Servicing

The number of foreclosure deeds recorded in Massachusetts dipped in November compared to October but jumped 38% from the same month last year, according to The Warren Group. In addition, foreclosure petitions have dropped significantly from earlier this year. A total of 880 foreclosure deeds were filed in November, down 11.6% from 996 in October and 37.9% higher than the 638 foreclosure deeds recorded in November 2007. November is the third consecutive month that the number of foreclosure deeds has been under 1,000. Year-to-date foreclosure deeds have shot up 64.8% to 11,486 from 6,970 during the first 11 months of 2007. "Some lenders are working harder to pursue loan modifications, but unfortunately, even with these modifications, many homeowners still face an uphill battle to hold onto their homes," said Timothy Warren Jr., CEO of The Warren Group. Fewer petitions to foreclose were filed by lenders in November. Foreclosure petitions fell 50.9% to 1,335 compared to 2,721 a year earlier and were 31.8% lower than October's 2,065 petitions. A total of 20,179 foreclosure petitions have been filed from January through November, down 24.8% from 26,848 during the same months in 2007. There were 1,134 auction announcements in November, a 27.9% increase from 887 a year earlier. Year-to-date auction announcements have jumped 34.2% to 18,064 from 13,465.

Fair value accounting can be improved to address concerns about the impairment of mortgage securities during the financial crisis, but it should not be suspended as requested by some banking groups, according to the Securities and Exchange Commission. The commission has just completed congressionally mandated report that concluded that fair value or market-to-market accounting did not play a "meaningful role" in the bank failures of 2008. Financial services groups have complained that the mark-to-market accounting has forced institutions to take larger than appropriate writedowns, which has contributed market instability and bank failures. The Independent Community Bankers of America said mark-to market accounting does not reflect the reality of community banking and it is "disappointed" that the SEC did not recommend suspension. SEC analysis of bank failures shows that fair value accounting was applied to only a "small minority" of bank assets and losses did not have a significant impact on capital. The SEC indicates in the report that it supports a Financial Accounting Standards Board proposal that allows management to use judgment in assessing whether an impairment loss is expected to be temporary. FASB is expected to finalize the proposal Jan. 8. SEC also indicated support for FASB's project to allow reversal of impairments on debt securities when sufficient evidence demonstrates a recovery.

The Federal Reserve Board has selected four investment managers to run its mortgage-backed securities purchase program that will begin in early January and buy up to $500 billion in agency MBS by end of the second quarter. The Fed said it selected BlackRock Inc., Goldman Sachs Asset Management, PIMCO and Wellington Management Co. LLP to purchase Fannie Mae, Freddie Mac and Ginnie Mae MBS and employ a "passive buy and hold investment strategy." Credit Suisse analysts expect the Federal Reserve MBS purchases will drive mortgage rates down and boost the issuance of Fannie Mae, Freddie Mac and Ginnie Mae MBS. "We estimate that mortgage rates will get to 4.75% in the first quarter," said Mahesh Swaminathan, a Credit Suisse mortgage strategist. Fannie, Freddie and Ginnie combined MBS issuance has averaged $65 to $70 billion in recent months. "Monthly MBS issuance will rise to $100-$125 billion range in the first quarter of 2009," Mr. Swaminathan said. He expects Ginnie Mae MBS will make up one-third to 40% of monthly issuance.

The delinquency rate on home loans owned or guaranteed by Fannie Mae rose seventeen basis points to 1.89% in October, the most recent month for which delinquency figures are available. That's more than double Fannie Mae's 0.83% delinquency rate in October of 2007. The delinquency rate has risen every month over the past year. Fannie Mae also said that it funded $31.7 billion in home loans during November, consisting of $7.9 billion of net retained loans and $23.8 billion of new mortgage-backed securities. The company's total portfolio of guaranteed or owned home loans was roughly flat in November. Year-to-date, the total book of business has grown at a 7.5% annualized rate.

The Treasury Department said it will invest $5 billion in Troubled Asset Relief Program funds in GMAC Financial Services to keep the auto and mortgage lender running as part of its effort to assist the domestic automobile industry. Treasury also is lending $1 billion to General Motors so the car maker can participate in a rights offering and support GMAC's reorganization as a bank holding company. The Federal Reserve Board approved GMAC's application to become a BHC on Dec. 24. GMAC said it would immediately expand its financing for car buyers thanks to its new access to low-cost funding. During the fourth quarter, the company's mortgage lending and servicing arm, Residential Capital, "dialed back" its lending, a spokeswoman said, because it had to pay servicing advances to investors on an increasing number of delinquent loans. ResCap services nearly $400 billion in mortgages. "We are hopeful that GMAC's bank holding company structure and the infusion of capital through the TARP program will improve ResCap's access to cost competitive capital, which will increase the amount of credit that we can extend to mortgage consumers," GMAC spokeswoman Jeannine Bruin said. GMAC originated $8.5 billion in single-family loans in the fourth quarter, down from $10.8 billion in the third quarter.

House prices fell by 2.2% from September to October and prices are off by 18% over the previous 12 months, according to Standard & Poor's/Case-Shiller housing price index that tracks existing home sales in 20 major metropolitan areas. "The bear market continues with home prices back to their March 2004 levels," said David Blitzer, chairman of S&P's index committee. Since the peak in house prices in mid-2006, the 20-city HPI is down 23.4% as of October 30. Over the previous 12 months, 14 of the 20 cities are reporting price declines in excess of 10%. Even Seattle and Portland are reporting annual rates of decline of 10.5% and 10.2% respectively. IHS Global Insight economist Patrick Newport expects house price declines will accelerate over the next few months. "Although prices are near equilibrium in many cities, they are likely to undershoot the equilibrium price on the way down-just as they overshot on the way up-because the number of homes on the market remains high," Mr. Newport said.

Subservicer Ofori Lender Services, Southfield, Mich., plans to service all of its loans through a new system in January in a move it said is slated to save it $2,500 in telecommunication costs. Ofori said it plans to service its loans through the Southfield, Mich.-based McDonald Computer Corp.'s Web-based system during the upcoming month. "By greatly reducing our cost on technology and management portfolios, we will become a more competitive subservicer," said Karen Heller, Ofori Lending Services' servicing manager.

Distressed sales in Florida during November continued to boost the state's existing home market on a year-to-year basis but Realtors say buyers there and nationwide have yet to fully return to the market. The Sunshine State saw existing home sales rise 4% year-to-year to 8,751 during the month when the median price, at $158,300 was down 27% compared to a year ago, according to the Florida Association of Realtors. "Market conditions nationwide continue to vary with solid sales gains in some areas, including many Florida markets," said the National Association of Realtors. "We have favorable affordability conditions, but we need more than that to give buyers with jobs the confidence they need (to return to the housing market)," said NAR chief economist Lawrence Yun.

A Freddie Mac report shows the agency expanded its mortgage portfolio by over $40 billion in November, but its issuance of mortgage-backed securities remains relatively meager. The secondary market agency said it purchased $10 billion of its own MBS in November for its investment portfolio, which totaled $805.4 billion as of Nov. 30. However, Freddie issued only $14.5 billion in MBS in November, up slightly from $13.5 billion in October. Ginnie Mae issued $27 billion in single-family MBS in November. Freddie's monthly report also shows that single-family mortgage defaults continue to rise at a fast clip. Since October, loans 90-days or more past due are up 18 basis points to 1.52% as of Nov. 30. In November 2007, only 0.6% of Freddie guaranteed loans were seriously delinquent.

Fraud prevention firm National Loan Auditors, Walnut Creek, Calif., is now offering an online resource portal aimed at providing clients with up-to-date information on statutes and case law pertaining to lending and foreclosure. The portal includes status updates on all federal, state and municipal legislation, the company said. "NLA Law Portal adds value to our forensic loan audit by providing support for its findings and information on how to effectively use the audit report in legal proceedings," said August Blass, CEO of National Loan Auditors. "Users are given summaries and guidelines that distill lending and foreclosure law into a short manageable synopsis, saving hours in research." Once access has been granted, clients have the ability to search various summary topics such as alternatives to workout agreements, Truth in Lending Act summary, and Home Ownership and Equity Protection Act action steps. State legislation topics also are available. By selecting a state, users will receive current case law and statues in that state. Litigation tools also will be displayed when applicable.