Secondary Market

Fannie Mae has issued a notice to servicers detailing changes to how they should evaluate ""imminent default"" and how they determine the market value of properties for pre-foreclosure sales. The GSE is requiring servicers to apply the imminent default test now used only for HAMP modifications to all non-HAMP mods secured by owner-occupied properties. In addition, Fannie Mae is requiring servicers to use only approved providers for broker price opinions or appraisals on short sales and deeds-in-lieu.

Home prices in the U.S. continue to tumble as foreclosures claim a larger share of the market. Residential prices slipped 2.5 percent during the first quarter of this year when compared to the previous quarter, according to a national index calculated using sales prices from mortgages acquired by Fannie Mae and Freddie Mac. The index shows prices fell 5.5 percent between the first quarter of 2010 and the first quarter of 2011. It's the largest annual drop recorded since the second quarter of 2009.

Oklahoma Governor Mary Fallin recently signed legislation to restrict Wall Street home resale fees, also known as private transfer fees. The fees require that a private third party receive a percentage of the final sale price of a home every time the property is sold, typically for 99 years. Oklahoma is the 30th state to restrict their use. On the federal level, the Federal Housing Finance Agency has issued a proposed rule that would prevent Fannie Mae and Freddie Mac from investing in mortgages with these fees.

Residential Credit Solutions announced Tuesday that it has issued a newly created asset-backed securitization comprised of residential loans and real estate. The secondary market offering carries a value of more than $110 million. Forty-four percent of the structure is collateralized with delinquent mortgages and REO properties and 46 percent is current mortgage loans.

Prices on U.S. commercial real estate fell 4.2 percent in March, according to a national index released by Moody's Investors Service this week. The latest drop brings the index down to its lowest level since its peak in October 2007. A high volume of distressed transactions are weighing on price performance, Moody's says. However, the agency's analysts note that they've seen a pick-up recently in the number of deals trading hands overall, which they see as a positive sign for the commercial real estate market as it sets the stage for recovery.

California Attorney General Kamala Harris announced the creation of a 25-person task force on Monday charged with protecting homeowners from mortgage fraud. Within the last year, the California Department of Justice says it has received thousands of complaints related to foreclosure scams and mortgage servicing practices. In addition to fraud on the default side of the business, the task force will be on the lookout for misconduct and false claims involving investments and securities tied to subprime mortgages.

Fannie Mae and Freddie Mac recently announced they will be issuing new guidelines this summer that will align their procedures for handling past due mortgages and implement a new incentive and penalty structure based on individual servicers' performance. Moody's Investors Service says this new directive - in particular the monetary motivation involved - will likely shift servicers' focus to loans backing the GSEs' mortgage bonds and away from loans in private-label residential mortgage-backed securities (RMBS).

Lender Processing Services, Inc. recently added a new property module to its McDash Loan Data suite of products. The suite is offered by LPS's Applied Analytics division. The new module supplements the McDash database with an updated view of borrower equity. It combines public records information related to second liens with the analytic capabilities of the LPS Home Price Index to provide an indication of current total loan-to-value (LTV) ratios for residential housing across the country.

Loans backing commercial mortgage-backed securities (CMBS) that were liquidated at a loss in the first quarter carried an average loss severity of 38 percent, according to Moody's Investors Service. That figure represents a decline from 40 percent for the previous quarter and was the first reduction in the severity of losses since the fourth quarter of 2008. During the month of April, CMBS loans totaling $2.9 billion became newly delinquent, while previously delinquent loans for $3.0 billion became current, worked out, or were liquidated.

Industry analysts, economists, even lawmakers generally concede that the pooling of risky subprime mortgages into secondary market securities fueled the economic collapse that almost brought the nation's financial system to its knees. But New York Attorney General Eric Schneiderman is looking for proof that major financial institutions were hocking these dicey mortgage-backed securities during the days leading up to the collapse of the housing market, knowing that these transactions would result in billions of dollars in mortgage losses.