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SUBPRIME SERVICERS IMPROVE CASH FLOW IN Q2 their ability to limit losses on delinquent loans in the second quarter, according to the Servicer Dashboard report from Moody's Investors Service. Moody's uses a cash flow efficiency metric to measure how much cash a servicer receives by looking at the amount a servicer collects on modified and liquidated loans as a proportion of losses from principal on modified loans and liquidations. A higher metric indicates more cash flow from delinquent loans. The report revealed the cash flow efficiency Overall, major subprime servicers improved cure and cash flowing rate, which gauges servicers' ability to cure distressed loans. Three servicers saw improvements in certain cat- egories: Chase (for all product types), BofA (jumbo), and Ocwen (subprime). Moody's said BofA's and Chase's improvements were due to modifications and the resolution of the robo- signing issue while Ocwen's progress was due to its aggressive approach with modifications and the acquisition of Litton. Looking at modification re-default rates, Most servicers did not improve their total metric increased for subprime servicers, rising from 0.27 in Q1 to 0.29 in Q2, the highest level obtained over the past five quarters. Moody's attributed the improvements to an increase in liquidation and modification volumes. Cash flow efficiency increased for most servicers with Ocwen and GMAC Mortgage improving the most. Ocwen's efficiency metric rose to 0.37 in Q2, up from 0.33, while GMAC went from 0.35 to 0.39. Aurora and Chase were the only servicers whose efficiencies decreased. The report also noted Bank of America all servicers stayed within the range of 45-50 percent in the subprime category. For Alt-A loan products, Citi stood out with its lower rate of 23 percent compared to 38 percent for other servicers. For jumbo loans, Citi continued to set itself apart for having a much lower rate while GMAC's re-default rate rose to 40 percent. Servicers continued to see longer foreclo- ARE WE SEEING SUNLIGHT THROUGH THE SHADOWS? darkened the industry's outlook is fading. In fact, we are beginning to see the sunlight on the horizon, according to market data from CoreLogic. In July, shadow inventory—unlisted homes The shadow inventory that previously seriously delinquent, in foreclosure, or held as REOs—declined 10.2 percent year-over-year, falling to 2.3 million units, CoreLogic reported last month. "This is yet another hopeful sign that the inventory was eerily close to the level recorded two years prior in May 2009. Now, the heavy shadows are lifting. The current shadow inventory is valued at (BofA) saw improved performance by complet- ing a large number of short sales. However, the bank was still at the bottom with its cash flow efficiency metric at 0.24. As for the current-to-worse roll rate, which sure timelines for Jumbo, Alt-A, and subprime product types. Moody's measures the average number of days between foreclosure referral and foreclosure sale. The report noted GMAC's high concentration of judicial state foreclosures was one of the main reasons it was the worst performer in all categories. "Judicial state backlogs, especially in the assesses a servicer's ability to keep current loans from becoming seriously delinquent, progress was made in the second quarter with Chase and Ocwen improving the most in the subprime category and Chase leading in the Alt-A category. VERBOSITY "Modifications on mortgages held in the servicers' own portfolios and those serviced for the GSEs performed better than modifications on mortgages serviced for others. Of the modifications implemented from January 1, 2008, through June 30, 2011, that were in effect at least one year, 22.9 percent of modifications on mortgages held in the servicers' own portfolios, 26.1 percent of Fannie Mae mortgages, and 25.6 percent of Freddie Mac mortgages were 60 or more days delinquent after 12 months. Conversely, 47.9 percent of government-guaranteed mortgages and 44.4 percent of private investor-held loans were 60 or more days delinquent after 12 months." —Office of the Comptroller of the Currency Mortgage Metrics Report, Second Quarter 2012 36 housing market is slowly healing," said Anand Nallathambi, president and CEO of CoreLogic. Last July's 2.6-million-home shadow $382 billion, down from $397 billion in July 2011, and equates to a six-month supply, according to CoreLogic. The analytics firm also reports the rate of distressed sales taking homes out of the shadows is close to matching the rate of newly seriously delinquent homes falling into the shadows. Seriously delinquent homes—those 90 or states of NJ, FL, PA, and OH, continue to drive the high volumes and extended timelines for all servicers," the report stated. Timelines for aged inventory, or the time it takes servicers to resolve their highly delinquent loans (90-plus), remained mostly unchanged. BofA saw an increase for jumbo timelines while GMAC and Wells Fargo maintained their status as the best performers. more days delinquent—are the most common type of home in today's shadow inventory, making up 1 million of the current 2.3-million- home total. About 900,000 homes are currently in foreclosure, and another 345,000 are in REO. Despite fading shadows nationally, some states continue to struggle with long foreclosure timelines. "While a lower outflow of distressed sales helps alleviate downward home price pressure, long foreclosure timelines in some parts of the country cause these pools of shadow inventory to remain in limbo for an extended period of time," said Mark Flemming, chief economist at CoreLogic. Forty-five percent of the industry's shadow STAT INSIGHT foreclosure on residential U.S. properties in the third quarter. Source: RealtyTrac Average days to complete 382 inventory is concentrated in five states—Florida, California, Illinois, New York, and New Jersey.

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