Loss Mitigation

The number of mortgage borrowers who owe more on the loan than their home is worth decreased slightly during the first quarter, but CoreLogic sees a problem area among homeowners with second mortgages. The company found that 10.9 million, or 22.7 percent, of all residential properties with a mortgage were in negative equity as of the end of March. CoreLogic says the underwater ratio of borrowers with home equity loans is more than double that of borrowers without second mortgages.

Specialty servicer Ocwen Financial Corporation recently launched a new product to help buyers of non-performing loan portfolios or residuals of private-label securities get more value from their loans. A turnkey product, PlatformPlus allows distressed asset investors to set up their own specialty servicing operations using Ocwen's expertise and management.

Williston Financial Group and its wholly owned subsidiary WFG National Title Insurance Company have appointed Morgan Harris as EVP of default services. As head of the company's default services division, Harris will be responsible for the strategic direction of the division, as well as the oversight and management of all aspects of sales and production.

More than three-quarters of foreclosure counselors say the borrower experience when turning to the government's flagship modification program for relief is sub-par. The Government Accountability Office (GAO) says counselors it polled cited concerns about HAMP trial denials, including long waiting periods and documentation issues. Some 39 percent said paperwork had been lost or needed to be resubmitted, while 46 percent said it typically takes seven months or more to receive a decision on a trial mod application.

Even with the highest foreclosure rate in the nation, Nevadans are not using bankruptcy to keep their homes, according to Columbia Law School professor Ronald Mann. Mann's analysis shows that Nevada's bankruptcy filing rate so far this year is 5,176 filings per million adults, more than twice the national rate of 2,562 per million. At the same time, he notes that Nevada's percentage of filings under Chapter 13 of the bankruptcy code, which often allows debtors to keep their property, trails the national average.

Foreclosure prevention actions on loans held by Fannie Mae and Freddie Mac declined during the first three months of this year, driven primarily by loan modifications. Permanent loan mods dropped for the third consecutive quarter to 86,201. Short sales were essentially flat at 25,705. According to the GSEs' regulator, even with the drop-off in loss mitigation actions the two companies' delinquency rates ""remain below industry levels."" In the first quarter, foreclosure starts declined while completed foreclosures increased.

Goldman Sachs has agreed to sell its residential mortgage servicing subsidiary to Ocwen Financial Corp. Ocwen will pay $263.7 million in cash to acquire Litton Loan Servicing. In addition to the cash purchase price, Ocwen will lay out another $337 million to take care of some of Litton's outstanding debt. The deal will result in Ocwen's acquisition of a servicing portfolio of approximately $41.2 billion in unpaid principal balance of primarily non-prime residential mortgage loans.

Fannie Mae laid out new standards for mortgage servicers Monday related to the management of delinquent loans. The move is part of the Servicing Alignment Initiative announced by the company's regulator in late April to bring both Fannie Mae's and Freddie Mac's procedures for handling past-due mortgages in line with one another. The new rules are intended to address identified servicing issues such as the commencement of foreclosure actions while loss mitigation talks are ongoing and breakdowns in borrower communication.

HOPE LoanPort (HLP), a Web-based tool that streamlines home retention applications on behalf of borrowers at risk of foreclosure, recently welcomed nonprofit counseling agencies in Alaska and Kansas to its system. Used by housing counselors, housing finance agencies, investors, and major mortgage servicers, HLP now assists struggling homeowners in 49 states and the District of Columbia.

The rate at which distressed loans held in U.S. commercial mortgage-backed securities (CMBS) are being transferred to special servicers continues to decline, according to Fitch Ratings. The agency reports that approximately $85.7 billion in loans were being worked out by special servicers as of the first quarter of 2011. Specially serviced CMBS loans reached a peak in the second quarter of 2010 at $91.2 billion. But Fitch has noticed a declining trend ever since and the agency expects it to continue.