Lender Processing Services (LPS), an analytics and real estate services provider, reported $80.4m in net income in Q210 or $0.85 per diluted share, up 6.9% from the $75.2m reported in the second quarter of last year.

The earnings came despite decreased revenue in its default services division, which provides an “end-to-end” process from loss mitigation to short sales, property preservation and a network of REO brokers. In Q210, LPS reported $415.5m in revenue from these services, an 8.2% decline from the same quarter of last year.

According to LPS, the declines came from a 16% drop in foreclosure starts in Q210, driven “by a broader industry slowdown.”

Revenues from its loan origination side declined as well. Its loan transaction services department saw a 7.2% drop from last year to $415m in Q210. While revenues from its loan facilitation services were also down 5.4% from last year, mortgage origination revenues stayed above projections from the Mortgage Bankers Association (MBA), which predicted a 20% decline in origination from 2009 to now.

“LPS had a strong quarter despite very difficult conditions in both the origination and default markets and a sustained challenging macro-economic environment. LPS, with its comprehensive end-to-end solutions for the mortgage and real estate industries, remains well positioned for a solid 2010 and to continue to grow profitably in 2011 and beyond,” said Lee Kennedy, executive chairman of LPS.

Write to Jon Prior.

President Barack Obama's has signed the bill that extends unemployment benefits for the over 2.5m Americans out of work.  The legislation today passed the House of Representatives  by a vote of 272-152, the day after it passed through the Senate.

Through the bill, the cut off for benefits has been extended from June 2 to Nov. 30 and unemployed citizens will continue to receive payments for 73 weeks after that, for a total of 99 weeks of unemployment benefit. The new law works in concert with Home Affordable Unemployment Program, which gives qualified homeowners the ability to borrow up to $50,000 to assist them with their mortgage, provided that they have a reasonable prospect of resuming payments within 24 months.

But is 99 weeks enough time to fill the unemployment gap?  U.S. economist Lawrence Souza told HousingWire in the upcoming print edition that the current state of unemployment is not going to be solved overnight.

"It will be 2015 when full employment is achieved at 95 to 96% of the workforce," said Souza. "Job growth is the number one variable that drives fundamental demand for commercial space, absorbtion, occupancy rate, rent growth and price appreciation."

The estimated cost surrounding the legislation is $34bn, one reason some in Congress were hesitant to vote it through.  But Obama argued that the bill had to be funded via deficit spending as it was an emergency measure to protect 9.5% of the United States' population.

The bill was sponsored by Representative Charles Rangel (D-NY) and is titled the American Jobs and Closing Tax Loopholes Act of 2010 (download here).

Write to Christine Ricciardi.

The watchdog of the federal bailout efforts criticized efforts under the Home Affordable Modification Program (HAMP), saying the number of borrowers receiving modifications remains "anemic."

Special Inspector General for the Troubled Asset Relief Program (SIGTARP), in its quarterly report (download here), noted fewer than 400,000 permanent modifications through HAMP so far. As of June 30, a total 753,275 mortgages were being modified, either permanently or on trial basis.

"Treasury's refusal to provide meaningful goals for this important program is a fundamental failure of transparency and accountability that makes it far more difficult for the American people and their representatives in Congress to assess whether the program's benefits are worth its very substantial cost," SIGTARP said in the report this week.

The Treasury Department launched HAMP in March 2009 to provide incentives to servicers for the modification of loans on the verge of foreclosure. In order to receive a permanent modification through the program, borrowers must make three monthly payments during the trial period and submit all documentation.

In exchange for participation in the program, the Treasury distributes TARP funds as incentives. So far, SIGTARP found, the program has paid out $247.37m in incentives through the first-lien modification program and $149,3000 in incentives for the Home Affordable Foreclosure Alternatives (HAFA) program:

The TARP watchdog noted that, despite participation in HAMP, the program failed to "put an appreciable dent" in foreclosure filings so far.

"Indeed, the number of trial and permanent modifications that have been canceled substantially exceeds the number of homeowners helped through permanent modifications," SIGTARP said.

According to the June HAMP report, servicers converted 51,205 trial modifications into permanent status with 8,823 permanent modifications canceled, including 195 mortgages that borrowers paid off. Cancellations continue to rise as servicers comply with Treasury guidance to make decisions on aged trials. Of the cancellations in June, 60% had been in trial modifications for six months or longer.

SIGTARP once again in its quarterly report criticized the Treasury for failing to publicly announce goals or performance benchmarks of borrowers to be permanently helped. In the April report, SIGTARP recommended Treasury identify participation goals and expected costs for each HAMP program and subprogram, as well as launch a fraud awareness campaign and include warnings with each new program announcement.

Since then, SIGTARP noted, Treasury failed to clarify an expected number of permanent modifications.

Write to Diana Golobay.

Individuals going through mortgage modification may soon receive a bit of padding during the process.  That is, if U.S. Representative Jackie Speier (D-Calif.) has anything to do with it.  She is proposing a new bill to Congress that would shield a homeowner's credit score from an adverse rating after the mortgage has been modified.

Under HR5743, more commonly known as the Protecting Homeowners' Credit History Act, on-time modified loans would not be considered delinquent by the mortgage servicer and knowledge of these payments would not be reported by credit bureaus in rating evaluations.

Speier said that she has seen drops as much as 100 points on an individual credit rating while lenders are having mortgages renegotiated, a stab that can prevent car, home and life insurance loan approval.  She believes that is unfair.

"Homeowners shouldn't have their credit scores damaged for doing the right thing," Speier said.

How the bill would be interpreted is unclear.  Credit scores in mortgage finance are generally proposed on two different rating systems: FICO, which rates a person's credit from 300-850, and VantageScore, which uses a range of 501-900; both based in various standards and evaluation criteria.  The Protecting Homeowners' Credit History Act does not specify which one, or both, it will protect.

Not all are on board with this bill.  After all, say some like Joseph Pigg, VP and senior council of the American Bankers Association, where's the accountability?

"To deny information on modifications being used in credit scores only harms the ability of lenders to evaluate the creditworthiness of borrowers in the future, making it harder to determine a borrower's ability to repay any future loan," Pigg said to the Chicago Tribune.

According to research by FICO released this month, about 25.5% of Americans have credit scores below 599.

Write to Christine Ricciardi.

Behrooz Vida, a consumer bankruptcy attorney at the Dallas-based Vida Law Firm, believes facilitating loan modifications in the bankruptcy process is not working, and that lenders should be more willing to work with borrowers that are in the process of a bankruptcy. Vida was a panelist at a SourceMedia loss mitigation conference in Dallas Thursday.

Another panelist at the conference, Patricia Hennessy, vice president of bankruptcy and probate for BBVA Compass (BBV: 0.00 N/A) argued that since a bankruptcy filing limits creditors' access to individual debtors, the borrower should contact the bank.

Vida responded that banks should access court records of borrower assets and liabilities — made public record after a bankruptcy filing — to facilitate a loan modification.

Total bankruptcy filings are projected to top 1.63m in 2010, and increase nearly 10% and nearly 9% in 2011 and 2012, respectively, according John Griggs, chief operating officer of Fort Worth-based Ascension Capital Group.

Griggs said the rate of bankruptcy filings closely follows rates of foreclosure, unemployment and strategic default. Ascension projects unemployment will remain high through the end of 2010, then flatten out and reduce and hover around 8% by late 2011 or early 2012.

In addition, the value of option adjustable-rate mortgages (ARMs) that will reset will peak at approximately $35bn by early 2011, with some borrowers seeing their monthly payments increase by as much as 80%, driving more bankruptcy filings.

Jim Cruzan, corporate counsel for Ascension Capital Group, suggested that the courts take on the task of facilitating a loan modification, a notion Hennessy strongly objected to.

"We can't have judges deciding what a lender's rights are or what a person should pay," she said, adding there are concerns for the impact such a move would have on neighboring properties, as well as the lender's business.

Vida took the position that banks should add bankruptcy capabilities to their loss mitigation software systems, but Hennessy said that's impossible since every bankruptcy judge interprets the federal code differently.

Instead, Hennessy said lawyers should encourage their clients to obtain a loan modification before they file for bankruptcy. Then, after filing, the borrower can reaffirm the debt, pay the new lower payment and keep his or her home.

Vida argued a lawyer opens themselves up to potential litigation if they encourage a client to take on a loan modification and then the borrower later can't make the payments. In addition, Vida said banks do not move quickly enough to process a debt reaffirmation on a mortgage, modified or not, before the 60-day time period.

"I've got to rely on the mortgage company to send the paperwork to me," he said.

In the case of BBVA Compass, Hennessy said there are approximately 7,400 borrowers with real estate loans that are currently in a bankruptcy. The bank is the 15th largest in the country, and larger institutions likely have even greater numbers. The problem is just too large for banks to make that much contact, she said.

"In the communication process, we would look more to come from your side of the street," Hennessy said. "We're told to shut up and sit on our hands" once the bankruptcy is filed.

The panel brought many opinions to the table, but the magnitude of the challenges in complex bankruptcy and mortgage loss mitigation created many questions.

Write to Austin Kilgore.

The author held no relevant investments.