Foreclosure

With little faith that ongoing negotiations between state officials and major mortgage servicers will result in a fair and just settlement, Massachusetts Attorney General Martha Coakley signaled Wednesday that she will be taking her case to the courts. Coakley did not disclose which companies would be targeted, but cited servicers' failure to establish their right to initiate foreclosure and filings of false or misleading documents as the basis for the impending legal actions.

Fannie Mae has opened up a new Mortgage Help Center in St. Louis, Missouri, to provide free education and counseling services to struggling homeowners. The St. Louis facility is the GSE's 11th Mortgage Help Center to open across the country. It was developed in partnership with the Urban League of Metropolitan St. Louis, local community and elected officials, and area mortgage servicers.

The Federal Housing Finance Agency (FHFA) had knowledge of such foreclosure procedural abuses as robo-signing and falsified documentation years before these infractions made front-page headlines and triggered industry-wide investigations, according to the agency's own inspector general. Beyond a number of very specific red flags - including consumer complaints, media reports of foreclosure mills, and even public court filings - the inspector general says the sheer nature of market conditions should have been enough to lead FHFA to take action.

The current compensation structure for mortgage servicing needs to be revised so servicers' incentives will align with those of borrowers and investors, stated Federal Reserve Governor Sarah Bloom Raskin in a speech Tuesday. Raskin says it is imperative that servicers have adequate incentives to perform payment processing efficiently on performing mortgages, and to perform effective loss mitigation on delinquent loans. She also believes investors need methods to allow them to monitor servicer performance.

After two very sharp moves over the previous two months - a huge jump in July and a big dip in August - the delinquency rate of loans held in commercial mortgage-backed securities (CMBS) stabilized in September, according to Trepp LLC. The company says for at least one month, the reading reverted to its pattern from earlier in the year when modest bumps in the rate were the norm. Trepp reports the CMBS delinquency rate inched up just 4 basis points between August and September to 9.56 percent.

The Federal Housing Administration's (FHA) reserves have fallen below legal limits, and the agency now holds $4.7 billion against a $1 trillion portfolio. According to reports recently released by FBR Capital Markets & Co. and HUD's Office of Inspector General (OIG), FHA may crack down on lenders and servicers and may not be paying out default claims quite as generously as in the past. FBR says FHA claim denials could cost the industry as much as $13.5 billion.

The National Federation of Community Development Credit Unions has completed a new Credit Union Foreclosure Intervention Toolkit to help credit unions combat the foreclosure crisis in their communities. The toolkit was developed with the support of a financial education grant from the National Credit Union Foundation (NCUF). The federation says it has seen the national foreclosure crisis reflected in a dramatic shift in demand between different types of counseling services, from pre-purchase to foreclosure intervention counseling.

Data released by Lender Processing Services (LPS) Monday shows that foreclosure starts were up in August by 19.7 percent when compared to the previous month. However, overall foreclosure starts were down more than 12 percent from August of last year. At the same time, LPS says the number of loans in the 90-plus day delinquency bucket on which foreclosure has not been initiated has contracted to levels not seen since 2008, and the loan deterioration rate is less than half that seen in 2009.

California has withdrawn from settlement negotiations between the 50 state attorneys general and the nation's top servicers regarding robo-signing and other foreclosure-related violations. California's Attorney General Kamala Harris says progress has been made in identifying common-sense reforms to mortgage servicing, but she believes the current settlement proposal is ""inadequate"" for California homeowners. As the state with the highest incidence of defaults, California has been a significant participant in the negotiations.

A new quarterly survey of bank risk professionals from FICO paints a decidedly pessimistic picture of housing's future. The company describes its latest results as a reversal of the growing optimism seen in late 2010 and early 2011. The survey shows that bankers expect mortgage defaults and foreclosures to remain elevated for at least five more years, and housing prices nationally to hold below the pre-crisis levels of 2007 until the year 2020.