Loss Mitigation

Mortgages are becoming more and more of a litigious matter, with the number of mortgage-related cases reaching an all-time high since being tracked in 2007, according to Mortgage Daily's 2011 fourth quarter Mortgage Litigation Index. At 244, the number of cases rose from 218 in the 2011 third quarter and from 151 over the same period a year earlier. Foreclosure-related litigation cases reached 99 and accounted for 40 percent of all cases. One attorney attributes the increase to a high level of awareness among borrowers that foreclosure-related issues can be litigated, sometimes successfully.

The Obama Administration released its March Housing Scorecard Friday, which showed delinquencies on a downward decline, while modifications continue to help struggling homeowners through reduced monthly payments. Foreclosure completions were down though, but delays are expected to pick up due to the mortgage settlement, which just received approval from a federal judge Friday.

The Securities and Exchange Commission (SEC) filed a complaint against the former CEO and CFO of Franklin Bank for using loan modification programs to cover its non-performing loans. Franklin CEO Anthony J. Nocella and CFO J. Russell McCann applied loan modification programs during the third and fourth quarters of 2007, masking how many of Franklin's loans were actually non-performing and artificially boosting its net income and earnings, the SEC stated Friday in a release. By the end of September 2007, the two hid more than $11 million in non-performing single family residential loans and $13.5 million in non-performing residential construction loans.

The $25 billion settlement received approval from a federal judge Wednesday, but the announcement was not made public until Thursday, according to a Reuters’ article published Thursday evening. U.S. District Judge Rosemary Collyer approved the national, historical settlement, which was brought on by federal officials and 49 state attorneys general against the top five largest servicers – Bank of America; Citigroup, JPMorgan Chase; Wells Fargo and Ally Financial. Oklahoma was the only state to opt out of the agreement. In a statement Friday, HUD Secretary Shaun Donovan called the the approval ""a victory for American homeowners.""

The nation added 120,000 jobs in March, far below expectations of the fourth straight month of 200,000-plus payroll gains. Payroll gains for January and February were revised, adding 13,000 to the February numbers but subtracting 9,000 from January.

First time claims for unemployment insurance fell 6,000to 357,000 for the week ended March 31, the Labor Department reported Thursday but the previous week’s report were revised upward to show a jump for the week ended March 24 to 363,000 instead of the originally reported 357,000.

FICO's quarterly survey of bank risk professionals found a reversal in the sentiment of U.S. lenders, with expectations for loan repayments more upbeat in the first quarter of 2012 than they had been during the previous quarter. The results show fewer lenders are anticipating a rise in delinquencies on home loans than at any time since FICO launched its survey in early 2010. When asked about the availability of credit, however, the credit gap persists in housing, with lenders still unsure about the real estate sector.

RES.NET announced Tuesday that the company has launched a custom tasking enhancement for all its software applications. The company calls the new feature ""revolutionary,"" enabling servicers and asset managers to create fields and customize tasks and workflows on the fly without being impacted by development constraints or quality assurance issues. Custom tasking enables users to add fields to track regulatory changes, tasks to cover process changes, or workflow assignments to solve departmental inefficiencies - all within minutes.

Morgan Stanley may have sold its servicing sector off, but it's still going to be under a watchful eye for previous practices. The Federal Reserve issued a consent order against Morgan Stanley Tuesday to address servicing and foreclosure issues from the company’s former subsidiary Saxon Mortgage Services. The consent order requires Morgan Stanley to hire an independent consultant to review foreclosure proceedings initiated by Saxon that occurred between 2009 and 2010. According to the Fed, Saxon was ranked the 34th largest residential servicer.

Across the board, loan performance improved for February, and foreclosure starts were down compared to the month before in January, according to a report from LPS Applied Analytics. Despite the decrease in foreclosure starts, foreclosure inventory still remains near historic highs, while delinquency rates are at their lowest level since August 2008. Foreclosure starts were down 15.2 percent compared to the previous month, reversing the increase seen during January. Foreclosure inventory was at 4.13 percent in February, a 0.5 percent monthly decrease, but still remains high. In December 2005, foreclosure inventory was at 0.48 percent.