Servicing

GMAC Financial Services expressed some doubt about its ResCap's mortgage unit's future in preliminary third-quarter results that show a substantial net loss at ResCap is likely to be the main contributor to an even larger net loss for the company as a whole. "Adverse market conditions have made it difficult for ResCap to maintain adequate capital and liquidity levels," GMAC said. "As a result, absent economic support from GMAC, substantial doubt exists regarding ResCap's ability to continue as a going concern." ResCap's estimated $1.9 billion 3Q loss actually represents a relative improvement over last year's $2.26 billion decline, but overall, GMAC's preliminary $2.5 billion 3Q loss this year is greater than last year's $1.6 billion 3Q net loss for the company as whole.

TCF Financial, the banking parent of a mid-sized residential servicing company, has received preliminary approval from the Treasury Department to participate in the agency's capital purchase program. In a statement, TCF of Wayzata, Minn., said the government will buy $361 million worth of preferred stock in the depository and receive a warrant to buy 3.2 million shares of its common. At mid-year, the bank's subsidiary, TCF Mortgage of Minneapolis, ranked 54 among residential servicers with $6.7 billion in housing receivables, according to the Quarterly Data Report. The capital purchase effort is part of the government's new Troubled Asset Relief Program, legislated into law by the Emergency Economic Stabilization Act.

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.