Loss Mitigation

Mortgage industry lawsuits are beginning to stack up - Federal Home Loan Banks are suing lenders, lenders are suing insurers - all in an attempt to recoup losses from a crippling national housing crisis. In the latest rendition of the industry's legal series, Bank of America has brought a suit against First American Corp. over what the lender says were defective title insurance policies.

Nationwide, one in every 200 residential loans funded last year, totaling $14 billion, involved fraud, according to First American CoreLogic. Despite what looks like an unsettling amount of shadiness lurking within the mortgage market, the company says the fraud rate has been steadily declining for the past three years and is now about 25 percent lower than when it peaked in the third quarter of 2007.

The first Retaining Occupancy on Foreclosure (ROOF) Agreement was recently signed in the city of Detroit. Created to help combat the blight problems in Detroit by cutting down on the number of homes left vacant after foreclosure, the goal of the program is to salvage Detroit neighborhoods and greatly reduce the number of vacant homes by keeping foreclosed homes occupied by either the owner or tenant until the property is sold at an REO sale.

Servicers are working faster and more diligently to convert trial modifications to permanent status under the Home Affordable Modification Program (HAMP). But the bitter truth is that some homeowners won't qualify for long-term relief even after making their trial payments. To offer these homeowners another option, Fannie Mae is instituting the ""Alternative Modification"" (Alt Mod) and requiring all its servicers to evaluate a borrower for the new solution before proceeding with foreclosure.

The Treasury has committed $50 billion of Troubled Asset Relief Program (TARP) funds to the Home Affordable Modification Program (HAMP) to pay servicers for helping homeowners avoid foreclosure. New estimates released by the Congressional Budget Office (CBO) show that the administration is expected to use no more than $20 billion for servicer incentives when all is said and done - indicating that HAMP will help far fewer distressed homeowners than originally promised.

Orange County, California-based UnitedTech Lender Services, Inc. (UTLS), the holding company to the UTLS family of companies, is providing various solutions to mortgage industry participants through its subsidiaries, UTLS Technology Services and UTLS Consulting Services.

Since the peak of 2008, hotel revenue has declined almost 20 percent. Fitch Ratings says it's the largest decline among the major commercial mortgage-backed securities (CMBS) property types. Given the current capital restrictions, the agency predicts defaults on hotel loans held by CMBS investors will nearly double by 2012 - with delinquencies jumping from the current level of 16.6 percent to 30 percent.

With the effective date of the administration's Home Affordable Foreclosure Alternative (HAFA) program just around the corner, lenders and servicers are preparing for an influx of short sale and deed-in-lieu requests. In an effort to provide industry professionals with the technology they will need to service the hundreds of thousands of loans estimated to be eligible for HAFA, Equator Financial Solutions, a Los Angeles-based software provider of default servicing solutions, is launching a HAFA software solution.

The allowance of broker price opinions in the administration's Home Affordable Foreclosure Alternatives (HAFA) program has created a major controversy. As DSNews.com previously reported, four appraisal organizations recently wrote a letter to Treasury Secretary Timothy Geithner, voicing concerns over the use of BPOs for short sales under HAFA. In response to this opposition, Vicki Cox Golder, president of the National Association of Realtors (NAR), wrote her own letter, supporting HAFA and its allowance of BPOs.

Wells Fargo said Wednesday that it has agreed to participate in the administration's Second Lien Modification Program (2MP). Wells is only the second major servicer to sign on to the junior lien component since it was introduced nearly a year ago. Under 2MP, when a borrower's first lien is modified under HAMP and the second lien servicer is a 2MP participant, that servicer must offer either to modify the second lien or to accept a lump sum payment from Treasury in exchange for fully extinguishing the second lien.