Origination

GMAC Financial Services has tightened standards on a servicing-related program geared toward small- to medium-sized correspondent lenders, according to trade group officials and executives familiar with the effort. Moreover, a top executive who managed the program left the company in recent weeks, National Mortgage News has learned. The effort, known as '3-D,' is a way for GMAC's mortgage division, Residential Capital Corp., to gather servicing rights and grow its portfolio. With 3-D, according to executives familiar with it, the loans are sold to Fannie Mae with ResCap obtaining the underlying servicing rights. "There's certain tax advantages to it," said one servicing broker close to the situation. A trade group official said ResCap eliminated "the bottom tier" firms participating in 3-D "and only wants to deal with high net worth companies." A ResCap spokeswoman stressed that GMAC "has not discontinued" what she called its "rapid delivery program to Fannie Mae, though we may elect to change certain features of the program." She declined to comment further.

With limited loan options and similar pricing among competitors, service is how an originator stands out.

Triad Guaranty Inc. - which is in the process of liquidating - reported a fourth-quarter loss of $79.1 million, a 35% improvement from the same period a year earlier. The Winston-Salem, N.C., mortgage insurer had a net loss of $595.6 million for the full year, compared to a net loss of $631.1 million for 2008. The MI's book of business is in "run-off" status. Ken Jones, president and chief executive, said, "First-time defaults, while down moderately from earlier 2009 quarters, continued at a high volume. We have seen very little permanent impact to date from the existing loan modification programs and, consequently, the cure rates on existing defaults remain at historic lows and have shown little sign of improvement." Its total insurance-in-force declined to $50.5 billion at Dec. 31, 2009, a 7.5% drop from Sept. 30, 2009 and a 19.3% decline from Dec. 31, 2008.

New-home building in California rebounded in January from a year earlier, but industry officials cautioned against calling it a recovery because the numbers for January 2009 were extremely low. "It's great to see some positive activity, but given the fact that we're comparing this month to one of the lowest months on record doesn't exactly bring a housing recovery to mind," said Liz Snow, president of the California Building Industry Association. According to the Construction Industry Research Board, permits were pulled for 2,979 units in January, an increase of 48% from the same month a year ago but down 18% from December. Permits for single-family homes totaled 1,908, up 50% from January 2009 but down 28% from the previous month, while multifamily permits totaled 1,071, up 45% from a year ago and up 11% from December. Ben Bartolotto, research director for CIRB, said the monthly decline from December to January is typical because January is usually one of the weakest months for housing starts. He also noted any enthusiasm for the year-over-year increases seen in January should be tempered with the fact that the numbers for January 2009 were extremely low. CIRB is forecasting a modest recovery for 2010, with permits being pulled for 52,000 total units, up slightly from the record-low 36,289 permits pulled in 2009.

The dollar volume of primary new mortgage insurance written in January was lower than any month in 2009, according to the Mortgage Insurance Cos. of America. Only $4.16 billion of new insurance was written in January. The worst month in 2009 was the $4.76 billion written in October. For the fourth consecutive month the number of new applications received has declined. There were only 19,438 applications for the month, down from 26,284 in December (the lowest in 2009) and 75,614 in January 2009 (the best month in this category last year). The amount of primary insurance-in-force among the private MIs continued to slide. In January 2009 it was $949.3 billion. By December it fell to $863.4 billion and at the end of January 2010, it was $851 billion. The cure/default ratio for January 2010 was 62%, with 61,195 cures and 98,685 defaults. This is the highest number of defaults since January 2009's 106,482.

Even though existing-home sales fell 7.2% in January to a seasonally adjusted annual rate of 5.05 million units, the inventory of available homes is continuing to shrink, a sign that housing values might be stabilizing, according to the National Association of Realtors. In January inventory fell 0.5% to 3.27 million existing homes available for sale, which represents a 7.8-month supply at the current sales pace. In December the number was better (a 7.2-month supply) but NAR says "raw unsold inventory" is 9.6% below a year ago, and is at the lowest level since March 2006. "Activity should be picking up strongly in late spring as buyers take advantage of the tax credit, which is critical to absorb distressed properties reaching the market and to continually chip away at inventory," said NAR. The January existing home sale figure compares to a downwardly revised pace of 5.44 million in December. The results, the weakest since June, were worse than many housing economists had forecast. Mr. Yun admitted that the sales numbers are "not good." The trade group hopes that sales will spike this spring as consumers move to take advantage of the $8,000 first-time homebuyer tax credit which is set to expire in late April. The median sales price was $164,700, unchanged from a year earlier and down 3.4% from December.

Freddie Mac said it will stop buying and securitizing interest-only mortgages - a $40 billion a year market - on Sept, 1. Interest-only and alt-A products have been Freddie's downfall: the two loan types accounted for 44% of the mortgage giant's credit losses in 2009. Freddie exited the alt-A market a few years back but the product still accounts for 8% of its portfolio holdings. The GSE currently has $129.9 billion in interest-only mortgages, which comprises 7% of its single-family mortgage portfolio. These loans have an average loan-to-value ratio of 106% and 17.6% are 90 days or more past due. This loan product features interest-only payments for a set period of time before the loan becomes fully amortizing and the borrower has to start making principal and interest payment. Because the initial payments are so low, it is very difficult to modify these loans once the homeowner defaults. Freddie has modified only 0.2% of its interest-only portfolio. Despite these problems, Freddie purchased $800 million in interest-only mortgages in 2009.

Freddie Mac reported that 4% of its single-family mortgages are 90 days or more past due, up from 2% in January of 2008. The serious delinquency rate edged up 16 basis points in January to 4.03%, according to the GSE's monthly activity report. The secondary market agency's report also provides investors with an update on the delinquent mortgages the GSE is buying out of its existing mortgage backed securities. On Feb. 10, Freddie said it will purchase all loans that are 120 days or more past due out of its MBS. The update on MBS coupons affected shows that $71.5 billion in loans were eligible for purchase as of Jan. 31. Freddie will disclose its initial purchases in a March 4 report. Meanwhile, Freddie purchased $22.6 billion in refinanced loans in January, down from $27.3 billion in the previous month. MBS issuance totaled $36.6 billion, down from $44 billion in December. For all of 2009, Freddie issued $475.4 billion in MBS, compared to $357.9 billion in 2008.

Two-thirds of the households that sold their homes in California last year did so because they couldn't make their mortgage payments, as changes in family and employment status took hold, according to the state's brokerage community. California is the largest mortgage market in the nation. Tighter loan underwriting standards and a decline in equity also continued to impact the market in 2009, leaving owners with little equity and making it difficult, if not impossible, to refinance, the California Association of Realtors said in its latest survey of home sellers in the Golden State. "Many homeowners chose to sell last year because their adjustable-rate mortgage reset at the same time home prices were experiencing an unprecedented decline," said CAR president Steve Goddard. Financial difficulties also impacted the ability of sales to close on time, with 63% of all deals falling out of escrow prior to closing. Nearly seven out of 10 of sellers cited "buyer could not get an acceptable mortgage" and more than six of 10 said "buyer backed out" as the primary reasons the sale fell through. Other reasons included "buyer's remorse," 26%; "lender withdrew and did not fund," 24%; and "home prices continued to decline," 18%. Once a deal made it to the closing tables, half the sellers reported that escrow did not close on time. The median difference between the selling and listing price was $32,315, but the list-to-sold-price ratio was significantly larger for first-time sellers ($30,000 below list price) than those who had previously sold a home ($8,000 below list).

GMAC Financial Services has forced out six managers in the servicing division of Residential Capital Corp. as part of a belt-tightening effort at the company. A GMAC official confirmed the layoffs to National Mortgage News but would not provide any further details. (For the full story including who was let go see the Monday paper edition of NMN.) Meanwhile, GMAC is quietly shopping around more than $2 billion in troubled loans to investment banking companies and hedge funds, according to officials familiar with the talks. "There's no offering circular yet," said one New York hedge fund executive "but there are plenty of conversations." A GMAC spokesman declined to comment about the troubled loan talks. The cutbacks at ResCap came a few days before GMAC CEO Michael Carpenter told a Congressional panel that the company is planning an initial public offering in the next two years. Elected officials pressed Mr. Carpenter on his plans for ResCap and once again he repeated that GMAC, which is 56% owned by the government, is exploring its strategic options. He noted that ResCap has been successfully walled off from the rest of the organization. "I look at ResCap as a problem to be solved, not an opportunity," he said. A spokeswoman added that GMAC wants to minimize risk at the company but wants to "support our role as the fifth largest servicer serving three million homeowners."