TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/57493
THE LATEST SERVICING billion in relief from the settle- ment, testifying to the state's importance in the foreclosure crisis and the part that politics sometimes played in the process. California Attorney General Kamala Harris, a highly visible advocate for redress, reportedly threatened to pull out of the pact until federal officials and servicers offered her more from the settlement. "This is an historic amount of relief for California homeowners, but it is one piece of a broader focus. We will continue our crackdown on mortgage fraud and quickly move to pass legislation that will simplify, reform, and upgrade our broken mortgage system," she said in a statement. Of the funds designated for California homeowners, $12 bil- lion will apply to loan principal reductions for those with under- water loans, while about 28,000 others will benefit from an estimated $849 million assigned to refinance programs. Of eligible states, Oklahoma is the only one whose attorney general strayed from the settle- ment to pursue a separate accord with the servicers. A statement at nationalmortgagesettlement. com said that homeowners from the Sooner State will not benefit from the settlement. Statements from servicers about the settlement seemed gen- erally supportive but guarded. A spokesperson with Chase said that the bank had "worked very hard" with officials over the past year to produce the settle- ment, adding that it "includes far-reaching relief that will help many of our customers and complement our already ex- tensive efforts to improve our borrower assistance efforts and servicing processes." Dan Frahm, a spokesman with Bank of America, said that the settlement would "help provide additional support for homeown- ers who need assistance, [bring] more certainty to the housing market, and [align] to our ongo- ing commitment to help rebuild our neighborhoods and get the housing market on track." Mike Heid, president of Wells Fargo Home Mortgage, called the agreement "a very important step toward restoring confidence in mortgage servicing and stabil- ity in the housing market" and said that the financial institution "welcomes the establishment of servicing standards as part of this agreement." Few released their actual con- tributions in these statements. For its part, Wells Fargo will pay $5.3 billion, reserving $3.4 billion for principal reductions and short sales, $1 billion in un- restricted funds for federal and state governments to resolve the foreclosure crisis, and $900 mil- lion for first-lien refinance loans. Citigroup said that it would contribute $2.2 billion to home- owners in three installments that included cash upon settlement, relief payments, and refinancing concessions. Ally offered $310 million, with $110 million in unrestricted funds for state and federal programs and $200 million in homeowner relief. "This agreement reflects our commitment—at both the federal and state levels—to ensure justice, and to recover losses, for victims of reckless and abusive mortgage practices." — U.S. Attorney General Eric Holder Fitch Shows Support for AG Servicing Settlement Ratings agency says that the recent state and federal servicing agreement will benefit the industry's servicers. A ccording to Fitch Ratings, the $25 billion mega-settlement will likely net a positive boon for the mortgage servicing industry. In a research note, the rat- ings agency said the agreement resolves some of the servicers' outstanding liabilities for process errors, even while it offers up additional relief to at-risk bor- rowers and streamlines practices for the servicing industry. Fitch said that ratings for residential mortgage-backed securities (RMBS) continue to reflect infrastructure costs, process changes, loss mitigation timeline extensions, and operational challenges made concrete by the agreement. Fitch downgraded the risk rat- ings last June for institutions left with weaker hands as a result of the financial crisis, the result of growing delinquencies, mortgage defaults, new areas of risk, and slower-than-expected growth. Four of the five banks named in the agreement received down- grades by Fitch at the time. RMBS servicers have already made significant operational strides to concentrate on process deficiencies identified in the settle- ment, the ratings agency wrote. Fitch added in a statement, "That modification schemes designed to help borrowers avoid foreclosure, including principal reductions, could improve perfor- mance. However, indiscriminately applying a wide-ranging program could raise moral hazard risk." Despite the settlement applying to the country's five largest ser- vices, Fitch believes many of the process changes will be widely adopted by the servicing industry. THE M REPORT | 51 ORIGINATION SERVICING ANALYTICS SECONDARY MARKET