Servicing

Popular, Inc., Puerto Rico's largest mortgage lender, has completed the sale of loans and servicing assets from its U.S. mortgage subsidiary to units of Goldman Sachs. Popular said the sale reduces its loan and servicing rights holdings by $700 million, freeing up that much in additional liquidity and significantly reducing the bank's holdings of U.S. subprime mortgage assets. "The closing of this transaction is a major step forward in our efforts to build capital and liquidity, and create a leaner and more efficient business," said Richard Carrion, Chairman and CEO of Popular. Terms were not disclosed.

PMI, which reported a third quarter loss of $229 million, said it expects paid claims, net of captive reinsurance recoveries, for its U.S. mortgage insurance operations to be between $850 million to $900 million for full year 2008. This is a reduction from its previous expectation for full year 2008 paid claims. Earlier, PMI had estimated that claims in its U.S. mortgage insurance business would be between $900 million and $975 million.

The entire mortgage insurance industry will remain capital constrained, especially in the absence of "significant government actions" such as the Troubled Asset Relief Program, declared Friedman Billings Ramsey analyst Steve Stelmach. The comment appeared in a report on The PMI Group Inc., Walnut Creek, Calif. "We continue to expect the difficult credit environment (particularly in the seasonally weak fourth quarter) to weigh on results, despite heightened efforts on the parts of mortgage lenders and servicers to more proactively mitigate losses. In addition, at 15.8-to-1 risk-to-capital, leverage is stretched during a time when the entire industry's ability to gain access to capital or reinsurance is limited," he wrote. Capital levels continue to erode at PMI because of the sale of its Australian and Asian units. Management expected this to occur, but Mr. Stelmach said, "The lower capital level is discouraging nonetheless."

The serious delinquency rate on FHA single-family loans rose 31 basis points to 6.91% during fiscal year 2008 (which ended Sept. 30), according to Federal Housing Administration data. The increase occurred despite FHA adding 780,000 mortgages to its insured portfolio. The federal mortgage insurance agency ended FY 2007 with 6.60% of its loans 90 days or more past due. But FHA experienced a surge in mortgage originations during FY 2008 and its insured portfolio increased by 22% to 4.3 million single-family loans. In normal times, this influx of new loans would have driven the serious delinquency rate down. However, FHA borrowers are facing tough times and one-third of FHA foreclosed properties are in Ohio and Michigan, which are suffering from a prolonged economic downturn and loss of jobs. Agency officials also note that FHA loans with down payment assistance provided by nonprofits have a default rate three times higher than other FHA loans. And the performance of those loans will be a "drag" on the FHA insurance fund for the next three to five years, officials at FHA said. Congress passed a ban on DPA on FHA loans that went into effect Oct. 1. But DPA still accounted for 30,900 of the 150,000 FHA loans closed in September.

A group of credit unions calling themselves the Credit Union Housing Roundtable is calling on their regulator, the National Credit Union Administration, to make $1 billion of low-cost loans available to help consumers refinance troubled mortgage loans. The proposal comes as banking regulators are preparing a plan to fund mortgage refinancings through banks for millions of homeowners facing foreclosure or in delinquency on their home loans. "We think that credit unions are in a position to help and we ought to be able to create our own version that is not going to be at the taxpayers' expense," said Gary Oakland, president of BECU (formerly Boeing Employees CU), one of the organizers of the group. --Credit Union Journal

Franklin Credit Management Corp., once an active bidder in the non-performing loan market, has received notice from the NASDAQ that its common stock will be delisted on Monday, November 3. The NASDAQ Hearings Panel recently rejected Franklin Credit's request for continued listing. The company said that going forward it expects its common stock to be quoted on the "pink sheets." Franklin also services performing, sub-performing and "scratch and dent" loans.

Zaio Corp. of Canada abruptly pulled the plug on its U.S. property database unit, dismissing its top officers. The end came on Thursday when Zaio issued a press release confirming the shut down. The company said that the division's top officers, James Kirchmeyer and Douglas Vincent have resigned. Zaio, which bills itself as a technology and database company, says its secure database has 140 million property records and 24 million photographs.

JPMorgan Chase said it is expanding it loan modification program to keep more people in their homes and plans to extend the effort to its Washington Mutual and EMC Mortgage divisions. "While implementing these enhancements, Chase will not put any additional loans into the foreclosure process," the company said. (JPM bought WaMu last month and took control of EMC when it acquired Bear Stearns.) As part of this initiative, the lender is setting up regional counseling centers, hiring additional councilors and introducing new financing alternatives. "The enhanced program is expected to help 400,000 families -- with $70 billion in loans -- in the next two years," the banking company said.

The White House is reviewing several foreclosure prevention programs but is not ready to endorse a new loan modification program that the Treasury Department and the FDIC are working on. "We're doing an analysis right now on several different ideas" to help more homeowners, said the President's press secretary Dana Perino. During a press briefing she said the White House is willing to consider the FDIC proposal, which involves guarantees to increase loan modifications. She said the Administration wants any program to strike a balance in terms of effectiveness, fairness and protecting the taxpayer. After her remarks, Senate Banking Committee chairman Christopher Dodd, D-Conn., sent a letter to President Bush urging him endorse the FDIC proposal and direct Treasury to create the new program. The program is needed to "address the exploding foreclosure crisis" and the country cannot afford "further delay," Sen. Dodd says in the letter, which was signed by eight other committee Democrats.

Roughly 48% of Nevada homes that are mortgaged have negative equity -- making the state, by far, the hardest hit when it comes to the nation's housing crisis, according to a new report issued by First American CoreLogic. After Nevada, Michigan ranked second in negative equity (39% of homes with mortgages), followed by Florida and Arizona (29% each), and California with 27%. FACL based its findings on a database of 42 million properties where there's a first and/or second lien. Nationwide, 18% of homes have negative equity, the company found. During the housing boom, Arizona, California, and Nevada where among the fastest growing in terms of price appreciation. Michigan and Ohio (where 22% of mortgaged homes have negative equity) have been hard hit by the decline in the U.S. auto industry.