Servicing

A study suggests that stock market losses and falling home values are disproportionately affecting senior citizens, making it harder for them to recover from the financial crisis compared to younger Americans. Data from Golden Gateway Financial, a reverse mortgage lender, also show 25% of survey respondents are "either borrowing against their home or trying to sell it in order to generate income to survive." At the same time, Golden Gateway Financial reported, during the September-October-November period, its offices saw a 200% increase in the number of incoming calls by senior citizens facing foreclosure. In this economic climate, experts believe there will be a further increase in demand for mortgage products that will allow seniors to benefit from their equity. "As savings accounts continue to shrink, alternatives such as reverse mortgages are an even more attractive and natural way for senior citizens to make retirement easier," assistant professor at Haas School of Business, University California Berkeley, Thomas Davidoff, said. Golden Gateway Financial also said "seniors understand their precarious situation and are exploring aggressive actions to stay afloat in this economy."

RealtyBid.com, a national online auction company based in Rainbow City, Ala., is offering more than 2,000 REO properties for auction during the month of December. CEO Tony Isbell said the 18 lending institutions offering foreclosure homes are highly motivated to sell. "These lenders need to get as much of this foreclosure inventory off their books before the end of the year as possible," Mr. Isbell said. "Plus, they are preparing for the large influx of new foreclosure properties they will be dealing with in 2009. Many of them have mandated that these properties must sell by Dec. 17." Thousands of homes are available each month on RealtyBid.com from lenders, builders and real estate brokerage firms.

Rosario Divins, a self-represented foreclosure prevention specialist from San Antonio, has been arrested for allegedly engaging in a fraudulent foreclosure prevention scheme. According to Johnny Sutton, U.S. attorney for the Western District of Texas, Divins allegedly unjustly enriched herself by collecting large sums of cash or property titles from individuals in desperate financial situations who responded to her mail offering to stop their residential foreclosures. Despite three separate sanctions from the U.S. Bankruptcy Court for the Western District of Texas ordering her to stop misrepresenting herself and making false promises to her clients, the indictment alleges that Divins has continued to implement her scheme.

The ratio of commercial mortgages that are past due crept up in the third quarter but remained historically low, according to the Mortgage Bankers Association. Overall, 0.63% of loans in commercial mortgage-backed securities were 30 or more days past due in the third quarter, up 10 basis points from the second quarter. In addition, 1.38% of commercial mortgages held by FDIC insured banks were at least 90 days past due, up 29 basis points from the second quarter. Other investor categories, including life insurance companies, reported lower delinquency rates. Jamie Woodwell, MBA's vice president of commercial real estate research, said that commercial and multifamily mortgages have not seen the same kind of credit deterioration that has been seen in residential real estate, but he said that delinquencies are likely to continue rising due to "economic and credit market stress."

A home price index from default management and collateral valuation provider Integrated Asset Services estimates that home prices declined 1.7% in the month of October. On a year-over-year basis, the IAS360 index shows prices were down 12.9% in October, a slight drop in the annualized rate of decline from September. The index also found signs of improvement in both the Florida and Arizona markets. But declines in prices continued to be widespread, with all four U.S. Census Bureau regions showing lower home prices. "Housing prices at the national level continue to look bleak," IAS said.

The Securities and Exchange Commission has nearly completed a study on mark-to-market accounting and preliminary findings point to the need for additional guidance in valuing mortgage-backed securities in inactive or illiquid markets, according to SEC chairman Christopher Cox. "The work we have already done suggests that the accounting standard setters could improve upon the existing security impairment models," the SEC chairman told an American Institution of Certified Public Accountants. Congress mandated the study because financial services executives are complaining that mark-to-market accounting is forcing wholesale writedowns of assets at fire-sale prices. "Investors have also clearly indicated a view that the current concept of mark-to-market accounting increases transparency of financial information provided to investors - but that in inactive or illiquid markets, additional guidance would be useful to promote reasonable application of the standards," Mr. Cox said. SEC is slated to submit its mark-to-market study to Congress by Jan. 2.

Mortgage bankers will foreclose on 8.1 million homes over the next four years, representing 16% of all outstanding residential loans in the U.S., according to a new report issued by Credit Suisse. Back in April CS forecast 6.5 million foreclosures, or 13% of outstanding mortgages. The Wall Street firm says it favors a plan by Treasury to create a 4.5% mortgage using mortgage-backed security issuance but believes the agency "should target an even lower rate in foreclosure hot zones where entire neighborhoods are at risk." CS analyst/managing director Rod Dubitsky estimates that within two years 72% of consumers with a subprime loan - and 83% of payment-option ARM borrowers - will be in a negative equity position if home prices fall 15%. Mr. Dubitsky spoke at the annual housing forum sponsored by the Office of Thrift Supervision on Monday afternoon.

House Financial Services Committee chairman Barney Frank, D-Mass., does not expect changes to the bankruptcy law to prevent foreclosures will be included in an economic recovery bill that congressional leaders want to pass in late January for President Barack Obama to sign. But the committee chairman warned industry groups that Congress could pass a bankruptcy bill later next year that allows judges to modify mortgages on primary residences if the level of loan modifications does not pick up significantly. "If by February we have the same frustration. If we aren't able to have a better success rate at reducing foreclosures, then I believe political support for bankruptcy will increase," Rep. Frank said at an Office of Thrift Supervision housing forum. Chairman Frank also noted that the new president would have "plenty of legal authority" to implement an aggressive loan modification program thanks to the Troubled Asset Relief Program Congress passed in October. And the economic recovery bill does not need to address that issue. "I don't think you need legislation," he told reporters.

The percentage of home loan borrowers who are least 60 days past due on their mortgage rose 54% between the third quarter of 2007 and the third quarter of this year, according to TransUnion.com. Nationally, 3.96% of homeowners were 60 or more days past due in the third quarter, marking the seventh consecutive quarter of rising overdue rates, according to TransUnion. That delinquency rate, considered a precursor to foreclosure, was up 12% from the second quarter. States with the highest delinquency rates were Florida, at 7.82%, and Nevada, at 7.71%, the company said. The lowest overdue rates were found in North Dakota, South Dakota and Montana, states where the 60-day overdue rate remained below 2%. Average mortgage debt per borrower stood at $192,287 nationally.

Re-defaults of newly modified loans are "remarkably high," according to the Office of the Comptroller of the Currency. The OCC released data showing that 36% of modified loans are 30 days past due after three months. "After six months, the rate was nearly 53% and after eight months, 58%," Comptroller John Dugan said at an Office of Thrift Supervision housing forum. Using first quarter data, the OCC also found that 35% of modified loans were 60-days past due after six months. "Not all re-defaulted mortgages go to foreclosure," Mr. Dugan said. But the OCC is beginning to ask servicers why the re-default is so high. The Comptroller also gave a preview of the third quarter OCC/OTS report on loan workouts and foreclosures that will be released soon. He noted that loan modifications have nearly doubled since the first quarter and foreclosure starts fell 2.6%. Foreclosure starts totaled 288,740 in the second quarter.