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The FHA is experiencing "a large number of zero payment defaults" in which borrowers fail to make even one payment on their new government-insured mortgages, a Department of Housing and Urban Development official said at the Mortgage Bankers Association's annual National Fraud Issues Conference in Las Vegas. The trend, which Lisa Gore, the assistant special agent in charge of the criminal investigation division in HUD's inspector general's office, called "a huge red flag" that some type of fraud has been committed, is similar to the one experienced in the 1999-2001 housing market turndown. Ms. Gore's remarks confirm a front page Washington Post report earlier this month that many FHA borrower's are defaulting as quickly as they close. The newspaper's analysis of FHA data found that more than 9,200 loans insured by the agency in the past two years have gone delinquent with either one payment or no payments being made. The analysis found that the pace of what the Post called "instant defaults" has tripled in the last year, and more than two dozen loans are defaulting in this manner every week, the newspaper reported. Ms. Gore said the IG's office has stepped up the number of investigations into the "large number" of these and other cases of possible fraud. One investigation involves "more than 100 loans," she told MortgageWire.

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 that, "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.

There are two different recommendations regarding the common stock of PMI Group Inc., Walnut Creek, Calif., after the company announced both a fourth quarter loss and its search for new capital.Zacks Equity Research, Chicago, has upgraded its recommendation on the shares of PMI to a 'hold.' Zacks said "the shares have already yielded more than a 99% return since we recommended them as a sell in September 2007. At this point, we think that the downside potential is rather limited, and we would advise the investors to book profits on their positions." Meanwhile, FBR Capital Markets analyst Steve Stelmach said in a new research report that PMI's capital structure and ultimate loss development "remain very much in question. Without improved visibility on either metric, we believe investors are better served shying away from the risks associated with PMI and the mortgage insurance stocks generally." FBR maintained its 'market perform' rating on PMI while lowering its price target for its common stock from $5 to $1, reflecting the company's significant cost of capital relative to its need for some form of capital relief.

Fannie Mae and Freddie Mac increased the pace of loan modifications in the fourth quarter, but repayment plans continue to represent over 75% of the GSEs' workout efforts, according to a Federal Housing Finance Agency report. The GSEs completed nearly 23,780 loan modifications in the fourth quarter, compared to 13,500 in 3Q. In December, the GSEs initiated 29,100 workout plans compared to 8,700 loan modifications. The FHFA report shows Fannie is continuing to deploy its 'HomeSaver Advance' program, which allows the agency to make small, unsecured loans to homeowners so they catch up on their payments. These advances immediately cure delinquent loans and Fannie does not have to absorb the cost of purchasing the loans out of securitized pools. Fannie made 9,300 HomeSaver advances in December, compared to 8,760 in September when the GSEs were was placed in conservatorships. Freddie does not have a similar program. Meanwhile, GSE loans 90 days or more past due (including those in bankruptcy and foreclosure) rose to 2.14% in December from 1.52% in September. "When adjusted for the suspension of foreclosure sales, the rate would have been 2.1%," the GSE regulator said. Fannie and Freddie suspended foreclosure sales in late November and December for the holidays.

Thornburg Mortgage, once a top ranked originator of "super jumbo" loans, said Tuesday it may file for Chapter 11 bankruptcy protection and has hired the law firm of Kirkland and Ellis to advise it on restructuring options.A REIT that is publicly traded on the "pink sheets," Thornburg said its lenders — which include such names as Citigroup, Credit Suisse, JPMorgan Chase, and Greenwich Capital — have agreed to give it certain forbearances on its loans "through March 31." The company was de-listed by New York Stock Exchange late last year. Its shares trade for just 2 cents compared to an all time high of $140. It has an on-balance sheet portfolio of roughly $20 billion that it services on a monthly basis and needs to finance.

Fitch Ratings, New York, expects that in the near to medium term, retail will represent a growing proportion of overall defaults in the commercial mortgage-backed securities sector. The rating agency said, "declining retail performance was chiefly responsible for a 13 basis point increase in delinquencies in February" when Fitch's U.S. CMBS loan delinquency index was 1.28%. "The rate of increase is consistent with Fitch's expectations that loan defaults will increase to at least 3% by year-end 2009," Fitch said.

U.S. commercial real estate loan collateralized debt obligation delinquencies may increase faster than expected this year, according to Fitch Ratings, New York. "With CREL CDO delinquencies increasing 1.3% on average over the last two months, the default rate for year-end 2009 could exceed Fitch's initial base expectation for the life of the transactions if this pace continues," said Fitch senior director Karen Trebach. U.S. CREL CDOs delinquencies increased to 5.4% in February from 3.8% in January, according to Fitch Ratings, New York.

Senate Democratic leaders want to pass a bankruptcy cramdown bill in the next three weeks, but it could get bottled up in the Senate Banking Committee, which has no jurisdiction over the bankruptcy code. "We're trying to get it adopted in the next couple of weeks," Banking Committee chairman Christopher Dodd, D-Conn., told the Consumer Federation of America. The House-passed bankruptcy bill (H.R. 1106) was referred to his committee because it includes provisions to strengthen the federal deposit insurance system and enhance the effectiveness of a Federal Housing Administration program to restructure underwater mortgages. Even opponents of allowing bankruptcy judges to reduce the principal amount of a mortgage say Sen. Dodd has been placed in a difficult spot because his committee cannot amend the bankruptcy provisions in H.R. 1106. "If anything, it slows up the process," one financial industry lobbyist said. The Senate may leave for its spring recess on April 6 with the bankruptcy bill still in limbo, he added. Meanwhile, consumer groups remain optimistic the Senate will pass a bankruptcy loan modification bill but there are concerns that Democratic senators are not united on the issue and their leaders lack a clear strategy for passing a bill.

Senate Democratic leaders want to pass a bankruptcy cramdown bill in the next three weeks, but it could get bottled up in the Senate Banking Committee, which has no jurisdiction over the bankruptcy code."We're trying to get it adopted it in the next couple of weeks," Banking Committee chairman Christopher Dodd, D-Conn., told the Consumer Federation of America. The House-passed bankruptcy bill (H.R. 1106) was referred to his committee because it includes provisions to strengthen the federal deposit insurance system and enhance the effectiveness of a Federal Housing Administration program to restructure underwater mortgages. Even opponents of allowing bankruptcy judges to reduce the principal amount of a mortgage say Sen. Dodd has been placed in a difficult spot because his committee cannot amend the bankruptcy provisions in H.R. 1106. "If anything, it slows up the process," one financial industry lobbyist said. The Senate may leave for its spring recess on April 6 with the bankruptcy bill still in limbo, he added. Meanwhile, consumer groups remain optimistic the Senate will pass a bankruptcy loan modification bill but there are concerns that Democratic senators are not united on the issue and their leaders lack a clear strategy for passing a bill.

Jack Ferm, a former radio talk show host in Las Vegas, was arrested on two counts of felony theft and related charges in connection with the operation of U.S. Justice Foundation, a mortgage rescue firm. Mr. Ferm is the president and owner of U.S. Justice Foundation, a document preparation business that allegedly misled customers into believing his service would stop ongoing foreclosures on their homes without the need to retain an attorney. His company website indicates he has a participated in successful litigation against numerous large corporations. The Nevada Attorney General's office received numerous complaints about alleged misrepresentations made by Mr. Ferm, including several clients who paid thousands of dollars to the U.S. Justice Foundation with no legal documents having been prepared or filed on their behalf. In many cases, Mr. Ferm required the victims to pay a monthly charge — in addition to the original retainer.