Servicing

Negotiations over bankruptcy cram down provisions in a housing bill have hit a snag and Senate Democratic leaders have put off legislative action until late April. "(I)t looks likely that we will not be able to take up this housing bill until the next work period," said Regan Lachapelle, a spokeswoman for Senate majority leader Harry Reid. "We will continue to work with Senator Durbin and Senator Dodd to ensure we have the votes when we move this bill forward." Democratic Sens. Richard Durbin (Ill.) and Christopher Dodd (Conn.) are leading the effort to pass the housing bill (H.R. 1106) with the bankruptcy cram down provisions. Lenders are seeking strong language in the bill to prevent homeowners they can help with a Treasury Department-compliant loan modification from opting into Chapter 13 bankruptcy where a judge can reduce the principal amount of the mortgage. Such bankruptcy protection seems acceptable to consumer groups. But the Center for Responsible Lending wants provisions to ensure low-income borrowers are protected if they cannot afford the monthly payments under a Treasury loan modification. Lenders are concerned this could be a big loophole. Other issues also need to be resolved. CRL president Michael Calhoun told a Women in Housing and Finance symposium that he is optimistic the Senate will pass a bankruptcy bill. "I think a bankruptcy package will come out of the Senate within the next four to six weeks," Mr. Calhoun said. The Senate returns from a two-week spring recess on April 20.

After its stock price dipped to under a dollar earlier this month, Citigroup, the nation's fourth largest residential lender, has seen its stock price more than triple, trading at $3.20 Thursday morning. The company said it plans to both increase the number of shares outstanding and undertake reverse stock split as part of the company's effort to exchange common stock for preferred securities, pending shareholder approval. Late last month, Citi announced that it is seeking to exchange about $27.5 billion in public and private preferred securities as part of its agreement with the Treasury Department, which has pledged to match up to $25 billion of the conversions.

After pleading guilty to conspiracy charges in connection with a multi-million dollar mortgage fraud scheme to commit bank fraud before U.S. District Judge George Caram Steeh, Ali Haidous, a real estate appraiser from Dearborn, Michigan, was sentenced to one year of imprisonment. Haidous admitted to inflating appraisals in a scheme involving 16 total properties located in Detroit, Dearborn, and Dearborn Heights, Michigan. Mortgages totaling $1.9 million were issued on the 16 properties by several financial institutions between April 2005 and April 2008. Haidous admitted to being paid $1,000, rather than his usual fee of $300-$500, for each fraudulent appraisal. Haidous prepared the fraudulent appraisals for co-defendant Hassan Nagi, a mortgage broker from Dearborn Heights, who used the fraudulent appraisals to submit false applications to obtain the mortgages for "straw buyers. Nagi pleaded guilty on Dec. 15, 2008 and is scheduled to be sentenced in April.

The Treasury Department has explained how to use a new website that allows homeowners to learn about Obama administration's new housing plan and whether they can qualify for a loan modification.The new MakingHomeAffordable.gov website has a calculator that allows homeowners to estimate how they could benefit from a modification. "Be sure to check out the calculator that allows homeowners to estimate the reduction to their monthly mortgage that they might get under the plan," a White House blog says. Meanwhile, agency officials are working on a net present value (NPV) test that servicers will use to determine if a loan should be modified. They plan to roll out a standard NPV model soon that provides some flexibility for servicers. For example, a servicer with a low re-default rate would not have to use the national rate.

In an effort to get stalled housing markets going again in their respective jurisdictions, a number of states are following California's lead in adopting tax credits for homebuyers. According to the National Association of Home Builders' Sales and Marketing and Council, plus other sources, legislation awaiting the governor's signature in Utah offers a $6,000 grant to be used by buyers for downpayments. The Kentucky House has cleared a $5,000 tax credit for new home purchasers. A similar measure has cleared the Virginia Senate and has been introduced in the Illinois House. In Georgia, a $3,600 tax credit spread over three years for new homebuyers has passed the lower chamber. These are all in addition to the $8,000 federal tax credit adopted by Congress in February. Also, North Carolina and South Carolina are said to be looking at replicating California's program, which gives Golden State taxpayers who buy a new home a credit of 5% of the purchase price, up to a maximum of $10,000 to be paid out over a three-year period. If adopted, the combined federal-state benefit would be as much as $18,000. In Missouri, meanwhile, the state housing finance agency is advancing buyers the federal tax credit in the form of a short-term loan. Delaware has a similar program, and Pennsylvania, New Mexico and several other states are considering such programs. Builder associations in Indiana, Kentucky, Michigan, New York, Oregon, Tennessee, Texas, Washington are said to be pursuing Missouri's model, which, in effect, "monetizes" the credit so buyers can use it for cash needed to close on their mortgages instead of waiting until they file their tax returns.

The yield on the benchmark 10-year Treasury plummeted to 2.5% Wednesday afternoon after the Federal Reserve said it would give a $1 trillion-plus shot in the arm to the housing and mortgage markets by purchasing $750 billion of agency MBS, $100 billion of Fannie/Freddie debt as well as $300 billion of longer-term Treasury securities. "The Fed is now trying to influence not just the spread between private interest rates and Treasuries (through its mortgage-backed securities purchases, for example), but to pull down the entire spectrum of interest rates by driving down the rate on benchmark Treasuries," said IHS Global Insight chief U.S. economist Nigel Gault in a report. The agency MBS market shortly after 4 p.m. Thursday was "more than keeping up with swaps but not keeping up with Treasuries," Art Frank, director and head of agency mortgage-backed securities research at Deutsche Bank Securities, told MortgageWire. He said agency MBS rallied on the news without any huge volume. Ensuing investor activity was fairly modest with some servicer convexity-related buying but not to any large extent, Mr. Frank said.

Kroll Factual Data and MIAC Analytics formed an alliance at the MBA Technology Conference in Las Vegas to provide whole loan collateral risk assessment to mortgage investors and risk managers. The alliance provides real-time risk metrics to help MIAC's clients measure fundamental risks, said Paul Van Valkenburg, principal at MIAC. He said it also provides customers with current loan value and borrower credit information that allows them to manage portfolio risk accurately and in a timely manner. Specifically, the alliance can deliver information within hours that once took days or weeks, Mr. Van Valkenburg said. Kroll Factual Data assesses consumer data to help clients evaluate loan characteristics and transfer risk. MIAC Analytics' software products assist with deriving loan loss reserve calculations, pricing and valuation of mortgage-based assets and other-than-temporary impairment for securities.

Fannie Mae and Freddie Mac officials are expressing concerns that the American Securitization Forum's efforts to draft consensus secondary market standards could potentially create another mortgage identification standard outside of the MERS Mortgage Identification Number and cause confusion in the industry. ASF has been seeking comment on delivery standards that are still under construction and may or may not include the MERS MIN. The ASF declined to comment on the issue. Each loan registered on MERS is given a unique MIN that identifies that loan. At present, the MIN and registering the e-note on MERS is mandated by both GSEs if they will accept an e-mortgage from any lender. Speaking at the Mortgage Bankers Association's Technology Conference in Las Vegas, Ted Adams of Freddie Mac stressed, "The MIN works and we're using it. The introduction of another loan identification number as purposed by ASF would be confusing." To combat the potential of the MIN being rendered obsolete by anything the ASF creates, R.K. Arnold, president and CEO at MERS, urged lenders to adopt e-processes and use the MIN, arguing that if usage is mainstream, the ASF will have to recognize the validity of the current MIN.

The chairman of the Mortgage Bankers Association, David Kittle, said there are changes coming to the organization that will make it a "lean mortgage machine going forward." He told attendees at the Regional Conference of Mortgage Bankers Associations in Atlantic City those changes will make MBA run like an entrepreneurial business. Details will come by the end of this month. Mr. Kittle made the theme of his speech, "If not now, when?" Speaking to the power of what one person can do, he noted the number of people in the room equals the gap in the disputed U.S. Senate race in Minnesota. As for issues with warehouse liquidity, MBA is meeting with the U.S. Treasury Department looking for the establishment of loan participation programs by Fannie Mae, Freddie Mac and/or the Federal Home Loan Banks. Such a program will reduce capital requirements for lenders and free up funds to be used to originate loans, he said. He addressed the cramdown issue, calling for members to fight for changes to the law. If the industry does not do something about it, "they will do something to us," Mr. Kittle said. He also said he is working with other housing trade groups to go to get a $15,000 tax credit for home purchases, and he called on the administration to drop plans to limit the mortgage interest deduction, declaring, "President Obama, don't kill it, expand it."

Fannie Mae's refinancing volume jumped to more than $41 billion in February, nearly three times the refis the company experienced during the month of January and the largest refinancing volume in nearly a year. Fannie also said more than 100,000 borrowers have accessed its online mailbox to inquire about their eligibility for refinancing under the Obama administration's refinancing plan, and about 50,000 callers have contacted Fannie's national hotline since the plan made its debut on March 4. The government-sponsored enterprise — currently held in government conservatorship — said it has launched a new addition to its website that will allow borrowers to quickly determine if they have a Fannie Mae-held mortgage. This is a determining factor in whether a borrower is eligible for the program, Fannie said.