Servicing

The president of Metropolitan Money Store, Joy Jackson of Fort Washington, Md., pleaded guilty for her role in the company's massive mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit. According to her plea agreement, Jackson helped incorporate MMS, which offered foreclosure consultation and credit services to financially distressed homeowners. From September 2004 to June 2007, Jackson and others conspired to fraudulently promise to help homeowners avoid foreclosure and repair their damaged credit. The homeowners were directed to allow title to their homes to be put in the names of straw buyers for a year, during which time MMS promised to improve the homeowners' credit ratings, help them obtain more favorable mortgages, and eventually return title to their homes to them. The homeowners were told that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit. The straw buyers were paid up to $10,000 to participate in the scheme and allow the properties to be put in their names. Jackson also served as a straw buyer on several properties in Maryland. In addition, Jackson directed others to transfer the equity proceeds of homeowners into the general checking accounts of MMS as well as her personal accounts. She withdrew these funds and paid for goods and services for herself, including art, cars, clothing, credit card bills, homes, fur coats, furniture, airline trips, gambling expenses, jewelry, limousine services, student tuition and a luxury wedding for herself and an alleged conspirator. As a result of this scheme, the total loss attributable to Jackson, including the estimated losses to the mortgage lenders, is $16.88 million. Jackson is the seventh defendant to plead guilty in the MMS mortgage fraud scheme. Sentencing is scheduled for Nov. 16.

Loan sale advisory firm DebtX, Boston, plans to sell through two separate sales a total of 108 million euros ($147 million) in nonperforming real estate loans from financial institutions in Germany. The first sale involves 94 million euros ($128 million) in nonperforming commercial real estate loans from throughout Germany and is scheduled to take place on April 23. The second involves 14 million euros ($19 million) of nonperforming loans secured primarily by residential real estate in East Germany and it is scheduled to take place on May 14. The company expects to hold additional European loan sales in coming months as more financial institutions in the euro zone seek to sell the assets rather than managing them through prolonged workouts, said DebtX managing director Gifford West.

Attorney J. Thomas Cardwell of Akerman Senterfitt has been appointed to serve on the Florida Supreme Court's task force on residential mortgage foreclosures. The task force recommends policies, procedures, strategies, and methods for easing the backlog of foreclosure cases while protecting the rights of parties involved in them. An interim report from the task force is due by May 8. The task force has 15 members, including state judges, consumer advocates, mediators and lenders. Mr. Cardwell is chair of Akerman Senterfitt's financial institutions practice, a former chairman of the firm and general counsel to the Florida Bankers Association.

Integrated Asset Services LLC, a Denver-based default management and residential collateral valuation services provider, has rolled out a new product, called the "Conditioned Valuation Model." The company describes a CVM as a cost-effective tool that allows the integration of automated property analytics with human observation, adding that it falls out on the continuum between an automated valuation model and a broker price opinion. A CVM delivers a real-time, 360-degree view of the condition of the property, the neighborhood, the condition-adjusted value and market price trends. "Traditionally, the industry has had the choice of a more expensive human-based solution or faster and riskier automated solutions. But the current mortgage industry requires these two valuation approaches interact intelligently and at the right price point," said Dave McCarthy, chief executive of IAS. A CVM costs half the price of a standard BPO. The executive said CVM was designed to help avoid AVM failure to disclose supporting data and valuation methodologies that result in questionable property valuations. The CVM uses a valuation formula that integrates property data from IntelliReal, IAS' technology partner, to provide real estate intelligence, analysis, current neighborhood sales data and active listings. The data is then combined with a hands-on inspection performed by a third-party property inspection firm, including photos on the subject property and its neighborhood condition, occupancy status, and conditions that impact value.

Fitch Ratings in Chicago has downgraded the long-term issuer default ratings of Birmingham, Ala.-based Regions Financial and its bank subsidiary, Regions Bank, to 'A' from 'A+', reflecting asset quality deterioration, expected earnings pressure, as well as continued economic uncertainty. Fitch said the company has a solid core funding base and good capital position. Problem loans have been mainly centered in the homebuilder, condominium, and home equity (especially Florida second lien home equity) portfolios, which collectively total $9 billion or 9% of the total portfolio. While nonperforming assets are elevated from historical levels, Regions' efforts to actively address its problem assets have helped contain the overall pace and level of deterioration. Although Regions has actively managed its stressed loan portfolios, especially in fourth quarter-2008, Fitch said it expects performance pressures to continue throughout 2009 and it anticipates that it may be difficult for the company to return to profitability in 2009 given the need to address problems elsewhere in its loan book, which could ultimately weaken its recently bolstered capital base.

Industry veteran Tom Donatacci, senior vice president of business development and subservicing for Residential Capital Corp., Horsham, Pa., has left the company. At press time Mr. Donatacci could not be reached for comment. A spokeswoman confirmed that he had left ResCap, noting that his separation was "absolutely voluntary." ResCap added that, "We are aggressively conducting an internal and external search to fill the head of fee-based servicing position. This leadership role is critical to our ongoing commitment to growing volumes in our subservicing business." Among his duties Mr. Donatacci was involved in overseeing ResCap's subservicing business. A former executive at both Lehman Brothers and Cohane Rafferty Securities, he left the lender/servicer about 10 days ago. Cerberus Capital, which is a hedge fund, and General Motors own ResCap.

Mission Capital Advisors, LLC in New York is now accepting bids for a commercial real estate mortgage loan and real estate owned portfolio with an outstanding balance of $48 million. The sale offers prospective bidders an opportunity to acquire nonperforming and REO assets secured by a variety of collateral types, including office, industrial warehouse, retail, condominium, town homes, marinas, single family residential, and commercial development land. On behalf of a Southeastern super regional bank, Mission Capital is soliciting final bids from investors for the purchase of individual loans/REO, any combination of loans/REO, or the entire portfolio. Overall, there are 17 loans or REO assets available, including five loans in Florida, four loans in South Carolina and six loans and two REO assets in Georgia. The portfolio is divided into several single asset pools, allowing investors to target specific assets by performance, collateral type or geography based on their individual acquisition criteria, said Will Sledge, director at Mission Capital Advisors.

The recent performance of prime jumbo residential mortgage-backed securities from 2005-2007 suggests average losses on the securities might be about three or more times what was previously expected, but there appears to be some hope government initiatives could still make a difference, according to Fitch Ratings. Fitch said it "will continue to assess the range of potential impacts of government housing stabilization efforts on nonagency prime RMBS" and also will "continue to closely monitor other potential mitigants to performance deterioration, such as federal financial stability efforts." Currently, Fitch expects 2005, 2006 and 2007 loss estimates to be "approximately three, four and five times higher, respectively, than prior loss estimates." Huxley Somerville, Fitch's U.S. RMBS group head, said dramatic increases in delinquencies resulting from declining home values, rising unemployment and lack of refinancing alternatives, combined with declining credit enhancement are pressuring jumbo ratings. Fitch said borrowers with negative equity in some recent vintage pools "are approaching 50%" and "after adjusting for home price declines to date, loans estimated to have no equity in the property are defaulting at rates approximately three times that of loans estimated to have equity remaining."

The Mortgage Bankers Association has drafted and sent to Washington officials a regulatory reform proposal suggesting how a new federal mortgage regulatory agency the group has been calling for might set lending and servicing rules for the entire mortgage industry, regardless of charter or license. "Under our proposal, we are calling for one federal regulator to implement standards and oversee all mortgage bankers and brokers," MBA president and chief executive John Courson said. State and federal regulators would sit on the board of directors of the newly created Federal Mortgage Regulatory Agency, which will establish uniform lending standards and update them as needed without going to Congress for approval. "The new regulator also will work with federal and state regulators to enforce lending standards for their regulated entities," MBA says in a letter to House and Senate banking committee leaders.

The Office of Management and Budget is considering changes to the estimates the Federal Housing Administration is using for house values over the next several years, which could lead to a possible increase in mortgage insurance premiums FHA charges on single-family loans. Sources also note that losses on FHA loans with seller-funded downpayment assistance continue to rise. A re-estimate by OMB could show "massive losses," which might require a congressional appropriation or higher premiums, said a former Department of Housing and Urban Development official. William Apgar, senior advisor to the HUD secretary for mortgage finance, said HUD is working with OMB, but he could not comment further because the budget projections have not been finalized yet. Mr. Apgar noted that FHA is vulnerable to rising unemployment, declines in house prices and a weak economy. The FHA program has weathered many housing downturns, Mr. Apgar said. "FHA has historically played the role as the stabilizer in tough markets." OMB is expected to send the President's fiscal year 2010 budget to Congress in late April to early May.