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Federal banking regulators said last week in a new report that nearly one-third of outstanding mortgages were approved with less than full documentation. Around one-fifth had credit scores below 660, and more than 90 percent were serviced by a third party. The findings came from the Comptroller of the Currency and Office of Thrift Supervision, which jointly surveyed the 14 largest mortgage servicers.

Banks surveyed were Bank of America, Citibank, First Horizon, HSBC, JPMorgan Chase, National City, U.S. Bank, Wachovia and Wells Fargo. Thrifts surveyed were Countrywide, IndyMac, Merrill Lynch, Wachovia FSB and Washington Mutual. All of these thrifts have either failed or been acquired since last summer.

The respondents serviced 34,877,891 mortgages for $6.1 trillion as of Sept. 30, 2008. Their combined portfolios accounted for around 90 percent of first mortgages serviced by banks and thrifts and more than 60 percent of all U.S. mortgages.

The servicers owned less than 10 percent of the loans they serviced, based on the number of loans outstanding. Those loans were owned by third parties through residential mortgage-backed securitizations and loan sales. The share of loans serviced for Fannie Mae and Freddie Mac was 62 percent.

Around nine percent of the loans serviced by the surveyed institutions were subprime. Borrowers with credit scores below 620 were considered subprime.

Alt-A loans amounted to 10 percent, the report said. Alt-A included borrowers with scores between 620 and 659. Low- and no-documentation loans made up 30 percent of loans serviced by the institutions.

Jumbo mortgages amounted to seven percent.

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February 3, 2009 — Concerns over Bank of America’s financial condition led to servicer rating downgrades at the banking giant and its mortgage subsidiary. The Charlotte, N.C.-based company’s primary servicer ratings for prime, Alt-A and HELOC product was downgraded to RPS1- from RPS1 by Fitch Ratings, an announcement yesterday said.

Servicers are rated on a scale of one to five, with one being the strongest. Ratings are further differentiated by plus or minus signs.

Fitch cited a downgrade to B-of-A’s issuer-default rating in light of its deteriorated financial condition.

“The servicer rating actions reflect the potential impact on servicing operations of continued pressure on Bank of America, N.A.’s, financial flexibility in the increasingly challenged residential mortgage market,” the ratings agency stated. “A company’s financial condition is an important component of Fitch’s servicer rating analysis.”

During 2008, B-of-A’s earnings fell to $4 billion from $15.0 billion during 2007. Its Dec. 31 acquisition of Merrill Lynch & Co. Inc. — which had a fourth-quarter net loss of $15.3 billion and a $27.1 billion full-year loss — is likely to further strain earnings.

B-of-A’s condition also led to several residential servicer rating downgrades at subsidiary Countrywide Home Loans.

Countrywide saw its primary servicer ratings for Alt-A, subprime and HELOC loans downgraded to RPS2+ from RPS1. Countrywide’s prime mortgage servicer rating was downgraded to RPS1- from RPS1, while its special-servicer rating was downgraded to RSS2+ from RSS1-.

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Bank of America is hiring 1,000 loan originators and processors before April 27 when B-of-A plans to re-brand its legacy mortgage operation and the Countrywide Home Loans business as Bank of America Home Loans, the company said.
“To help meet and capture share of the current demand for mortgages, Bank of America is taking several measures, including the hiring of about 1,000 associates in mortgage origination and processing across the country,” said CEO Ken Lewis. “This includes adding to our centralized retail sales capacity and hiring 300 associates to support our phone channel.”
He added that more than half of the jobs will be filled from within the BoA organization, though there will be some outside hiring.
The hiring follows 7,500 layoffs at Countrywide as part of the merger and death of that brand.

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