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...

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...

U.S. policymakers are studying the Canadian mortgage market, which endured a far less costly downturn during the economic recession, for ideas that could be imported in the reform of the domestic mortgage finance system. “We must find characteristics in other countries similar to our own system,” said Rep. Carolyn McCarthy, D-NY, during a hearing in the House Financial Services Subcommittee on International Monetary Policy and Trade this week. In many ways, the U.S. mortgage market is unique. The ubiquity of the 30-year fixed-rate mortgage, a standard mortgage product here, is unparalleled elsewhere. While a 30-year...

Prepayments increased overall in September, particularly on agency fixed-rate MBS, with faster pay-downs occurring in lower coupons, according to analyst reviews of prepayment speeds. The experts expressed surprise at unexpectedly high prepayments for recent low coupon vintages and greater weakness for higher coupons. Deutsche Bank analysts reported that speeds for 4.0 percent Fannie Mae MBS issued in 2010 and 2009 more than doubled in September compared to the previous month. Speeds for similar MBS with 4.5 percent coupons increased also as much, they noted. For example, prepayment speeds for 2010 Fannie MBS with a 4.0 percent coupon...

Securitization market participants continue to face significant uncertainty from regulatory forces on both sides of the Atlantic that is dampening securitization activity, raising costs and probably leaving some deals undone. Much of the problem stems from capital requirements and the use of credit ratings, which have fallen into disrepute among many lawmakers and regulators in the wake of the collapse of the subprime mortgage market and the resulting credit market freeze in 2008. After last year’s enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Federal Reserve, the Federal Deposit Insurance Corp., the...

Transparency, investor access to information and a willingness to engage in loss mitigation can help reduce the wave of litigation and investor losses resulting from repurchase demands, according to mortgage litigation experts. There’s a better alternative to fighting out buyback claims in court: all counterparties should sit down and find ways to resolve issues that trigger repurchase claims in an open and forthright manner, said panelists on a webinar hosted by Inside Mortgage Finance Publications. “We have to work together because the country is hurting and the longer this drags on, the bigger the problem is going...

Use of principal reduction in loan modifications increased in the second quarter of 2011, according to the Office of the Comptroller of the Currency. Principal reduction has gained popularity for non-agency mortgages after initially being used almost exclusively on portfolio loans. Some 8,645 principal reduction mods were completed by major banks and thrifts in the second quarter of 2011, according to the OCC. Non-agency mortgages accounted for 48.9 percent of all principal reduction mods in the second quarter of 2011, with portfolio mortgages accounting for the rest of the activity. ...

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]

State attorneys general trying to negotiate a big-ticket settlement with top mortgage servicers saw their coalition fracture further over the past week, including a decision by Massachusetts to move independently toward litigation. A major stumbling block continues to be divergent views among the states on whether lenders should get immunity from non-servicing issues such as potential litigation over securitization as part of the deal. The widely held view is that top banks were willing to put up a combined $20 billion to be used to help struggling borrowers to settle legal challenges that were spawned by...

Its decision to dump its wholesale correspondent channel is the latest in a series of moves by Bank of America to distance itself from “legacy” mortgage issues, but analysts remain doubtful. Moody’s Investors Service last week downgraded the bank’s rating. “The downgrades result from a decrease in the probability that the U.S. government would support the bank, if needed,” thanks to the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the ratings firm said. Moody’s said that the government is likely to continue to provide some level of support to systemically important financial institutions. “However, it is also...