The servicing settlement being negotiated between state attorneys general and major banks will likely require principal reduction via loan modifications and possibly refinances. Principal reduction, however, will likely only be required for certain mortgages held in bank portfolios. The Federal Housing Finance Agency has refused to allow principal reduction on mortgages serviced for the government-sponsored enterprises. Non-agency mortgage-backed security investors, meanwhile, have been more accepting of principal reduction of late but the vast majority of such mod activity is already concentrated on portfolio loans. ...

FHA claims rose in 2011 from last year with loss mitigation and property conveyances accounting for the bulk of paid claims, according to Inside FHA Lending’s analysis of FHA fiscal year data. Though increasing by 7.7 percent, claims are still far below the 15.0 percent average for FHA loans, said an agency spokesperson. On Sept. 30, servicers reported 635,096 mortgages in serious default, yielding a default rate of 8.7 percent. This fiscal year, FHA reported 326,892 claims, of which 200,808 were loss mitigation-related and 91,448 were property conveyance actions. Claims related to pre-foreclosure sales and Home Equity Conversion Mortgage loans showed the most ...

The Department of Housing and Urban Development is seeking executive clearance for a final rule which would revise and update requirements for lender indemnification, lender-insurance eligibility and termination under the FHA’s Single-Family Lender Insurance Process. The final rule was sent to the Office of Management and Budget for review on Oct. 18 with possible issuance in the next couple of weeks. HUD declined to discuss the details of the final rule. The three main changes to the program include a more explicit definition of what ...

Fannie Mae, Freddie Mac and their federal conservator are trying to devise a new servicing compensation scheme without upsetting the to-be-announced agency MBS market that Wall Street dealers and Main Street mortgage lenders depend on. In a recent white paper outlining two alternatives for reforming servicing compensation so that more resources are available for distressed loans, the Federal Housing Finance Agency said “promoting continued liquidity” in the TBA market is one of its primary objectives. The agency also mused that a new servicer compensation system for the government-sponsored enterprises could...

Ocwen Financial’s pending purchase of subprime servicer Saxon Mortgage is just the latest growth spurt for the firm. “We are looking at other transactions as we speak,” William Erbey, chairman of Ocwen, said last week on a call with investors. Even with the Saxon deal, Erbey said Ocwen’s pipeline of potential acquisitions increased in the third quarter of 2011 compared with the previous quarter, to more than $300.0 billion in unpaid principal balance. ...

Fannie Mae, Freddie Mac and their federal regulator are facing considerable negative pushback from the mortgage industry about their controversial plan to change the economics of the mortgage servicing industry. The Federal Housing Finance Agency and the government-sponsored enterprises are trying to come up with a system that will provide more resources for servicing distressed loans and reduce the volatility lenders face as a result of carrying mortgage servicing right assets on their books. In addition to ultimately improving servicing quality for GSE loans and reducing default losses, the agencies appear to...

With home sales slow, house prices still floundering and little lender appetite for cash-out refinancing, the mortgage servicing business may be another year or more away from reversing the historic contraction that’s been underway since early 2008. But a new servicing ranking by Inside Mortgage Finance reveals that some companies have managed to grow their business. Servicing remains a top-heavy industry dominated by three companies that collectively held 47.8 percent of the market as of the end of September. But only one of those firms – second-ranked Wells Fargo – has seen its servicing portfolio...(Includes one data chart)

With the clock running down on the Home Affordable Modification Program and disappointing results so far, a new government watchdog report urges the Treasury Department to put more pressure on mortgage servicers. Only 5.4 percent of the $45.6 billion set aside for HAMP has been spent so far, said a new report by the Special Inspector General for the Troubled Asset Relief Program. With less than a year left until HAMP expires, the program has helped approximately 25,000 to 30,000 homeowners a month with new permanent mortgage modifications. Treasury estimated that nearly 1 million homeowners are still...

Now that the long-awaited revision of the Home Affordable Refinance Program is out of the way, look for the Federal Housing Finance Agency to redouble its efforts to discharge the government’s backlog of real estate owned properties with all deliberate speed. During an interview on C-SPAN’s “Newsmakers” program last weekend, FHFA Acting Director Edward DeMarco said the agencies are sifting through over 4,000 comment letters on the proposed REO bulk sales program. “Now that we have the HARP announcement out, we are turning to this as the next priority,” said DeMarco. “We do think we will have some good...

Overwhelmed by the tidal wave of foreclosures and under intense scrutiny by lawmakers and regulators, the mortgage industry and default servicers in particular are being challenged like never before to keep up with complex, ever-changing compliance rules and they are in dire need of a technology solution to keep up with the changes. Compliance technology vendors such as Irvine, CA-based DecisionReady are striving to keep up with the demands of their clients, who may not exactly know what they want but know they need a solution that keeps them connected and on top of the latest legal and procedural changes, according to...