Mortgage insurer and credit enhancement solution provider PMI Group (PMI: 0.00 N/A) late Tuesday saw its credit rating rebound from triple-C to single-B minus as Standard & Poor's removed the company from credit watch status to outlook stable.

Its wholly owned subsidiary, PMI Mortgage Insurance, retained a double-B minus rating and stable outlook.

The news marks the continuation of what started out a week of positive developments at the company. PMIs stock traded up 33% in early trading Monday after announcing an amended and restated credit agreement that substantially reduces the potential for covenant default by eliminating certain covenants present in the previous credit agreement.

"We are pleased with Standard & Poor’s recognition of the positive benefits resulting from the execution of the amended agreement and the upgrade of our holding company ratings,” said chairman and CEO Steve Smith in a media statement Tuesday.

The announcement comes weeks after PMI posted a Q109 loss of $115.3m, or $1.41 per share, from continuing operations, driven primarily by higher-than-expected negative earnings and loss adjustment expenses in its US mortgage insurance operations.

Write to Diana Golobay.

Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.

(Update 1: corrects number of employees at the firm)

Perhaps the most enduring aspect of the nation's mortgage crisis thus far is this: it is bringing together two usually separate sides of the mortgage banking industry, in originations and default management. Long separated by both process and staffing, we're seeing many origination specialists — whether technology, process, consulting, document management, or otherwise — make the move into the default space as the drumbeat of loan modifications continues to grow ever-louder.

The latest firm to make the move is business process outsourcing (BPO) vendor Genpact, which said Wednesday that it had rolled out a new line of services designed to target growing demand for loan modifications.

"Right now, 1 out of every 150 U.S. home loans are in foreclosure, 20 million American homeowners have mortgages that exceed the value of their homes and more than 10 million homeowners are seeking refinancing in this low interest rate environment," says Bob Pryor, who runs sales and marketing at the 35,500-employee firm.

"This increase in mortgage activity has placed tremendous additional pressure on the mortgage industry's already-limited resources. We believe that based on our expertise in streamlining processes, and our record of successful service to the industry, we are uniquely positioned to assist lenders manage this increase in activity."

A unique position is one thing, and Genpact is very well known as a BPO vendor in the origination space; the firm has worked with such clients as Wachovia Bank, and has deep experience in loan processing, underwriting, closing, and even post-closing processes. But the firm is hardly alone in pitching a new suite of services designed to manage some or all aspects of the loan modification process. The mortgage market has been flooded in the past 12 months with firms expanding their product and service offerings into the loss mitigation space, with a particular focus on loan modifications.

The reason? Loan modifications are seen by most as, essentially, a "re-underwriting" of an existing origination.

The list of firms offering loan modification solutions is a long one, and includes the traditional title-related outsourcing giants, such as The First American Corp. (FAF: 14.98 +0.07%), which in August of last year rolled out a what it called a “single, complete loan modification cycle solution” for servicers. The company’s solution includes credit scoring, valuation services, risk modeling, scoring, document preparation and document recording to identify borrowers who are most at-risk of foreclosure. Using this information, the FAF solution presents customized refinance and workout options.

In Nov. of last year, Lender Processing Services, Inc. (LPS: 16.78 +1.39%) said it had rolled out its own loss mitigation outsourcing platform, called RediMod. LPS’ platform focuses on enabling mass loan modifications by automating loan eligibility and best-fit determinations for modification programs, and then combining loan-level and portfolio analytics with customizable customer contact strategies tailored to meet a servicer’s specific requirements, according to the firm's website.

Houston-based Integrated Mortgage Solutions, a long-time default services outsourcer, launched its Asset Disposition and Management Services division, or ADAM, late last year. The firm's ADAM platform incorporates IMS' existing loss mitigation services — skip tracing, door-knocking, inspections and preservation — with a borrower outreach call center and short sale service.

In contrast, Genpact's approach looks to simplify interactions between borrowers and lenders using a set of web-based modules that can be rapidly deployed to process consumer-facing modification requests with minimal lead time, the firm said in a press statement. The firm then uses back-end analytics to develop modification plans pursuant to a servicer's internal process, and will provide the tools needed to execute a modification, as well as track the short and long-term performance of a modified mortgage.

"Our approach to loan modifications cuts red tape for the consumer and provides a clear, easy to understand roadmap throughout the modification process," says Genpact's Pryor.

But with redefault rates among modified mortgages already running at 50 to 70 percent — or more — within just six months of modification, it's clear that the challenge here isn't just managing through the red tape often associated with the modification process. It's in correctly identifying those borrowers most likely to reperform and stay reperforming, while expeditiously managing through a growing volume of borrowers for whom a modification may not be the best available option.

Paul Jackson is the editor-in-chief of HousingWire.com and HousingWire Magazine.

Wells Fargo Home Mortgage said this week that it will look to add up to 200 employees in its San Antonio customer service operations center, with many of the positions in loss mitigation roles designed to work with troubled borrowers. The bank will be looking to hire full-time positions in both loan-application processing and default/borrower retention at a job fair scheduled for June 4, according to a local press report in the San Antonio Business Journal.

A spokeswoman for Wells Fargo & Co. (WFC: 29.60 +1.89%) told local press officials that the bank was looking expand its recently-acquired operations center in San Antonio from Wachovia Bank, which Wells Fargo acquired late last year as the bank faltered under the weight of pay-option ARMs.

The move to expand comes as Wells Fargo, like many lenders and servicers, is seeing the number of bad loans on its books continue to mushroom upward. The bank posted quarterly net income of $3 billion during the first quarter of 2009, but absorbed $3.3 billion in charge-offs on bad loans and $4.6 billion in loss provision expense for loans it expects to go bad in the near future.

Wells Fargo is neck-and-neck with fellow banking behemoth Bank of America Corp. (BAC: 7.29 -0.14%) in a race for dominance in a vastly changed U.S. mortgage landscape. For its part, Wells saw $175 billion in loans, mortgage originations and mortgage securities purchases in the first quarter, along with $190 billion in mortgage applications from more than 800,000 prospective borrowers. The company also touted more than 150,000 “mortgage solutions” in the quarter, in its first quarter earnings summary.

Write to Paul Jackson.

A new partnership seeks to capitalize on distressed market conditions in both equity and debt, which continue to loom around the nation.

Private equity firm Alcion Ventures and diversified real estate firm, Golub & Company, just launched a $100m joint venture to pursue troubled properties in turnaround and workout situations.

“We expect the market to eventually begin to trough so as to allow us to make informed decisions," says Martin Zieff, co-founder of Alcion. "Once that condition exists this relationship will afford us a unique platform upon which to take advantage of attractively priced risk."

The two companies maintain a 15-year relationship, of which they say provides a foundation for the success of this new program. The firms say they understand how to maximize value while mitigating risk, a key factor in such a venture.

“It’s the property, not the paper,” said Newman. “A well positioned and operated asset, in the end, is necessary to outperform the market.”

Desired asset types for the program are diverse, including commercial and residential properties. And with co-investment vehicle opportunities, the potential transaction size is unlimited, the companies say.

Golub & Company's senior vice president, Michael Goldman, will lead the initiative.

Write to Kelly Curran.

SilverLeaf Financial, like some other institutions, is looking to capitalize on the growing volume of distressed assets.

The firm said recently it's seeking to raise more money in order to take on $100m in Federal Deposit Insurance Corp. (FDIC) funds, in addition to the $40m it already holds. "Our goal is to align ourselves with the right investment funds, because we're very focused on purchasing more assets from the FDIC," said Shane Baldwin, CEO of SilverLeaf.

In the past, the company has raised money on a deal-to-deal basis, using their own capital to pay the 10% deposit required by FDIC bid award winners.

Now, SilverLeaf says it will seek commitments from accredited investors and institutional investors prior to bidding, in attempt to make the strategy more systematic.

Currently, SilverLeaf holds 11 pools consisting of 17 loans from the FDIC. The company says 10 of these loans have been successfully worked out, while the others are "in the process," all of which add up to $80m in face value notes from the FDIC.

SilverLeaf says its exit strategies include assisting the borrower in the refinancing process through various programs, obtaining a Deed in Lieu of Foreclosure and taking possession of the underlying collateral, managing the foreclosure process to expedite monetization when necessary, and aggressively pricing and marketing the foreclosed property, targeting a 30 to 60-day fire sale.

Write to Kelly Curran.

The UK Parliament is considering legislation to bring so-called 'sale and rent back' agreements within the scope of the Financial Services Authority (FSA) regulation.

These deals occur when a firm approaches an underwater borrower and offers to purchase the distressed asset. In return the resident gets to rent the property for an extended period, with the option to repurchase in the future.

Critics claim that often residents are left out in the cold as missing one's month of rent is reason for eviction. Proponents say the initiative helps keep owners in their homes, at a price they can afford; an important option considering rents in the UK's major cities are not falling dramatically as demand stays high.

Nonetheless, the government suspend operations in this market in May after the Office of Fair Trading (OFT) issued a report identifying a number of risks to homeowners entering into these arrangements.

"The Office of Fair Trading found last year that vulnerable homeowners were at risk from unscrupulous sale and rent back operators," explains Chief Secretary to the Treasury, Yvette Cooper. "It's not right that people can be pushed out of their homes through dodgy deals."

The OFT report recommends compulsory regulation, increasing consumer awareness and improving information about housing benefits, as a way to ensure sale and rent backs are fair.

The FSA will publish shortly details of its regulatory regime, which will take effect on July 1, 2009, subject to Parliamentary approval.

Write to Jacob Gaffney.

American International Group (AIG: 25.25 +0.44%) this week picked Eric Martinez Jr. to take over the CEO position at the firm's United Guaranty Corp., a mortgage guaranty insurance provider.

He replaces William Nutt, whose reasons for leaving the company were not disclosed before this story went to press.

In his months since joining AIG in January, Martinez negotiated the disposition of several properties, including AIG's prime real estate holding in Japan for $1.2bn. He previously served in executive roles at Safeco and AGL Resources, an insurance provider and energy services company, respectively.

Martinez's new role will place him at the helm of AIG's financial services businesses just as the company faces continuing political and public criticism over its damaging financial products division.

The chief restructuring officer at AIG, Paula Rosput Reynolds, in a media statement described Martinez as well-suited for the challenge of developing a strategy for United Guaranty in the face of AIG's ongoing realignment.

In the latest loss to the company's stability, chairman and CEO Edward Liddy said in May he would leave the company as soon as a replacement can be found.

Write to Diana Golobay.

Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.