Loss Mitigation

Bank of America has sold the servicing rights of 400,000 home loans to Fannie Mae, according to media reports. The unpaid principal balance on the loans is said to be $73 billion. The loans were sold at a price of $500 million. BofA's CEO Brian Moynihan referenced a sale of mortgage servicing rights in a CNBC interview this week, but did not name the purchaser. A BofA spokesperson told DS News the sale is consistent with steps the company is taking to address legacy mortgage issues and position for growth.

Illinois Governor Pat Quinn recently announced the new Mortgage Resolution Fund (MRF) created to permanently modify loans to affordable amounts. The MRF is being funded with $100 million from the state of Illinois and $445.7 million from the Hardest Hit Fund a fund established by the Obama Administration in 2010 to help families in markets hardest hit by the housing and economic crisis. Under the MRF, delinquent loans will be purchased from lenders at present value and modified according to current home values.

Mortgage delinquencies declined 27 percent in the first half of 2011 compared to the first half of 2010, according to data from HOPE NOW. For the first half of 2011, the number of 60-day plus delinquencies was 2.7 million, down 1 million from the first half of 2010. Foreclosure sales also declined year-over-year for the period - down 25 percent. At the same time, the total number of foreclosure starts during the first six months of 2011 was 1.13 million, a decrease of 9 percent from the first six months of 2010.

Washington Attorney General Rob McKenna and Assistant Attorney General Jim Sugarman have filed suit against ReconTrust Company, a subsidiary of Bank of America, for illegally foreclosing thousands of Washington homes. McKenna and Sugarman are requesting the court require ReconTrust to abide by state laws in addition to inflicting civil penalties of up to $2,000 per violation and restitution for affected homeowners.

KML Law Group, P.C., with its principal office in Philadelphia, has been formed to provide creditor's rights representation to secured lenders in Pennsylvania and New Jersey. KML is the result of the restructuring of the law firm of Goldbeck McCafferty & McKeever, which has served the mortgage banking industry since 1981. The shareholders of KML were shareholders in the Goldbeck firm and will continue to provide legal services, including loan resolution, home retention, foreclosure, bankruptcy, eviction, REO closings, and related legal services.

Homeland Security Capital Corporation has added a second acquisition as part of its entry into the mortgage and settlement services business by completing the purchase of all of the stock of Timios, Inc. Homeland Security Capital is an international provider of technology-based radiological, nuclear, environmental, disaster relief, and electronic security solutions to government and commercial customers. Timios is a paperless provider of title insurance and escrow services. Last month, Homeland Security Capital also acquired the assets of Default Servicing LLC.

Freddie Mac said Monday that it logged a $2.1 billion net loss for the second quarter. The company has requested $1.5 billion in taxpayer funding from Treasury, bringing the total amount of its capital draws while in conservatorship to $66.2 billion. Freddie's latest financials represent a slide from the previous quarter, when it posted a $676 million profit and needed no money from Treasury. The GSE acquired 24,799 REO properties through foreclosure in the second quarter but sold 29,355, shrinking its inventory of repossessed homes.

The administration has released a new report on its flagship Home Affordable Modification Program (HAMP). Officials say more borrowers are qualifying for permanent modifications, and in less time. The rate of modifications moving from trial to permanent status under the HAMP umbrella is up to 74 percent, according to Treasury. At the same time, conversions from a trial to permanent modification are down to 3.5 months on average, compared to an average of 5.2 months a year ago.

Fannie Mae's second-quarter loss narrowed from the previous quarter, but still in the red, the GSE says it needs to draw another $5 billion from Treasury, bringing its tally of taxpayer-funded support to $104.8 billion since the company was placed into conservatorship. The company reported a net loss of $2.9 billion for the April-to-June period, compared to a net loss of $6.5 billion in the first quarter of the year. Fannie Mae acquired 53,697 REO homes through foreclosure over the three months ending in June.

Bank of America and the Department of Housing and Urban Development (HUD) have reached a settlement regarding 57,000 delinquent government-issued mortgages serviced by the bank. Under the agreement, BofA must pursue loan modifications with the 57,000 borrowers that it previously did not offer foreclosure alternatives. However, the servicer will not be held liable for foregoing such efforts in the past, though the actions are required by HUD.