidity strain for the company particularly given the current stressful environment. Favorably, the company continues to reduce the amount outstanding by paying the obligations as they mature. Of the $62.4 million due this year approximately half has already been extinguished," Fitch said. The agency added that the company's ratings had been based on the assumption that technology investments may have allowed the title unit to show better margins than its peers in a down market, but this has not been the case.