Servicing

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.

Fannie Mae and Freddie Mac are projected to force mortgage originators to buy back over $1 billion in whole loans in 2009 because of misrepresentations or fraud, according to their regulator. "In 2006 and 2007, the underwriting was so poor and there was a lot of mortgage fraud," Federal Housing Finance Agency director James Lockhart told reporters. "They have the right under their agreements to require the originator to repurchase the loan," he added. The government sponsored enterprise regulator indicated the buybacks could range from $1 billion to $1.5 billion. Buybacks can put "some real discipline into the origination system," the GSE regulator told a Women in Housing and Finance luncheon. "If you know you are going to get the mortgage back, you may be a little more careful in the future," he said.

The foreclosure crisis is not only impacting homeowners, but also displacing renters who are involved in an estimated one-fifth to two-fifths of all foreclosures, according to Eric Belsky, executive director of housing studies at Harvard University. He told a NeighborWorks training symposium that that 35% of renters live in single-family homes and automatic evictions due to foreclosures have become a "major rental housing issue." The federal government has provided $4 billion for cities and municipalities to purchase foreclosed properties and fix them up for homebuyers or renters. But the city of Boston is receiving only $15 million," Mr. Belsky said. "It's just pathetic." Housing groups are urging President-elect Barack Obama's transition team to increase funding for this program and to drop a requirement that foreclosed properties must be purchased at a discount, which has the effect of driving down property values. House Financial Services Committee chairman Barney Frank, D-Mass., wants to get a provision in Obama's economic recovery bill that would protect renters from being evicted after a foreclosure.

Sen. Dick Durbin, D-Ill., slammed the Mortgage Bankers Association for continuing to oppose his bankruptcy bill and for grossly underestimating the foreclosure problem. At a press conference, the second ranking Democrat in the Senate noted that MBA chairman David Kittle recently testified at a committee hearing that allowing bankruptcy judges to modify mortgages would result in a $295 tax per month on every homeowner. The Senate Judiciary Committee member said he challenged that tax number and MBA has provided no evidence to support it. "It is just a number thrown at the committee by the mortgage bankers who I don't believe enjoy the greatest credibility," Sen. Durbin said. "We are in the process of responding to the committee's questions," said MBA spokesman John Mechem. But allowing bankruptcy cramdowns will increase the mortgage rates by 150 to 200 basis points, he said. "We stand behind that estimate." Allowing judicial modifications would give servicers an "incentive to modify mortgages," Sen. Durbin said at the press conference, and it would give struggling homeowners "some leverage" in negotiating with servicers.

GMAC Financial Services warned Wednesday that unless more of its note holders agree to an exchange program, its plans to become a bank holding company and potentially tap TARP funding will collapse. The exchange offer involves $38 billion worth of corporate notes. (GMAC extended the "early delivery" time of the exchange three days to 5 p.m. this Friday.) To date 21% of GMAC, and 21% of Residential Capital Corp. note holders, have agreed to an exchange, far shy of the 75% needed. In a statement, GMAC Financial - the parent of ResCap, the nation's sixth largest mortgage servicer - said the Federal Reserve is requiring GMAC to have minimum regulatory capital of $30 billion to become a bank holding company. The note exchange offer is key to achieving that goal. The exchange offer involves cash and/or issuing new corporate notes. In a public filing back in November ResCap warned that if GMAC stops providing liquidity to its mortgage division it could be forced into bankruptcy. GMAC Financial is 51% owned by hedge fund giant Cerberus Capital and 49% owned by General Motors, the ailing automaker. ResCap services $391 billion in home mortgages, according to the Quarterly Data Report.

Congressional approval for the second $350 billion installment of TARP funds may depend on the Treasury Department's ability to show that banks are actually using their government investment money to make new loans, House Financial Services Committee chairman Barney Frank, D-Mass., said Wednesday. At a House hearing lawmakers lambasted TARP chief Neel Kashkari and his agency for not adopting the FDIC's loan modification model and pulling a "bait and switch" on Congress by abandoning their stated early goal of buying troubled mortgages in favor of making preferred stock investments in banks. Mr. Kashkari, an assistant secretary at Treasury, said his boss, Henry Paulson, has made no decision on when he will ask for the remaining $350 billion. To date, 87 banks in 30 states have received government investments under the $700 billion Troubled Asset Relief Program. Members of the House Financial Services Committee complained that there is no requirement for the recipients to increase their lending and no mechanism to measure it.