As mortgage bankers ponder regulatory plans to radically restructure servicing fees, the dollar volume of their portfolios continued on a downward trajectory in the fourth quarter, according to exclusive survey figures compiled by National Mortgage News.
At yearend, servicing balances totaled $9.61 trillion, the fourth consecutive quarter in which mortgage debt fell on a combined, nationwide basis. (Housing debt peaked at $10.1 trillion in the fourth quarter of 2009.)
Moreover, four of the nation's top five servicers — Bank of America, JPMorgan Chase & Co., CitiMortgage and Residential Capital Corp. — ended the year with declines in their mortgage servicing rights portfolios. Only one company, No. 2 ranked Wells Fargo & Co., managed to increase its servicing portfolio — but by a mere 1%. Since NMN began surveying lenders 15 years ago, mortgage debt outstanding has never fallen, that is, until last year — and it has never dropped four quarters in a row.
The fall in balances, however, is hardly startling. Over the past three years more than 3 million consumers have lost their homes to foreclosure, thus eliminating these loans from the books of servicers as these units transform from a loan into real estate owned.
Also, many investors who are bottom-feeding by purchasing distressed properties are doing so by using cash — instead of a mortgage. (The National Association of Realtors recently reported that "all-cash" deals rose to 32% of purchase transactions in January, compared with 26% a year earlier.)
At yearend, the nation's top five servicers were B of A with $2.06 trillion of receivables (down 4% year over year), Wells ($1.8 trillion/up 1%), JPMorgan Chase ($1.25 trillion/down 10%), CitiMortgage ($601 billion/down 16%) and ResCap ($355 billion/down 5%). Their combined market share was 64%. The only processor registering a solid gain was U.S. Bank Home Mortgage of Bloomington, Minn., which expanded its portfolio by 16%, to $216 billion.
Meanwhile, industry officials continue talks with the Federal Housing Finance Agency and Federal Reserve Board about restructuring the 25 basis point minimum servicing fee on Fannie Mae and Freddie Mac loans.
One industry trade group official familiar with the Fed's thinking, said of the agency: "There are many conversations going on — and no one is close to any sort of agreement."
At last month's Mortgage Bankers Association servicing conference in Dallas, FHFA Director Ed DeMarco provided few details on which way his agency might be headed, saying the issue is "complicated" and affects "several aspects of the mortgage financing process." DeMarco said that whatever course the FHFA takes, it is paramount that liquidity be maintained while preserving profitability for servicers of all sizes.
