Servicing

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.

The Federal Deposit Insurance Corp. is offering to share its playbook on streamlined loan modifications with all residential servicers. The process was developed at IndyMac FSB, now a ward of the government. FDIC said it will share its "Mod in a Box" guide to provide servicers with the "necessary tools to facilitate streamlined and systematic loan modifications." According to FDIC chairman Sheila Bair, the IndyMac approach is effective in dealing with mortgages in portfolios and securitized pools. "I would encourage all industry participants to adopt the FDIC loan modification program as the standard approach in dealing with the grave problems facing us with continued mounting foreclosures," she said. FDIC inherited 60,000 delinquent mortgages when IndyMac was placed into conservatorship in July. Under the program FDIC mailed 23,000 loan modification proposals to borrowers and completed more than 5,300 transactions after verifying the borrowers' income. On average, the modifications cut a borrower's monthly payment by $380 or 23%.

Fannie Mae and Freddie Mac are suspending all foreclosures and evictions of homeowners during the holiday season -- November 26 to January 9 -- while their servicers get up to speed on a new streamlined loan modification program favored by the Treasury Department. The temporary suspension is expected to give troubled borrowers already 90 days past-due a chance to benefit from the new streamlined approach that servicers are trying to implement by December 15. "Until the streamlined modification program is fully implemented, we felt it was in the best interest of both borrowers and Fannie Mae to take this extra step," said Fannie chief executive Herb Allison. Freddie has instructed its servicers and foreclosure attorneys to contact 6,000 borrowers with pending foreclosure sales. If the single-family property is occupied the foreclosure sale will be halted. Fannie estimates the suspension will benefit 10,000 homeowners. Under the streamlined approach, the government sponsored enterprises can reduce the interest rate to 3%, extend the loan up to 40 years and even defer payments on part of the principal if necessary. The objective is to reduce borrowers' payments to 38% of gross income through a fast and simple process. "With this suspension, seriously delinquent borrowers may have an opportunity to avoid foreclosure and workout terms to stay in their homes," GSE regulator James Lockhart said.

House Financial Services Committee chairman Frank Barney, D-Mass., is urging the Treasury Department to reduce the cost of mortgage insurance premiums on the FHA's "Hope for Homeowners" program by using money from the Troubled Asset Relief Program. In a new letter to Treasury, Rep. Frank urges the secretary Henry Paulson to use the TARP funds to reduce the "high level" of upfront and annual fees on H4H loans. The Federal Housing Administration is required to charge a 3% upfront and a 1.50% annual premium. "These high fees are depressing program usage, and using TARP funds to pay them down could significantly increase the number of foreclosures averted," Rep. Frank says in the November 20 letter. (On a regular FHA loan, the upfront premium is 1.75%. The annual premium is 55 basis points.) The committee chairman also wants Treasury to begin purchasing whole loans on a "large scale" for the specific purpose of modifying the loans and keeping the borrowers in their homes."

Borrowers who are refinancing out of a one-year adjustable rate mortgage or a hybrid-ARM are overwhelmingly replacing those loans with fixed-rate loans, according to Freddie Mac. In total, 94% of prime borrowers who originally had a one-year, conforming ARM chose a conforming fixed-rate loan when refinancing in the third quarter, according to Freddie Mac's survey. 82% of prime borrowers who initially had a hybrid ARM refinanced into a conforming fixed-rate mortgage. Freddie Mac chief economist Frank Nothaft said that elevated interest-rate volatility in the third quarter has discouraged borrowers from seeking ARM loans. "When borrowers see so much change in interest rates it highlights the payment risk that they may face from future rate increases," he said.