Servicing

Sales increased a bit in Las Vegas last month, and the number of listings declined. But the average price of houses sold also dipped, according to monthly figures supplied by Robert Jenson, a realty agent who specializes in luxury properties. In February, a total of 20,953 units were listed for sale in the city, a decline of just 19 units from January. Only 2,023 units were sold last month, an increase of 28 units. But the average sales price fell 2.2%, to $179,303, Mr. Jenson reported. Nearly half the units listed for sale were properties that have been foreclosed on by lenders (9,037) while most of the rest were listed as short-sales (7,416). Despite the glut of houses for sale, the number of luxury units priced over $1 million that sold in February increased to eight, from just three the previous month. The average selling price was $1.99 million. Mr. Jenson's data does not include sales by builders.

The yield on the benchmark 10-year Treasury dropped to 2.8% as of noon on March 6 from 3% at mid-week, a sign that mortgage rates could be headed lower soon. The yield moved below its recent range as investors — discouraged by the stock market's current bleak prospects — moved into Treasuries as a safe haven, according to a market update from Jefferies & Company. Also causing investors to flock to Treasuries, boosting prices (which move in the opposite direction from their yields) was a relatively pessimistic employment report. (See related story above.) Meanwhile, Quicken Loans is advertising a 30-year fixed-rate conventional loan at 4.7% if the consumer pays 1.6 in upfront points.

The mortgage insurance division of Genworth Financial lost $368 million in 2008 compared to a $167 million profit the year before as default claims swamped the unit.According to the Quarterly Data Report, Genworth — one of the industry's most conservatively managed MIs — ranks fourth nationwide in terms of policies-in-force with $147 billion. Genworth's shares have been trading under $1 for the past two weeks. Meanwhile, according to a recent report in Reuters, the U.S. Treasury Department has no current plans to give the ailing MI sector an injection of capital using Troubled Asset Relief Program funds. As reported by National Mortgage News, Federal Housing Finance Agency chief James Lockhart is in favor of the MIs receiving a capital injection under TARP.

The House of Representatives on Thursday night approved legislation 234 to 191 that would let bankruptcy judges modify or "cram down" mortgages, but the bill's fate in the Senate remains unclear. Though the House leadership had enough of a majority to pass the bill over opposition from Republicans and several conservative Democrats, Senate leaders do not have as much leeway. Some Senate Democrats, including Sen. Evan Bayh of Indiana, continue to push for ways to narrow the bill, encouraged by the banking industry, which believes the legislation will drive up the cost of credit. The bill passed on Thursday included language designed to encourage borrowers to attempt to seek a loan modification from their lender before bankruptcy. For example, if a servicer offered a borrower a loan modification, the homeowner would have to consider it before heading to bankruptcy court. The judge would retain the ultimate say in determining if the borrower acted in good faith and could still reduce the terms of the mortgage. The borrower also would have to wait 30 days between trying to receive assistance from the servicer and going to bankruptcy. The National Association of Consumer Bankruptcy Attorneys said the bill "will not excuse families from paying their mortgage. It simply gives bankruptcy court judges the authority to modify loans and puts a floor on the downward spiral of home values in neighborhoods across the country."

Employment in the loan brokerage sector fell to an eight-year low in January to 73,600 positions, yet another sign that this third-party lending channel is facing a grim future. According to new figures released Friday morning by the Bureau of Labor Statistics, total employment in the mortgage industry (which includes loan brokers) fell to 271,800 full-time positions, also a multi-year low. Year-over-year broker employment fell by 20% while total residential finance employment declined by 18%. In recent months more lenders have eliminated their wholesale production channels, and several mortgage insurers have placed restrictions on broker-sourced loans. Meanwhile, the national unemployment rate jumped to 8.1% in January, the highest since 1983. More Americans collecting unemployment means these families will have a harder time paying their monthly mortgages. Meanwhile, one investment banker told National Mortgage News that some large banks that are still involved in correspondent lending are considering increasing their net worth requirements on third-party lenders, which could cause more job displacement in the industry.

Employment in the loan brokerage sector fell to an eight year low in January to 73,600 positions, yet another sign that this third-party lending channel is facing a grim future. According to new figures released Friday morning by the Bureau of Labor Statistics, total employment in the mortgage industry (which includes loan brokers) fell to 271,800 full-time positions, also a multi-year low. Year over year broker employment fell by 20% while total residential finance employment declined by 18%. In recent months more lenders have eliminated their wholesale production channels, and several mortgage insurers have placed restrictions on broker-sourced loans. Meanwhile, the national unemployment rate jumped to 8.1% in January, the highest since 1983. More Americans collecting unemployment means these families will have a harder time paying their monthly mortgages. Meanwhile, one investment banker told National Mortgage News that some large banks that are still involved in correspondent lending are considering increasing their net worth requirements on third-party lenders, which could cause more job displacement in the industry.

The House of Representatives on Thursday night approved legislation 234 to 191 that would let bankruptcy judges modify or "cramdown" mortgages, but the bill's fate in the Senate remains unclear. Though the House leadership had enough of a majority to pass the bill over opposition from Republicans and several conservative Democrats, Senate leaders do not have as much leeway, according to a report in American Banker. Some Senate Democrats, including Sen. Evan Bayh of Indiana, continue to push for ways to narrow the bill, encouraged by the banking industry, which believes the legislation will drive up the cost of credit. The bill passed on Thursday included language designed to encourage borrowers to attempt to seek a loan modification from their lender before bankruptcy. For example, if a servicer offered a borrower a loan modification, the homeowner would have to consider it before heading to bankruptcy court. The judge would retain the ultimate say in determining if the borrower acted in good faith and could still reduce the terms of the mortgage. The borrower also would have to wait 30 days between trying to receive assistance from the servicer and going to bankruptcy.

Fitch Ratings, New York, has downgraded the U.S. residential primary servicer ratings of PHH Mortgage Corp., Mt. Laurel, N.J. The downgrade reflects a recent downgrade of the issuer default rating of parent company PHH Corp. Fitch is worried about PHH Corp.'s financial flexibility in the increasingly challenged residential mortgage market and the potential impact on PHH Mortgage's servicing operations. "Fitch believes that PHH Mortgage continues to operate an effective servicing and subservicing platform. However, Fitch will continue to monitor PHH's ability to maintain its portfolio performance and loan servicing capabilities in a rising delinquency environment," the rating agency said. Fitch cut PHH's ratings for prime, alt-A and subservicing from "RPS1-" to "RPS2+" and for home equity lines of credit from "RPS 1-" to "RPS2"

A report from the Federal Reserve Bank of St. Louis suggests that the number of subprime mortgage loans terminated between 2001 and 2006 outweighed the number of estimated first-time homebuyers who sought subprime mortgages. The analysis appears in the March/April issue of Review, the St. Louis Fed's bi-monthly journal of economic and business issues, and was conducted by Yuliya S. Demyanyk, a senior research economist with the Federal Reserve Bank of Cleveland and formerly of the St. Louis Fed. She focused on whether borrowers intended to keep their subprime mortgages long enough to substantiate an increase in homeownership or planned a quick exit strategy at origination, using subprime loans as bridge financing to speculate on house prices — in other words, quickly sell the house for profit after its value increased. Ms. Demyanyk found almost half the loans originated between 2001 and 2006 exited the market either through prepayment or default within the first two years of origination and about 80% did so within three years of origination. "Subprime mortgages were very risky all along," she said. "The extent of their risk, however, was hidden by the rapid appreciation in house prices, allowing termination of the mortgage by refinancing or prepayment. When prepayment became costly — with zero or negative equity in the house increasing the closing costs of refinancing — defaults took their place." The number of defaults in the limited sample of subprime purchase-money mortgages within two years of origination is almost equal to the number of first-time homebuyers who took a subprime mortgage. "If the data for the rest of the market were available," said Ms. Demyanyk, "the number of defaults would no doubt be even greater."

Freddie Mac is suspending foreclosure sales on mortgages eligible for the Home Affordable Modification Program as part of the Obama Administration's Making Home Affordable plan. Previously, the company had suspended foreclosure sales on occupied properties through March 6, 2009. Freddie Mac will instruct its servicers not to make a foreclosure sale on a property eligible for the Home Affordable Modification program unless they completed their effort to contact the borrower and either the borrower did not respond or lacked the capacity or willingness to participate in the program or any other Freddie Mac workout program. Servicers are given broad authority to postpone foreclosure sales on a case-by-case basis when the servicers are working with borrowers to avoid foreclosure using any of Freddie Mac's workout options.