Monday Morning Cup of Coffee

A look at stories across HousingWire's weekend desk … with more coverage to come on bigger issues: Fannie Mae directed servicers to work closely with Housing Finance Agencies across the country now that the HFAs received a total $7.6 billion in Hardest Hit Funds from the Treasury Department. The money will be used to provide temporary relief to unemployed mortgage borrowers through the HHF Unemployment Programs and delinquent borrowers through the HHF Reinstatement Programs. The more than 2,000 servicers of Fannie Mae loans were directed, according to a letter, to accept funds through the programs. Borrowers who receive help through these programs, which vary by state, cannot already be in a Fannie Mae forbearance plan or a Home Affordable Modification Program trial. Christopher Whalen, managing director of Institutional Risk Analytics said at a presentation at a University of Virginia conference, that the major banks have worked through roughly one-fourth of inevitable foreclosures. The issue going forward, Whalen said, will not be if a loss has occurred but when the bank chooses to recognize that loss. "The U.S. banking industry is entering a new period of crisis where operating costs are rising dramatically due to foreclosures and loan repurchase expenses," Whalen said. He added that both President George W. Bush and Barack Obama have failed to restructure the largest banks between 2008 and 2009, which means the process will be done over the next three to five years "whether we like it or not." As a result, Whalen said, the U.S. economy can expect depressed growth and continued elevated unemployment levels. "The largest U.S. banks remain insolvent and must continue to shrink until they are either restructured or the subsidies flowing from the Fed, Fannie Mae/Freddie Mac cover hidden losses.," Whalen added. "The latter course condemns Americans to years of economic malaise and further job losses." Fitch Ratings affirmed the Wells Fargo (WFC) home equity line of credit (HELOC) and second-lien mortgage servicer rating at RPS 1- over the weekend after the San Francisco-based bank resubmitted 55,000 foreclosure affidavits in 23 states. The credit rating agency said Wells has a "highly developed control environment" and continually enhances its default management processes. Another agency Moody's Investors Service put the Wells first-lien servicer rating up for review a day after the bank announced the affidavit corrections. When the Special Inspector General for the Troubled Asset Relief Program revealed last week that the Treasury's Home Affordable Foreclosure Alternatives program has completed 342 short sales and deed-in-lieu of foreclosure, the market was underwhelmed. A Treasury official deferred to the SIGTARP report, but Equator said 117,000 HAFA short sales were initiated on its platform since the program launched in April. One real estate agent who specializes in short sales told HousingWire that servicers will eject homeowners from HAFA into their own proprietary programs "for any perceived violation." Christopher Hanson, of the Hanson Law Firm in California and releases a short sale periodical, said lenders would not give up the deficiency right, which is required through HAFA, in exchange for the $2,000 pay out from the Treasury. The Treasury expects to release an official HAFA report in November. Regulators closed no banks over Halloween weekend, according to the Federal Deposit Insurance Corp. So far, 139 banks have failed in 2010, just one below the amount in 2009. Write to Jon Prior.


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