Servicing

Sen. Dick Durbin, D-Ill., has introduced a bill that would allow bankruptcy judges to modify mortgages on primary residences and he is working to include it in the economic stimulus package. The Senate assistant majority leader said Congress has already committed over $1 trillion to address the financial crisis. "Why don't we take a step that would indisputably reduce foreclosures and that would cost taxpayers nothing?" Sen. Durbin asked. The Financial Services Roundtable said the Durbin bill and a similar measure introduced by Rep. John Conyers, D- Mich., in the House would be "counter-productive" and encourage bankruptcies. "They will inject additional risk into home buying and the markets will respond by increasing interest rates, fees, downpayments, or all three," FSR president and chief executive Steve Bartlett said.

Investment funds affiliated with PennyMac -- a "scratch and dent" firm headed by a former top executive at Countrywide Financial Corp. -- have purchased a $558 million portfolio of 2,800 residential loans from the government using a cashflow sharing arrangement. Initially, the Federal Deposit Insurance Corp. will receive 80% of the cashflow on the mortgage portfolio with the balance going to the investor group. A spokesman said eventually the FDIC will receive 60% of the cashflow. "Once it hits a certain threshold it adjusts downward," said the spokesman. He declined to say what that threshold is. The portfolio consists of outstanding first and second liens scattered throughout the U.S. with the heaviest concentration in Arizona, California, Florida, and New York. PennyMac's servicing division will service and work out the loans, the company said in a statement. Investment funds managed by a PennyMac affiliate called PNMAC Capital Management LLC bought the loans from the FDIC, paying cash for them. The portfolio belonged to First National Bank of Reno, which failed this summer. PennyMac is headed by Stanford Kurland, who was forced out of Countrywide in 2006 in a power struggle with then chairman and CEO Angelo Mozilo. (On July 1 CFC was sold to Bank of America.) At one time Mr. Kurland was considered to be Mr. Mozilo's successor at the company. PennyMac was formed by Mr. Kurland last year with financial backing from BlackRock Inc. and other investors.

Departing Treasury Secretary Henry Paulson on Wednesday weighed in on the future of Fannie Mae and Freddie Mac, suggesting a 'public utility' model might be the best way to "resolve the inherent conflict between public purpose and private gain." Speaking before the Economic Club of Washington, Mr. Paulson repeatedly emphasized that the "pre-conservatorship" structure of Fannie Mae and Freddie Mac is not an option for policy makers who will weigh in on the issue this year. Mr. Paulson said the nation needs what he called a "vibrant private market" for mortgages, saying the government might want to "enhance" the ability of depositories to fund mortgages as a possible substitute should Fannie and Freddie be dismantled. He provided no details but discussed four options: expanding the role of FHA and GNMA in mortgages; creating a partial government guarantee for MBS issued by GSEs; completing privatizing the housing GSEs; and the public utility model where private sector money would be used to purchase and securitize mortgages (but not hold them) and where the government would set interest rates and yields.

RealtyTrac, an online marketplace for foreclosure properties, and Assist-2-Sell, (http://www.assist2sell.com) a discount real estate company, have formed an agreement and strategic partnership that will allow Assist-2-Sell visitors to search nationwide for foreclosure properties, supplied in real time from RealtyTrac's comprehensive database of defaults, auctions and bank-owned homes. "We are committed to providing Assist-2-Sell and its visitors the most comprehensive set of foreclosure properties, and pertinent foreclosure-related editorial content, written to help consumers understand the foreclosure process and the steps involved with buying a home in foreclosure," said Rick Sharga, senior vice president at RealtyTrac. With real estate in a downturn in most markets nationwide, the foreclosure marketplace is one of the few growing areas in real estate. More than 750,000 homes received a foreclosure notice in the third quarter of 2008, up 71 percent from the third quarter of 2007, according to a RealtyTrac report. Said Mary LaMeres-Pomin, co-founder and co-chief executive officer of Assist-2-Sell. "This new alliance between Assist-2-Sell and RealtyTrac will add value to our customers and extend the reach of both companies on the Internet." To find out more visit http://www.realtytrac.com.

Sen. Dick Durbin, D-Ill., has introduced a bill that would allow bankruptcy judges to modify mortgages on primary residences and he is working to include it in the economic stimulus package. The Senate assistant majority leader said Congress has already committed over $1 trillion to address the financial crisis. "Why don't we take a step that would indisputably reduce foreclosures and that would cost taxpayers nothing?" Sen. Durbin asked. The Financial Services Roundtable said the Durbin bill and a similar measure introduced by Rep. John Conyers, D- Mich., in the House would be "counter-productive" and encourage bankruptcies. "They will inject additional risk into home buying and the markets will respond by increasing interest rates, fees, downpayments, or all three," FSR president and chief executive Steve Bartlett said.

In downgrading its ratings on Carmel, Ind.-based insurance company Conseco Inc., Fitch Ratings cites concerns with the company's commercial and residential mortgage investments. "Fitch believes Conseco's statutory capital will be pressured by impairments in the deteriorating market for commercial mortgage backed securities and commercial mortgages. Fitch also notes Conseco's exposure to a sizable but highly rated alt-A residential mortgage-backed security portfolio and below-investment-grade fixed maturity corporate securities that are greater than 100% of statutory capital. The company has a meaningful exposure to GAAP unrealized losses on its investment portfolio that under statutory accounting rules are not reflected in capital," the rating agency said. The report added that Conseco is working on various initiatives to improve statutory capital and the future of its ratings will be based on the ability to improve is financial profile.

A survey conducted for Reecon Advisors, an independent real estate economics and information company, finds that most people oppose using federal bailout funds to help pay the mortgages of homeowners who are in default. While 51% of respondents opposed using the bailout to help homeowners in trouble, 43% supported helping troubled homeowners, according to the Reecon Advisory Report. David Lereah, a former Mortgage Bankers Association and National Association of Realtors chief economist who is president of Reecon Advisors, said the findings indicate that there are "significant political barriers to proposals now being drafted in Congress to use some of the remaining $700 billion of bailout funds to help stem foreclosures by helping defaulted homeowners with their mortgages." Reecon Advisors publishes a new weekly newsletter about residential real estate, which can be found at www. reeconadvisoryreport.com.

Homesaledirectory.com, a Flagstaff, Ariz.-based home for sale listing website for buyers and sellers, has formed a strategic partnership with RealtyTrac, in which RealtyTrac will power a nationwide foreclosure home search on Homesaledirectory.com. Said Jason Dittberner, president of Homesaledirectory, "Home buyers and investors are searching for the best buying opportunities available and this partnership adds yet another valuable resource." With real estate in a downturn in most markets nationwide, the foreclosure marketplace is one of the few growing areas in real estate. More than 750,000 homes received a foreclosure notice in the third quarter of 2008, up 71% from the third quarter of 2007, according to the RealtyTrac U.S. Foreclosure Market Report. Said Ari Monkarsh, vice president at RealtyTrac, "We look forward to providing Homesaledirectory.com and its customers the most comprehensive foreclosure data available on the Internet."

The California housing market, which is still reeling from foreclosures and declining values, now has something new to worry about: what might happen to prices if an earthquake strikes. According to a new report issued by Impact Forecasting LLC and Aon Benfield, only 14% of California homeowners carry earthquake insurance. The report notes that a natural disaster, such as a "great" earthquake in southern California "could send shockwaves throughout the financial and insurance industries." Aon, a reinsurance company, says many mortgagors could walk away "from their damaged homes without repairing them, leaving many homes in foreclosure and forcing the banks to bear the brunt of the loss in capital." California, typically, represents 20% of all residential loans serviced in the U.S. "Thoughts of just how bad this mortgage crisis might be should a significant earthquake occur in the next couple of years have crossed many of our minds," the authors write.

Roughly 50 different investors received confidential bid packages on IndyMac Bank FSB, the insolvent thrift that is also the nation's ninth largest residential servicer. A spokesman for the Federal Deposit Insurance Corp. also clarified that the investor group awarded IndyMac this past Friday is putting roughly $2.9 billion into the deal: $1.6 billion that represents the difference between the thrift's liabilities and the value of its assets (after the assets have been marked-to-market) and another $1.3 billion in cash that will be used to capitalize the re-constituted lender/servicer. "It's failed bank math," he said. The spokesman said at least 80 different investors were invited to bid but declined to say how many were involved in the final bid process. Of the 80, 50 received bid packages. Late last week the FDIC agreed to sell the Pasadena, Calif.-based IndyMac to IMB Management Holdings, a consortium of hedge funds led by Dune Capital, J.C. Flowers, Paulson & Co., and others. IndyMac has $13.9 billion in assets and $12.3 billion in liabilities, said the spokesman.