Life is full of unintended consequences, and logistical nightmares - just ask foreclosure departments. It seems that "tensions rose as attorneys and modification experts of the borrowers trapped in their underwater mortgage make rival claims for compensation." It seems that in most cases, they didn't know about each other. At stake are interest and fees paid by the borrowers as well as future compensation claims. According to one story, "Some attorneys turned up at the borrower's doorstep to discover that their clients already had a mod expert who they knew nothing about." "It's a logistical nightmare..." said one spokesperson. (Maybe true!)
Just who is servicing all those loans out there? Bank of America is #1 with $2.1 trillion (20% of the market). Wells is #2 with $1.8 trillion (17% of the market). Chase has $1.4 trillion for about 13% of the market, Citi has about $700 billion for a 6% market share, and GMAC/Ally has about $300 billion for 3% of the market. The next five are USB, SunTrust, PHH, OneWest Bank and PNC, all with less than $200 billion and all with less than a 2% market share. In total there is about $10.6 trillion of 1-4 unit servicing outstanding. These 10 companies have about 70% of all residential servicing!
Recently FHA has come out with its stand on foreclosures, with the commissioner saying, "I strongly urge every FHA-approved servicer to immediately conduct a full review of its servicing operations and procedures to ensure full compliance with all HUD requirements. HUD holds mortgagees accountable for their servicing practices in order to protect the public trust and the FHA Insurance Fund. FHA-approved servicers are obligated to comply with all applicable laws and regulations." And FHFA, which runs the agencies like Freddie and Fannie, came out with THIS. AQ wrote, "...it seems like the borrowers who have claimed to be victims of 'robosigning' will still need to be dealt with individually, on a case by case basis, which tells me only time will heal this problem. It also means borrowers must be willing to work with servicers."
There is general agreement that, in spite of potential documentation issues, over time foreclosures and short sales are an important mechanism to help normalize the housing market. Ownership is transferred to owners who have the ability to afford it, and sales reduce the amount of nonperforming loans held by banks. Banks are not in the business to own single family homes. In the past year, roughly 30-35% of home resales were either foreclosures or short sales. As a result, if these transactions are temporarily removed from the existing home sales tally, the volume of sales could drop precipitously.
JPMorgan Chase's CEO caused a stir with the somewhat misleading announcement, carried through AP, that Chase has stopped using MERS after lawyers have argued in court proceedings that the system is unable to accurately prove ownership of mortgages. "The system lacks the required paper trail to prove mortgage ownership in foreclosure proceedings."
MERS released a statement in response. "JP Morgan Chase is a valued member of MERS. They currently have their correspondent loans registered on the MERS System. They do not, nor have they ever, registered their retail loans on the MERS System. As members of MERS and for loans registered on the MERS System, banks have the option of foreclosing in their own name, or MERS foreclosing for them. JPMC has chosen to foreclose in their own name, which is a common decision that is allowed under the structure of MERS."
And in fact if anyone is interested in MERS current status in the business, they can visit THEIR SITE. Or they can read what the general public reads about MERS
Deals are being done out there. Gleacher & Company, an investment bank, announced that it intends to "launch a residential mortgage banking initiative". To that end it formed Descap Mortgage Funding, in order to buy ClearPoint Funding. ClearPoint Funding (out of MA and with about 100 employees being managed by some of the ex-MortgageIT group) is an independent residential, non-depository mortgage lender is currently licensed in 13 states plus DC. Gleacher apparently feels ClearPoint will originate mortgages as a logical extension of its existing secondary mortgage and asset-backed business.
On the opposite coast, Skyline Financial, with veteran CEO Bill Dallas, has raised $8.2 million in Series B funding led by GRP Partners, with Chaparral Investments and Dallas Capital Management, Inc. participating. "This new capital will be used to expand mortgage origination capacity, accelerate hiring of seasoned loan officers and continue acquisitions of mortgage brokerage firms. Skyline has 120 loan officers and 11 branches across California, Texas and Oregon.
And REIT Invesco Mortgage Capital, with the help of Credit Suisse and Morgan Stanley, raised $286.4 million through the sale of 12 million common shares Wednesday. The REIT "plans to use proceeds to acquire residential & commercial mortgage-backed securities and other mortgage loans, and for general corporate purposes."
HUD and FHA have requested comment on regulatory changes that will strengthen its ability to force lenders to indemnify or reimburse the FHA for claims against the insurance fund. HUD is also proposing new rules that would increase performance standards for FHA's authorized lenders. HERE IS HUD'S GUIDANCE
According to Reverse Mortgage Daily, Fannie Mae announced it's no longer purchasing reverse mortgages due to its internal systems lack of ability to handle the new HECM Standard and Saver products. "Fannie Mae's importance in the reverse mortgage business has been sliding dramatically ever since it announced significant pricing changes in 2009. The GSE's market share went from 68% in the second quarter of 2009 to approximately 2% during the second quarter of 2010." It seems that most lenders use Ginnie Mae's HMBS program.
Yesterday was a good day for both mortgages and stocks. In spite of a slightly-higher-than-normal volume day ($2.5 billion), MBS's with lower coupons were better by .250 by the end of the day. Stocks rallied, although Treasury prices were about flat and the 10-yr closed at 2.43%. And prior to the 8:30AM EST numbers, that's about where we were: unchanged.
This morning we've already had the monthly trade numbers and producer price numbers, and the weekly Jobless Claims number - which has seemed to become more important than the PPI. (Inflation is tame - it's the job market that is the big concern.) The trade deficit came in at $46.3 billion for August. The PPI was +.4%, stronger than expected, but for those not using food & energy the number was +.1%, as expected. Jobless Claims went from 449k up to 462k, +13k. Although we still have a $13 billion 30-yr bond auction ahead of us, but the numbers this morning showed continued weakness in the jobs market with overtones of inflation and more dollar weakness. The yield on the 10-yr is sitting around 2.43%, and mortgage prices are roughly unchanged.
A little old lady answered a knock on the door one day, and was confronted by a well-dressed young man carrying a vacuum cleaner.
"Good morning," said the young man. "If I could take a couple minutes of your time, I would like to demonstrate the very latest in high-powered vacuum cleaners..."
"Go away!" cried the old lady. ''I'm broke and haven't got any money!'' and she proceeded to close the door.
Quick as a flash, the young man wedged his foot in the door and pushed it wide open.
''Don't be too hasty!'' he said. ''Not until you have at least seen my demonstration!''
And with that, he emptied a bucket of horse manure onto her hallway carpet.
''Now, if this vacuum cleaner does not remove all traces of this horse manure from your carpet, Madam, I will personally eat the remainder.''
The old lady stepped back and said, ''Well you just stay right there while l get you a fork, 'cause they cut off my electricity this morning."
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