Problem Loans Piling Up During Ongoing Foreclosure Moratoriums

The widespread implementation of voluntary foreclosure moratoriums in early 2009 is resulting in an unprecedented buildup of defaulted mortgages that will be extremely difficult to work through in the months ahead. According to preliminary numbers compiled by Inside Mortgage Finance, a record-high 2.54 percent of mortgages serviced by the top servicers in the country were 90 days or more delinquent at year-end. This was the largest quarterly jump ever recorded in the most serious delinquent category.

At the end of the third quarter, 90 plus day delinquencies stood at 1.92 percent. The buildup of defaulted loans has only gotten worse in the first quarter as most major mortgage market players have reduced or stopped foreclosures in response to political pressure. The new Obama loan modification initiative will be severely challenged to put a dent in the more than one million mortgages now facing foreclosure.

Share of Private MI Business Sinks to New Low in 4Q08

Private mortgage insurers, battered by a combination of greatly tightened conventional mortgage underwriting standards and plummeting stock prices, watched their share of the total mortgage insurance business drop to just 22 percent in the fourth quarter, according to Inside Mortgage Finance. That was way down from the 74 percent market share seen a year earlier and was the lowest level ever recorded by Inside Mortgage Finance. Not surprisingly, FHA accounted for most of the shift away from private mortgage insurance last year. During 2008, FHA’s share of the mortgage insurance business rose from 21 percent to 69 percent.

New Homeowner Affordability and Stability Plan Unveiled by White House

President Obama today unveiled a potentially far-reaching mortgage relief plan that administration officials said could “help up to 7 to 9 million families restructure their mortgages to avoid foreclosure.” The centerpiece of the new effort to finally pump some federal bailout money into the U.S. housing market is a $75 billion Homeowner Stability Initiative that pays mortgage servicers an up-front fee of $1,000 to modify mortgages for struggling homeowners as well as an additional $3,000 over three years if the loan remains current.

Additionally, borrowers are encouraged to start current with a government provided “monthly balance reduction payment.” Under the broader plan, Fannie Mae and Freddie Mac are directed to allow qualifying borrowers on existing government-sponsored enterprise loans to refinance even if they owe more than their home is worth.

Correspondent Lenders Continued to Pick Up Market Share in 4Q08

Correspondent lenders, capitalizing on weakness in the mortgage broker business and ongoing cutbacks in retail lending capacity, continued to increase their share of new originations in the final months of 2008. According to numbers released this week by Inside Mortgage Finance, correspondents accounted for 38 percent of all loans made in the fourth quarter. That was up from 25 percent a year earlier and the highest correspondent level seen since the mid 1990s.

Separately, mortgage broker activity was down dramatically in 4Q08 from year earlier levels, although the broker share did rise slightly between the third and fourth quarters of last year. Retail mortgage originations were also off as most large bank lenders significantly reduced their headcount in 2008.

Appraisal Issues Remain Top Concern for Housing, Mortgage Markets

Appraisal issues are putting the brakes on both homes sales and mortgage refinancings in early 2009, raising the possibility of some sort of government intervention. Meanwhile, the mortgage industry is gearing up for the new Appraisal Code announced by Fannie Mae and Freddie Mac as part of an agreement with New York Attorney General Andrew Cuomo. Details of the new appraisal standards as well as their potential impact on appraisers and other mortgage market players will be addressed at an Inside Mortgage Finance audio conference tomorrow at 3 pm EST.

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Top 4 Banks Start 2009 with More than Half of All Mortgage Servicing

The four largest banks in the country started 2009 controlling a record-high 55 percent of the total residential mortgage servicing outstanding, according to new numbers released this week by Inside Mortgage Finance. A year ago, those same banks –Bank of America, Wells Fargo, JPMorgan Chase, and Citi– serviced just 32 percent of all the mortgages in the U.S. The dramatic jump in consolidation reflects BofA’s acquisition of Countrywide, JPMorgan Chase’s purchase of Washington Mutual, and Wells Fargo’s absorption of Wachovia.

BofA ended 2008 as the top mortgage servicer in the country with $2.06 trillion in volume and a 19 percent market share. Wells came in second with $1.78 trillion and a 16 percent market share. Chase and Citi rounded out the top four with $1.5 trillion (14 percent share) and $809 billion (7 percent share), respectively. Residential Capital, part of the newly minted GMAC bank holding company, was the fifth largest mortgage servicer at year-end with $365 billion and a 3 percent market share.