Servicing

Moody's/Economy.com is forecasting the housing market will hit bottom by the end of this year and house prices will remain flat in 2010. "By the end of this unprecedented downturn, house prices will have declined by double digits peak to trough in nearly 62% of the nation's metro areas. In about 10% of metro areas, price declines will exceed 30%," according to the Moody's latest forecast. Senior director for housing economics Celia Chen noted many of the imbalances in the housing market have corrected. The excess supply of unsold homes for sale has nearly stabilized and housing affordability has been restored in most markets. The Obama administration is working on foreclosure mitigation, she said, which should keep foreclosures at 1.5 million in 2009, compared to 1.4 million in 2009. In addition, the housing market will benefit from the economic stimulus package in terms of adding jobs and boosting confidence. "Policy makers are fully engaged and working hard to turn the economy around with the stimulus package," Ms. Chen said. At the same time, the Federal Reserve and Treasury Department are working to "pull down" mortgage rates.

Foreclosures across the U.S. plummeted by more than 25% in January, with many of the hardest-hit states seeing dramatic drops in the number of homes repossessed by lenders, according to the latest U.S. Foreclosure Index released by the Sacramento-based ForeclosureS.com. Nationally, the number of completed foreclosures dropped from 97,841 in December to 72,694 in January 2009. Pre-foreclosure filings also dropped 12% from 190,467 in December to 166,860 in January. Foreclosures in California dropped more than 31% in January to 14,351, less than half the 31,851 properties foreclosed in the peak month of September 2008. In Florida, there were 10,007 foreclosures completed in January, down from 12,786 in December. Nevada fell from 4,039 in December to 3,207 in January. Arizona, Texas, Georgia, and Ohio also experienced declines in completed filings. Among states with the most pre-foreclosure filings, only Texas and Michigan saw increases. "Efforts last year by government and industry to lay the groundwork for housing recovery finally are yielding the hoped-for slowdown in the foreclosure hemorrhage," said Alexis McGee, president of ForeclosureS.com. With the amount of both state and federal government foreclosure intervention programs and mortgage lenders who are finally starting to be more accommodating on their loan modifications to avoid foreclosure, Ms. McGee expects the growth of 2009 foreclosures to be much less than many experts are predicting.

Private investors are interested in purchasing highly illiquid mortgage assets from banks and other financial institutions with the aid of long-term government financing, according to Treasury Department officials. There is "tremendous interest" in purchasing these assets but currently the investors can only secure short-term financing, a Treasury official told reporters. Providing longer-term financing will make it more "comfortable" for them to buy and hold these assets, he said. Treasury secretary Timothy Geithner said the Obama administration is willing to put up $500 billion in financing capacity and possibly expand it to $1 trillion if this private/public partnership program is successful in cleansing banks of bad assets. It is one part of the administration's plan to stabilize the financial system and increase the flow of credit. Treasury officials are still working on the structure of these partnerships, which would allow the government to share in the upside, if the investors make an attractive return. Treasury is not planning to shield investors from losses through insurance or guarantees - at least initially. "The program will evolve," the Treasury official said. But that is "not our intent at the moment."

Sixty-two of 79 newly renovated lofts in the historic Rowan building in downtown Los Angeles sold for a total $21.8 million on Feb. 8 in the largest-ever simultaneous electronic auction of residential properties. Winning bids ranged from $207,000 for a studio to $534,000 for a two-bedroom/two-bathroom penthouse loft. Unlike conventional auctions, where items are sold one after another in a high-pressure environment with the auctioneer calling the shots, the Intellimarket Internet-based auction system used at the Rowan sells all units simultaneously with the bidders determining the auction's pace and length. At the Rowan, bidders were able to see the amount others were offering for every unit on large bidding screens or on their own computers through a secure website. The auction clock reset every time a new bid was received so bidders had ample time to consider their next step. The auction ended when there had not been a bid submitted on any of the properties for five minutes, or about three hours after its start. More than 250 pre-qualified buyers registered to participate. "The success of this auction confirms that there are plenty of prospective buyers sitting on the sidelines because they are uncertain of values in this real estate market," said William R. Stevenson, president of Intelligent Market Systems, which developed the proprietary software used in the auction.

First American Information and Outsourcing Solutions segment, a member of The First American Corp, in Dallas, has hired Sandy Hildreth as vice president of REO Westlake Operations for the segment's Outsourcing and Technology Solutions business line. . In her new role, she will be responsible for the day-to-day operations of First American's REO location in Westlake, Texas, and is charged with expanding the company's operations in Westlake to handle the growing demand for outsourced REO services. In addition to its Westlake location, First American also has REO operations in Denver, Colo., and Anaheim, Calif. Ms. Hildreth most recently was an assistant vice president at Litton Loan Servicing where she created the company's REO quality control department that was responsible for vendor scoring and performance management. Earlier, she led REO operations at Fremont Investment & Loan and joined Litton following the Fremont portfolio acquisition. During her 15-year career, Hildreth has held senior REO and operations positions at Centex Home Equity and Associates Financial Services. She has also completed the American Financial Services Association's management development program. To find out more about the company, visit www.firstam.com.

The American Securitization Forum has begun its next phase of a project aimed at restoring investor confidence in the moribund market for mortgage- and asset-backed securities that includes a proposal for monthly servicer reporting on deals through maturity. The group, as part of its ongoing Project on Residential Securitization Transparency and Reporting, released a request for comment on its new residential MBS reporting package for the securities that sets guidelines aimed at making the performance of their underlying loans easier to track. The reporting package consists of a proposed package of data fields set to be updated monthly by RMBS servicers throughout the life of an RMBS deal and distributed to investors and credit rating agencies. The ASF, in conjunction with its conference in Las Vegas, also has released for comment a revised version of last year's proposed RMBS disclosure package, a 135-field package of pool and loan-level information that was designed to be used when RMBS deals are initiated and aimed at allowing investors to more easily compare loans and transactions across all issuers and perform some key loan-level analysis. The ASF said it also has issued a set of recommended data fields for manufactured housing securitizations and addressed issues involving information about modifications, second liens, fraud, the definition of "full documentation" and standard terms and identifiers designed to avoid confusion. Both packages include similar recommendations for file naming conventions and were designed to complement each other.

There are $171 billion of commercial and multifamily mortgage loans held by non-bank lenders and investors that are set to mature this year, a survey from the Mortgage Bankers Association said. The Commercial Real Estate/Multifamily Survey of Loan Maturity Volumes found that short-term floating-rate mortgages in commercial mortgage-backed securities and mortgages held by credit companies, warehouse facilities and other investors are more likely to mature in 2009 and 2010 than are fixed-rate CMBS mortgages, mortgages held by life insurance companies or multifamily mortgages held or guaranteed by Fannie Mae, Freddie Mac or FHA. MBA found that $120 billion of non-bank commercial/multifamily mortgages are scheduled to mature in 2010. "Substantial concerns have been raised about the volume of mortgages maturing in the face of the current credit crunch," said Jamie Woodwell, MBA's vice president of commercial real estate research. "This study shows that while the dollar volume of maturing non-bank mortgages represents only one-tenth of the total outstanding balance, it is not evenly spread across investor and lender groups. Across all these investor groups, commercial/multifamily lenders and servicers have a wide variety of tools to help them deal with maturing mortgages, which should mitigate - but not eliminate - the impact of maturities in 2009." Of the total non-bank holdings of commercial/multifamily mortgages coming due in 2009, 52.8% is in CMBS, collateralized debt obligations or other forms of asset-backed securities, and an additional 33.6% is held by credit companies, warehouse facilities or other investors. Life insurance companies hold only 9.8% of the non-bank mortgages maturing in 2009, and 3.8% are held or guaranteed by Fannie Mae, Freddie Mac or FHA.

The U.S. Mortgage Insurance operations at Genworth Financial Inc., Richmond, Va., had a fourth quarter 2008 net operating loss of $114 million; one-year prior, it had an operating loss of just $3 million. The company said higher captive reinsurance coverage benefits and loss mitigation actions were more than offset by higher incurred losses. For the period, Genworth received $206 million in pre-tax income from lender captive reinsurance coverage. Paid claims were $173 million, an increase of $41 million over the third quarter 2008 and $108 million over the fourth quarter 2007. Average paid claim increased from $39,200 in the fourth quarter 2007 to $52,300 for the most recent period. The amount of new flow insurance written during the quarter was down 48% from the third quarter 2008, to $3.2 billion. For the year, the U.S. MI business lost $330 million, compared with net operating income of $167 million in 2007. Genworth's MI business in Canada had net operating income of $67 million, down from $88 million one-year prior. Net operating income at the Australian MI unit was flat, at $40 million. However higher delinquencies in Spain were responsible for the "other international" segment of Genworth's MI business, recording an $8 million loss for the fourth quarter 2008.

Despite an increasing willingness among lenders to forgive a portion of the principal balance on loan modifications, Fitch Ratings predicts that 60% to 70% will still re-default within one year. The "aggressive" use of streamlined modification without income verification is one factor behind Fitch's gloomy prediction. Rising unemployment and continuing home price declines also will undermine efforts to keep troubled borrowers in their homes, the rating agency said. Initial data does not suggest that principal reduction alone has much impact on re-default rates, according to Fitch. The rating agency found that even with principal forgiveness of 20% or more of the loan amount, 28% of loans re-defaulted within six months. That compares to a 30% re-default rate on loans where the outstanding principal increased on a modification due to the capitalization of past due interest and other costs. By contrast, Fitch said modifications that reduce the borrower's monthly payment do appear to reduce the re-default rate. Reducing the borrower's payment by 20% or more lowered the six-month re-default rate to 21%. That compares to a 49% re-default rate for modifications where the monthly payment increased by 10% or more due to the capitalization of arrears. Fitch recommends that servicers focus on a borrower's cash flow and payment-to-income ratio in fashioning loan mods. "Some combination of payment reduction and either principal forbearance or forgiveness may be the most effective approach to mortgage modification as it may increase borrower's ability and willingness to repay the modified amounts," Diane Pendley, a managing director and head of Fitch's operational risk group, said in a press release.

Treasury Secretary Timothy Geithner Tuesday morning promised that a "comprehensive" government program to revive the housing market and help consumers avoid foreclosure is in the works but offered no details on what the effort might entail. The new Treasury secretary said specifics of the plan will be released in the next few weeks. At press time, Treasury officials were offering no guidance on the issue. "Millions of Americans have lost their homes, and millions more live with the risk that they will be unable to meet their payments or refinance their mortgages," said Mr. Geithner. Meanwhile, the new Term Asset-Backed Securities Loan Facility, or TALF, does not include single-family mortgages. (See related story.)