Servicing

Lenders participating in the Hope for Homeowners program want to restructure underwater mortgages on a trial basis for three or six months to make sure the borrower can make the payments and the Federal Housing Administration will insure the new loan, MortgageWire has learned. During a conference call with industry executives, Department of Housing and Urban Development officials seemed receptive to this idea, sources said. Lenders are expected to reduce the principal to a 90% loan-to-value ratio under the Hope program. And they don't want to take the writedown until they are sure the FHA will insure the new loan. Under HUD rules, the FHA cannot insure a loan if the borrower misses the first payment. Meanwhile, HUD is under tremendous pressure to issue guidelines for the Hope program before Oct. 1. Industry groups are telling HUD that they cannot begin to identify borrowers who could benefit from the foreclosure rescue program until they see the guidelines.

Wachovia Corp., Charlotte, N.C., has announced the liquidation of its $509 million of government-sponsored enterprise preferred stock at a pretax loss of $171 million. The sales, completed July 21, were part of the company's effort to reduce leverage on its balance sheet, Wachovia said. It did not say whether the preferred shares were in Fannie, Freddie, or both GSEs. Several other banking companies have disclosed financial hits on GSE preferred stock since the seizure of Fannie and Freddie was announced Sunday. Wachovia also said it had sold about $1.3 billion of auction-rate securities that it had repurchased under settlements with regulators. When it announced the settlements in August, the $812.4 billion-asset Wachovia estimated that about $8.5 billion of the bonds were eligible for repurchase and that, after redemptions and planned sales, it would hold about $3.1 billion of them at June 30 of next year. It had previously set aside $500 million to cover legal expenses and estimated market losses associated with the auction-rate securities.

Fannie Mae and Freddie Mac will be removed from the S&P 500 Index after the close of trading on Sept. 10, Standard & Poor's has announced. S&P said the reason for the removals is that the market capitalization of both government-sponsored enterprises has fallen far below the $5 billion minimum required for listing on the S&P 500. As of the close of trading on Sept. 9, Fannie's market capitalization totaled approximately $1.04 billion and Freddie's stood at approximately $614 million, S&P reported. Fannie will be replaced in the index by Fastenal Co., and Freddie's place will be taken by Salesforce.com. S&P can be found online at http://www.standardandpoors.com.

Wall Street analysts that cover the stocks of Fannie Mae and Freddie Mac are expected to keep covering the companies, at least for the time being, but the two government-sponsored enterprises are facing eventual delisting from the New York Stock Exchange . One veteran Wall Street analyst put it like this: "They're still public. And we've been in this position before with them -- remember when they weren't reporting earnings? If they're on the pink sheets, we may still cover them." NYSE rules stipulate that companies whose shares close (on average) below $1 over a 30-day period receive a warning letter giving them six months to get their share price back above $1. In some cases, the exchange has given extensions on the six-month rule. Since Sunday's takeover, the two GSEs have traded and closed at under $1, but both were up in trading Wednesday. Fannie's shares stood at $1.13 at deadline time. Fannie can be found on the Web at http://www.fanniemae.com, and Freddie can be found at http://www.freddiemac.com.

The Federal Deposit Insurance Corp. has set a Sept. 15 deadline for the first round of bids on IndyMac Bancorp, telling investors they can bid on the entire franchise or its individual assets, which have been segmented into five different pieces. According to one investment banker who has the offering circular, the assets include: the thrift's gargantuan servicing portfolio ($180 billion in mostly residential rights) and platform; its home equity line of credit portfolio; a whole loan portfolio; its reverse mortgage business; a construction loan portfolio; and its depository franchise. "They can bid for it in totality or in pieces," said the investment banker, who requested that his name not be used. The FDIC took control of IndyMac in July, placing the thrift into a conservatorship.

Lehman Brothers Holdings Inc., which suffered an estimated $7.8 billion in gross writedowns largely related to residential mortgages and commercial real estate in the third quarter, has made plans to sell approximately $4 billion of its United Kingdom mortgage portfolio and spin off its CRE-related exposures into a new company. The Wall Street firm, which has estimated that it will take a $3.9 billion net loss in reporting preliminary third-quarter results, said it also plans to sell a majority interest in its investment management division. The company said it has retained BlackRock Financial Management Inc. to sell the United Kingdom portfolio and expects to complete the sale within a few weeks. DBRS has downgraded the company's long-term ratings in response and placed all ratings under review with negative implications. Earlier, Standard & Poor's and Fitch had warned that some of Lehman's ratings might be downgraded due to large percentage declines in its stock price resulting from intensifying concerns about its capitalization.

The IAS360 House Price Index rose 0.9% on a national level in July, but was 11.4% below the level recorded a year earlier, according to Integrated Asset Services LLC, Denver. The index tracks monthly changes in the median sales price of detached single-family residences in "neighborhoods" in 360 counties across the United States, the company said. Three of the four U.S. regions designated by the index posted increases in July, with only the West showing a continued decline (0.7%), IAS reported. The increases in the other regions were 3.1% in the Midwest, 1.7% in the South, and 1.6% in the Northeast. "The IAS360 HPI is unique in that it's not a seasonally adjusted or smoothed index," said Dave McCarthy, president and chief executive officer of IAS. "This, combined with its timeliness and granularity, gives lenders, investors, and consumers a peek at the raw changes in home price forecasts from the front lines." The company, a provider of default management and residential collateral valuation services, can be found online at http://www.iasreo.com.

Consumer satisfaction with the company that services their home loan declined for the second straight year, according to J.D. Power and Associates. The study measures four areas of customer satisfaction: billing, payments, contact with the lender, and annual account administration. On a 1,000-point scale, overall satisfaction fell 14 points to 784 in the 2008 survey. "For most customers, their mortgage servicer is akin to a utility company -- they just want things to work, and they expect a friction-free experience," said Rocky Clancy, executive director for financial services at J.D. Power and Associates. "Bumps in the road" that require consumers to ask questions or solve problems lowers customer satisfaction, he said. The survey found that electronic billing and payment options increased customer satisfaction. Branch Banking and Trust ranked highest among primary servicers for the second consecutive year, with a customer satisfaction score of 839. J.D. Power, headquartered in Westlake Village, Calif., can be found online at http://www.jdpower.com.

Residential home loan delinquencies have risen for six straight quarters, with 3.53% of borrowers being at least 60 days behind on their mortgage payments in the second quarter, according to a TransUnion analysis of consumer loan data. This was up 51% from the level recorded in the second quarter of last year, TransUnion said. Nevada and Florida continued to top the list of states with the highest 60-day delinquency rates in the TransUnion data, with rates of 6.63% and 6.47%, respectively. "The second quarter of 2008 showed not only a substantial increase in the nation's unemployment rate and unprecedented gas prices, but also a continued decline in consumer confidence," said Keith Carson, a senior consultant in TransUnion's financial services group. The company can be found on the Web at http://www.transunion.com.

More than 100,000 homeowners lost their properties to foreclosure in August, 6% more than in July and more than 80% higher than in August 2007, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm. Foreclosures hit nearly 102,000 in August, and so far this year lenders have repossessed a record 656,545 properties nationwide, the company said. That amounts to 8.6 of every 1,000 households in the United States. "While we continue to see record numbers of foreclosures and actions that may lead to foreclosure, and despite the higher 6.1% August unemployment rate, it does appear that the overall situation is beginning to stabilize," said Alexis McGee, president of the firm. "Importantly, many regions of the country -- particularly the Northeast and Midwest -- have seen a less dramatic increase in foreclosures and pre-foreclosure activity in 2008 compared with 2007." The company can be found online at http://www.foreclosures.com.