Closer scrutiny of portfolio loan quality and growing repurchase demands have pushed mortgage software providers MasterServ Financial and The Prieston Group to develop products to help lenders manage their portfolio risks and reduce buyback risks. MasterServ Financial, a technology solution provider to the mortgage banking industry, is expanding its portfolio monitoring product from distressed real estate loans and REO management to new portfolios of performing mortgage loans. With the shift in real estate values, a weak economy and high unemployment rate, it is very difficult to determine whether the loans in a lender’s portfolio today are...

The Obama administration’s Housing Scorecard for September paints a reasonably rosy picture of efforts to help troubled homeowners and future market prospects. With record low mortgage interest rates, housing affordability increased modestly. But the number of new default notices rose from 59,500 in August to 78,900, which is still well below the 96,500 level of a year ago. Notably, sales of real estate owned properties were down this period. Preliminary numbers from July 2011 show that there were 46,200 REO sales, as opposed to 62,200 in June and 61,800 a year ago. New home sales were down slightly in...

In five years, the mortgage servicing business will likely be dramatically different than it is now or has been in the past, experts say, and getting there won’t be easy. “Homeowners think servicing is about them, that the industry should be trying to solve their problems,” said Peter Swire, a law professor at Ohio State, during a panel at this week’s Mortgage Bankers Association annual convention. “But the servicer is working primarily for the investor,” he said, adding that the “legal structure of servicing makes the homeowner extraneous.” Although there is widespread acknowledgement that change is necessary, the significant...

Mortgage Electronic Registration Systems has been at the center of two significant developments recently that bring more legal clarity to the mortgage industry’s foreclosure practices – and could portend a quicker resolution of an enormous number of cases currently tied up in foreclosure. Early this week, the U.S. Supreme Court denied certiorari in Gomes v. Countrywide, declining to reconsider lower court rulings in the case, essentially affirming MERS’ authority to foreclose in California in the process. “The petition for a writ of certiorari is denied,” the high court said in its certiorari summary dispositions. “The chief justice [John Roberts] took...

Negotiations among major banks and state attorneys general to settle problems in foreclosure servicing practices reached a one-year anniversary this week with little apparent progress over the key issue of how much litigation relief the lenders will gain from the deal. “We worked out a tremendous amount of the settlement and gotten a lot done,” said a spokesman for Iowa Attorney General Tom Miller, who has been spearheading the negotiation on behalf of the states. However, he disputed applying the word “imminent,” which some bankers had used, to describe when the settlement might be finalized. “Let’s not jump...

The U.S. Attorney’s office in Manhattan has entered into an agreement with the law firm of Steven J. Baum, one of the largest volume mortgage foreclosure firms in New York state, that requires the firm to pay $2 million to Uncle Sam and to extensively change its mortgage foreclosure practices. The agreement resolves an investigation into Baum’s mortgage foreclosure-related practices, specifically whether the firm, on behalf of its lender clients, filed misleading pleadings, affidavits and mortgage assignments in state and federal courts in New York.

The strategic default problem is not going away, keeping pressure on servicers and MBS investors to find ways to dis-incentivize these actions. House prices continue to fall, and more underwater homeowners are willing to batter their credit rating and default on their mortgage to get out of an uneconomic deal. In a recent report, analysts at Deutsche Bank said the threat of legal action and risks to assets other than the mortgaged property play a large role in a homeowner’s decision to strategically default. Eleven states are considered non-recourse states, either because they explicitly forbid deficiency judgments or...

The servicing compensation structure for non-agency mortgages must be reformed, according to Federal Reserve Governor Sarah Bloom Raskin. The Federal Housing Finance Agency noted that the options it proposed for agency mortgages last week could also serve as a model for non-agency mortgages and could help revive the sector. “It is imperative to reconsider the compensation structure so that servicers have adequate incentives to perform payment processing efficiently on performing mortgages, and to perform effective loss mitigation on delinquent loans,” Raskin said in a speech this week. ...

Holdings of home-equity loans by banks and thrifts fell by 1.9 percent in the second quarter of 2011 compared with the previous quarter, according to the Inside Mortgage Finance Bank Mortgage Database. Delinquencies on the loans remain low but banks are being subject to greater regulatory scrutiny regarding their treatment of HELs. Banks and thrifts held $1.23 trillion in HELs at the end of the second quarter of 2011. The serious delinquency rate on the loans was 2.04 percent, down from 2.09 percent the previous quarter. ... [Includes one data chart]

High-quality endorsements and lower-than-expected prepayment speeds have given a slight boost to the FHA Mutual Mortgage Insurance Fund in the second quarter of 2011 even as agency officials remained cautiously optimistic about the recent book of business. In its quarterly report, the Department of Housing and Urban Development said that the MMI fund’s total capital improved by $100 million to $31.7 billion from the previous quarter as revenues from premiums and property sales exceeded higher claims payments. Endorsements in the second quarter alone added $1.7 billion to the capital reserve account, which stood at $2.8 billion at the end of June, the report noted. The FHA capital reserve account, which absorbs ...