The Treasury Department increased its threats against non-agency servicers regarding Home Affordable Modification Program performance. In a report released last week, the Treasury was highly critical of JPMorgan Chase and a number of other non-agency servicers remain on notice. Freddie Mac, acting as the Treasury’s compliance agent for the Making Home Affordable program, conducts quarterly assessments of HAMP servicers. In the third quarter of 2011, Chase was deemed to be in need of “substantial improvement” in compliance with MHA guidelines, the third quarter in a row for the servicer ...

The Federal Housing Finance Agency’s proposal to shift the handling of nonperforming loans to special servicers would not benefit most servicers and borrowers, according to the Mortgage Bankers Association. The proposal could also hinder efforts to shift activity to the non-agency market. In September, the FHFA proposed a fee-for-service compensation model for the government-sponsored enterprises and suggested it could also be applied to the non-agency market. According to the FHFA’s discussion paper, Fannie Mae or Freddie Mac would pay a set dollar fee per performing loan – $10 was cited as an example. For non-performing loans ...

American Home Mortgage Servicing agreed this week to settle a lawsuit brought by the Ohio attorney general in 2009. The subprime servicer did not agree to pay any penalties or complete principal-reduction loan modifications but did agree to specific servicing guidelines in the state. In 2009, Ohio’s attorney general filed a lawsuit claiming American Home violated consumer law by providing inadequate services to consumers seeking loan modifications. ... [Includes one brief]

Saxon Mortgage prevailed in a closely watched case decided by the Arizona State Supreme Court in November. The 5-0 ruling determined that the recording of an assignment is not necessary to enforce a foreclosure under Arizona law. The decision in Vasquez v. Saxon Mortgage could have a wide-ranging impact, according to legal analysts. Jean Braucher, a professor of law at the University of Arizona, said the court essentially approved of servicers’ “sloppy procedures,” ...

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...

Three more non-agency servicers agreed with New York’s Department of Financial Services to revamp their servicing practices to address alleged improper servicing. American Home Mortgage Servicing, Saxon Mortgage and Vericrest Financial last week agreed to servicing practices previously agreed to by Goldman Sachs Bank, Litton Loan Servicing and Ocwen Financial. Among other provisions, the agreements require a single point of contact for borrowers and the end of dual-track foreclosures. The servicers also must withdraw any pending foreclosure in which affidavits were inaccurate and... (Includes one data chart)

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. ...

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. ...

The 14 servicers operating under consent orders with federal regulators started their independent foreclosure review programs this week. The consent orders and Home Affordable Modification Program guidelines each contained single point of contact requirements, with varying degrees of guidance. At the Mortgage Bankers Association’s recent annual conference in Chicago, Diane Pendley, a managing director at Fitch Ratings, said servicers have implemented SPOC guidelines in at least eight different ways. ...

In a somewhat unusual announcement last week, Walter Investment Management said it was servicing approximately 910,000 loans representing approximately $59.0 billion of unpaid principal balance as of the end of the third quarter of 2011. The announcement was unusual because that was the extent of the statement. “We believe the major increase in the servicing portfolio could be due to Walter being allocated a portion of the servicing rights related to the Fannie Mae/Bank of America deal, whereby Bank of America sold the servicing rights to 400,000 loans to Fannie Mae,” said analysts at FBR Capital Markets. ...