Archive for May, 2011
International Business Machines (IBM: 190.71 -0.14%) will rebrand its mortgage servicing division as Seterus on July 9, according to a notice sent to affiliates.
IBM Lender Business Process Services, as it is known now, is a specialty servicer based in Beaverton, Ore.
In January 2010, IBM began negotiating with Bank of America (BAC: 7.22 -1.10%) to acquire Wilshire Credit Corp. The following March, IBM closed on the deal. BofA kept the servicing rights to the portfolio. IBM was able to build out its servicing capabilities with the Wilshire operating platform and the 900 employees who worked there.
It participates in the Home Affordable Modification Program and offers private workout options to distressed borrowers as well, including short sales.
"Over the last year, as a new member of the IBM family, we have seen this organization find itself and create its own character as a proud member of IBM. You have worked hard to improve the customer experience; you have done amazing things to help homeowners," according to the notice.
IBM will begin a campaign to push the new Seterus brand over the next few weeks, the notice said.
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Tags: Bank of America, foreclosure, IBM, mortgage servicing, Seterus, Wilshire Credit Corp.
Posted in Servicing/Default, Top Stories | 2 Comments »
Two state attorneys general sent threatening letters to Bank of America (BAC: 7.22 -1.10%) CEO Brian Moynihan this week, alleging the mega-bank's loss-mitigation efforts in Connecticut are insufficient and its default servicing subsidiary, Recon Trust, may be illegally foreclosing on Utah homes.
The most pressing complaint comes from Utah Attorney General Mark Shurtleff, who accuses Recon Trust of breaking laws that stipulate only state bar members and title insurance companies can qualify as valid "trustees of trust deeds" with the power to partake in foreclosure sales.
Because ReconTrust is foreclosing in the state and does not fall within one of these two categories, Shurtleff alleges the bank is enforcing invalid foreclosures across the state.
A spokesperson for the Utah AG said the number of foreclosures affected by Shurtleff's claims "is somewhere in the thousands."
Bank of America responded, saying, "ReconTrust will continue to handle foreclosures in compliance with applicable laws. Bank of America makes every effort to reach out to delinquent customers to offer home retention options as well as foreclosure avoidance programs. Foreclosure is always our last resort."
The state statutes outlining who can qualify as valid trustees of trust deeds were passed in 2001 and 2004. The statutes were upheld by the 10th Circuit Court of Appeals in 2009, the Utah AG said.
"It is my understanding that ReconTrust claims that as a national bank it is exempt from following Utah law in exercising its fiduciary powers," Shurtleff wrote in the letter. "This office adamantly disagrees with that position on the basis that the section of the National Bank Act granting national banks authority to act in a fiduciary capacity specifically states that such authority shall be exercised only when not in contravention of state or local law."
In Connecticut, Attorney General George Jepsen accused BofA of failing to devote enough services to help distressed homeowners in the state.
"I express these concerns on behalf of the thousands of distressed Connecticut borrowers who continue to experience significant difficulties due to Bank of America's failure to devote adequate resources to loss mitigation," Jepsen wrote in his letter to Moynihan. “Bank of America can and should do more.”
Jepsen said he is worried about the bank's plan to lift its Connecticut foreclosure moratorium in the near future.
"I do not see that it has any credible plan to deal with the inevitable increase in requests from borrowers seeking loan modifications," he wrote in his letter.
In response to Jepsen's claims, BofA said it recently met with Connecticut's AG to discuss his concerns and will continue to work with his office.
"In Connecticut, we have partnered with area home counseling organizations, local government officials and agencies on home retention events and educational forums," BofA said. "Since 2009, we have participated in 15 outreach events in Connecticut covering all major urban areas, including Bridgeport, Hartford, East Hartford, Stamford, Norwalk, Danbury, New Haven and New London."
The letters from the Connecticut and Utah attorneys general come as negotiations between mortgage servicers and the 50 state AGs and state regulators are ongoing. Individual AGs are also stepping up legal actions against servicers. On Wednesday, the California and Illinois attorneys general sent subpoenas to Lender Processing Services Inc. (LPS: 16.789 +1.44%) and Illinois AG Lisa Madigan also subpoenaed National Title Clearing Inc.
Write to Kerri Panchuk.
Tags: Bank of America, BofA, Brian Moynihan, Connecticut Attorney General, default servicing, foreclosure moratorium, foreclosures, George Jepsen, loss mitigation, Mark Shurtleff, Recon Trust, Utah Attorney General
Posted in Servicing/Default, Top Stories | No Comments »
Federal Deposit Insurance Corp. Chairman Sheila Bair told a House subcommittee Thursday she had no reservations about a single director leading the Consumer Financial Protection Bureau.
Under the Dodd-Frank Act, the CFPB will open July 21 and become the de facto regulator for the entire mortgage industry, from origination through servicing.
The White House has not nominated director, yet. But a recess appointment could be made over the weekend. The leading candidate is Elizabeth Warren, who has served as the special adviser to the Treasury Department to oversee the agency's build-up.
But the House Financial Services Committee approved a bill, among other CFPB reforms, that would establish a five-member committee to oversee rulemaking rather than a single director.
Rep. John Carney (D-Del.) asked Bair about the debate and if she was uncomfortable with a single director in charge of the bureau.
"Not really, no," Bair said. "Early on, when Congress was considering this, we were sympathetic to a board approach."
Bair understands regulation via committee. The FDIC board needs at least five votes in favor of a rule proposal or enforcement action before the regulator can act.
While the CFPB would not, as currently structured, require such a process, Bair said she has no reservations.
"I like boards. I think even though it's more difficult for me. I'm no dictator. I have to go get my five votes just as a chairman of a committee has to do that. I think it is a good process," Bair said. "Either way though, you have the OCC with a single-head, so you have both models in the financial regulatory sphere. So, no, I have no reservations."
Republican lawmakers feel differently. A group of Senators sent a letter to President Obama saying they would not give the necessary votes to any CFPB director nominee until the House reforms are signed into law.
Bair sees no conflict with the CFPB and other regulators. The CFPB director will actually sit on the board at the FDIC, which Bair said, should give that person the "sensitivity, knowledge and awareness" of its rulemaking.
But she added the agency will level the playing field for insured banking institutions. During the run-up to the financial crisis, she said, these banks were pressured to lower underwriting standards and compete with other players under little or no regulation.
"You had a lot of nonbank mortgage originators with really no regulation whatsoever and they were selling these loans off to the securitization process and not really retaining any of the risk," Bair said. "So, I think with more robust regulatory mechanisms, it will help level the competitive playing field to make sure we don't have competitive pressure on banks to lower their standards."
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Tags: Bair, CFPB, Consumer Financial Protection Bureau, Dodd-Frank, Elizabeth Warren, FDIC, foreclosure, House, mortgage, obama, Republican, subcommittee, Treasury Department, White House
Posted in Origination/Lending, Top Stories | No Comments »
The Financial Industry Regulatory Authority fined Credit Suisse (CS: 26.60 -0.41%) and Merrill Lynch for alleged misrepresentations regarding the levels of subprime delinquencies in pools of residential mortgage-backed securitizations.
FINRA, an opt-in independent regulator for all securities firms doing business in the U.S., fined Credit Suisse $4.5 million and Merrill Lynch $3 million. The fine is also a penalization for inadequately supervising delinquency data.
"Credit Suisse and Merrill Lynch failed to monitor and supervise the reporting of historical delinquency rates, depriving investors of information essential to assessing the profitability of mortgage-backed investments," said Brad Bennett, FINRA Executive Vice President and Chief of Enforcement.
In short, FINRA claims the two financial firms did not do a good enough job of notifying investors when subprime mortgage delinquency reports changed the results of predicted performance outcomes.
In the run up to the housing bust, traditional delinquency data was used for selling subprime RMBS. So, if a financial firm marketed a 2007 subprime RMBS series, the rate of delinquencies for 2005 and 2006 subprime loans would be used, for example.
FINRA found that in 2006, Credit Suisse misrepresented the historical delinquency rates for 21 subprime RMBS it underwrote and sold.
"Although Credit Suisse knew of these inaccuracies, it did not sufficiently investigate the delinquency errors, inform clients who invested in these securitizations of the specific reporting discrepancies or correct the information on the website where the information was displayed," FINRA said in a statement.
FINRA found that Merrill Lynch negligently misrepresented the historical delinquency rates for 61 subprime RMBS it underwrote and sold. Merrill update its website in a timely fashion, FINRA said, but that alone did not show a reasonable responsibility to its investors.
"In eight instances, the delinquencies were significant enough to affect an investor's assessment of subsequent securitizations, as it was referenced in five subsequent RMBS investments," FINRA said.
Both firms are going to pay, FINRA said, but neither admit or deny the charges.
On January 1, 2009, Merrill Lynch was acquired by Bank of America, but the firm continues to do brokerage business under its own individual broker-dealer registration.
Follow him on Twitter @JacobGaffney.
Tags: Credit Suisse, FINRA, Merrill Lynch, subprime RMBS
Posted in Secondary Market/Investors, Top Stories | 1 Comment »
The Federal Reserve Bank of New York received a whistle-blower letter from a Litton Loan employee, who claims the mortgage servicer used internal procedures to deny mortgage modifications to distressed homeowners.
"We are in possession of the letter and are conducting an inquiry," a N.Y. Fed spokesman told HousingWire.
The letter was provided to the central bank by the Financial Times.
The London-based international newspaper reports the employee's letter detailed a "denial sweep" strategy to clear the backlog of applications for loan modifications.
Goldman Sachs (GS: 109.79 +1.13%) acquired Litton Loan in 2007. The Houston-based firm services about $46.1 billion worth of U.S. mortgages. In December, Goldman announced plans to sell Litton a few months after discovering "process issues" with Litton's foreclosure procedures.
The FT article said the Litton employee reviewed loans that were eligible for modification under the federal Home Affordable Modification Program, yet were denied for various reasons. The letter claims Litton employees mistakenly calculated borrower income and denied some applications.
Other applications were rejected for failing to contain appropriate documents even though the necessary paperwork was entered into Litton's computer system, according to the letter under investigation by the New York Fed.
A spokeswoman for Litton Loan said the company is "not commenting on this issue."
When the company announced plans to participate in HAMP in August 2009, President and CEO Larry Litton said "our company has used modifications as the primary method of helping homeowners avoid foreclosure."
"The company has been, and continues to be, a proponent of thoughtful and practical loan modifications that provide affordability to homeowners," Litton said then.
Write to Jason Philyaw.
Tags: foreclosure, FT, Goldman Sachs, HAMP, Home Affordable Modification Program, Larry Litton, Litton Loan, loan modification, mortgage
Posted in Servicing/Default, Top Stories | 3 Comments »
The 30-year, fixed-rate mortgage rate fell to 4.6% in the most recent Freddie Mac Primary Mortgage Market Survey, reaching a new low for 2011.
That compares to a rate of 4.61% a week earlier and 4.84% last year. The 15-year, FRM followed suit, averaging 3.78%, down from 3.8% a week earlier and 4.21% last year.
The 5-year, Treasury-indexed hybrid adjustable-rate mortgage averaged 3.41%, down from a week earlier when it averaged 3.48% and down from 3.97% last year.
Meanwhile, the 1-year, Treasury-indexed ARM averaged 3.11% in the most recent week, down from a week earlier when it averaged 3.15%
“Fixed mortgage rates eased slightly for the sixth consecutive week amid reports of slower economic activity," concluded Frank Nothaft, vice president and chief economist, Freddie Mac.
Write to Kerri Panchuk.
Tags: 30-year FRM, adjustable-rate mortgage, ARM, freddie mac
Posted in Origination/Lending, Top Stories | 3 Comments »
Real gross domestic product in the United States increased at an annual rate of 1.8% in the first quarter, based on the revised estimate released by the Commerce Department's Bureau of Economic Analysis Wednesday.
GDP — a comprehensive measure of the output of goods and services in America — grew 3.1% in the fourth quarter, but lost speed in the first three months of 2011, as imports surged, exports fell, personal consumption declined and cuts were made in federal spending.
Analysts with Econoday noted the government's GDP report indicated relative strength in personal spending and investment in inventory as well as investments made in business equipment and software.
Write to Kerri Panchuk.
Tags: Bureau of Economic Analysis, commerce department, econoday, GDP, Gross Domestic Product
Posted in Servicing/Default, Top Stories | No Comments »
Initial jobless claims rose 2.3% last week, topping most analysts' estimates and reversing the declines of the prior few weeks.
The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended May 21 increased to 424,000 from 414,000 the previous week, which was revised upward by 5,000 claims.
Analysts surveyed by Econoday expected 404,000 new jobless claims last week with a range of estimates between 395,000 and 420,000. A Briefing.com survey projected new claims of 400,000 for last week. Most economists believe weekly claims lower than 400,000 indicate the economy is expanding and jobs growth is strengthening.
The four-week moving average, which is considered a less volatile indicator than weekly claims, fell by 1,750 to 438,500 from an upwardly revised average of 440,250 for the prior week. The seasonally adjusted insured unemployment rate for the week ended May 14 dipped to 2.9% from 3%, according to the Labor Department.
The total number of people receiving some sort of federal unemployment benefits for the week ended May 7 fell to nearly 7.74 million from 7.94 million the prior week.
Write to Jason Philyaw.
Tags: jobless claims, labor department, unemployed
Posted in Secondary Market/Investors, Top Stories | No Comments »
More investors are bullish about home prices in the coming year and are beginning to aggressively hunt for residential real estate investments in their own backyards, according to a new survey conducted by Move Inc.
The firm's real estate investor survey found 22% of investors are bullish about home prices going up in the next six to 12 months, a slight uptick from prior periods. About 53.5% expect home prices to remain relatively the same.
However 22% is a much higher share of the market than expected, prompting Move Inc. to conclude in its survey report that "local markets may be heating up with renewed investor interest and activity."
Based on survey results, Move concluded 69% of investors believe they'll have an easier time finding investment properties in the future, while 43.5% believe it may be harder. Some 62% are paying more attention to local home values, with the expectation that it may be time to jump off the sidelines.
Even though first-time homebuyers are often considered the ones to watch when it comes to jump-starting a lagging housing market, 65.5% of the investors who responded to the Move survey said they expect first-time homebuyers to have trouble qualifying for mortgages in an era of heightened underwriting, making it easier for them to nab good deals.
About 18.5% expect to invest using cash-only, and 80.5% expect to receive cash discounts from sellers.
Write to Kerri Panchuk.
Tags: home prices, investors, Move Inc., real estate
Posted in Secondary Market/Investors, Top Stories | 1 Comment »
If America's debt crisis is spreading like a lethal cancer, then the nation only has to look as far as Canada for a possible cure, says David Rosenberg, a chief economist with wealth management firm Gluskin Sheff + Associates.
Rosenberg argues in a new article that Canada in the early 1990s faced a debt crisis similar to America's current economic woes.
He says, the important thing is Canada is now back in the black after spending "years of painful austerity as taxes were raised, spending was cut," and apparently many government operations were privatized. Other high-dollar "untouchables like means testing and claw backs for social security were not just touched, but squeezed," Rosenberg writes.
Canada now is doing well, Rosenberg argues. But, he says, America's northern neighbor hit its own debt wall nearly two decades ago as it faced deficits and debts that, much like America's current fiscal crisis, seemed "difficult to reverse."
Canada even underwent its own version of a credit rating scare. In fact, it was more than a scare. Rosenberg says, "Canada endured not just the ignominy of credit downgrades but also recurring financial market gyrations that frequently disrupted business activity."
The hero of Canada's tale of fiscal constraint and redemption is former finance minister Paul Martin, according to Rosenberg.
Rosenberg says Martin "was so successful at turning the bloated deficit around, not to mention reversing Canada's long-standing reliance on big government, that he has since been hired as a consultant to the Cameron-led Coalition in the U.K."
Rosenberg finishes his advocacy of Martin's turn-around-plan with an opinion that does not look favorably on America's current crop of top economic operators. "So if you’re wondering why it is that global financial markets have responded favorably to the financial plan unveiled by the U.K. government, now you know," he said. "Notice that Hank Paulson and Larry Summers weren’t offered any postings."
Write to Kerri Panchuk.
Tags: America's debt crisis, Canada, debt crisis, Gluskin Sheff, Hank Paulson, Larry Summers
Posted in Commentary | No Comments »