Servicing

Clayton Holdings, which is cooperating with an investigation into mortgage underwriting fraud on Wall Street, named Paul T. Bossidy its new chief executive officer on Tuesday. A spokeswoman said he replaces Frank Fillips who retired from the Connecticut-based Clayton this summer. Mr. Bossidy, 48, has worked for various divisions of General Electric, including GE Vendor Financial Services. Clayton is owned by Greenfield Partners, a hedge fund. Earlier this year New York attorney general Andrew Cuomo granted Clayton immunity from prosecution in exchange for providing information on the due diligence work it conducted for Wall Street firms that securitized subprime mortgages over the past five years. One key issue AG Cuomo is looking at is underwriting "exceptions" granted by projects managers working for Clayton on Wall Street accounts. Over the past three years subprime firms funded $1.7 trillion in A- to D and other non-conforming loan types -- much of it securitized through Wall Street firms such as Bear Stearns, Credit Suisse, Deutsche Bank, Lehman Brothers, and Merrill Lynch.

MountanView Servicing Group, Denver, has completed the transition to CompassPoint mortgage servicing rights valuation technology. MountainView provides MSR valuations for over 100 servicers. Compass's MSR valuation analytics were developed with significant input from Mountain View, the two companies said. The Compass MSR valuation analytics include both static and option adjusted spread valuations.

An attorney at Pillsbury Law predicts that the "opaque credit default swap market" is poised to spur a spike in litigation as CDS buyers seek to recoup losses and sellers seek to reduce or avoid payment obligations. Ed Flanders, head of Pillsbury Law's financial services litigation team, said CDS counterparties are scrambling to assess their exposure. "Once-profitable hedge funds are marshaling their cash assets to meet substantial CDS payment obligations," he said. Pillsbury and the Atlantic Legal Forum are hosting a conference on the future of CDS in New York on Nov. 6.

Merrill Lynch, which has agreed to be acquired by Bank of America, took another set of partially mortgage-related multibillion-dollar writedowns in the third quarter that contributed to a net loss of $5.2 billion. The writedowns included $5.7 billion resulting from a previously announced sale of super-senior asset-backed security collateralized debt obligations. Another $3.8 billion was lost principally from severe market dislocations in September, including real estate-related asset writedowns and losses related to certain government-sponsored entities and major U.S. broker-dealers, as well as the default of a U.S. broker-dealer. In addition, $2.6 billion in net losses resulted primarily from completed and planned asset sales across residential and commercial mortgage exposures.

As part of a larger financial markets rescue package by the Swiss government, the Swiss National Bank and UBS have come to an agreement designed to "materially de-risk and reduce" UBS's balance sheet by transferring up to $60 billion of the latter's partially mortgage-related problem assets into a newly created fund. UBS said problem assets transferred into the fund include U.S. securities that were valued at about $31 billion as of Sept. 30 in the following categories: subprime, alt-A, prime, commercial real estate and mortgage-backed securities, student loan auction rate certificates and other securities backed by student loans, as well as a reference-linked note program. At completion of the transaction, UBS's net exposure in these risk categories will be reduced to nearly zero (compared to $44.2 billion on June 30), with residual long positions held by UBS in these asset classes hedged through existing short positions, including credit protection embedded in the RLN programs, UBS said.

Lender Processing Services, Jacksonville, will offer servicers using its systems access to servicing technology from Reverse Mortgage Solutions.Dan Scheuble, co-chief operating officer at LPS, said the partnership extends LPS's reach into the growing business for reverse mortgage loans. The primary market for reverse mortgage loans, or home equity conversion mortgages, is homeowners over the age of 65 who have paid off their mortgages. Currently, there are approximately 34 million seniors in the nation. LPS estimates that 12.5 million seniors currently own their homes mortgage-free, representing $4 trillion in equity.

The housing market will hit bottom between mid-2009 and mid-2010, economist Christopher Thornberg said at the REOMAC Fall Conference in Hollywood Beach, Calif.. At the show's opening session, he predicted the industry will see negative growth in the third and fourth quarters and through most of 2009. Positive growth will begin in the fourth quarter of 2009 and first couple of quarters of 2010, he said. "In the second half of 2010 things will finally start to get back up and running," said Mr. Thornberg. "The scarring of this downturn will have worn off. Your typical homebuyer has a two year memory. People are going to be so scared, they're not going to touch it for two years. By mid-2012 they will start buying again." Housing markets, when they hit bottom, they don't bounce, he added. "It's not like the stock market. Housing markets splat. They hit bottom and stay there." He encouraged REOMAC members, which include asset managers and REO agents, to keep some perspective, because mortgage rates are still lower than they were in 2000. States like California have to see prices come down 40-45% to get back in line with historic norms relative to incomes, he said. "Every state is different. We're getting there."

A group of Idaho appraisers have filed a class-action lawsuit against the Bank of America-owned Countrywide Financial Corp., claiming the lender used strong arm tactics, intimidating appraisers to generate reports and "blacklisted" some for not cooperating with the company. The lawsuit, filed in U.S. District Court in Seattle, claims Countrywide forced appraisers to use improper appraisal techniques that benefited the lender. BoA/Countrywide is the nation's largest residential lender, according to figures compiled by the Quarterly Data Report. The lawsuit claims Countrywide's actions caused "substantial damage to thousands of appraisers on top of distorting real estate prices in the marketplace." At press time, a spokesman for BoA had not returned a telephone call about the matter.

ForeclosureRadar reports banks filed 904 notices of default in Orange County in September, down 64% from August and 25% from a year ago, according to a story in The Orange County Register. But the dramatic decline in defaults (which initiate the foreclosure process), is due to Senate bill SB 1137, according to ForeclosureRadar. The bill's foreclosure provision enacted on September 8 stipulates that servicers must contact a homeowner at least 30 days before filing a NOD and explain what options the borrower has to avoid foreclosure. Sean O'Toole, president of the company, has noted that the drop in foreclosure starts would be temporary as banks adjust to the new law, calling it a paperwork issue.

Single-family housing starts dropped 12% in September to a level not seen in 26 years and construction activity has fallen by 70% since the peak of the housing boom in January 2006. The U.S. Census Bureau reported that single-family housing starts, on a seasonally adjusted annual rate, declined to 544,000 units in September compared to 618,000 in August. Compared to the year ago starts are down a stunning 42%. The multifamily sector has held up well. Single-family construction has not been this weak since the 1982 recession. The National Association of Home Builders is calling on Congress to pass another economic stimulus package with a "real" tax credit to stimulate home buying and reduce inventories. The $7,500 first-time homebuyer tax credit that Congress passed in July is really an interest-free loan that the buyer has to pay back to the government. NAHB executive vice president and chief executive Jerry Howard said fixing the tax credit and raising it to $10,000 is his group's top priority. "We want to make it a little bit richer, drop the recapture and extended it to all buyers," Mr. Howard said.