Loss Mitigation

As the GSEs and other federal agencies sell their collective inventory of repossessed homes, they will generate significant pressure on prices, according to Radar Logic. The company's analysis shows that the government's REO inventory now accounts for 46 percent of the nation's total bank-owned supply, which equates to 219,060 foreclosed homes. Add to that its share of non-performing loans heading to foreclosure, and the government's REO holdings could balloon to 3.1 million properties.

ELK Software announced last week that users of its Short Sale Commander platform have closed more than $600 million in short sales since the system was launched in early 2009. In addition, the company says more than 22,000 active residential short-sale listings valued at over $3.3 billion are currently employing Commander tools. The software features built-in comparable and automated valuation model (AVM) tools that enable agents to price distressed listings with a single-click.

A general practice of servicers today is to consider borrowers for a standard Fannie Mae mortgage modification based solely on the homeowners' verbal statement of their financial information. But that's about to change. The GSE has issued new servicing guidelines stating that effective July 15, 2010, all servicers must verify the borrower's income, liabilities, and monthly expenses to determine that a financial hardship does exist, before a loan modification can be offered.

The landmark financial reform legislation approved by House and Senate leaders on Friday includes a provision which offers a remedy to the growing number of unemployed homeowners who are facing foreclosure. The amendment provides $1 billion to ensure homeowners who've lost their jobs don't lapse on mortgage payments. Qualified homeowners will be able to borrow up to $50,000 to assist them with monthly payments, provided they have ""a reasonable prospect"" of resuming mortgage payments within 24 months.

Mortgage giant Freddie Mae reduced the size of its mortgage portfolio in May, while the delinquency rate of single-family home loans it guarantees stood unchanged from the previous month. According to the GSE's monthly summary report, its total mortgage portfolio decreased at an annualized rate of 4 percent last month. The drop can be largely attributed to the company's purchases of home loans it had sold to investors that were 120 or more days past due.

Mortgage servicers completed 112,088 loan modifications through their own proprietary programs in May, according to a report released this week by HOPE NOW. That compares to 47,724 new permanent modifications under the government's Home Affordable Modification Program (HAMP) during the same month. Altogether, just over 159,000 mortgage modifications were completed in May, as well as 213,000 other workouts, such as repayment and forbearance plans.

Ocwen Financial Corporation continues to find its name at the top of the list of key performance metrics when it comes to the federal government's Home Affordable Modification Program (HAMP). Ocwen is one of only two servicers who have been able to achieve a three-month turn time on trial to permanent conversions. Most other servicers' trial plans are significantly longer, extending up to seven months for some of the largest banks.

Willis North America recently announced that it has formed a distressed asset practice in order to advise clients on managing the risks associated with financially distressed, foreclosed, or abandoned commercial properties and to provide a range of insurance solutions. According to the company, this new unit will coordinate specialist capabilities from across Willis' practice areas to structure insurance programs that respond to a range of risk management and insurance issues related to distressed assets.

More than 180 foreclosure rescue companies with customers in New York have been sent cease-and-desist letters from the office of state Attorney General Andrew M. Cuomo. These letters, which came as a result of Cuomo's ongoing investigation into the mortgage rescue industry, warn the companies to immediately end all misleading and illegal conduct. According to Cuomo, thousands of New Yorkers have been affected by foreclosure rescue scams.

Performance of home mortgages serviced by the largest national banks and thrifts improved earlier this year, for the first time in more than 24 months. According to a new report from the Office of the Comptroller of the Currency, home loan delinquency rates dropped during the first quarter of 2010, with improvements in prime, Alt-A, and subprime categories. Foreclosure statistics increased, though, with the largest institutions initiating more than 370,000 new foreclosures and 1.1 million already in process.