Servicing

KDX Ventures, Boston, a partnership of DebtX and KEMA Advisors, will sell $144 million in multifamily and healthcare loans for the U.S. Department of Housing and Urban Development. The portfolio includes 15 multifamily loans and four healthcare loans, ranging in size from approximately $1 million to $30 million. The collateral is located in 12 states in the east, south and midwest. Investors may bid on any individual loan or on pre-determined pools of loans. "KDX Ventures is expecting strong interest in these HUD loans due to increasing demand for product from investors around the world," said DebtX chief executive Kingsley Greenland. "Over the past three months, a significant new number of investors have entered the whole loan marketplace. The increasing liquidity is likely to mean very active bidding for the HUD loans." The transaction announced today is the first since KDX Ventures signed a multi-year agreement with HUD in October to sell loans. Bids will be accepted at http://www.debtx.com on Feb. 4, 2009.

The average rate for a 30-year fixed-rate mortgage as tracked by Freddie Mac fell for the 10th consecutive week in a row to another survey-record low of 5.01%, down from 5.09% the week before. "Since the end of October 2008, these rates have declined by almost 1.5 percentage points, or a payment savings of about $184 a month for a $200,000 loan -- an additional $11 dollars from last week," said Freddie Mac chief economist Frank Nothaft in the weekly report. The average 30-year rate was up from 5.87% a year ago. The average 15-year FRM rate was 4.62%, down from 4.83% the previous week and from 5.43% a year ago. It has not been lower since June 13, 2003 when it was 4.6%. The average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages was 5.49%, down from 5.57% the previous week and 5.63% a year ago. The average rate for one-year Treasury-indexed ARMs was 4.95%, up from 4.85% the previous week but down from 5.37% a year ago. Average points were 0.6 for 30-year FRMs, 0.7 for 15-year FRMs and five-year hybrids and 0.5 for one-year Treasury-indexed ARMs.

The number of Home Equity Conversion Mortgages originated in calendar year 2008 increased by 6.4% over the previous year, according to new figures released by the Department of Housing and Urban Development. There were 115,176 of the Federal Housing Administration-insured reverse mortgage loan product originated last year, compared with 108,293 in 2007. Dollar volume figures were not available. According to an analysis from Reverse Market Insight, a consulting firm based in Aliso Viejo, Calif., Miami was the No. 1 market for reverse mortgage originations, with 9,561 HECMs originated in 2008, followed by Los Angeles at 4,126; Tampa, Fla., at 3,956; Santa Ana, Calif., at 3,695 and Baltimore at 3,595. Reverse Market Insight also determined that 2,949 lenders produced at least one HECM last year, a 76.5% increase over the previous year. NRMLA president Peter Bell said changes to the program recently put in place, such as a higher loan limit, the ability to use the loan for purchases and co-op eligibility, will lead to further growth of the product.

In early April a U.S district court judge will hear arguments in the National Association of Home Builders' case against the government, challenging newly issued Real Estate Settlement Procedures Act regulations that could hurt builders.NAHB originally filed for a preliminary injunction to block implementation of the "required use" section of the RESPA rule that bans builders from offering discounts and upgrades to buyers that are contingent on their use of an affiliated mortgage company. The trade group dropped that request after the Department of Housing and Urban Development agreed to delay the effective date. HUD extended the implementation date from Jan. 16 to April 16. NAHB claims the RESPA rule will force them to divest their affiliated mortgage and title companies, which could "greatly obstruct" the industry's effort to stimulate demand and sell off the excess supply of newly constructed homes. "In promulgating the final rule, HUD has flouted consumer satisfaction surveys and dampened the housing sector's efforts toward economic recovery," NAHB said in a filing with the U.S district court in Alexandria, Va.

Key senators have reached a compromise with Citicorp that could speed passage of bankruptcy provisions that allow judges to modify mortgages and reduce or "cram down" the principal amount of the loan to the fair market value of the property. As part of the agreement, judges could only modify existing mortgages, not new mortgages. [As press time, it was unclear what the cutoff date is.] "Citigroup's support means that the dam has broken across the mortgage industry. Now we have a real chance to pass this legislation quickly," said Sen. Chuck Schumer, D-N.Y. Senators Dick Durbin, D-Ill., Chris Dodd, D-Conn., and Schumer want to include the bankruptcy provisions in the economic stimulus package that Congress is expected to pass by mid-February.

Under a "worst case scenario," the Federal Home Loan Banks may have to report substantial impairment in the value of their $76.2 billion of private-label MBS, but the true economic losses embedded in the portfolio are manageable, according to Moody's Investment Service. Moody's estimated that the impairment would be so great that only four of the 12 FHLBanks would remain above regulatory capital minimums if all of the MBS are subject to "other than temporary impairment" under accounting rules. But Moody's said this degree of impairment is unlikely. Overall, Moody's estimates that the economic losses embedded in the MBS total less than $1 billion. John von Seggern, president and CEO of the Council of Federal Home Loan Banks, noted that most of the banking industry is upset about the "other than temporary impairment" standard and that bankers are advocating accounting changes. "The real story of the Moody's report is that the economic losses embedded in the FHLBanks' MBS are manageable," Mr. Von Seggern said.

The Federal Home Loan Banks may see substantial impairment in the value of their $76.2 billion of private-label MBS, according to Moody's Investment Service. Under a "worst case" scenario, Moody's estimated that the impairment would be so great that only four of the 12 FHLBanks would remain above regulatory capital minimums, though Moody's said this degree of impairment is unlikely. Under a "base case" scenario, the writedowns could still be "material to the banks' capital bases," Moody's said in a report. The degree of impact depends upon whether the banks must report the writedowns as "other than temporary impairment," which would significantly affect capital levels, according to the rating agency. In related news, the Federal Home Loan Bank of Boston president and chief executive, Michael A. Jessee, will be retiring from the Bank effective April 30, 2009. Mr. Jessee has agreed to remain in his current executive capacity during the next four months to ensure a smooth transition.

The Financial Accounting Standards Board has approved by a 3-2 vote changes to its other-than-temporary impairment guidance that should reduce the amount of charges banks and other holders of mortgage-backed securities have to report in the fourth quarter. The new guidance (first proposed on Dec. 19) allows management to make a "reasonable judgment" of future cash flows of debt securities in determining impairment. Previous guidance required consideration of what "market participants" would use in determining the current fair value of MBS. At Wednesday's meeting, the board amended the proposed guidance to stress that MBS holders are required to assess collections of future cash flows even when the securities are performing and borrowers making timely payments. In making that assessment, MBS investors must consider all available information reflecting past events and current conditions in developing estimates of future cash flows. "I don't think it represents amnesty on OTTI in the fourth quarter. It still requires an assessment of the collectibility of the cash flows," said FASB member Leslie Seidman. Board members also stressed that the new guidance is not retroactive to the third quarter or previous periods.

Fannie Mae and Freddie Mac will extend its suspension of foreclosure sales and evictions until January 31 to give their servicers more time to help troubled borrowers and to implement a new streamlined loan modification program. In November, the mortgage giants said they would suspend evictions during the holidays, but that was due to end Jan. 15. This extension will "give servicers additional opportunities to help put more families on the path to stable homeownership," Freddie Mac chief executive David Moffett said. Fannie Mae said the extension also gives servicers more time to implement its new policy that allows renters to continue to live in foreclosed properties. Previously, renters were automatically evicted. Freddie is developing a similar policy to allow renters to remain in their homes, a company spokesman said.

President-elect Barack Obama wants Congress to pass his massive economic stimulus bill shortly after he takes office on Jan. 20 and he will hold off on proposing a "sweeping" plan to prevent foreclosures. In a CNBC-TV interview, Mr. Obama said he will work with the chairmen of the House and Senate banking committees in developing the foreclosure plan. "I expect to unveil plans to prevent foreclosures in consultation with [Rep.] Barney Frank and [Sen.] Chris Dodd, who've done some very good work on this, sometime in the next month or two," he told CNBC. On Wednesday, Sen. Richard Durbin, D-Ill., told MortgageWire he didn't know when Obama's team would send the stimulus bill to Congress, but he is urging them to include a bankruptcy provision that allows judges to modify mortgages on primary residences. Meanwhile, it appears that some in the mortgage industry may put aside their long-standing opposition to bankruptcy modifications -- provided it is a last resort and servicers have tried to modify the loan first. The Wall Street Journal reported that Citicorp is in discussions with key Senators on a possible bankruptcy compromise.