Most major mortgage servicers reported slight increases in the number of loans in distress during the third quarter of 2011, according to the Inside Mortgage Finance Large Servicer Delinquency Index. Servicers handling over $7 trillion in mortgage loans reported a combined 10.70 percent delinquency/foreclosure rate as of the end of September. That was up 12 basis points from the previous quarter. Of the 17 servicers included in the index, only six reported improved mortgage performance data compared to June. The problem was focused squarely on more...(Includes two data charts)

Major mortgage servicers are widely expected to agree to principal reduction for some struggling homeowners as part of the price of settling complaints over foreclosure practices brought by state attorneys general. That idea doesn’t sit well with some MBS investors, who are concerned that they will end up paying some of the cost of reducing principal as a way to keep distressed borrowers in their homes. The Association of Mortgage Investors warns that principal reduction of securitized loans would be akin to forcing the middle class to bear the settlement’s burden. In a statement, the AMI warned that principal reductions could...

With the severe housing recession having created a more than abundant supply of poorly performing mortgages that will likely linger for years, “step servicing,” or varying compensation based on the amount of servicing work performed, may well be the wave of the future. “Currently, many in the industry are proposing step servicing fees for transactions including newly originated prime jumbo product,” said Kathleen Tillwitz, senior vice president of U.S. and European structured finance for DBRS, in a recent analysis. “As a result, the servicing fees we are seeing for prime jumbo loans are currently ranging anywhere from...

Despite low mortgage rates, the outlook for the purchase-mortgage market remains gloomy. And you can blame it mostly on current housing market conditions. One of the biggest problems plaguing the housing market, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, is the large share of distressed properties that make up home sales in most areas of the country. Nationally, foreclosed properties and short sales accounted for a whopping 48.4 percent of home purchase transactions tracked in the HousingPulse Distressed Property Index during...

Total single-family originations could drop another 20 percent or more in 2012, following a similar decline this year, according to mortgage industry economists. The consensus forecast from Fannie Mae, Freddie Mac and the Mortgage Bankers Association is that $1.28 trillion in home loans will be originated in 2011, a decline of 22 percent from last year’s estimated volume. But 2011 will prove to be just a prelude to another sharp decline in production next year. Despite the fact that mortgage rates are expected to stay at...

The industry robo-signing foreclosure scandal took an historic turn this past week, with the first filing of criminal charges ever brought. Nevada Attorney General Catherine Cortez Masto brought 606 criminal charges against two Lender Processing Services employees who allegedly directed and supervised a robo-signing scheme which resulted in the filing of tens of thousands of fraudulent documents with the Clark County (NV) Recorder’s Office between 2005 and 2008. California resident Gary Trafford has been charged with 102 counts of offering false instruments for recording (a category C felony), false certification on certain...

House Financial Services Financial Institutions Subcommittee Chairwoman Shelley Moore Capito, R-WV, and ranking member Rep. Carolyn Maloney, D-NY, last week introduced H.R. 3461, the Financial Institutions Examination Fairness and Reform Act, to address widespread industry concerns with bank examinations. Some bankers say the reasons for certain decisions made by regulators during the examination process have not been clear. Bankers have also reported that some examiner decisions have effectively and unnecessarily reduced the amount of capital available for increased lending.

Freddie Mac this week announced a new class of single-family MBS backed by mortgages previously repurchased from MBS because they were in serious delinquency. Both government-sponsored enterprises began aggressively buying seriously delinquent loans out of their MBS trusts at the beginning of 2010 because new accounting rules required them to consolidate all their outstanding MBS on their balance sheets. Buying the distressed loans out of the MBS trusts had no impact on their financial accounting, but it allowed them to better manage...

An underwater borrower’s strategic decision to default on a mortgage is triggered not only by economic conditions but how fast the notion can be transmitted throughout a society, which could either result in a full market recovery or a systemic collapse, according to a new mortgage industry study. The study, Strategic Default in the Context of a Social Network: An Epidemiological Approach, suggests that the key to understanding strategic default is to look at it in terms of a disease and how contagious it is. “As social animals, humans knowingly or otherwise look to their peers before...

The outstanding supply of subprime mortgages in the market continued to decline in the third quarter, but three special servicers significantly increased their portfolios, according to a new ranking and analysis by Inside Nonconforming Markets. The growing servicers – Ocwen Financial, Nationstar Mortgage and Walter Investment Management – all focus on high-touch servicing. Special servicing is in particularly high demand as banks have started to sell their subprime holdings, a trend expected to...