Servicing

General Motors Acceptance Corp. -- which controls the nation's seventh largest residential servicer -- has received approval from the Federal Reserve to participate in its new "Commercial Paper Funding Facility" program. In a recent SEC filing it was disclosed that GMAC forgave $101.5 million of "indebtedness" to the servicing unit, Residential Capital Corp. According to a report on Bloomberg, GMAC also is considering becoming a bank holding company. GMAC is the parent of ResCap, which has a bank affiliate, GMAC Bank. The FDIC-insured depository is based in Midvale, Utah, and at year-end had $18.2 billion in real estate loans on its books. What's left of GMAC's warehouse lending business is being done out of the bank, according to one source familiar with the operation. At press time a GMAC spokeswoman had not returned a telephone call about its bank holding company plans.

General Motors Acceptance Corp. -- which controls almost $400 billion in residential servicing rights -- made it official on Thursday, declaring that it's in talks with regulators to become a bank holding company. In a statement GMAC said that as a bank holding company it would have "expanded opportunities for funding and for access to capital." A spokeswoman for the company declined to elaborate. The BHC move comes at a precarious time for the company: its residential lending/servicing arm, Residential Capital Corp., continues to lose money, has slashed its work force (including its broker/wholesale channel), and one of its owners, General Motors, has been in merger talks with Chrysler. GMAC is 51% owned by hedge fund giant Cerberus, and 49% by the automaker. Rumors about GMAC filing to become a BHC have been floating around all week. ResCap already owns a depository, GMAC Bank of Utah. As a BHC, GMAC, in theory, would have been able to apply for capital assistance under the new Troubled Asset Relief Program.

Fannie Mae purchased $44.1 billion in mortgages during September, a 9% increase from the previous month, according to new figures released by the company. The rise in acquisitions occurred during a month in which the Congressionally-chartered mortgage giant was taken over by its regulator, the Federal Housing Finance Agency. Even though September's purchase volume was an improvement from August, acquisitions were down 33% compared to September 2007, reflecting residential originations in the primary market. The company reported that 1.57% of its loans were in delinquency, compared to 1.45% the prior month. A year ago, late payments on Fannie Mae loans were less than half at 0.71%. At month's end Fannie had $761.4 billion of loans and securities in portfolio, a slight rise from August. But compared to September 2007, its holdings are up 5%.

Treasury and FDIC officials are making progress on developing a loan modification program that relies on government guarantees to help up to 3 million struggling homeowners -- but a final agreement has not yet been reached. Washington sources indicate that a program being pushed by Federal Deposit Insurance Corp. chairman Sheila Bair might provide $500 billion to $600 billion in loan guarantees that would allow banks, hedge funds and other mortgage holders to restructure residential loans and lower a homeowners' monthly payments. The program could include some guarantees on second liens which might prevent HELOC investors from blocking loan modifications. The talks between Treasury and FDIC are ongoing. "While we've had productive conservations with Treasury and the Administration about options for the use of credit enhancements and loan guarantees, it would be premature to speculate about any final framework or parameters of a potential program," said an FDIC spokesman.

Fannie Mae's loss mitigation policies are a "major roadblock" to restructuring mortgages, according to Neighborhood Assistance Corp. of America chief executive Bruce Marks who is urging Fannie's regulator to intervene. "We hope that you can make an immediate reversal of these policies," the NACA CEO says in a letter to Federal Housing Finance Agency director James Lockhart. According to NACA, Fannie won't reduce the interest rates below current market rates and will not reduce the principal amount to make the payments affordable. Fannie said it is starting to lower the interest rates temporarily to get borrowers back on track and extending the loan terms to make payments more affordable. Director Lockhart noted that Fannie is offering delinquent borrowers HomeSaver Advances and it is considering other innovative loan modification actions. The NACA CEO claims the HomeSaver program is "deceptive" because the arrearage is placed in an unsecured loan while nothing is done to restructure the mortgage. "It is deceptive to have the loan appear current when the payments continue to be unaffordable," Mr. Marks said.

First Financial Network, Inc., Oklahoma City, Okla., is marketing a $500 million loan portfolio on behalf of the Federal Deposit Insurance Corp. It includes loans from the recently failed First National Bank of Nevada, Reno, Nev. and First Heritage Bank, NA, Newport Beach, Calif. There are approximately 585 performing and non-performing commercial real estate, commercial and industrial, gaming, Small Business Administration 504, residential and consumer loans to bid on Dec. 16. The majority of the collateralized properties are located in Arizona (44%), Nevada (35%) and California (15%). The portfolio will be stratified into pools based on performance, collateral type and geographic location. Investor due diligence materials will be available online at http://www.firstfinancialnet.com/ beginning Nov. 3. Bliss Morris, president and CEO of First Financial Network, said, "First Financial Network anticipates continued strong secondary market interest for this diverse portfolio comprised predominantly of CRE and C&I loans. We continue to see high demand for both performing and non-performing loans in all asset classes as evidenced by the successful closing of several major transactions conducted by First Financial Network in the third quarter."

The prices of existing homes declined at an unprecedented annual rate during the first half of this year, according to the Standard & Poor's/Case-Shiller home price indexes. In August, existing home prices were down 17.7% from a year earlier in the 10-city index, and down 16.6% in the larger 20 city index, a slight increase from the July rate of decline. "The downturn in residential real estate prices continued, with very few bright spots in the data," said David Blitzer, chairman of the index committee at S&P. He noted that for the fifth straight month, every region of the country posted declines. Both the 10 city and 20 city composite indices have been declining on a year-over-year basis for 20 straight months.

In September, HOPE NOW, the foreclosure prevention alliance of mortgage servicers, counselors, investors and the broader mortgage industry helped 212,000 homeowners avoid foreclosure. It is the first time that the number of foreclosures prevented through the alliance in one month exceeded 200,000. Since July 2007, when the organization started recording these data, it has helped nearly 2.5 million homeowners stay in their homes. The September total is 15.6% or 30,000 higher than the previous record of 192,000 foreclosure preventions set the month before, August 2008. This data shows that during these very challenging time for many homeowners, HOPE NOW's executive director Faith Schwartz said, the industry is making a difference. "HOPE NOW members are continuing to explore new ways to help more homeowners avoid foreclosure and will keep looking for additional options." HOPE NOW reported that so far this year approximately 1.6 million homeowners had been able to avoid foreclosure, compared to approximately 1.5 million helped in all of 2007. If the current trend continues, HOPE NOW expects to assist up to 2.1 million homeowners by the end of 2008, a 40% more than in 2007.

Freddie Mac purchased or guaranteed $27.2 billion of mortgages in September, a slight gain from the multi-year low of $25.8 billion established the month before. The GSE was placed in a conservatorship on September 7. Its regulator, the Federal Housing Finance Agency, has directed the secondary market giant to increase purchases of its own mortgage-backed securities. However, Freddie reported that its holdings of its own MBS declined by $22.6 billion to $375 billion in September. Its investment portfolio declined by $24 billion to $738.9 billion. Freddie issued $22 billion in guaranteed MBS in September, nearly matching its issuance in the previous month. The mortgage company has added a new data table ("Other Investments") to its monthly summary report. The September issue shows that Freddie purchased $10.4 billion of private-label "non-mortgage" asset backed securities.

U.S. Central FCU said its mortgage-backed securities portfolio took a beating over the past month, declining in value by another $700 million, increasing the corporate credit union's unrealized losses to $3.8 billion at September 31. That doesn't include additional losses of $2.3 billion when U.S. Central marks-to-market its entire portfolio - a total fair value loss of $6.1 billion - which U.S. Central is required to report under generally accepted accounting principles. The largest portion of the losses are on so-called private label mortgage backed securities, those not issued by Fannie Mae or Freddie Mac. U.S. Central reported a book value of $19.9 billion of private label MBS that it is carrying for $17.1 billion, but has a fair market value of just $14.8 billion - a whopping unrealized loss of $5 billion on those securities. U.S. Central has indicated an intent to hold most of those securities to maturity, allowing it to account for them at carrying value, instead of fair market value. The corporates' corporate is also sitting on $880 million of unrealized losses on $12 billion worth of other asset backed securities, backed by credit card loans, student loans, auto loans, and commercial real estate, as well as $145 million of losses on corporate bonds and notes that it holds. -- Credit Union Journal