Shadow Inventory For Nonagency RMBS Could Take Three Years To Clear

Regional variations in the shadow inventories of distressed U.S. mortgages could indicate where home prices may pick up or continue to stabilize and where additional declines may still be in store, according to a recent report published by Standard & Poor's (S&P) Ratings Services.


"We estimate that the entire shadow inventory of distressed properties currently outstanding that back nonagency residential mortgage-backed securities would take nearly three years to clear at the current average national resolution rate," says Standard & Poor's credit analyst Diane Westerback. "Given this backlog, we believe that average home prices could fall again if demand doesn't rise in step with the potential influx of supply."

The original principal balance of the current shadow-inventory overhang - which S&P defines as outstanding properties that are (or were recently) 90 days or more delinquent, in foreclosure or real estate owned (REO), but haven't yet hit the market - amounts to roughly $480 billion, or 30% of the entire nonagency market.
 
 

HUD Announces M&M III Contracts, Separates Functions

The U.S. Department of Housing and Urban Development (HUD) has announced it is awarding contracts to 23 companies to serve as asset managers (AMs) and 32 other firms to serve as field service managers (FSMs) under the third generation of its Management and Marketing (M&M) program, known as M&M III. The new contracts are intended to reduce risk, increase sale prices and accelerate the pace of reselling HUD's inventory of foreclosed Federal Housing Administration (FHA) homes.

HAFA

Under HAFA, all homeowners that do not qualify for a Home Affordable Modification Program (HAMP) loan modification must be considered for participation in the HAFA program before a lender forecloses. Government-sponsored enterprises Fannie Mae and Freddie Mac recently announced their own versions of the program.

B of A Passes 70K HAMP Permanent Mods,

Bank of America says it has completed more than 70,000 permanent modifications under the federal government's Home Affordable Modification Program (HAMP), converting more than 16,000 homeowners from trial to permanent contracts in the past month.

FHFA Orders Delisting Of GSE Stock

The Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to delist their common and preferred stock from the New York Stock Exchange (NYSE) and any other national securities exchange. Once the delisting is completed, each enterprise’s common and preferred stock is expected to be quoted on the Over-the-Counter Bulletin Board.


"FHFA's determination to direct each company to delist does not constitute any reflection on either enterprise’s current performance or future direction, nor does delisting imply any other findings or determination on the part of FHFA as regulator or conservator," says FHFA Acting Director Edward J. DeMarco. “The determination to direct delisting is related to stock-exchange requirements for maintaining price levels and curing deficiencies."

Each company's common stock price has hovered near the NYSE minimum average closing price requirement of $1 over 30 trading days for most months since the conservatorships were established in September 2008.

Most recently, Fannie Mae’s closing stock price has been below the required $1 average price for the past 30 trading days. Per NYSE rules, a company in that condition must either drop from the exchange or undertake a "cure" to restore the stock price above the $1 mark if it does not meet the NYSE’s minimum price requirements.

The alternatives for putting in place such a cure do not assure maintaining the minimum price level or avoiding loss of shareholder value.

In view of Freddie Mac’s share price being close to the $1 mark and the common situation of both companies operating in conservatorship with support from the Treasury Department, FHFA has determined that Freddie Mac should also initiate an orderly delisting process.

“A voluntary delisting at this time simply makes sense and fits with the goal of a conservatorship to preserve and conserve assets,” says DeMarco.

Each enterprise’s stock will continue to trade, but through a different trading mechanism. The enterprises remain Securities and Exchange Commission registrants and subject to applicable federal securities laws.



SOURCE: Federal Housing Finance Agency

Fannie and Citi Offer Mortgage Relief to BP Oil Spill Victims

Mortgage companies are beginning to step up and offer some relief to homeowners whose livelihood has been impacted by the BP oil spill off the coast of the Gulf of Mexico. Fannie Mae has issued an announcement suggesting its servicers immediately suspend or reduce mortgage payments for borrowers whose properties or income have been affected by the spill. CitiMortgage is suspending foreclosures and REO evictions in coastal areas of the Gulf until September 17.

Fitch Projects Steep Re-Default Rates on HAMP Modifications

The government’s Home Affordable Modification Program (HAMP) has been widely criticized for what many say are substandard results, and a new report from Fitch Ratings indicates that even the small successes it’s made so far may soon be reversed.


The company says that within 12 months, 55 to 65 percent of the prime loans modified under the federal program will likely re-default. For modifications on subprime and Alt-A loans, the projection is even higher – 65 to 75 percent.

What’s worse is that Fitch called its estimates “conservative.”

The agency’s analyst wrote in their report, “Fitch continues to believe that, when properly done, modifications can benefit both homeowners and [residential mortgage] investors. However, modification performance or sustainability continues to be affected by the borrowers’ desire to keep their property, as well as having sufficient cash flow to make the modified payments.”

The ratings agency says it is encouraged by the prospects of the administration’s newest initiative, the principal write-down modification approach, since it attempts to address the borrower’s desire to stay in the home.

However, Fitch’s analysts note that the program, which isn’t expected to be ready for implementation until later this year, limits the principal write-down to no less than 115 percent of current value and also requires the borrower to perform under the terms of the modification for three years to receive the full benefit of the write-down.

According to Fitch’s report, approximately 15 percent of all non-GSE loans held in residential mortgage-backed securities (RMBS) by balance had received at least one modification as of May 2010, including almost 35 percent of RMBS subprime loans.

Thanks DS NEWS

But even modified loans prove to need more restructuring, Fitch says. Its study shows that 15 percent of all modified mortgages in non-GSE securities have received at least one additional modification.



While modifications continue to be the primary strategy to work out problem loans, accounting for just under 70 percent of all loan workouts, the use of alternative methods to foreclosure, such as short sales and short payoffs, has increased materially since mid 2009, Fitch said.



Currently, 50 percent of prime and 35 percent of subprime and Alt-A distressed liquidation sales are not by REO sale, the ratings agency reports.

Mediation Process

http://caseclarity.com/

This site has a great flow chart on the mediation process.

Circuit Court of Appeals Cases from Last Week

U.S. Supreme Court, June 07, 2010

Hamilton v. Lanning, --- U.S. ---- (2010)(Supreme Court approves "forward looking approach" for computing chapter 13 plans by above-median debtors, i.e. the court may account for changes in the debtor’s income or expenses that are known or virtually certain at the time of confirmation)



9th Circuit Court of Appeals, June 09, 2010



In re Southern Cal. Sunbelt Developers, --- F.3d --- (9th Cir 2010)( 1) bankruptcy court properly concluded that 11 U.S.C. section 303(i) permitted an award of attorney's fees for a section 303 action as a whole, including fees incurred to litigate claims for fees and damages under section 303(i)(1) and (2); 2) section 303(i) permitted an award of punitive damages under section 303(i)(2)(B) in the absence of an award of actual damages under section 303(i)(2)(A); and 3) the bankruptcy court properly held two individual appellants jointly and severally liable for the costs and attorney's fees the debtors incurred in obtaining dismissal of the involuntary petitions. However, the judgment is reversed in part where the bankruptcy court erred by holding the individual appellants liable for the debtors' costs and fees incurred! on the section 303(i) motions themselves)



Thanks to Findlaw.com

Free Power Point Viewer

http://www.microsoft.com/downloads/en/confirmation.aspx?familyId=048dc840-14e1-467d-8dca-19d2a8fd7485&displayLang=en

Free Power Point Viewer

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Who owns the Note?

https://www.mers-servicerid.org/sis/


By Matt Weidner, Esq.

One of the most important issues in virtually every foreclosure case is trying to identify exactly who owns the note that the Plaintiff is foreclosing on. This issue is almost never clear in the pleadings filed by the Plaintiff despite the fact that this issue is the central issue in the entire case. Remember, the servicer is not the proper party in interest if they are not entitled to profit from the foreclosure judgment.

The plaintiffs and their attorneys make it difficult to find this information, but now we have assistance from
an unlikely source, MERS or Mortgage Electronic Registration System.  A change on the MERS website that was just published today allows any party to search the MERS site by address of MIN number to gain the identity of the owner or investor in the note.


You can check the MERS website here to access this information. This is critically important information in every case, especially when the Plaintiff has identified one party and the MERS site identifies yet another!

Foreclosure Hearings in a Hallway!!!!!!!!!!

This is horrifying tome they are holding foreclosure hearings in a hallway in Broward County.



http://www.oppenheimlaw.com/media-coverage.php?new_id=107%20-

Analysis: Lenders Aggressively Going after Money Lost in Foreclosures

Over the past year, lenders have become much more aggressive in trying to recoup money lost in foreclosures and other distressed sales, creating more grief for people who thought their real estate headaches were far behind, according to a Washington Post analysis today. Before the housing bust, when the volume of foreclosures was relatively low, lenders rarely chased after deficiencies because borrowers had few remaining assets to claim and doing so involved hassles and costs. But with foreclosures soaring, lenders are more determined to get their money back, especially if they suspect borrowers are skipping out on loan they could afford, an increasingly common practice in areas where home values have tanked. Those who had a second mortgage, such as a home-equity line of credit, in addition to their primary mortgage may find themselves particularly vulnerable, especially if they tapped into the equity line for cash. A handful of states do not allow lenders to pursue deficiencies, nor does a federal program that took effect April 10. Lenders participating in that initiative are paid for approving short sales and as a condition, they cannot go after outstanding debt. In many states, lenders can go after deficiencies, though laws vary widely, said John Rao, an attorney at the National Consumer Law Center. Some states limit how long the banks have to file a claim or collect the debt.


http://www.washingtonpost.com/wp-dyn/content/article/2010/06/15/AR2010061505428_pf.html

Former Mortgage Executive Charged with Fraud

Lee Farkas, the former head of the now bankrupt mortgage lender Taylor, Bean & Whitaker Mortgage Corp., has been charged in a fraud scheme that led to multibillion-dollar losses and targeted the 2008 federal bank bailout program, Reuters reported yesterday. Farkas was charged with 16 counts including conspiracy, securities fraud and bank fraud, according to an indictment unsealed in U.S. District Court for the Eastern District of Virginia. Prosecutors accused Farkas and unnamed co-conspirators of orchestrating an eight-year scheme that also contributed to the downfall of Colonial Bank, a unit of now-bankrupt Colonial BancGroup, one of the 50 largest banks at the time. The indictment said that Farkas and the co-conspirators tried to misappropriate money from multiple sources, including a lending facility controlled by TBW known as Ocala Funding, which had received funding from Deutsche Bank and BNP Paribas Bank. The alleged scheme also could result in some $3 billion in losses for the Federal Housing Administration and government mortgage guarantor Ginnie Mae, the largest ever for those agencies, said Kenneth Donohue, the Housing and Urban Development Department's inspector general.