Servicing

Genworth Financial - which posted a large third-quarter loss - said it has borrowed $930 million of a $1.7 billion credit line. Among other things, Genworth is considering selling its mortgage insurance division, one of the largest in the U.S. Formerly a division of General Electric, Genworth offers not only mortgage insurance but life, long-term care, retirement and other policies. In the third quarter, the publicly traded company lost $258 million, compared to net income of $339 million in the same period last year.

Realtors, homebuilders and mortgage bankers are asking Congress to extend and make permanent, before year-end, the $729,750 maximum loan limit for Fannie Mae, Freddie Mac and Federal Housing Administration loans. Congress increased the loan limits in high-cost markets back in February as part of a stimulus bill to revive lending in the jumbo loan market. The increase, though, expires on Dec. 31. Without an extension, the loan limit will fall to $625,500 on Jan. 1. "Specifically, we ask that Congress eliminate the forthcoming decreased limit for high cost areas," the Mortgage Bankers Association said in a Nov. 13 letter to House and Senate leaders. MBA also wants Congress to increase the conforming loan limit from $417,000 to $625,000 to provide a "broader range of secondary market support.

Bayview Financial of Coral Gables, Fla., is offering a $500 million "scratch and dent" portfolio, according to investment banking sources. At press time the company had not returned a telephone call about the matter. More scratch-and-dent portfolios are hitting the market now that Treasury has pulled the plug on its plan to buy troubled mortgage assets from financial institutions. "We think it's going to be a great time to buy," said George Ostendorf, president of American Mortgage Capital Group of Chicago. (For the full story see the Monday edition of National Mortgage News.)

Freddie Mac posted a $25.3 billion loss in the third quarter, admitted that its negative net worth now totals almost $14 billion, and mentions in a new filing that unless it receives a cash infusion it could be placed into receivership. The company, however, fully expects that Treasury will lend money to bolster its net worth, bringing the firm into a positive cash position. "We expect to receive such funds by Nov. 29," it says in a new filing with the Securities and Exchange Commission. It notes that maintaining a positive net worth "could constrain some of our business activities," including buying residential loans from banks, mortgage companies and other originators. Freddie and its "sister" company Fannie Mae have been operating under a government conservatorship since Sept. 6. The GSE blamed its third-quarter loss on money set aside to deal with its deferred tax assets ($14.3 billion) and $15.1 billion in charges and impairments on "available-for-sale" MBS and other holdings. Earlier this week Fannie Mae posted a $29 billion third-quarter loss and said it was having trouble rolling over its debt.

Senate Banking Committee chairman Christopher Dodd, D-Conn., said he will try to pass a change to bankruptcy laws during the lame-duck session that would allow a judge to restructure a mortgage on a primary residence in foreclosure. At a committee hearing, Sen. Dodd indicated the bankruptcy change would be temporary - possibly three to five years - but is necessary to deal with the nation's foreclosure crisis. Wells Fargo Bank executive vice president Jon Campbell warned that investors would likely demand higher downpayments and pricing on home loans to offset cramdowns. Sen. Dodd said he has heard arguments that such a bankruptcy change would affect credit availability for primary residences. "But I just don't see the evidence of that," he said, stressing that cramdowns would be temporary. Congress returns on Monday to consider a stimulus package that would bailout the auto industry. Some observers expect the legislative session will continue into December but note it's impossible to predict if anything will pass in a crisis environment.

The federal government would guarantee up to 50% of any losses on a modified loan that subsequently defaults under a proposal being promoted by the Federal Deposit Insurance Corp. The agency's effort is geared toward modifying 2.2 million non-Fannie Mae/Freddie Mac loans by the end of 2009. "Assuming a re-default rate of 33%, this plan could reduce the number of foreclosures during this period by some 1.5 million at a projected program cost of $24.4 billion," the agency said Friday, revealing details about its plan. The Treasury Department, however, is refusing to back the agency's idea with any of the $700 billion allocated under the Emergency Economic Stabilization Act. Servicers participating in the FDIC program could receive $1,000 for successfully modifying delinquent loans once the borrower makes six payments. In restructuring a loan, the borrower's monthly payment must be reduced to 31% of monthly income. The 50% loan guarantee would apply to modified loans with loan-to-value ratios of up to 100%. "For LTVs above 100%, the government loss share would be progressively reduced from 50% to 20% as the current LTV rises," FDIC says. Modified loans with LTVs above 150% would not eligible for the program. Loan guarantees would expire after eight years.

The Federal Deposit Insurance Corp. hopes to complete a deal to sell a majority of IndyMac Federal Bank in December, according to an agency spokesman. "Our intent is to sell as much of it as possible to one buyer," the spokesman said. It's unclear that if sold, what will happen to the FDIC's loan modification efforts at the thrift. One source said he expected continuation of the loan-mod program to be a pre-condition of a sale. An investment banking source familiar with the transaction said at least two parties are involved in the latest round of bidding for the Pasadena, Calif.-based thrift, once a top player in the alt-A market. The investment banker described the parties as "consortium bids" that have syndicated out their financing. He said there is one lead negotiator for each consortium. The FDIC spokesman declined to discuss the bidding process except to say, "We'll be conducting bidding later this month." The FDIC placed IndyMac into a conservatorship this past summer. The company was formed two decades ago by Countrywide Financial founder Angelo Mozilo.

Residential lenders foreclosed on 662 houses and condominiums in Orange County in October, less than half the July peak and down 37% from September, according to a report in The Orange County Register. The newspaper, quoting ForeclosureRadar.com, said foreclosures have decreased each month since hitting 1,444 in July, though last month's total rose 19% from October 2007. Southern California has been one of the hardest hit areas in terms of home price declines in the U.S. Orange County also served as the headquarters of several subprime lenders. Sean O'Toole, who heads ForeclosureRadar, said it's possible the foreclosure numbers are tapering off because servicers are focusing more on loan modifications than taking over homes.

'Scratch and dent' investor Kondaur Capital Corp. of Santa Ana said it has raised $150 million in new capital from an unnamed New York financial firm. In a statement the Kondaur said the investor, which previously co-purchased loans with Kondaur through other business ventures, is now making a direct "and substantial investment" in the firm. At press time company chairman and CEO Jon Daurio could not be reached for comment. Now that the Treasury Department has abandoned its purchase of troubled mortgage assets, the SnD market is beginning to pick up steam, investors told MortgageWire. (For more details on this development see the Monday edition of National Mortgage News.)

Banks receiving capital injections and other financial support from the federal government should make credit available to their customers and adopt loan modification programs to prevent foreclosures, according to federal banking regulators. "At this critical time, it is imperative that all banking organizations and their regulators work together to ensure the needs of creditworthy borrowers are met," the regulators say in a joint statement. The interagency statement also stresses that lenders and servicers adopt "systematic, proactive and streamlined" loan modification protocols. "Supervisors will fully support banking organizations as they work to implement effective and sound loan modification programs," the regulators say. One recipient of a capital injection, Webster Financial Corp., Waterbury, Conn., said its national bank subsidiary has temporarily suspended foreclosure activity for 90 days. "During these challenging economic times, we feel a heightened responsibility to assist those who are under financial pressure and are threatened with the possibility of losing their homes," Webster chairman and chief executive James Smith said.