Servicing

Manhattan Bancorp, Los Angeles has agreed to invest in a new mortgage-related capital markets and advisory business with Bodi Advisors Inc. and a new MB subsidiary called MB Financial Services Inc. The three entities plan to capitalize a new limited liability company that will conduct business under the name BOM Capital LLC. BOM Capital is slated to focus on the trading of residential mortgage-backed securities and whole loans for the accounts of customers and the company will be positioned to potentially expand into the origination, brokerage and sales of mortgages. Manhattan Bancorp, which is the holding company of Bank of Manhattan, is set to initially own a 70% stake in BOM Capital with Bodi retaining a 30% stake.

Allowing homeowners to reduce their monthly mortgage payments for the life of the loan can significantly lower the rate of defaults compared to loan modifications that require borrowers to eventually pay past due amounts and fees, according to a new study of recently modified loans conducted by the University of North Carolina at Chapel Hill's Center for Community Capital. Combining lower payments with a writedown of loan balances that exceed home values can prevent even more defaults, says Roberto Quercia, director of the center, part of UNC's College of Arts and Sciences. The study, "Loan Modifications and Redefault Risk: An Examination of Short-Term Impact," analyzed 10,000 loans that were modified to prevent default. These modified loans came from a pool of more than 1.3 million mostly subprime and adjustable-rate mortgages made during the peak of the mortgage boom, from 2005-2006. The results show that the type of modification matters. Six months after receiving a modification, homeowners who got a "traditional modification" - where past due amounts and fees are added to the loan and total payments on it ultimately rise - had a 60% higher rate of delinquency than those whose modifications led to a reduced payment for the life of the loan. A full third of delinquent borrowers in the sample received a modification that ultimately increased their total payments. Homeowners who obtained a rate reduction were about 13% less likely to redefault than similar borrowers who received a traditional modification.

Already ubiquitous for its credit scoring technology, Fair Isaac Corp., Minneapolis, has officially adopted the brand 'FICO' as its corporate identity. "The FICO brand means empowerment, innovation and value...qualities that we've earned over time, that mean a great deal to our clients and partners, and that distinguish us in the marketplace," said Laurent Pacalin, chief marketing officer at FICO. The company will retain Fair Isaac Corp., as its legal name, and its NYSE ticker symbol, FIC. Effective immediately, however, the company logo, website and all other company materials will reflect its new identity: FICO. "The use of the name FICO is a simplification of the company's identity, not a change in strategy," said Mark Greene, FICO chief executive. "Our commitment remains strong as ever to our clients' businesses. We will continue to offer the full breadth of analytics and decision management products and services they need, and to operate in the geographic areas of the world that matter most to them."

Mark Korell, who once headed the nation's largest mortgage banking firm, has joined JPMorgan Chase and will assist the bank in regard to what he calls "cross strategies" tied to its correspondent lending group.Mr. Korell confirmed that he's joining JPM, but offered no other details on what exactly he'll be doing for the company. JPM is the parent of Chase, both the nation's third largest residential funder and servicer.

The California Department of Corporations says residential servicers modified 136,785 mortgages last year, which means the state met its goal of preventing 100,000 foreclosures in 2008.In early 2008 Governor Arnold Schwarzenegger unveiled the "Subprime Mortgage Agreement" where major lenders agreed to freeze interest rates for families at risk of losing their homes to foreclosure. "There have been other resolutions to mortgage issues, but the modification of terms that results in affordable, sustainable payments is the outcome most likely to prevent foreclosure and preserve home ownership for tens of thousands of families in California," said corporations commissioner Preston DuFauchard. Many of the largest state-licensed mortgage lenders and servicers, including the ten who signed onto the Governor's Agreement, now participate in the survey representing more than half of the home mortgage market in California.

Zacks Equity Research predicts that when Freddie Mac releases full-year results shortly the GSE will have lost $39.50 a share. Meanwhile, the Chicago based research firm — which has a "sell" rating on the government controlled GSE — says the company will lose $13.12 a share in 2009, and $9.81 next year. In trading Tuesday, Freddie's shares were selling for 39 cents each. "Though recently the government laid out an expanded role for the GSEs in the housing market as part of its Homeowner Affordability and Stability Plan, we anticipate the price volatility to continue as the market looks for further information on the future structure of the GSEs and their role," Zacks says in a new research note. "Further, as the housing situation continues to worsen, we anticipate higher losses and write-offs. As a result, the conservatorship is expected to continue for a long time and this will yield no value to the common shareholders of the company."

Central States Mortgage, Wauwatosa, Wisc., which provided residential origination services to more than 250 credit unions, shut its doors on Monday, the second closure of a major CU-related mortgage firm in as many months.CSM is owned by 25 credit unions and the Wisconsin Credit Union League. Central States originated $538 million in residential loans in 2008, compared to $707 million the year before. The lender has been embroiled in controversy over the past eight months -- first with the firing of its CEO and founder Richard Jungen, then with a suit claiming Mr. Jungen defrauded it of $15 million through a secondary funding vehicle he owned called Interim Funding. (The alleged fraud took place while he was still managing Central States.) Members United Corporate FCU of Illinois, which provided a warehouse line of credit to Central States, is also preparing to write-off millions of dollars in loans to CSM. A message at the Central States switchboard this morning says the company has suspended operations. Mr. Jungen founded Central States in 1984, then sold a majority stake to the credit unions in 1997. He continued to head the operation until last July when he was fired.

Titan Lenders Corp., Denver, has launched a warehouse lending operations service platform to facilitate community bank and credit union entry into warehouse lending, a sector that is badly in need of liquidity. Titan said the platform will help depositories sustain a prudent level of due diligence, compliance and profitability when offering bridge financing to non-depository mortgage bankers. Mary Kladde, president of Titan, has been outspoken in the need for an increase in the availability of warehouse funds, even going as far as calling for the government to use Troubled Asset Rescue Program money for this purpose. (The Mortgage Bankers Association has done the same.) Titan will provide back-office outsourcing services on a per transaction basis. "Regional banks, community banks and credit unions could be great resources for local mortgage bankers that have lost, are in risk of losing, or need to increase the capacity of their warehouse line, at a time when purchase and refinance activity is picking up," said Ms. Kladde.

The Radian Group, the nation's third largest mortgage insurance company, said as of March 15th it will no longer write new policies on "attached" condominium units.At press time the company could not be reached for comment. According to a new bulletin posted on the MI's website, the Philadelphia-based firm also will no longer insure construction-to-permanent loans and interest-only mortgages. In a new filing with the Securities and Exchange Commission, Radian says it expects to incur "significant" losses this year thanks to large claims on alt-A mortgages, high LTV loans, pool insurance and other products. In 2008 Radian had to pay claims on 110,553 first-lien primary defaults, an 82% increase from the year before. Two weeks ago Radian posted a 2008 net loss of $410 million. Its stock is trading at about $1.35 a share.

Single-family originations by commercial and savings banks totaled $214.6 billion in the fourth quarter, down only 15% from a year ago and 6% from the previous quarter, according to Federal Deposit Insurance Corp. data. Wholesale loan production has held up surprisingly well - totaling $148 billion in the fourth quarter, down only 8.6% from a year ago and 6.1% from the previous quarter. Thrifts originated $52.3 billion in 1-4 family loans in the fourth quarter, down 21% from the third quarter, according to the Office of Thrift Supervision. Compared to the fourth quarter of 2007, loan production at OTS-regulated thrifts is down 64% - mainly due to the failures of Washington Mutual and IndyMac in the third quarter. Meanwhile, an FDIC report shows the delinquency rate on single-family loans held by banks and thrifts jumped dramatically in the fourth quarter. Loans 90 days or more past due or in nonaccrual status hit 4.89%, up more than 100 basis points from the third quarter.