Fannie Mae has hired Cenlar, a Trenton, N.J., thrift, to service all newly written unsecured loans made under the GSE's HomeSaver Advance program beginning Friday.

Fannie has been using Dyck O'Neal, an Arlington, Tex., collection agency, to service the HomeSaver loans, which are given to delinquent homeowners to cover past-due amounts on their mortgages.

Dyck O'Neal will continue to service outstanding advances, Fannie said. It disclosed the plan in a memo to servicers last month.

Amy Bonitatibus, a Fannie spokeswoman, would not say why it decided to make the switch. Dyck O'Neal did not return a call seeking comment.

The GSE acquired 71,000 HomeSaver Advances from mortgage servicers last year and 20,400 in the first quarter of this year. The advances have an average balance of $7,100; the maximum loan amount is $15,000.

The $572 million-asset Cenlar specializes in the subservicing of mortgages and home equity lines.

Last month, Dyck O'Neal received a cease-and-desist order from the Georgia Department of Banking and Finance for engaging in what the state called "mortgage broker/lending activities without a license."

Rod Carnes, Georgia's deputy commissioner for nondepository financial institutions, said the order prohibits the company from servicing mortgages in the state.

"Each state is different but in Georgia, you have to be licensed to service," he said.
Carnes would not say whether the order bars Dyck O'Neal from servicing the unsecured HomeSaver Advances.

Bonitatibus said Fannie is just beginning to review the Georgia order and could not discuss the matter.

Kondaur Capital Corp., an Orange, Calif., buyer and servicer of distressed loans, received a similar cease-and-desist order from Georgia in May.

Fannie created HomeSaver Advance last year to help borrowers avoid foreclosure.
Working out loans this way, rather than modifying their terms, spared the GSE from having to buy nonperforming mortgages out of securitized pools, a practice that had produced large paper losses.

Fannie (which was subsequently taken over by the government) has been backing away from the advances this year in favor of modifications. The Federal Housing Finance Agency reported to Congress that 70% of borrowers who received the advances in early 2008 had redefaulted.

Last month, Fannie brought in-house the certification and custodial work, previously handled by Dyck O'Neal, on HomeSaver Advance loans.

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