Archive for April, 2010
Erik and Amy Lutz have listed for sale a four-bedroom, three-bath home at 22145 N. 78th St. in Scottsdale for $469,900.
The 3,129-square-foot house was built in 1999 in the North Scottsdale neighborhood. It is located in the Sonoran Hills subdivision. Jason Lutz of John Hall & Associates is the listing agent for the property.
Lutz is the chief financial officer at the Devine Group, a leader in employment assessments and business solutions. He holds the same position at Strategic Executive Services. He previously was the president at Great Southwest Mortgage in Scottsdale.
Richard Cimino, currently the CEO of iServe Servicing, a recent HAMP participant, is responsible for building, managing and establishing client relationships in the mortgage servicing division.
Cimino's past executive experience includes serving as president of the servicing division for New Century Mortgage for 10 years ending in June 2007, and was responsible for building all loan servicing operations for the number two sub-prime lender in the nation.
For this episode of In This Corner, Cimino let's us know what he would change about the program.
What improvements would you like to see to the HAMP program? Obviously, there are the recent principal write down guidelines in place now. Is there another change you would like to see to the modification program?
While HAMP is a very strong program, there are always areas for improvement. In this case, I believe that there needs to be resolutions to the program. One of them would be early identification of borrower intentions and abilities – whether or not the borrower actually wants to or can afford to stay in the property and identification of the exit strategy early in the process. In other words, is there going to be a short sale, deed-in-lieu, or just take it to REO? That might be a good way to get some quicker resolutions to a lot of these properties. iServe Servicing is set-up and licensed to handle any and all of these resolutions.
How does a HAMP modification affect not just that particular borrower but even borrowers right next door?
Aside from the logistics that move the refinance mechanism, there’s a situation of putting values at risk throughout the country. If you have one in seven borrowers in default or headed for default, normally only two or three may actually remain in their homes. With that assumption, the values of properties begin to come down, not so much from the REO scenario, but from the principal reduction scenario. Consequently, all values across the board go down in the long term, which then reduces the values of all the properties in the neighborhood. As a result, all seven borrowers are impacted – even the borrowers who are keeping their mortgages current.
At a very granular level, what is the major difficulty servicers are having when trying to solve these loans with borrowers?
There is a huge difference between a special servicer like iServe Servicing and a mega-servicer. The mega-servicers are dealing with hundreds of thousands of loans, some with legacy pricing and procedures established when delinquencies were very low. That applies to subprime, Alt-A and prime. Their biggest problem is the response rate that they’re getting through HAMP. When they do get contact with a borrower and engage in a pre-qualification scenario, up to 70% of the borrowers that are interested don’t bother following through with the required documentation. Due to the pricing structure that’s in place in the legacy servicing agreements, the servicers cannot put the staffing in place that’s necessary to deal with the volumes. With the mega-servicers, there is not a lot of follow-up in what we call the “backroom process,” like the paperwork gathering or the actual underwriting once the documents are received. A special servicer like iServe Servicing is properly staffed to handle the volumes of defaulted loans.
And what advantage does a special servicer like iServe Servicing have?
We have the experience, industry-knowledge, advanced technology and size to offer tailored solutions. When you look at a mega-servicer, the amount of files that one of their loss mitigation people is handling could be anywhere from 350 to 1,000 loans. iServe Servicing handles 150 to 200 files per workout person. This allows us to adequately service each loan by giving it the time necessary to obtain a successful modification or other appropriate resolution. Many borrowers are confused and scared by the process and we can offer the “hand-holding” to walk the borrower through the process to a successful resolution.
In addition, our business efforts have expanded into working as a component servicer to some of the mega-servicing institutions. We would go in and say, “iServe Servicing would like to get involved in offering you solutions to your full servicing operation and/or resolution to your volume overflow through our component servicing group. We have a dynamic business model which includes origination, REO, and an advanced technology platform that allows us to offer customizable solutions to our clients.” This can be a relief to a mega-servicer who is overwhelmed with the volume and is happy to have an outlet for part of the servicing process.
Greater Baltimore’s foreclosure rate remained below the national average in the first quarter, but the number of filings increased 141%, according to data released Thursday.
The Baltimore-area registered 6,515 foreclosure properties during the quarter — up 141% from the period a year earlier — with 0.59 of its housing units receiving a foreclosure filing during the quarter. That’s according to Irvine, Calif.-based RealtyTrac’s Q1 2010 Metropolitan Foreclosure Report.
The Baltimore-area numbers, however, declined 1.32% from the fourth quarter of 2009.
British home prices leapt 10.5% in April from the same month last year, returning to double-digit growth for the first time since June 2007, home-loans provider Nationwide said.
Prices rose by 1% in April from March, taking the annual gain to 10.5%, according to Nationwide.
The average value of a home in Britain stood at STG167,802 ($A275,831), according to the survey.
Souring commercial real estate loans are taking a disproportionate bite out of ailing mid-size bank balance sheets as more failures are set to come in 2010.
Regulators shut down seven more banks last week in Illinois. The total cost to the Federal Deposit Insurance Corp. Deposit Insurance Fund (DIF): $974m. According to the analytics firm, Trepp, the latest moves by the FDIC indicate the agency is focusing its resources toward one problematic region at a time.
In the week before the Illinois closings, three banks in Florida and two in California were shut down.
According to Trepp partner, Foresight Analytics, the next region of interest could be Puerto Rico. There, seven banks made it to the Foresight watch list. To gauge how accurate that list can be, all but one of the seven Illinois bank failures last week were on the list.
Through Q110, more than 2,100 banks reported quarterly financial reports, and 14 of them are considered undercapitalized, significantly undercapitalized or even critically undercapitalized. The common malady of each troubled balance sheet is toxic commercial loans.
According to Trepp, these loans account for an average of 51% of the banks’ non-performing assets – a disproportionately high percentage. In all but two cases, the amount was above 35%.
Deutsche Bank drills down further. According to its research, the four largest US banks – Bank of America, Wells Fargo, JPMorgan Chase and Citigroup – hold the lowest percentage of exposure to the climbing delinquency rate in CMBS and make up Group 1 in the graph below. Group 2 consists of banks with total assets exceeding $150bn. Group 3 has between $25bn and $150bn in assets. Group 4 has between $10bn and $25bn in assets. And Group 5, representing more than 7,000 of the nation’s smallest banks with less than $10bn in assets, has the highest percentage of exposure to these loans.
More bank closings could be on the way. Failures in 2009 reached 140, an increase of almost 500% from 2008, according to research from Grant Thornton. At the end of 2009, the FDIC “Problem List” had grown to 702 insured institutions.
Earlier in April, Trepp reported that problematic commercial loans spreading through commercial mortgage-backed securities (CMBS) would plague small and mid-sized banks more than the larger ones. The firm forecasts 200 of these banks will fail in 2010.
Write to Jon Prior.
