Servicing

The financially struggling Residential Capital Corp. has sold $12.7 billion in Fannie Mae-related servicing rights. The company confirmed the sale -- first reported in the American Banker -- but declined to say who the buyer was. "We're not giving out any more information about the sale," a spokeswoman said. GMAC Financial Services -- the parent of ResCap -- recently applied with the Federal Reserve to become a bank holding company, a move that may give it access to a cash infusion under the Emergency Economic Stabilization Act. The company has warned, however, that it may not receive approval from the Fed. GMAC owns a depository based in Utah. Among servicers, ResCap ranks sixth nationwide, according to the Quarterly Data Report.

Defaults on single-family mortgages and construction loans continued to accelerate in the third quarter as banks and thrifts added $50 billion to loan loss reserves for the second consecutive quarter, according to the Federal Deposit Insurance Corp. FDIC chairman Sheila Bair said institutions are "aggressively growing reserves. But overall reserve growth continues to lag behind the growth of troubled loans." The serious delinquency rate (90-days or more past due) on single-family mortgages rose to 3.9% in the third quarter, up from 3.3% in the second quarter. Charge-offs in single-family loans totaled $3.9 billion, down from $4.6 billion in second quarter. The decline may be attributable to J.P. Morgan Chase's acquisition of Washington Mutual. Commercial banks originated $228.8 billion in single-family mortgages during third quarter, down 19% from the second quarter. After closing 22 banks this year, FDIC officials said the deposit insurance fund has declined to a 0.76% reserve level and the FDIC board will meet in December to consider a hike in insurance premiums. The FDIC's problem bank list has jumped to 171 institutions with $115.6 billion in assets, up from 117 institutions in second quarter.

The risk of delinquency continues to rise in the fourth quarter of this year, according to First American Corelogic's Core Mortgage Risk Index. The CMRI showed that delinquency risk rose 12% from a year earlier for the fourth quarter of this year. First American said the risk reading remains high at 54% above the base period established in the first quarter of 2002, a period near the end of the last U.S. economic recession. Due to current economic conditions, First American predicts that the risk index will either stabilize near its current level or rise to higher levels over the next 12 months.

The Federal Reserve's plan to purchase up to $500 billion of housing-related government-sponsored enterprises' mortgage-backed securities as well as up to $100 billion of their debt could mean a refinancing boom if the initial positive MBS market reaction to the move lasts. The immediate reaction to the move largely was "euphoria" in the MBS market, said Art Frank, director and head of MBS research at Deutsche Bank. "If this holds it's going to kick off a refi wave of some size," Mr. Frank said. But as of late Tuesday morning the market had "given up a little bit" of its initial outperformance based on the reaction of the benchmark Fannie Mae current coupon, he said. Premiums were not performing quite as well due to anticipation of a possible refi wave, Mr. Frank added. Overall, the MBS market as of Tuesday morning had done "very well" in reaction to the Fed's decision to join Fannie Mae, Freddie Mac and the Treasury in buying MBS in hopes of spurring purchases and refinancing that would be helpful to the larger economy, according to Ken Hackel, managing director at RBS Greenwich Capital.

Mission Capital Advisors LLC, New York, is accepting bids for a portfolio of sub-performing and non-performing commercial mortgage loans, secured by various commercial real estate and business assets in the greater Chicago Metro area and various towns in Indiana. These loans have a balance of more than $50.3 million. Mission is not identifying the seller. It is soliciting indicative bids from prospective bidders for the purchase of individual loan pools, any combination of loan pools, or the entire portfolio. The portfolio is divided into 11 large balance pool assets and a small balance pool of 18 assets that is an "all-or-none" portfolio, allowing investors to target specific assets by performance, collateral type or geography based on their individual acquisition criteria. The real estate collateral consists of retail, multifamily/condo, industrial, office, C&I, residential and commercial development land. "This offering is unique in that investors can bid individually on the large balance assets while the smaller balance assets must be bid on as a pool," said Stephen Emery, director at Mission Capital Advisors. "Additionally, much of the collateral is within the Chicago metro area, which is a great location for residential and commercial assets." A detailed offering memorandum and confidentiality agreement can be found at http://www.missioncap.com.

Freddie Mac, a ward of the government since early fall, bought just $19.27 billion worth of mortgages during October, its worst showing of the year. Meanwhile, the delinquency rate on its single-family portfolio rose to 1.34% in October, a 10% increase in late payments from September. A year ago just 0.54% of its holdings were considered delinquent. Its retained portfolio increased to $763.66 billion, a 4% gain from the pervious month. Compared to the same month last year, its portfolio has increased 9%. Two weeks ago the GSE received a $13.8 billion cash injection from the government after posting a record $25.3 billion loss in the third quarter. Like many mortgage investors the company has been forced to slash the value of its massive mortgage holdings in the wake of rising loan delinquencies.

On Friday night the Office of Thrift Supervision closed Downey Savings and Loan of California, a top 40 ranked residential lender, and once a large player in the subprime and alt-A markets. The Federal Deposit Insurance Corp. was named receiver of the thrift and immediately sold Downey and another ailing depository, PFF Bank & Trust of Pomona, to U.S. Bancorp of Minneapolis, which operates the nation's 11th largest mortgage banking company. The bank promised to implement a loan modification program for ailing residential borrowers at the two thrifts. According to a statement put out by FDIC, USB will purchase "virtually" all of their assets under a loss sharing agreement with the government. Downey had $12.8 billion in assets, PFF $3.7 billion. USB will assume the first $1.6 billion in losses on select asset pools at Downey and PFF.

The government's just-announced rescue of Citigroup will protect the financial services giant from large losses on a $306 billion pool of residential and commercial mortgage securities and will lead to an expansion of the bank's loss mitigation efforts to help troubled homeowners. Citigroup announced an ambitious loss mitigation program on Nov. 11 and said it has adopted a streamlined loan modification model similar to one developed by Federal Deposit Insurance Corp. But the rescue package, developed by the Federal Reserve, Treasury Department and FDIC, says the government will provide Citigroup with a "template to manage guaranteed assets. This template will include the use of mortgage modification procedures adopted by the FDIC, unless otherwise agreed." FDIC chairman Sheila Bair generally considers the FDIC model to be superior to the models adopted by the banks and Fannie Mae and Freddie Mac. Citigroup has agreed to absorb the first $29 billion in losses on the $306 billion pool and the government will absorb 90% of future losses for 10 years on residential assets and five years on commercial real estate assets. In providing this guarantee, regulators reduced the capital risk weighting on the $306 billion, which freed up $16 billion in existing capital for Citi. Treasury also provided Citigroup with a new $20 billion capital infusion - on top of the $25 billion it received earlier on the TARP program.

The average rate on a 30-year fixed rate mortgage fell to 6.04% during the week ending November 20 from 6.14% the week before and 6.20% the same week a year ago, according to Freddie Mac. The average rate on a 15-year FRM dropped to 5.73% from 5.81% the previous week and from 5.83% a year ago, the average rate on a five-year Treasury-indexed hybrid adjustable-rate mortgage slipped to 5.87% from the previous week's 5.98% and 5.88% a year ago, and the average rate on a one-year Treasury-indexed ARM slipped downward to 5.33% from 5.29% a week ago and 5.42% a year ago. Average points were 0.7 for 30- and 15-year FRMs, 0.6 for five-year hybrids and 0.5 for one-year ARMs. Freddie Mac can be found online at http://www.freddiemac.com.

Goldman Sachs predicted on Friday that the yield on the 10-year Treasury -- which mortgages are pegged to -- could fall to 2.75% by the end of the first quarter. On Friday morning the 10-year Treasury was yielding 3.24%. In years past, when the 10-year fell so too did mortgage rates but because of the housing recession lenders -- as well as Fannie Mae and Freddie Mac -- are charging extra points, fees and higher rates to compensate for the worst housing market since the Great Depression.