Servicing

Federal Housing Administration lender Shore Mortgage, Birmingham, Mich., which is licensed in 25 states, said it is planning to significantly grow its origination staff due to rate-driven increases in its business and its reputation for swift mortgage closings. President Robert Rahal said in a prepared statement that the company is seeking to hire an additional 80 to 100 new employees and has a training program for those lacking experience. He said positions the company is seeking to fill include loan officers (10-20 people per month for the next three months), underwriters, processors, closers, post-closing specialists and account executives. The company is licensed to do business in Alabama, Arkansas, Arizona, Florida, Georgia, Illinois, Indiana, Maine, Michigan, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, Tennessee, Utah, Virginia, Washington and Wisconsin.

Real estate economists Michael Sklarz and Norm Miller, co-founders of Collateral Intelligence, say the widely followed Case-Shiller home price index has exaggerated home price declines for most homeowners. In a white paper, they argue that the Case-Shiller methodology -- which mixes distressed and non-distressed home sales -- has overstated price declines in most areas. They also say that as foreclosure sales have increased, the discounts associated with foreclosure prices, historically about 22% below normal market sales, have increased to 25% to 50% in many markets. The Collateral Intelligence (www.co-intel.com) executives say that because of the widening foreclosure discounts, distressed sales should be examined separately from non-distressed sales when evaluating market conditions and likely future movements in home values. The Case-Shiller index was created by economists Robert Shiller and Karl Case. The two men could not be reached for comment.

Fannie Mae bought just $29.65 billion in mortgages from its seller/servicers in November, its worst purchase month of the year. The government sponsored enterprise also issued $23.8 billion in mortgage-backed securities during the month, a low for the year as well. Its commitments plunged to a yearly low of $21.19 billion in November too. However, since November ended mortgage rates have plunged and the GSE's December commitments should show an increase. Fannie, and its sister company, Freddie Mac, have been operating under a government conservatorship since September.

A consortium of private equity investors led by Dune Capital Management has agreed to pay $13.9 billion to acquire IndyMac and its $158 billion servicing portfolio from the Federal Deposit Insurance Corp. The new owners of IndyMac -- which also includes J.C. Flowers & Co., Paulson & Co. and others -- will control the nation's 10th largest servicing company, according to figures compiled by National Mortgage News and the Quarterly Data Report. Besides the servicing portfolio and platform, Dune and its partners will take control of: a $16 billion loan portfolio, $6.9 billion in securities, the Freedom Financial reverse mortgage business (including $20.2 billion in receivables) and 33 retail branches. The sale is not without risk to the government. FDIC has agreed to share losses on some of the thrift's loans and will be on the hook for $2 billion in construction and other loans made by the Pasadena-based IndyMac. The investors formed IMB Management Holdings to buy the thrift, which will be structured under a holding company called IMB HoldCo LLC. Steven Mnuchin, chairman and co-CEO of Dune, will be chairman and CEO of IMB. The sale was announced Friday afternoon. At least one other bidder -- also a private equity consortium -- was vying for IndyMac, which was created by Countrywide Home Loans in the 1980s as a non-conforming loan conduit. The investor consortium will capitalize the institution with $1.3 billion in cash. IMB will continue IndyMac's much ballyhooed loan modification program where troubled mortgages are restructured, providing consumers with easier payment plans.

The Federal Deposit Insurance Corp. has trimmed the final list of IndyMac bidders down to two private equity consortiums: Dune Capital Management and one other, according to investment banking sources. The identity of the other consortium could not be ascertained at press time. "The deal still isn't done," said the source. "We could hear today or any time over the next few days." The FDIC declined to comment. One source, requesting anonymity, said Apollo Management is out of the running as a bidder. The agency prefers to sell IndyMac FSB of Pasadena, Calif. in a whole bank transaction instead of the government retaining some of its troubled assets. The agency, noted one investment banker, is very focused on getting private equity investors to put as much money as possible at the bank holding company level in the event more cash is needed at an institution. "The problem with private equity investors is that they want as much control as possible but they want limited liability in case something goes wrong," said the investment banker. The FDIC had hoped to complete the deal by year-end but has not. Complicating the sale of IndyMac's $180 billion residential servicing portfolio is large buyback requests forced upon the failed thrift by Fannie Mae. Fannie said it is waiting on "information from the FDIC with regard to servicing valuations and confirmation of the identity and eligibility of the proposed buyers in order to finalize an agreement." Fannie, which is operating under a federal conservatorship itself, added that it "will continue to work constructively with the FDIC and IndyMac Federal Bank to reach a resolution in the near term that is in the best interest of all parties involved." IndyMac was taken over the government last summer and has operated under a conservatorship ever since.

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.