Servicing

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.

Credit unions in Wisconsin and elsewhere are adding up the costs of the recent failure of Central States Mortgage Corp. of Wauwatosa, and the current tab appears to be $5 million and counting. In the fourth quarter the 25 credit union owners of CSMC charged-off almost $3 million of stock they held in the 25-year-old company, according to call report data submitted to the National Credit Union Administration. In addition, several CUs are taking hits on Central States loans they participated in. The Wisconsin CU League, also an owner, is believed to have charged-off the value of its shares.

Goldman Sachs & Co. is scaling back the lending operations of Senderra Funding, Fort Mills, S.C., in particular its wholesale division, sources told National Mortgage News. A spokesman for Goldman Sachs in New York declined to comment. Goldman acquired Senderra a few years ago when it was known primarily as a subprime wholesaler. Today, Senderra is originating FHA-backed loans, Fannie Mae products and some jumbos. (For the full story see the Monday edition of National Mortgage News.)

The New York Federal Reserve Bank ramped up its purchase of GSE mortgage-backed securities the past two weeks due to an increase in refinancings and agency issuance of MBS.MBS issuance by Fannie Mae, Freddie Mac and Ginnie Mae increased to $97 billion in February, compared to $61 billion in January. A new Credit Suisse report says issuance could reach $130 billion in March. "The Fed's purchases of agency MBS have been very effective in lowering rates, improving liquidity in the market and spurring refis," said CS mortgage strategist Mahesh Swaminathan. From February 26 through March 11, the New York Fed purchased $57.2 billion in agency MBS compared to $44.9 billion for previous two-week period. Meanwhile, Treasury said it purchased $12.7 billion in Fannie and Freddie MBS in February, down from $22.6 billion in January.

Foreclosures increased in February across all regions despite temporary halts by major banks and Fannie Mae and Freddie Mac, according to the latest U.S. Foreclosure Index released by Foreclosures.com. The company, based in Sacramento, Calif., said the increase was seen primarily in the second half of the month. Completed foreclosures in February reached the highest monthly total since the foreclosure crisis began, soaring by more than 67% over January's reduced foreclosures. In February, 121,756 new foreclosures were completed, up from 72,694 in January, which had seen a 26% drop from December's 97,841 foreclosures. The index found the number of pre-foreclosure filings also increased, hitting 207,703 in February, up more than 24% from 166,860 in January. Alexis McGee, president of Foreclosures.com, said many homeowners are in trouble and rising unemployment continues to intensify the problem. "Nearly all the bank moratoria have since expired or are about to expire," she said. "Annualizing the first two months of this year, if foreclosures were to continue unabated, we could end up with another 1.2 million homes back in lenders' hands by year-end." Regionally, the index of real estate owned showed completed foreclosures in the Southwest for February were up more that 63% from January. In the Midwest, REO went up nearly 90%; in the Southeast, REO increased more than 46%; in the Northeast, REO grew by 138%. REO in Alaska and Hawaii went up nearly 68% from January, and up 28.6% from September 2008.

Foreclosure filings were reported on 290,631 properties during February, an increase of nearly 6% from January and up almost 30% from February 2008, RealtyTrac's February 2009 U.S. Foreclosure Market Report shows. The increase is somewhat surprising, given that many of the foreclosure prevention efforts and moratoria in place in January were extended through most of February as well, said James J. Saccacio, chief executive officer of RealtyTrac. "There were some notable exceptions to this: a 45-day voluntary moratorium in Florida expired at the end of January, and foreclosure activity there was up 14%; and many New York foreclosure proceedings delayed by a new law for an extra 90 days appear to have hit the system in February, when the state's foreclosure activity increased 23 percent from January." Nevada continued to document the nation's top state foreclosure rate. Foreclosure filings were reported on 15,783 properties, a 9& increase from January and a 156% increase from February 2008. Arizona posted second highest rate with one in every 147 housing units receiving a filing, and California was third with one in every 165 housing units receiving a foreclosure filing. Foreclosure filings were reported on 80,775 California properties in February, the most of any state and a 5% increase from January. The state's foreclosure activity increased 51% from February 2008, with auction sale notices increasing nearly 179%.

The weakening economy and continued credit crunch contributed to increases in commercial/multifamily mortgage delinquencies during the fourth quarter of 2008, according to a report from the Mortgage Bankers Association. "As expected, the weakening economy continues to take a toll on the performance of commercial and multifamily mortgages," said Jamie Woodwell, vice president of commercial real estate research. "But commercial and multifamily mortgages are actually performing better than just about every other type of loan. Of more than 35,000 commercial/multifamily mortgages held by life insurance companies, only 33 loans were delinquent at the end of 2008, and commercial/multifamily mortgages ended 2008 as some of the best performing loans held by commercial banks and thrifts." In addition to the Commercial/Multifamily Delinquency Report, the MBA released a research data note reviewing the performance of commercial/multifamily mortgages held by banks and thrifts. The note finds that commercial mortgages and multifamily mortgages are the best performing loans, ranking lowest among bank loans in terms of charge-off rates, second and third lowest in terms of 30-day plus delinquency rates and second and third lowest in terms of increases in delinquency rates between the third and fourth quarter. Between the third and fourth quarters, the 30-day plus delinquency rate on loans held in commercial mortgage-backed securities rose 0.54 percentage points to 1.17%. The 60-day plus delinquency rate on multifamily loans held or insured by Fannie Mae rose 0.14 percentage points to 0.30%. The 90-day plus delinquency rate on multifamily loans held or insured by Freddie Mac stayed the same at 0.01%. The 90-day plus delinquency rate on loans held by FDIC-insured banks and thrifts rose 0.24 percentage points to 1.62%.

Ocwen Financial Corp.'s net loss narrowed 46% from a year earlier to $3.7 million ($0.06 per share) last quarter as the servicer of subprime mortgages cut operating expenses. The West Palm Beach, Fla., company said it incurred $14.7 million of paper losses, after taxes, on trading securities and investments. Income from the core servicing business jumped 44% to $18 million, as the unit's operating expenses fell 16% to $40 million. However, revenues from the business declined 6.7% to $75.7 million as faster prepayment speeds caused the servicing portfolio to contract 24%, to $40 billion of loans. William Erbey, Ocwen's chairman and chief executive, said that in December and January it renewed $500 million of credit lines that finance servicing advances. The company is "developing advance financing facilities with new private sector providers," he said. Ocwen has also joined an industry coalition that is seeking to have the government-sponsored enterprises guarantee such advances and the Federal Reserve Board's Term Asset-Backed Securities Loan Facility finance them, Mr. Erbey said.

PNC Bank has decided to pull the plug on National City's warehouse lending operation, giving non-banks that borrowed from the unit 12 to 18 months to find new lenders, National Mortgage News has learned. At press time a spokesman for the Pittsburgh-based PNC confirmed that the bank was indeed exiting the warehouse sector but would not comment on a time frame or how many jobs will be lost at NatCity's unit. (PNC bought the Cleveland-based bank earlier this year.) According to exclusive survey figures compiled by NMN, National City ranks second, nationwide, in terms of warehouse commitments to non-bank mortgage lenders. At year-end NatCity's warehouse group had agreed (or committed) to lend $2.2 billion to non-bank mortgage firms. "This is really going to hurt," said one advisor who works on warehouse issues. "NatCity is a big provider." The advisor, who requested his name not be used, said five non-bank borrowers received word of the pull out today. At year-end the largest warehouse provider, in terms of commitments, was Colonial Bancgroup, Montgomery, Ala. In trading Wednesday Colonial's shares ended at 36 cents. The depository has applied for government backing under the Troubled Asset Relief Program. A few weeks ago JPMorgan Chase exited the warehouse lending arena.