Servicing

The national mortgage delinquency rate — which includes both prime and subprime mortgages — climbed to a record 7.88% in the fourth quarter with subprime late payments reaching a staggering 21.88%, according to new figures released Thursday morning by the Mortgage Bankers Association.Figures compiled by National Mortgage News show that Americans owe $9.6 trillion on their loans which means $756 billion in residential mortgage debt is delinquent. Also, $196 billion in subprime debt is 30-days or more late. Prime foreclosures started in the quarter increased to 1.88% of outstanding loans, double last year's rate. The only positive in the numbers: the rate at which homes are going into foreclosure was flat but as MBA chief economist Jay Brinkmann noted: "This is mainly attributable to various state and local moratoria on foreclosure sales" and similar actions taken by Fannie Mae and Freddie Mac. But even though the rate of foreclosures may be flat the foreclosure inventory numbers are huge: 6.30% of all loans, and 23.11% of subprime mortgages are seriously delinquent or in foreclosure. The South and Midwest have the highest delinquency rates: 9.40% and 9.58%, respectively.

Suncoast Schools Credit Union of Tampa — one of the largest CU players in home mortgages — is talking to a crosstown CU about a possible merger, according to The Credit Union Journal. The other institution, GTE Federal Credit Union, ranks 95th in CU mortgage holdings whereas Suncoast ranks seventh, according to The Mortgage Industry Directory. If the two combine forces it would be the biggest merger ever of two credit unions. Both institutions, however, have been saddled with large losses because of the mortgage meltdown. Suncoast is Florida's largest credit union. A merger would create a giant with almost $8 billion in assets serving roughly 675,000 members. Last year Suncoast lost $76.7 million and GTE lost $27.5 million, according to figures compiled by the National Credit Union Administration.

MBIA Inc., Armonk, New York, said it paid a total of $1.4 billion in claims associated with its second lien residential mortgage exposures in 2008 but noted it could see some reimbursement for these claims if pending legal challenges against two unnamed seller-servicers go its way. "Based on a thorough analysis of the claims paid, MBIA has found that these claims resulted from defaulted mortgages that were ineligible assets in the securitizations the company insured," said the bond insurer, which recently split its more problematic structured finance business — including its mortgage-related exposures — into separate units from its municipal business. Although strained by these exposures, the company's chief executive Jay Brown said it believes it still has adequate liquidity. MBIA took a net loss of $2.7 billion during 2008, compared to a $1.9 billion net loss in 2007. During the fourth quarter of last year, it took a net loss of $1.2 billion compared to a net loss of $2.3 billion during the same period in 2007.

The members of the Mortgage Insurance Cos. of America started off 2009 the way 2008 ended, at the low end of the spectrum in terms of new business written and in the cure/default ratio. For January 2009, there was $7.1 billion of primary new insurance written, all through the traditional channel. This is compared with $7.2 billion in December 2008 (all but $28 million through the traditional channel) and $22.2 billion in January 2008 ($496 million through the bulk channel). However the numbers for January 2008 include Triad Guaranty, whose data stopped being included in the report in July 2008 and do not include Radian Guaranty, which rejoined the group and started reporting again in December 2008. The number of applications received increased from 61,597 in December to 76,130 in January, while certificates issued increased in the same time frame from 46,605 to 59,569. The amount of primary insurance in force decreased from $952.2 billion in December to $949.3 billion in January. There was a slight improvement in the cure/default ratio, to 48.0%, with 51,093 cures and 106,484 defaults. December's cure/default ratio was 47.3%. New pool risk written in January was $6.8 million, down from $8.1 million in December.

Over one-third of outstanding U.S. prime and alternative-A credit residential mortgage-backed securities may have so-called bankruptcy carveouts, Fitch Ratings found as part of its review of the cramdown legislation's potential effects on current RMBS transactions. Deals with carveouts allocate certain bankruptcy losses in atypical ways that tend to vary. Fitch found about 29% of prime deals and 46% of alt-A transactions have bankruptcy carveouts. These carveouts allocate the amount of the bankruptcy loss to bonds in reverse sequential order in amounts ranging from about $100,000-$400,000, Fitch said. "Bankruptcy losses in excess of this limit are then allocated, pro rata, across the capital structure," the rating agency said.

House Democrats have agreed to a compromise on pending bankruptcy/cramdown-related legislation that gives preference to interest rate reductions over reducing the loan amount. According to combined press reports, principal reductions would still be allowed but lenders would have to share any profit on the eventual sale of their residence with the owner of the mortgage. Also, limits would be placed on cramdowns if the homeowner has already modified his loan. Details were still being worked on at press time. The compromise comes just as new figures show that 8.3 million homes are now worth less than their loan value with another 2.2 million units approaching a negative equity position. (See related item.)

Suncoast Schools Credit Union of Tampa — one of the largest CU players in home mortgages — is talking to a crosstown CU about a possible merger, according to The Credit Union Journal. The other institution, GTE Federal Credit Union, ranks 95th in CU mortgage holdings, whereas Suncoast ranks seventh, according to The Mortgage Industry Directory. If the two combine forces it would be the biggest merger ever of two credit unions. Both institutions, however, have been saddled with large losses because of the mortgage meltdown. Suncoast is Florida's largest credit union. A merger would create a giant with almost $8 billion in assets serving roughly 675,000 members. Last year Suncoast lost $76.7 million and GTE lost $27.5 million, according to figures compiled by the National Credit Union Administration.

For the second consecutive month there has been a large decline in the Eleventh Federal Home Loan District Cost of Funds Index, driving it to its lowest point since April 2005.As calculated by the Federal Home Loan Bank of San Francisco, the index for January was 2.455%, down from 2.757% in December 2008. The 30 basis point decline follows a drop of nearly 40 basis points between November and December. For January 2008, the index was 3.970%. The index was calculated using total average funds of $82.0 billion and total interest expense of $167.7 million. The total interest expense is derived from interest expense reported on deposit accounts, Federal Home Loan Bank advances, and other borrowings, adjusted for the number of days in the month, according to FHLB-SF. The all-time low for the index was reached in May 2004, when it was 1.708%.

TCB Financial, Wayzata, Minn., a top 50 ranked residential servicer, has asked permission to return $361.2 million in Troubled Asset Relief Program funds to the Treasury as soon as possible. Under current rules depositories receiving TARP money can return the money after giving the government 30 days notice. In a statement TCB CEO William Cooper said, "TCF has sufficient capital and access to capital to operate without the TARP money," adding that, "we believe participation in TARP has created a competitive disadvantage" for the bank. According to a research note put out by Sandler O'Neill, "TCB is perhaps among the few with the wherewithal to pay back the funds immediately."

Critics of the Obama administration's loan modification proposal say that it would not adequately address consumers' nonmortgage debt loads or the second liens on their homes, and that many borrowers would end up defaulting again.According to a report in American Banker, the proposal, part of a broad housing plan unveiled last month, would subsidize principal or interest rate reductions that lower a monthly mortgage payment to 31% of the borrower's income. But there is no maximum for the total debt-to-income ratio a borrower may carry to be eligible for a modification. Nor is there any requirement or incentive for a consumer's other creditors to write down their loans. "You're not getting a complete picture of what the borrower can afford to pay if you don't take into account all their debt," said Fred Melgaard, executive vice president of DRI Management Systems, a Newport Beach, Calif., provider of default management software.