Loss Mitigation

Freddie Mac said Monday that its full menu of relief policies for borrowers affected by disaster is being extended to homeowners whose homes were damaged or destroyed by the recent storms in the South and are located in counties that the president has declared to be major disaster areas. The GSE says it has instructed its servicers to work with borrowers with Freddie Mac-owned mortgages affected by these storms to grant forbearance on their mortgage payments for up to one year.

After two years of no issuance, the credit quality of commercial-mortgage backed securities (CMBS) issued post recession has been strong, according to a new report from Moody's Investors Service. Since issuance resumed in 2010, Moody's has rated eight ""new generation"" or CMBS 2.0 conduit deals, and the company says contrary to some market reports, current underwriting is vastly improved compared to four years ago. As the credit cycle continues, however, the ratings agency expects the leverage of the loans in transactions to increase.

An estimated 210,000 homeowners received permanent, proprietary loan modifications from mortgage servicers during the first quarter of 2011, according to data released by HOPE NOW Monday. That's down nearly 20 percent from the fourth quarter of last year, and 40 percent fewer than the third quarter of 2010. While the quarterly totals indicate a significant slide in modification activity, servicers reported an uptick during March, but HOPE NOW's data also show an increase in foreclosure activity for the month.

The research firm and ratings agency DBRS says it has learned from various servicers that although Congress never authorized bankruptcy judges to modify mortgages on primary residences, these ""cram-downs,"" as they have been termed, are currently being performed in some courts. The agency's analysts say the amount of the cram-down varies by state, property value, and borrower situation but usually includes a reduction in the principal amount of the loan to fair market value.

California legislators have put two bills aimed at addressing the state's foreclosure problem to committee votes. Both failed to pass despite the fact that supporters packed the hearing rooms at the state Capitol, but neither is completely dead. They have both been scheduled for new hearings in the coming week. The Senate bill would have made it unlawful for a lender to move forward with foreclosure while evaluating the borrower for a modification. A second bill in the Assembly would have levied a $20,000 fee on lenders and servicers for every foreclosure initiated.

Fannie Mae has released new details on its book of business, which shows the share of mortgages it owns or guarantees that's past due by three months or longer has been on a steady decline for a year now. The nation's largest mortgage company reported that its seriously delinquent rate on single-family mortgage loans slipped to 4.44 percent in February of this year. That's down just 1 basis point from 4.45 percent in January, but it marks the 12th straight month that the rate has decreased.

A new mediation program to help ease those affected by residential mortgage foreclosures will soon be available in Peoria County, Illinois. The program's anticipated start date is June 1. The program, approved by the Illinois Supreme Court, is modeled after one that began last June in Will County. Both programs operate with no expense to taxpayers and are sustained by an increase in filing fees paid by lenders seeking to foreclose.

Struggling Minnesota homeowners with loans owned by Fannie Mae can now expect faster response times to their mortgage situations. The Minnesota Home Ownership Center recently partnered with the GSE to accelerate the mortgage resolution process. The Center's counselors will work directly with Fannie Mae staff on behalf of borrowers to find solutions. Assistance is free of charge.

Bank of America has assembled what you might call a ""Dream Team"" of default servicing executives to head up critical areas within its Legacy Asset Servicing unit. Collectively, this new team has more than 70 years experience working with distressed borrowers. The nation's largest mortgage servicer has brought in a former default and loan servicing exec of JPMorgan, someone who previously ran all of Wells Fargo Home Mortgage's default operations, and a top executive from Fannie Mae's national servicing operation.

Fannie Mae and Freddie Mac are issuing new guidelines to servicers in order to align their procedures for handling past-due mortgages. The objective is to ensure consistent servicing requirements for loans handled on behalf of the GSEs across four key areas: borrower contact, delinquency management practices, loan modifications, and foreclosure timelines. The new approach provides monetary incentives for servicers that perform well and imposes fines on those that do not.