Loss Mitigation

Texas Attorney General Greg Abbott says American Home Mortgage Servicing is using illegal debt collection practices and misleading struggling homeowners, resulting in foreclosure for some borrowers. Abbott brought formal charges against the company on Monday. State investigators allege that the mortgage servicer's agents used aggressive and unlawful tactics to collect payments and then in some cases, intentionally failed to properly credit homeowners.

The Dodd-Frank Financial Reform Act includes new appraisal management rules as well as stricter laws and firmer penalties for lenders. The bill's appraiser independence standards will give lenders new options on managing appraisers, and lenders are scrambling to evaluate options to decide what will benefit their businesses. An October deadline is looming for the issuance of new appraiser independence rules, which are expected to be more stringent than the Home Value Code of Conduct (HVCC).

U.S. consumers are less satisfied with their experience during the loan modification process than they are during loan origination, namely because mortgage servicers are missing the mark when it comes to delivering on best practices, according to J.D. Power and Associates. The company's survey found that mortgage servicers fail to adhere to a time frame for approval, don't provide the customer with status updates, and repeatedly ask borrowers for the same information. BB&T ranks highest in customer satisfaction among mortgage servicers.

Marix Servicing LLC, a Phoenix, Arizona-based specialty mortgage servicer, will be acquired by Walter Investment Management Corp. through an agreement with Marix's parent company Marathon Asset Management. The acquisition, which is expected to close in the next 30 to 60 days, will create one of the nation's top 10 servicers of subprime mortgages.

The Mortgage Bankers Association (MBA) offered the industry a ray of hope when it reported Thursday that foreclosure starts were down nearly 10 percent in Q2, but the brightness quickly faded when Lender Processing Services (LPS) released its own dataset. MBA's numbers were based on data through the end of June. LPS reports that by the end of July, foreclosure starts had jumped back up by 24.5 percent. It's the fourth highest level ever recorded by the company.

The percentage of home loans 90 or more days past due held by the nation's two largest mortgage companies has declined yet again. Fannie Mae's single-family serious delinquency rate has fallen to 4.99 percent. It's the fourth straight month that Fannie has reported a decline. Freddie Mac's serious delinquencies dropped to 3.89 percent, the fourth decrease in five months. The reciprocated declines seem a welcome herald, but researchers say they're merely the consequence of an increase in GSE foreclosures.

CoreLogic has announced the launch of its new Short Sale Monitoring Solution. The company says it's the industry's first short sale fraud prevention and pricing technology. The solution alerts lenders to ""risky"" pending and closed short sales. It matches details against other pending loan applications in CoreLogic's database and public records for the same property, and continues to watch properties for a period specified by the lender after short sales have closed.

Specialized Loan Servicing (SLS) in Littleton Colorado, announced Thursday that Oscar Southall is the company's new SVP of default operations. Prior to joining SLS, Southall held executive positions at Litton Loan Servicing for almost a decade. Most recently, he was VP of default administration. During the past nine months, SLS has added 150 new employees and $8 billion in loans to its servicing portfolio, and the company anticipates continued growth over the next year.

The number of underwater homeowners has declined for the second consecutive quarter. CoreLogic reports that 11 million borrowers owed more on the loan than their home was worth at the end of June. That equates to 23 percent of all residential properties with mortgages, and is down from 11.2 million, or 24 percent, at the end of March. It seems like good news on the surface, but the company says foreclosures, rather than meaningful price appreciation, were the primary driver behind the change in negative equity.

Foreclosure starts dropped during the second quarter and the inventory of homes in the process of foreclosure fell for the first time since 2006, the Mortgage Bankers Association reported Thursday. Loans 90 days or more past due also decreased. But it's a different story at the other end of the spectrum. After declining since the beginning of 2009, the number of 30-day delinquencies is going up. Overall, 13.97 percent of the nation's mortgages were delinquent or in foreclosure at the end of Q2, down from 14.01 percent three months earlier.