Compensation for non-agency mortgage-backed security servicers should be adjusted and the industry should adopt practices from commercial MBS servicing, according to Morningstar Credit Ratings. The firm that recently established its non-agency MBS rating capabilities said enhanced servicing could help revive the issuance of non-agency MBS. “Without these reforms it may prove very difficult to attract investors back into the fold of private-label residential mortgage securities given the weaknesses exposed in ...

Improved subprime performance and a lack of new originations have prompted major nonbank firms involved in subprime servicing to expand their portfolios with acquisitions of nonperforming agency mortgages. Ocwen Financial, Nationstar Mortgage and Walter Investment Management, among others, have all recently acquired large volumes of nonperforming agency mortgages. An estimated $525.0 billion in subprime mortgages were outstanding as of the end of the first quarter of 2012, according to an Inside Nonconforming Markets analysis ... [Includes one data chart]

Incentive payments to FHA servicers based on a compliance score will soon replace the current tier ranking-based inducements used by the Department of Housing and Urban Development to reward above par servicer performance. In an update to its servicer evaluation process, HUD said implementation of the National Servicing Center’s Servicer Performance Scorecard (SPS) is underway and the transition from Tier Ranking System (TRS) incentive payment to an SPS payment scheme will be announced in a mortgagee letter as soon as the implementation is completed. In the future, the SPS may be used as ...

Ocwen Financial has been a leader in principal-reduction loan modifications and officials at the company suggest the mods give Ocwen a competitive advantage over other servicers. The advantage could come into play as bank servicers look to complete required principal-reduction mods as part of the recent $25 billion servicing settlement. “I think we’ve done as many principal-reduction mods as the rest of the industry combined ...

American Home Mortgage Servicing ranked as the most active servicer in consumer-outreach efforts under the Home Affordable Modification Program, according to new data reported by the Treasury Department. Performance by other non-agency servicers varied, and even American Home lagged in some categories. As of the end of March, American Home was the only HAMP servicer among the top 10 to contact or evaluate 100 percent of its borrowers potentially eligible for HAMP. The servicer had evaluated a whopping ... [Includes one data chart]

After growing significantly via the acquisition of portfolios and subservicing, special servicer Walter Investment Management is looking to increase its servicing assets in different ways. Walter is close to establishing delinquency flow programs and will soon increase its agency originations. “The company currently expects to close one delinquency flow program in the second quarter with an additional program to come in the second half of the year,” Walter said this week ...

Mortgage servicers could find themselves in a quandary as they implement the national servicing standards outlined in the March foreclosure settlement agreement, especially if they run into conflicting FHA requirements. Compliance experts say that while many of the settlement standards could be carried out within the FHA program without being at odds with existing FHA requirements, conflicts do exist with the guidelines that cannot be resolved. Even when it is technically possible to comply with both FHA guidelines and the settlement standards, it is still going to ...

Regulatory scrutiny of lender-placed insurance is increasing, but non-agency servicers claim that they are compliant with existing and impending regulations for such insurance coverage. The Consumer Financial Protection Bureau is focusing on lender-placed insurance, provisions were also included in the recent $25.0 billion servicing settlement, Fannie Mae recently updated its policies and a number of state investigations are underway. “There appear to be a number of very significant problems with ...

Short sales on mortgages included in non-agency mortgage-backed securities have increased sharply in the past year, as a percentage of total distress property dispositions, according to analysts at Deutsche Bank Securities. The loss mitigation technique is seen as beneficial for borrowers, portfolio servicers and non-agency MBS investors, especially compared with foreclosure costs and timelines. “Short sales typically result in faster resolution and significantly higher principal recovery,” the analysts said. Short sales accounted for about ...

DBRS this week said seven firms are approved to provide third-party due diligence on non-agency mortgage-backed securities rated by the company. The companies are Allonhill, American Mortgage Consultants, Clayton, Digital Risk, Opus, RMG and R.R. Donnelley. Meanwhile, CoreLogic announced last week that Standard & Poor’s has approved the company as a third-party due diligence provider for non-agency MBS ... [Includes four briefs]