Servicing

GMAC Financial Services - which is trying to become a bank holding company and tap the Treasury's TARP program - has extended the deadline for its $38 billion note exchange program until Dec. 26, 2008 at 11:59 p.m. The "early" delivery portion of the note exchange was extended to Dec. 16 at 11:59 p.m. from this past Friday. GMAC, the parent of Residential Capital Corp., the nation's sixth largest servicer, is offering investors $0.55 to $0.85 on the dollar in cash or in the form of new bonds and/or preferred shares. It needs a 75% participation rate from note holders to reach its goal of amassing $30 billion in regulatory capital to form a bank holding company. Late last week, its participation rate was about 25%. ResCap controls roughly $400 billion in mortgage servicing rights. If GMAC does not become a BHC (and tap TARP funds) it may be forced into bankruptcy protection.

Thornburg Mortgage Inc., Santa Fe, N.M., on Friday reached an agreement with several of its reverse repurchase counterparties allowing for it to make the interest payment on its 8% senior notes that was due last month. The past-due payment will be made within the 30-day grace period allowed under the indenture. The counterparty lenders agreed that during the override period, which expires on March 16, 2009, they will not invoke any margin calls on the jumbo investor. Thornburg's common shares have been delisted but continue to trade on the "pink sheets." Thornburg agreed to pay the counterparties the remaining $110 million out of the liquidity reserve fund except for $41.2 million, which the company can utilize to make the foregoing senior notes interest payments and for forecasted operating expenses and debt service payments through March 2009. The company has also agreed to pay to the counterparties all of the principal and interest collected on the underlying collateral subject to the override agreement to further reduce the outstanding financed balance on an accelerated basis. The reverse repurchase agreement counterparties and their affiliates who entered the override agreement include JPMorgan Chase Funding Inc. (formerly Bear Stearns Investment Products Inc.), Citigroup Global Markets Limited, Credit Suisse Securities (USA) LLC, Credit Suisse International, Greenwich Capital Markets Inc., Greenwich Capital Derivatives Inc., The Royal Bank of Scotland PLC and UBS AG.

Federal Deposit Insurance Corp. researchers estimate that 839,000 single-family mortgages fell into the 60-days-plus late category during the third quarter, up 14% from the second quarter. Mortgages entering foreclosure fell 10% from the previous quarter to 574,000. "It is still the second highest quarterly number of foreclosures, double the number of two years ago," said FDIC chief economist Richard Brown. He attributes the slowdown in new foreclosures to state moratoriums, delays in processing, and more attempts by servicers to engage in workouts. "Even though foreclosures slowed to 574,000 during the quarter, the number of loans 60-days to 90-days past due rose by almost 265,000, and now total 1.9 million," Mr. Brown said.

Republic Mortgage Insurance Corp., Winston-Salem, N.C., has handed over the keys to its mergers and acquisitions unit to its founder, Larry Charbonneau. Mr. Charbonneau said the former Republic Strategic Advisory Inc., Houston, will now carry the name Charbonneau & Associates. He said there was no animosity between him and RMIC but that the company wants to concentrate on its core business of mortgage insurance. Besides M&A work, Charbonneau & Associates will focus on advisory work and warehouse lending consulting. Last decade, Mr. Charbonneau ran a well-regarded M&A boutique called Charbonneau-Klein Inc. He joined RMIC four years ago. The MI is a subsidiary of the publicly traded Old Republic International of Chicago. On Thursday, Old Republic paid its regular quarterly dividend of 17 cents a share.

R&G Mortgage Corp. has completed the sale of servicing rights and advances on $5.1 billion of agency and government-backed home loans to Banco Popular de Puerto Rico. The sale involved $3.8 billion of Freddie Mac mortgages and $1.3 billion of Ginnie Mae loans. Both companies are based in San Juan, Puerto Rico. R&G Financial is a bank holding company that specializes in banking, mortgage banking, consumer finance and insurance through its various subsidiaries.

Santa Ana, Calif-based First American Document Solutions, realizing the industry need for better post closing due diligence, has launched a new online portal designed to help lenders and servicers reduce their post-closing document management costs and improve investor compliance. The portal, dubbed ePostClosing.com, is a new platform that enables lenders and servicers to handle all of their document retrieval, trailing document, lien release and assignment tasks through a single online system. The platform offers customers instant access to the nation's largest property database, which includes more than 4 billion imaged records and access to a nationwide network of abstractors and field researchers. The services that are available online through ePostClosing.com include nationwide document retrieval, trailing documents and title policy retrieval, lien release services, assignment services, data solution and electronic vaulting.

JAM Equity Partners, a Los Angeles-based private equity firm, has invested $2.5 million in Wingspan Portfolio Advisors, a mortgage servicer specializing in delinquent loans. Wingspan, Dallas, said proceeds from the financing will be used to build out the company's servicing and technology platform. The arrangement includes an option for JAM to invest additional capital in Wingspan. Wingspan's founder and president, Steven Horne, is a lawyer who previously served as director of servicing risk with Fannie Mae and also spent nine years as a partner at Sherman Financial Group, where he built a unit that purchased and resolved portfolios of delinquent mortgage loans. He also served as director of default servicing for Ocwen. Mike Sekits, a partner at JAM, said, "We believe there are very few servicers that can match Wingspan's expertise in servicing distressed second mortgages and low-balance first mortgages, a huge opportunity that is especially problematic."

Ocwen Financial Corp., a servicer of subprime credit quality mortgages, said that the 60-day delinquency rate on its modified mortgages after six months is 24.6%, considerably below industry averages. Ocwen noted that the Office of the Comptroller of the Currency recently reported that, overall, 53% of borrowers were more than 60-days past due six months after having their mortgage modified. William Erbey, CEO of Ocwen, said the salient issue in the success of modifications for troubled borrowers is whether the mods are properly designed. He praised FDIC chairman Sheila Bair's defense of modifications as a loss mitigation tool. "We believe she is correct that the re-default problem lies with how some servicers are doing modifications, not with the concept of modification. It's possible to do modifications right."

In its November 2008 U.S. Foreclosure Market Report, RealtyTrac said foreclosure filings were reported on 259,085 properties during the month, a 7% decrease from October but still up 28% from November 2007. "Foreclosure activity in November hit the lowest level we've seen since June thanks in part to recently enacted laws that have extended the foreclosure process in some states, along with more aggressive loan modification programs and self-imposed holiday foreclosure moratoriums introduced by some lenders," said James J. Saccacio, CEO of RealtyTrac. He said more than half of the homeowners who received loan modifications to reduce monthly mortgage payments in the first half of 2008 are already delinquent on their loans again, according to the U.S. Office of Thrift Supervision. "Many of these delinquencies could turn into foreclosures next year," he said. Geographically, Nevada foreclosure activity in November decreased nearly 4% from October, but the state maintained the nation's No. 1 foreclosure rate. Filings were reported on 13,962 Nevada properties. Florida's rate moved up to the No. 2 spot thanks to an even bigger monthly decrease in Arizona, which posted the third highest rate with filings on 13,136 properties. Filings were reported on 60,491 California properties in November, the most of any state and a 6% increase from October. Florida posted 49,190 filings, up 68% from a year ago. Michigan foreclosures increased 28% from October with 14,594 filings. Visit www.realtytrac.com for more information.

The Treasury Department purchased $23.2 billion in Fannie Mae and Freddie Mac mortgage-backed securities in November and the Federal Reserve is gearing up to purchase GSE MBS by the end of December in an effort to reduce mortgage rates. Since Sept. 7, when the mortgage giants were placed in conservatorships, Treasury has purchased nearly $50 billion in government sponsored enterprise MBS. The Federal Reserve Board has committed to purchase $500 billion in Fannie and Freddie MBS over the next several quarters and $100 billion in GSE debt. The Federal Reserve Bank of New York completed its first purchase of GSE debt on Dec. 5. It purchased Fannie, Freddie and Federal Home Loan Bank notes with 1-2 year maturities. The Fed does not disclose purchase prices. But GSE regulator James Lockhart called the first purchase operation a "success." Initially, the New York bank plans to purchase GSE fixed-rate, non-callable senior benchmark securities on a weekly basis from its primary dealers.