Turning profits by investing in distressed mortgages has become increasingly difficult, according to distressed asset investors. Many investors cannot get the internal rate of return necessary to invest in this space, according to Steven Grundleger, executive vice president of capital markets at FNC. Grundleger and other market participants detailed the state of the distressed asset sector at the recent secondary market conference hosted by the Mortgage Bankers Association. Some 47.7 percent of home sales completed in April involved distressed borrowers, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, a monthly measure of...

Performance of Home Affordable Modification Program mods does not vary much between non-agency mortgages and agency mortgages, according to a new analysis by Inside Nonconforming Markets. Performance has been generally lackluster, although differences have emerged among non-prime HAMP servicers. As of the end of March, 1.56 million trial HAMP mods had been started, including 716,006 on non-agency mortgages, according to the Special Inspector General for the Troubled Asset Relief Program. And 670,186 permanent HAMP mods had been started, including 309,027 on non-agency mortgages. Some 46.6 percent of trial mods started on... [Includes one data chart]

Non-agency mortgage-backed security investors appear to be unwilling to support new non-agency MBS issuance until reforms are implemented for second-liens. Nancy Mueller Handal, a managing director at MetLife, said potential non-agency investors are looking for an alignment of issuer, investor and servicer interests. "A big piece of this comes down to the fact that servicers have been managing their second liens in portfolio to the detriment of the first lien," she said at a discussion this week hosted by the American Securitization Forum. Second liens became a major focus of a hearing on national servicing standards last week at...

High-touch servicer Nationstar Mortgage announced this week that it plans to raise up to $400.0 million via an initial public offering. The servicer - owned by Fortress Investment Group - primarily focuses on defaulted agency mortgages. Nationstar serviced a $64.2 billion portfolio as of the end of 2010, with subprime mortgages accounting for a 14.6 percent share. Reps. Gary Miller, R-CA and Brad Sherman, D-CA, recently introduced legislation to permanently increase the conforming loan limits. Few analysts believe that H.R. 1754, "the Preserving Equal Access to Mortgage Finance Programs Act," will gain much traction considering...

New legislation introduced in both the House and the Senate would impose tough national mortgage servicing standards, with plenty of sticks and barely a single carrot. Early last week, Sen. Jeff Merkley, D-OR, and Olympia Snowe, R-ME, introduced the Regulation of Mortgage Servicing Act to help homeowners stay in their homes by making the rules for mortgage servicers "more fair and transparent." The bill would require mortgage servicers to create a single point of contact for borrowers, end dual-track processing of foreclosures while homeowners are negotiating a modification, and provide an independent, third-party review before sending a family into...

All the witnesses at a hearing late last week in the Senate Banking Subcommittee on Housing, Transportation and Community Development agreed that national mortgage servicing standards are a necessity, but they acknowledged that the trick is deciding what they will cover and how they will work in an environment ridden with competing problems. "Servicers do not believe that the rules that apply to everyone else apply to them," said Diane Thompson, counsel at the National Consumer Law Center. "This lawless attitude, supported by financial incentives and too-often tolerated by regulators, is the root cause of the failure of...

The much-maligned Home Affordable Modification Program posted modest gains in the number of new trial and permanent modifications started during the first quarter of 2011, according to an Inside Mortgage Finance analysis of data released by the Obama administration. The number of new permanent mods started rose 8.1 percent from the fourth quarter, while the number of new trial mod offers was up 2.2 percent. First-quarter 2011 volume in both categories remained well below the levels set back in early 2010, when the program was still gaining traction. The number of active permanent HAMP modifications rose... [Includes two data charts]

The Government Accountability Office says the Consumer Financial Protection Bureau and other federal regulators should include foreclosure practices in their anticipated national servicing standards, as well as a formal assessment of the risks that are associated with poor documentation practices – the exact repercussions of which are still undetermined. The new GAO report was sparked by widespread criticism of mortgage servicers’ handling of foreclosure documents. It was believed that many affidavits had been improperly notarized or signed, leading to concerns over how these loans were transferred into...

&PTop rating agencies continue to have different requirements for issuers to obtain the most favorable ratings on certain transactions, including the all-important criterion of credit enhancement. The latest manifestation of this dynamic involved a recent $1.45 billion servicer advance receivable transaction by American Home Mortgage Servicing Inc., a deal that passed muster with DBRS and Standard & Poor’s. But AHMS withdrew the deal from consideration at Fitch Ratings because of that company’s more conservative rating criteria. DBRS and S gave most components of the transaction a triple-A rating. That included two $325 million senior term notes and a $600 million senior variable funding note. The deal included subordinate term notes of $150 million and $50 million. The primary assets of...

Government Accountability Office: Foreclosure report: The GAO released a report last week entitled Mortgage Foreclosures: Documentation Problems Reveal Need for Ongoing Regulatory Oversight, which was compiled as a result of a probe House Democrats requested...