Loss Mitigation

Each month of 2011, outstanding mortgage balances in the U.S. declined by an average of $30 billion, according to a recently released report from Moody's Analytics and Equifax. The report attributes the decline to defaulted loans being written off. Aggregate delinquency rose by 6 basis points in December to 6.12 percent, according to the companies' joint study. The rate remains in line with rates seen since April but has declined since a January high of 8.25 percent.

The mortgage servicing system is badly broken and would benefit from a single set of federal standards, according to White House officials. President Obama on Wednesday introduced what he's termed the Homeowner Bill of Rights - principles that he says will ensure borrowers and lenders are playing by the same common-sense rules. These rules address disclosures, conflicts of interest posed by investors and junior lien holders, assistance for at-risk homeowners, and safeguards to prevent wrongful foreclosures.

Massachusetts Attorney General Martha Coakley has seen mortgage and foreclosure-related complaints quadruple in her state over the past two years. In fact, the category now overshadows all other types of consumer complaints. Coakley's office counted 983 mortgage and foreclosure-related complaints last year, a 431 percent increase over 2009. Coakley says the data confirms that the subprime lending and foreclosure crisis is a top concern for homeowners who face losing their most valued possession.

President Obama on Wednesday outlined his proposal to allow millions more homeowners to cash in on today's historically low mortgage rates. He issued a call to Congress to pass legislation to establish a streamlined refinancing program through the Federal Housing Administration (FHA) that would be open to all non-GSE borrowers with non-jumbo loans who are current on their payments. The program would cost $5 to $10 billion and would be paid for by imposing fees on the largest financial institutions.

Was the nation's second largest mortgage company betting against mortgage refinancing? Allegations supporting the affirmative which were made public this week have prompted the U.S. Treasury to launch an official probe. Analysts say the story is less sensational than it appears and only highlights the conflict that comes with being neither fully public nor fully private. The GSE's main business is guaranteeing mortgage credit risk, but it needs to turn a profit to stay in this business, all the while being told its duty is to foster a housing recovery.

State attorneys general have until Friday to sign on to a settlement that would resolve claims against the nation's top five mortgage servicers surrounding documentation errors in foreclosure processing, according to a widely circulated media report. The year-long back-and-forth between state counsels and the largest servicers may be in its final days ... possibly. Attorneys general in Delaware and California have already rejected the proposal, and some say without California, in particular, the settlement may not be of interest to the banks.

IndiSoft announced Tuesday that the company has enhanced its RxOffice Premium Counselor Edition. The updated module has been approved by HUD to meet the reporting requirements of agencies participating in its Housing Counseling Program. It was created to address the surge in the number of homeowners needing counseling to make informed housing decisions, and gives counseling agencies a scalable and flexible web-based case management tool to manage their internal business operations.

Wells Fargo announced the launch of a new program, Neighborhood LIFT, which aims to bring reluctant buyers off the sidelines to help absorb excess inventory in two major cities. The bank established a goal of lending $10.5 billion to Los Angeles homebuyers and $1.3 billion to Atlanta buyers. In addition, Wells designated $15 million to assisting homeowners with down payments in Los Angeles and $8 million in Atlanta. The company chose to launch Neighborhood LIFT in Los Angeles and Atlanta because the two have high inventories of bank-owned homes.

The special mortgage investigation unit announced by President Obama during his State of the Union address Tuesday night has taken shape. The new Residential Mortgage-Backed Securities (RMBS) Working Group will operate within the Financial Fraud Enforcement Task Force and will consists of at least 55 Department of Justice attorneys and investigators, as well as state attorneys general. The president has tasked the group with uncovering those responsible for pooling and selling mortgage bonds that contributed to the financial crisis.

The default servicing industry is in a state of transition, according to Larry B. Litton Jr., CEO of Selene Finance, and it's the smaller, more nimble servicing operations that will have the advantage in reacting quickly to the new rules and the changes that are in store. Litton says many of the bigger servicing shops are still set up to do what he considers commoditized types of processes and aren't able to adapt quickly to the regulatory changes coming down the line, while smaller special servicers are already built for single point of contact and to be highly responsive to consumers.