Servicing

The majority of subprime loans originated in 2006 were made to non-Hispanic whites and upper-income borrowers, according to ComplianceTech, an Arlington, Va.-based provider of technology and business intelligence. The report concluded that a disproportionate share of loans to minorities and low-income borrowers were subprime loans, but that non-Hispanic whites received 56.2% of the more than 1.9 million subprime loans originated in 2006. Upper-income borrowers got 39.4%, while only 7.6% went to low-income borrowers. Maurice Jourdain-Earl, co-founder and managing director of ComplianceTech, said the problem with portraying the foreclosure crisis as a minority and low-income issue is that it affects the development of possible solutions. "There could be a tendency to write off the subprime lending debacle as a type of affirmative action gone bad," he said. "We must acknowledge that the foreclosure crisis affects broader and more demographically diverse segments of society. This politically responsible approach will likely change the tone, climate, and context of how solutions are crafted." The company can be found online at http://www.compliancetech.com.

EverBank Financial Corp., Jacksonville, Fla., has announced the receipt of a capital investment of approximately $100 million from an affiliate of Sageview Capital LP to support growth in EverBank's core banking and mortgage businesses. Sageview, a private investment firm (with offices in Greenwich, Conn.; Palo Alto, Calif.; and Stockholm, Sweden), will become the largest stockholder of EverBank. The investment will "fuel a substantial expansion plan" under which EverBank will increase its assets by over 30% and "dramatically expand" its direct deposit customer base, the bank said. "While other banks and financial institutions have needed to raise equity to shore up capital, EverBank has generated record year-to-date earnings and has a strong balance sheet, which will enable us to deploy capital offensively to take advantage of recent market disruptions," said Rob Clements, chairman and chief executive of EverBank. The companies can be found online at http://www.everbank.com and http://www.sageviewcapital.com.

Lender Processing Services Inc., Jacksonville, Fla., has announced the acquisition of McDash Analytics, providing access to what LPS called the industry's largest loan-level database of mortgage assets. LPS said it now offers loan-level data for more than 39 million active first- and second-mortgage loans, representing approximately two-thirds of the mortgage market. "McDash's solutions complement our existing analytic forecasting capabilities and will enable us to serve our clients on a more comprehensive level," said Greg Whitworth, president of LPS's applied analytics division. ".... LPS has been successful in bringing together the loan and property-level data and analytics needed to provide mortgage originators, servicers, and investors with a more complete, accurate picture pf their portfolios." LPS can be found online at http://www.lpsvcs.com.

Office of Thrift Supervision Director John Reich is urging thrifts to prepare for rising defaults and foreclosures on payment-option adjustable-rate mortgages. "As home values continue to drop and ARMs (particularly option ARMs) continue to adjust upward, management should establish loss mitigation strategies, which might include increasing servicing staff levels; designating loan modification and short-sale criteria; and appropriate ongoing accounting for troubled debt restructurings and REO," Mr. Reich told an industry group. Bank of America just reported that Countrywide Financial Corp. held $26.4 billion in option ARMs on its books as of June 30, and 12.7% are nonperforming. BoA completed its acquisition of Countrywide and its federally chartered thrift on July 1. "Delinquencies and foreclosures continue to rise and borrowers with option ARMs face headwinds from loan recasts due to negative amortization triggers," the OTS director told the American Bankers Association summer meeting in Orlando.

Thirty-one tranches from seven "scratch-and-dent" transactions issued by Ameriquest/Quest Trust X have been downgraded by Moody's Investors Service. Moody's said the downgrades are part of a wider review of all residential mortgage-backed securities "in light of the deteriorating housing market and rising delinquencies and foreclosures." The rating agency said many scratch-and-dent pools originated since 2004 are experiencing higher-than-expected rates of delinquency, foreclosure, and real estate owned.

Foreclosure filings in Massachusetts totaled only 351 in June, a temporary lull produced by new foreclosure regulations that took effect May 1, according to ForeclosuresMass.com, a provider of foreclosure data based in Framingham, Mass. The company noted that 3,414 foreclosure filings had been recorded in April, a record high. "Massachusetts foreclosures are in a holding pattern, but the low numbers of filings we've seen over the past two months will end within the next four to six weeks," said Jeremy Shapiro, president and co-founder of ForeclosuresMass.com. "Massachusetts homeowners continue to face a wide range of economic pressures, and will soon return to the record foreclosure levels being seen nationwide." The company can be found online at http://www.foreclosuresmass.com.

Freddie Mac has been designated the "Bear of the Day" for July 21 by Zacks Equity Research, Chicago. The Bear of the Day is a stock expected to underperform the markets over the next three to six months. "As the housing situation continues to worsen, we anticipate higher losses and writeoffs in the coming quarters," Zacks said. The research firm said Freddie will need to raise more capital, "which is becoming increasingly difficult and expensive," and predicted that the government-sponsored enterprise will suspend or cut its dividend. "Recent measures announced by the Treasury affirm our belief that both the GSEs [Freddie Mac and Fannie Mae] are too big and important to fail, but any investment by the Treasury will further dilute the existing shareholders," Zacks said, adding that it is maintaining its Sell recommendation on Freddie's shares and reducing its six-month target price to $4.50 per share. Zacks can be found online at http://www.zacks.com, and Freddie Mac can be found at http://www.freddiemac.com.

Freddie Mac has reaffirmed its commitment to raise $5.5 billion in new capital, and the publicly traded company said it has finally become a Securities and Exchange Commission registrant. "Becoming an SEC registrant marks an important milestone for the company and demonstrates our commitment to enhanced transparency and financial reporting," Freddie Mac chairman and chief executive Richard Syron said. The government-sponsored enterprise was expected to register its stock in 2003, but a $5 billion accounting scandal forced Freddie to concentrate on repairing its accounting systems and internal controls. Back in May, Freddie and Fannie Mae pledged to issue stock to raise additional capital. Fannie has issued $7.4 billion in common and preferred stock, but so far Freddie has not followed through. In the past two weeks, both GSEs have seen the value of their stock plummet. And the Federal Reserve Board granted Fannie and Freddie access to its lending window to head off any short-term funding problems. Freddie Mac has not set a date for its offering of common and preferred stock. The company said the date will depend on a "variety of factors, including prevailing market conditions."

Bank of America confirmed Monday that it is committed to maintaining the wholesale and correspondent platforms of Countrywide Financial Corp., which it purchased on July 1. According to the Quarterly Data Report, the Calabasas, Calif.-based Countrywide was the nation's largest correspondent lender and second-largest wholesaler in the first quarter, with production volumes of $31 billion and $9 billion, respectively. In a presentation released along with its second-quarter earnings, the Charlotte, N.C.-based BoA noted that the Countrywide mortgage franchise would discontinue the origination of certain types of nonconforming loans, including payment-option adjustable-rate mortgages. It reported that Countrywide will "significantly curtail" its use of low-documentation loans. Countrywide is no longer funding subprime loans of any type. In the first quarter, Countrywide's subprime servicing portfolio had a delinquency rate of 33%.

Despite taking numerous hits related to real estate lending, Bank of America beat Wall Street earnings estimates for the second quarter. The Charlotte, N.C.-based BoA earned $3.41 billion ($0.72 per share), down 44% from the level recorded a year earlier. The company recorded $3.62 billion of net chargeoffs and added $2.21 billion to its allowance for loan losses, saying most of the additional credit costs are "directly tied to housing," including home equity, residential mortgage, and homebuilder loans. Reporting Countrywide Financial Corp. results separately, Bank of America said the recently acquired company had a $2.33 billion net loss in the second quarter, including $4 billion in credit-related losses. The company can be found on the Web at http://www.bankofamerica.com.