Servicing

Genworth Financial Inc., Richmond, Va., has been downgraded by A.M. Best Inc., Oldwick, N.J., which cited concern over exposure to mortgages on the company's balance sheet -- both at its life insurance side (as an originator and investor in commercial mortgages and securities, as well as residential mortgage-backed securities) and on the mortgage insurance side. While Best said Genworth had prudent commercial mortgage loan underwriting practices and limited delinquencies so far, the rating agency added it expected "rising defaults in response to the deepening recession, and is most cautious on the retail, hotel and office properties within close proximity to distressed housing markets and/or labor markets where unemployment is high." Best cut the financial strength rating on Genworth Financial from A+(Superior) to A(Excellent). The Best move came days after Fitch Ratings, Chicago, cuts its Insurer Financial Strength rating on Genworth Financial two notches, from A+ down to A-.

Fiserv Inc. said it has enhanced its loan servicing platform product so that it can now manage indirect and other third-party loans. The single-platform capability broadens the spectrum of loans to be processed and provides online, real-time back-office transactions for diverse portfolios, Fiserv said at the MBA Servicing Conference in Tampa, Fla. The Fiserv 'Loan Servicing Platform' is designed to manage all current types of indirect financing, including same-as-cash and staged funding loans that manufacturers, distributors and retailers may offer to borrowers.

In response to the need for mass loan modifications, Lender Processing Services has created RediMod, an application designed to streamline the loan modification process. LPS indicated at the MBA Servicing Conference in Tampa, Fla., that this new tool addresses processing and fulfillment needs for loan modifications by automating loan eligibility and best-fit determinations. The application is modular to enable those servicers with partial workout processes to merely fill in the gaps if there isn't a need for a new end-to-end process automation approach. RediMod includes data and analytics models that assign each loan in a portfolio a default propensity and loss severity score. It also has a rules engine that identifies borrowers currently in default and those at risk of defaulting in the future.

Three of the nation's top four residential servicing companies -- which together control almost half of all U.S. home loans -- saw their share prices fall to new 52-week lows on Friday. The three are: Bank of America, Wells Fargo & Co., and Citigroup, which rank first, second and fourth, respectively, among residential servicing firms with a combined market share of 47.75% ($4.65 trillion in loans), according to the Quarterly Data Report. The nation's third largest servicer, JPMorgan Chase, saw its share price fall to $19.03, a dollar and change above its yearly low. At press time the share price of BoA had fallen more than 14% on the day to $3.37, while Citigroup slid about 20% to $2.01. Citigroup briefly fell below the $2 mark. The decline was stoked, in part, by concerns from analysts that Citigroup and BoA could be nationalized.

Sy Naqvi, who ran PNC Mortgage for 11 years until it was sold to Washington Mutual earlier this decade, has returned to the bank-owned lender. According to an official familiar with the matter Mr. Naqvi's chief job will be to evaluate all the mortgage operations of PNC Bank and National City Mortgage, which the bank inherited when it bought National City Corp. of Cleveland at year end. (For the full story see the Monday edition of National Mortgage News.)

The Obama administration's plan to modify 3 million nonprime loans will be a boon for Federal Housing Administration lenders, according to the chief executive of Lenders One, an alliance of 135 mortgage bankers. "FHA will end up with a huge market share of these modified loans," CEO Scott Stern said in an interview with National Mortgage News this week. Several Wall Street firms are using Lenders One to refinance loans that have already been written down in value. Because of the credit scores and loan-to-value ratios, "the refinancing option of choice is FHA," Mr. Stern said. "Servicers like it because you are replacing risky loans with safe FHA loans."

A troubled homeowner should be given every chance to modify his mortgage before filing for bankruptcy, according to the nation's GSE regulator who is concerned that changes in the bankruptcy code could actually hurt families and their bankers. Homeowners should not have to go through the "hardship and rigors" of bankruptcy to get their monthly payments reduced to an affordable level, said Federal Housing Finance Agency director James Lockhart. The Obama administration has outlined a $75 billion program to modify and refinance problem mortgages. But the administration also is supporting changes to the bankruptcy code that would allow judges to reduce or 'cram down' the principal amount of the mortgage. Although Obama's bankruptcy cramdown proposal is much more conservative than the bankruptcy bill recently passed by the House Judiciary Committee, Mr. Lockhart is concerned Congress will "go too far" and pass legislation that could be harmful. Bankruptcy sounds like a "good" solution, he said, "but it hurts individuals. And it can really dramatically weaken the balance sheets of our weak financial institutions, so we must be careful." Once a homeowner is in bankruptcy, Mr. Lockhart wants him to get one more chance at a loan modification and avoid living under a five-year bankruptcy financial plan. The bankruptcy judge should tell the servicer what the court is prepared to do and give the servicer "one more shot at it," he said.

Mission Capital Advisors, LLC, a commercial, residential and consumer loan sale advisor with offices in New York, Florida and Texas, has hired Jason Cohen as a managing director in the firm's New York office. In his new role, Mr. Cohen will originate loan sales, trade loans and create loan sale financing platforms. For the past five years he was a managing director with the Ackman Ziff Real Estate Group, where his volume of deals completed exceeded $3 billion and he originated and placed senior debt, mezzanine debt, preferred equity, and equity for all types of real estate. "Jason joins us at a time when there is a significant amount of commercial and residential loan portfolios on the market, with an expected increase throughout 2009 and beyond," said David Tobin, principal at Mission Capital Advisors.

Corus Bankshares Inc. and its subsidiary Corus Bank NA, both of Chicago, have entered into a written agreement with the Federal Reserve Bank of Chicago and a consent order with the Office of the Comptroller of the Currency. Corus Bank is a nationwide construction lender, specializing in condominium, office, hotel, and apartment projects. These agreements include several requirements related to loan administration as well as procedures for managing the bank's growing portfolio of foreclosed real estate assets. "The regulatory agreements are the result of ongoing discussions between the OCC, the FRB and Corus' senior management over the last few months to address the negative impact that current market conditions are having on Corus and how best to resolve them. We believe the remedial measures agreed upon with the regulators are necessary to address asset quality deterioration and overall risk management," said Robert J. Glickman, president and chief executive. He added the company's board is actively exploring strategic alternatives, including a merger or capital infusion. Corus' outstanding commercial real estate loans and unfunded construction commitments total approximately $5.8 billion.

Bond insurer MBIA has split its non-municipal exposures - including its problematic mortgage-related exposures in the structured finance sector - into a separately capitalized company. "This is not a 'good bank/bad bank' split, although that is how I expect many observers will report on the change," said MBIA chairman and CEO Jay Brown in a letter to investors. He said that structured finance policyholders should "feel very comfortable that their policies remain in an entity with ample claims-paying resources to meet any expected claims, even under our stress loss scenarios." He added that the company would "no longer use credit derivatives to guarantee new insurance transactions" of any type because "exposure to this market injected too much volatility into our financial statements." In response to the restructuring, Moody's Investors Service has downgraded the insurance financial strength ratings of MBIA Insurance Corp. and its supporting subsidiaries while placing the rating for the municipal subsidiary on review for possible upgrade. The downgraded ratings have a "developing" outlook, the rating agency said. Moody's cited among reasons for its ratings moves "the deteriorating credit profile of alt-A mortgage-backed securities, corporate CDOs and CMBS - all of which are negatively affecting MBIA Corp.'s risk-adjusted capital adequacy." The rating agency added, "The claims-paying resources of MBIA Corp. post-restructuring are roughly equivalent to Moody's expected loss estimates for the entity." It also noted that MBIA Corp.'s developing outlook "reflects the potential for further deterioration in the insured portfolio. It also incorporates positive developments that could occur over the near to medium term, including greater visibility about mortgage performance, the possibility of commutations or terminations of certain ABS CDO exposures, and/or successful remediation efforts on poorly performing RMBS transactions." In addition, Moody's said the developing outlook "is also based on the potential for various initiatives being pursued at the U.S. federal level to mitigate the rising trend of mortgage loan defaults."