Bank of America reported Tuesday that it saw a profit of $6.2 billion during the third quarter of this year, compared to a loss of $7.3 billion a year ago. Perhaps the biggest headline-grabber gleaned from BofA's third-quarter numbers is that the company lost its position as the largest U.S. bank by assets. On the mortgage side of the business, BofA says it has successfully implemented the rollout of a single point of contact for default servicing. Provisions for credit losses declined 37 percent from the year-ago quarter.
The bank appointed Terry Laughlin as the head of the "Legacy Asset Servicing" unit. In this role, Laughlin will oversee the company's mortgage modification and foreclosure programs. Barbara Desoer will continue to manage the company's home loan division, which will service performing loans and hold the bank's origination department, which wrote $306 billion in new loans during 2010. Laughlin will also be in charge of sorting out the bank's mortgage representation and warranties repurchase claims. Fannie Mae, Freddie Mac and private investors have put major lenders under pressure to buy back defaulted loans they say were not originated to standard. BOA settled with the GSEs late in December to pay $3 billion for their claims. "This alignment allows two strong executives and their teams to continue to lead the strongest home loans business in the industry, while providing greater focus on resolving legacy mortgage issues," BofA CEO Brian Moynihan said. "We believe this will best serve customers — both those seeking homeownership and those who face mortgage challenges — as well as our shareholders and the communities we serve."
In 2010, BOA completed 285,000 modifications through both its private programs and the government's Home Affordable Modification program. It has boosted its default servicing staff to 30,000, and it said it will hold 400 events this year to put borrowers in touch with those employees.
The figures provided by the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) are based on information collected from nine institutions with the largest mortgage servicing portfolios among national banks and thrifts.
The reporting firms include: Bank of America, JPMorgan Chase, Citibank, HSBC, MetLife, PNC, U.S. Bank, Wells Fargo, and OneWest Bank (formerly IndyMac). The report covers about 64 percent of all first-lien mortgages in the country, worth $5.8 trillion in outstanding balances.
The regulators’ quarterly mortgage performance report shows that new foreclosures initiated by these institutions also rose during the July to September timeframe, before the robo-signing scandal broke. The number of foreclosure starts in Q3 increased to more than 382,000 – 31.2 percent more than in the previous quarter and 3.7 percent more than in the third quarter of 2009.
All in all, the reporting institutions counted 1.2 million foreclosures in process as of September 30, 2010, according to the report. That represents a record-high 3.6 percent of their combined servicing portfolios. “Completed foreclosures, which have risen for six consecutive quarters, are expected to continue rising as servicers and borrowers exhaust home retention options to assist borrowers with seriously delinquent mortgages,” regulators noted in the report.
Although foreclosure activity increased during the third quarter, the servicers reported almost twice as many home retention actions as completed home forfeiture actions. They implemented 470,321 home retention actions, including loan modifications, trial period plans, and shorter term payment plans. By comparison, there were 244,840 home forfeiture actions, which takes into account the 187,000 completed foreclosures, as well as approximately 56,200 short sales and 1,700 deeds-in-lieu of foreclosure.
Home forfeiture actions in Q3 were up 11 percent from the previous quarter, while home retention actions dropped by 17 percent, the regulators reported. According to the OCC and OTS, servicers modified 1,506,025 loans from the beginning of 2008 through the second quarter of 2010. At the end of the third quarter of 2010, 48 percent of these modifications remained current or were paid off, but the report notes that more recent modifications have been performing better than the earlier ones.
At six months after modification, 20.2 percent of the modifications made in the fourth quarter of 2009 were seriously delinquent compared with 33.5 percent of the modifications made during the second quarter of 2009, according to the regulators’ analysis.
They also pointed out that modifications under the federal government’s Home Affordable Modification Program (HAMP) are performing better than servicers’ proprietary modifications implemented during the same period.
At six months after modification, the re-default rate for HAMP modifications was about half that of other modifications. The regulators attribute the distinction to HAMP’s emphasis on repayment sustainability, namely guidelines that ensure monthly payments are reduced and are affordable relative to verified borrower income, as well as the completion of a successful trial payment period.
The ratings agency looked at residential mortgage loans that were seriously delinquent or in default at any time between June 2009 and August 2010 and that belonged to 2005-2008 vintage RMBS loan pools. The analysis was book-ended with data as of the end of this August so that the results were not skewed by delays resulting from the recent foreclosure affidavit problems and moratoriums that began cropping up in September.
PNC Financial has been sued by the Federal Home Loan Bank of Chicago, alleging misrepresentations and omissions in connection with the sale of mortgage-backed securities. Goldman Sachs is reviewing the practices of its Litton Loan Servicing unit and has temporarily suspended evictions and foreclosures in several states, and Bank of America, JPMorgan, and Ally's GMAC Mortgage voluntarily imposed brief moratoriums on foreclosures to review their practices but have begun to resume evictions of delinquent borrowers. U.S. attorneys general for all 50 states are jointly investigating whether banks failed to review documents properly or submitted false information to evict delinquent borrowers.
"Bank of America and Fidelity National Financial have reached an agreement confirming that Fidelity will provide title insurance on the sale of foreclosed properties," said B of A spokesman Dan Frahm.
Under the agreement, Fidelity will defend the new homeowner in court if a foreclosed owner challenges the title. B of A will cover the costs and, if necessary, any damages awarded to the previous owner.
"Bank of America and Fidelity National are taking this step to facilitate the continued availability of title insurance that is vital to the marketability of foreclosed properties," Frahm said.
The giant bank is seeking similar agreements with other title insurers.
American Land Title Association chief executive Kurt Pfotenhauer welcomed the B of A/Fidelity agreement.
“Title insurers are looking to lenders to provide appropriate indemnities," he said. ALTA also has approached the GSE regulator about title indemnifications.
"We will continue to work with federal and state regulators, Fannie Mae, Freddie Mac and lenders to bring certainty to the marketplace," Pfotenhauer said.
One in every 29 Nevada homes received a foreclosure filing during the third quarter. Looking at total numbers of foreclosures, neighboring California was worst, with 191,016, followed by Florida, Arizona, Illinois and Michigan. Combined, the five states accounted for half of all foreclosures last quarter. Of course, once the moratorium ends, we can expect a new tidal wave of foreclosures. John McGeough, a broker, said that the current foreclosure freeze may give distressed homeowners extra time to do a short sale and avoid having their homes repossessed by the banks. "Foreclosure should be the last resort."
Copyright Loss Mitigation Institute LLC 2010.
All Rights Reserved.
The 30-year, fixed-rate mortgage hit its lowest point in more than 50 years. The Freddie Mac Primary Mortgage Market Survey reported the average rate for a 30-year, fixed-rate mortgage at 4.19% with an average 0.8 origination point for the week ending Oct. 14, down from last week's average of 4.27%. A year ago the average was 4.92%. This is the lowest rate the survey has recorded since its inception in 1971. Mortgage rates were last at this level in April 1951, according to Freddie Mac. The Bankrate survey of large banks and thrifts reported the average rate for a 30-year, fixed mortgage is 4.47% with a 0.32 origination point, slightly above the 25-year-old survey's record low of 4.45% posted last month. Rates for 15-year FRMs are falling steeply, setting a new low for Freddie Mac.
The GSE said the rate was down to 3.62% with an average origination point of 0.8. The rate for a 15-year FRM was 4.37% a year earlier. Bankrate said the average rate for 15-year, FRMs of 3.85% is a new record low and down from 3.87% a week earlier. Frank Nothaft, vice president and chief economist at Freddie Mac, attributed the declining rates to the loss of 95,000 nonfarm payroll jobs in September. The GSE said the average for a 5-year, adjustable-rate mortgage is 3.47% with an average 0.6 origination point, down from 4.38% a year ago. The average remained flat with last week. Bankrate reported the average rate for a 5-year, ARM fell last week to 3.62% from 3.64% previously. The one-year Treasury-indexed ARM averaged 3.43% with an average 0.7 point up slightly from 3.4%. At this time last year, the one-year ARM averaged 4.6%.
Copyright Loss Mitigation Institute LLC 2010.
All Rights Reserved.