Servicing

Home price declines are showing signs of easing but it's too early to declare a bottom, according to preliminary figures compiled by First American CoreLogic. The company released an early preview of its November findings, showing that prices declined at a rate of 9.6% in November, compared to 10.4% and 11.2% in October and September, respectively. "The consistent deceleration over the past two months with November indicating the same trend in price declines is encouraging because it could portend the trough in price declines," said Mark Fleming, chief economist for First American CoreLogic. But the economist cites continued job layoffs and a huge inventory of unsold homes as major negatives weighing on the housing market. Roughly $2 trillion in home equity has been wiped out over the past year. California cities continue to lead the pack in terms of price declines, according to the company. Salinas has suffered the most among California cities with values falling by almost 30%.

A new report shows that banks and thrifts are more successful at modifying mortgages they own than the loans they service for other investors and Fannie Mae and Freddie Mac. Only 51% of bank-owned modified loans had missed a payment after six months, compared to 61% for private investors, according to a third quarter mortgage metrics report issued by the Office of the Comptroller of the Currency and Office of Thrift Supervision. The joint report noted that 58% of Freddie modified loans were 30-day past due after six months and 57% of Fannie loans were delinquent. "The lower re-default rate for loans held by servicers may suggest that there is greater flexibility to modify loans in more sustainable ways when loans are held on the servicer's books than when loans have been sold to third parties," the report says. OCC and OTS collected the data from nine national banks and five thrifts with the largest servicing portfolios.

Hope Now servicers are planning to step up their loss mitigation efforts in 2009 and modify two million loans -- double the number of modifications this year, according to the private sector alliance. The alliance said servicers completed 107,800 repayment plans and 99,800 loan modifications in November to help homeowners avoid foreclosure. Hope Now projects the tally for modifications for all of 2008 will be 950,000. "We expect to double that to two million for 2009," said Steve Bartlett, president and chief executive of the Financial Services Roundtable. Mortgage Bankers Association chief operating officer John Courson stressed Hope Now will be more aggressive and employ new strategies to help troubled homeowners. "Stay tuned," he told reporters. The two trade group executives said they would welcome federal funding for foreclosure prevention efforts. And they support a FDIC plan would provide federal loan guarantees for modified loans.

The White House is pulling the plug on the Federal Housing Administration's "FHA Secure" refinancing program at yearend, according to industry sources. FHA Secure has helped at least 460,000 subprime borrowers refinance into Federal Housing Administration-backed loans. The Bush Administration launched the program in August 2007 as part of President Bush's first response to the subprime crisis which later morphed into a global financial meltdown. FHA Secure was meant to be a temporary program that expired at the end of 2008. However, lender and consumer groups have urged the Department of the Housing and Urban Development and the White House to extend it through 2009. "The expanded loan options offered by FHA Secure are an essential component of our collective efforts to help the largest possible numbers of at-risk borrowers," according to a November letter signed by several trade groups. Under the program, FHA loosened its underwriting standards to allow borrowers with adjustable-rate mortgages to refinance into fixed-rate FHA mortgages. The program was expected to help refinance borrowers who were behind on their payments, but only 4,000 delinquent borrowers were refinanced.

General Growth Properties Inc., Chicago, has gotten a forbearance and waiver agreement from the syndicate of lenders for the $900 million Fashion Show and Palazzo mortgage loans. The agreement lasts until Feb. 12, 2009. The loans had a maturity date of Dec. 12, 2008. Furthermore, GGP's syndicate of lenders for the 2006 senior credit agreement has entered into a forbearance and waiver agreement that extends until Jan. 30, 2009. In connection with this agreement, GGP has agreed to certain restrictions and covenants with this syndicate during the forbearance period.

Fitch Ratings has lowered Nationstar Mortgage's primary servicer rating for subprime mortgages to 'RPS2-minus' from 'RPS2'. Nationstar, based in Lewisville, Texas, serviced just over 89,000 predominantly subprime loans as of August 31, 2008, with an outstanding principal balance of nearly $12 billion. Nationstar is owned by the private equity firm Fortress Investment Group. Fitch said the downgrade reflects Nationstar's "reduced financial flexibility resulting from overall market illiquidity."

Fannie Mae and Freddie Mac servicers will begin sending thousands of letters of delinquent borrowers this month offering them the chance to sign up for a streamlined loan modification that could reduce their mortgage payments to 38% of gross monthly income. The government sponsored enterprises issued servicer guidelines for the new streamlined modification program (SMP) on Dec.12 and they held a press conference in Washington to kick off the new foreclosure prevention program. "Along with other recently announced initiatives to reach and help financially troubled borrowers earlier, including our Early Workout program, the SMP is a critical component our company's foreclosure prevention efforts," Fannie president and chief executive Herb Allison said. The SMP is available to borrowers who have missed at least three payments on their existing mortgage and have no more than 10% equity in the property. The mortgage interest rate can be reduced to 3% for five years to make the modified loan affordable.

Brookfield, Wis.-based Fiserv Inc. has enhanced capabilities to its Home Retention Solutions offering that enable financial institutions to identify and contact troubled borrowers with customized repayment solutions to try to keep them out of foreclosure. In addition, Fiserv is supporting programs such as Fannie Mae's Home Saver Advance Program, which provides an advance to cover past-due mortgage payments in exchange for a separate, unsecured loan, and the newly introduced Streamlined Modification Program, in which borrowers receive reduced interest rates or longer loan terms to make their payments more affordable. Among the enhancements developed since the initial launch of Home Retention Solutions in June 2008 are "one-touch" customer contact and advanced loss mitigation workflow tools that more fully automate the loan modification process, including secure electronic delivery of modification documents to borrowers with an electronic signature option when available. One-touch contact and the electronic fulfillment of the documents dramatically accelerate the completion of the modification process, even enabling the process to be completed in one phone call with the borrower.

Fannie Mae is tightening its lending standards on condominiums and it is introducing a new project eligibility review service (PERS) for new and newly converted condos that will be mandatory in Florida starting Jan. 15 and optional elsewhere. The delinquency and default rates on condo loans in Florida are "at an all time high," Fannie says in a notice to lenders. And the secondary market agency is reducing the maximum loan-to-value ratios for established condos in Florida when lenders don't use PERS or don't conduct full lender reviews. Use of PERS will cost lenders $30 per unit. Effective immediately, Fannie has eased its owner-occupied requirements for condominiums with bank-owned foreclosed units. Real estate owned units that are for sale (not rented) will be counted in the owner-occupancy ratio. The National Association of Realtors asked for this change. Meanwhile, lenders are bracing for loan buy-backs demands from Fannie and Freddie Mac and the lenders expect to face a lot of buy-backs involving condo loans, a source said.

Compass Analytics LLC, San Rafael, Calif., and Radar Logic Inc., New York, have integrated the latter's property index into the former's mortgage analytics and will expand on the business relationship going forward. The existing integration allows investors, portfolio managers, servicers and whole loan traders to "update property values as part of data load processes and leverage better loan-level property value, loan-to-value ratio and equity data for more accurate valuations," the companies said. Compass also will integrate the Radar Logic's residential price index derivatives into its CompassPoint mortgage analytics in the future. The derivatives integration would "enable analysts to mark-to-market RPX derivatives and model and employ the derivatives to hedge property value and credit risk in loan portfolios," according to the companies.