Friday, July 22, 2016

Owning Less Expensive Than Renting in How Many States?

(Thanks to Matt O. for this one.)

Mrs. Castranova comes to visit her son Anthony for dinner.

He lives with a female roommate, Maria.

During the course of the meal, his mother couldn't help but notice how lovely Anthony's roommate is.

Throughout the evening, while watching the two interact, she started to wonder if there was more between Anthony and his roommate than met the eye.

Reading his mom's thoughts, Anthony volunteered, "I know what you must be thinking, but I assure you, Maria and I are just roommates.''

About a week later, Maria came to Anthony saying, "Ever since your mother came to dinner, I've been unable to find the silver sugar bowl. You don't suppose she took it, do you?"

"Well, I doubt it, but I'll email her, just to be sure." So he sat down and wrote an email:

Dear Mama,

I'm not saying that you "did" take the sugar bowl from my house; I'm not saying that you "did not" take it. But the fact remains that it has been missing ever since you were here for dinner.

Your Loving Son, Anthony

A few days later, Anthony received a response email from his Mama which read:

Dear son,

I'm not saying that you "do" sleep with Maria, and I'm not saying that you "do not" sleep with her. But the fact remains that if she was sleeping in her OWN bed, she would have found the sugar bowl by now.

Your Loving Mama

All the housing statistics this week made my head spin. How good would you be at building your own house? Here's a short 10 question quiz that will see if you're up to it. (Hint: it helps if you know what a stud is.)

In loan originator education news, "We are over halfway through 2016, and that means another year of CE for all you MLOs. I know that CE requirements for both state and federal have been the bane of the existence of most MLOs, but there is one company that is trying to change the way the mortgage industry takes their CE. Ken Perry, and his team over at The Knowledge Coop have been creating CE courses from the beginning, and are trying to revolutionize the industry, offering both online and live federal classes across the country. The obvious goal of the classes is to educate, but they are also creating content and conversations aimed at engaging with the mortgage community beyond the classroom. Check out some of their upcoming live events: Spokane, WA, Austin, TX, Fife, WA, Wilsonville, OR, Irvine, CA, and San Ramon, CA. If you can't make a live event, you can call them directly for more info on their online courses at 800-936-2128.

 Here's something new in the builder world, besides a lack of buildable land and difficulty finding skilled workers: the board of directors at Pulte Homes changed, adding members due to shareholder activism. Yesterday the Atlanta-based home builder reported that second-quarter profits grew 14 percent from last year on a 41 percent gain in revenue. But arguably of more interest PulteGroup also announced an agreement with New York hedge fund Elliott Management, which built a 4.7 percent stake in the company. "While it is unfortunate that it took my actions - and one of the world's leading activists - to drive value at PulteGroup over the last several months, I am encouraged by the initial shareholder victories that were announced today," said retired founder William J. Pulte. Pulte has waged a public battle against the company since April and helped force Chief Executive Richard Dugas Jr. into early retirement.

 Along those lines, the NAHB Home Builder Optimism Index slipped to 59 in July from 60 in June.  And despite July's slip, optimism remains relatively high, though it hasn't hit the post-recession high of 65 last October. "The economic fundamentals are in place for continued slow, steady growth in the housing market," opined NAHB's chief economist, Robert Dietz. "Job creation is solid, mortgage rates are at historic lows and household formations are rising. These factors should help to bring more buyers into the market as the year progresses."

 Yet it seems that building permit delays are choking the U.S. housing supply. And as you'd expect, developers & builders are responding less quickly with new units in metro areas with long waits. Just take a look at places like Denver, San Francisco, Nashville, Austin, etc.

 Of course the basic laws of supply and demand dictate that as the demand for housing ramps up, due to immigration and household formation, and supply is not ramping up, prices will increase. Sure enough, the press is telling us that it is less expensive to own a home in 42 states than to rent. (Thanks to Guy S. for sending that story along.)

 Ellie Mae's June Origination Insight Report showed purchase loans making up the highest share of new closed loans since August 2014. Of the loans that passed through Ellie's system, the share of purchase originations hit a near two-year high in June. Purchases represented 65 percent of all loans that were closed during the month, up from 62 percent in May and the highest percentage since August 2014. Eighty-five percent of FHA originations were for purchase mortgages as well. "FHA purchases are also on the rise, representing 85 percent of closed FHA loans, the highest percentage since September of 2014."

 Lenders are certainly watching trends in the market, and theories on lending: rent versus buy, millennial homeownership, and urban versus suburban. Here's an article on all three!  My imagination runs wild when I read stories like this. For starters, I love the idea of so-called "second tier cities" becoming the "cool" place to be. In the digital age, we can start companies anywhere and attract employees on culture and building their own lives. I think this is great for cities like St. Louis and Pittsburgh mentioned in the piece, but also Charlotte, Detroit, Hartford, and Milwaukee. 

 Lenders also start to salivate when they read things like "Nationally, home ownership is near a 48-year low."  Not because that's good news but because it feels like we're so close to a surge. It feels like opportunity.  Along those lines, there is a massive conversation going on in the country right now about what we want our communities to look like, how opportunity should unfold for all Americans, and what that means for jobs and the economy. Depending on how that turns, coupled with low interest rates, we have the potential for a perfect storm of growth. Admittedly, there are some significant challenges and hurdles, but it almost feels like there is an undercurrent of transformation that means good things for all people including an expansion of economic opportunity.

 Many experts believe, however, that the biggest threat to this expansion is the gap between rich and poor - that we cannot grow all our communities and return home ownership to a 48 year high without including everyone in the growth. Increased cost(s), whether that's regulatory burden or limited access to credit, is also a threat to this expansion. Hopefully, we can continue to encourage the creative thinking associated with the success of technology companies recently and apply it across the board in many (if not all) industries.

 Lenders are certainly licking their chops over news like that, and sure enough most lenders are doing pretty well volume & profit-wise. The Office of the Comptroller of Currency (OCC) knows a thing or two about accounting and metrics. Bank officers everywhere took note earlier this month when the OCC released its periodic report on mortgage lending.

 For the second quarter of 2016, most analysts are expecting higher mortgage volumes versus the 1st quarter and increased gain-on-sale margins. The early read-across from mortgage banking results of the big banks appears "slightly lower than expectations" from a volume perspective, with volumes up about 30%. Gain-on-sale margins have been up nicely for most large banks, a positive read-through to the rest of the group. The question is, can earnings and results from originations make up for the big losses suffered from mark-downs in mortgage service rights (MSR), also factored into GAAP estimates for mortgage servicers.

 Sure enough, the "experts" who have been predicting the end of refinances predicted incorrectly. Just as mortgage bankers were preparing for the end of a historic boom driven by low interest rates, borrowers have begun knocking at their doors again with rate & term refis. And in earnings reports JPMorgan Chase & Co JPM.N, Wells Fargo & Co WFC.N and Citigroup Inc C.N said they originated $94 billion worth of new mortgages during the second quarter in their core mortgage operations, an increase of $23 billion, or 31 percent, over the first quarter.

 Rates are certainly great, and with mortgage rates near historic lows, and volumes still strong in the early days of the third quarter, banks predict the trend will continue, providing a bright spot in a low-rate environment hammering their wider results. JPMorgan has added more than 1,000 employees this year to handle the swell in mortgage business, said Mike Weinbach, its chief executive of mortgage banking. He believes U.S. lenders will make about $1.8 trillion of mortgage loans this year, 40 percent more than he had expected at the start of the year.

 For the big banks, mortgage banking makes up a small piece of the overall revenue pie. There are cross-selling opportunities, of course, but in general banks were looking forward to rates increasing in order to increase profits. Though low rates bring in new mortgage business and deliver fees from refinancing, banks are hard pressed to generate substantial income when rates fall too low. And don't forget that US banks' cost of funding has also risen. The difference between what banks pay for U.S. dollars and what they're earning is pretty slim, pressuring margins.

 At some point, there is little room left between what it costs banks to obtain funds and what they can earn from lending and investing. Rates on short- and long-term debt (often measured by the yield curve) have come closer together, leaving banks with razor thin margins almost regardless of the type of funding or loans they pursue. Wells, JPMorgan and Citigroup each talked about low rates as the main hurdle to producing better results. Their second-quarter profits fell 3.5 percent, 1 percent and 14 percent from a year earlier, respectively.

 Concerns about market volatility and apparent weakness in the U.S. economy earlier this year, combined with Britain's vote in June to exit the European Union have made it much less likely the Fed will raise rates further in the near-term. So if you like rates where they are, you'll like them for a while. And this week volatility quieted back down.

 The bond market has been darned quiet all week - which is just fine for plenty of capital markets staffs and LOs trying to close loans in July. Up a little, down a little, and yesterday was up a little as global markets faced a bout of risk aversion. We did have some news, and it was mostly in line with expectations and were largely consistent with a rebound in U.S. growth in the second quarter: initial jobless claims remain near historic lows, the Philadelphia Fed's diffusion index of manufacturing activity disappointed economists' forecasts but the internals of the report were rather strong, Leading Indicators continued to improve, and existing home sales came out just above expectations.

 Are you looking for some bond market-moving data this morning? Good luck. There is none scheduled, but we're off a little nonetheless. Thursday the 10-year yield ended at 1.56% and this morning it is 1.59% (worse .25 in price) with agency MBS prices down/worse about .125.

Thursday, July 21, 2016

Credit Unions, Research Conference, HMDA, Privacy Webinar, and YouTube Video

A successful man is one who makes more money than his wife can spend.
A successful woman is one who can find such a man.

(Yes, I know this is sexist. I'll try to make up for it tomorrow.)

Happy 6th year-old-birthday to the Dodd-Frank Wall Street Reform and Consumer Protection Act. Or is it the CFPB's 5th "birthday"? For those new to the business, the passage of Dodd-Frank in July 2010 put in place the Consumer Finance Protection Bureau in July of 2011. Lots more below on what it has been up to lately.

Critics, which may or may not include my cat Myrtle, say that the CFPB has made an art of governing and regulating by consent orders and press releases rather than actually establishing rules and regulations. Is it less expensive for the CFPB that way? Consumers are better protected; certainly the large banks are trying to work with the CFPB but some suggest that non-banks, who have taken a large market share from banks, are not working closely with the CFPB. And there are even some that think Richard Cordray wants to be the governor of Ohio or even a candidate for vice president.

 You gotta love the CFPB. "The Consumer Financial Protection Bureau announced that its supervisory actions in the first four months of the year uncovered illegal activities in auto finance and payments that led to approximately $24.5 million in restitution to more than 257,000 consumers. The report also highlights issues CFPB examiners found through the agency's examination of businesses in auto loan origination, debt collection, mortgage origination, and small-dollar lending." Being a capital markets guy, I am no math whiz, but I think that this works out to about $95 per head - a sum critics say buys dinner for 4 at Applebee's or less than half of one month's car loan payment.

 There have been setbacks for the regulator. The Consumer Financial Protection Bureau doesn't have the legal authority to adopt a rule banning arbitration clauses that mention broker-dealers, even if the sole purpose is to exempt broker-dealers from the rule, SIFMA said. The bureau should defer regulation arbitration by entities regulated by the Securities and Exchange Commission to the agency.

 Of particular interest to lenders is the news last week regarding HMDA. At this point most, if not all, lenders are collecting the data that will be required. But they are all slicing and dicing the data to see what regulators will find, prior to the regulators finding it. Yes, beginning with data collected in 2017, financial institutions will file their HMDA data with the Consumer Financial Protection Bureau rather than the Federal Reserve Board. The FFIEC and HUD published the following documents on Resources for HMDA Filers to help financial institutions report Home Mortgage Disclosure Act (HMDA) data collected in or after 2017. These materials are also accessible from the FFIEC website: filing instructions guide for HMDA data collected in 2017, filing instructions guide for HMDA data collected in 2018, technology preview, and the endless frequently asked questions. (Appendix A to Regulation C provides instructions for completing the loan/application register for HMDA data collected in 2017 and submitted in 2018, but not for HMDA data collected in 2018 and submitted in 2019.)

 For its part the CFPB released a YouTube video on the final rule of HMDA. Yes, the video is an hour, about 57 minutes longer than the typical YouTube video, but one should at least listen to the introduction.

 Of course the CFPB is not focused solely on mortgages. At the end of this month the CFPB is expected to release a proposal to regulate debt collection practices. The proposal is expected to expand the definition of debt collector and tighten up activities.

 The U.S. subsidiary of Spanish bank Santander was fined $10 million by the CFPB over allegations of deceptive overdraft practices. The bank used a telemarketing vendor to enroll customers in its overdraft service, but the vendor reportedly did so without customer consent.

 The industry is certainly watching the CFPB's chess moves regarding arbitration. "Lewis Wiener, Kymberly Kochis and Frank Nolan of Sutherland Asbill & Brennan write: On May 5, 2016, the CFPB released its proposed regulation on restricting the use of class action waivers and arbitration provisions in consumer contracts. The proposal, if effectuated, would essentially overturn years of U.S. Supreme Court precedent."

 A bipartisan group of 70 U.S. Senators has petitioned CFPB Director Richard Cordray to exclude credit unions from complete CFPB regulatory oversight. "Congress and federal regulators have long taken the approach that credit unions and community banks should be treated differently from the largest financial institutions and non-bank lenders," the Senators wrote. "It is our hope that the CFPB also takes this approach and considers the impact of its rulemaking on smaller financial institutions and consumers." In the letter, the Senators urged the Bureau to tailor its financial rules to match the role of community banks and credit unions around the country.

 ATS Secured's new white paper is out, written by former CFPB regulator Ben Olson: Achieve Vendor Management & Mortgage Closing Success in a Post-TRID World. "Get guidance from a former CFPB regulator on safely navigating the full impact of 3rd party risk. Gain valuable insight on; liability, responsibility for disclosures, the true definition of 'service provider,' the most important CFPB and TILA-RESPA rule expectations, risk assessment & planning, accuracy of disclosures and permissible changes."

 The CFPB has announced that it plans to host its second research conference on consumer finance on December 15-16, 2016. The announcement contains a call for complete papers or detailed abstracts that include preliminary results to be submitted by August 26. The CFPB is encouraging the submission of a variety of research including, but not limited to, work on "the ways consumers and households make decisions about borrowing, saving, and financial risk-taking; how various forms of credit (mortgage, student loans, credit cards, installment loans, etc.) affect household well-being; the structure and functioning of consumer financial markets; distinct and underserved populations; and relevant innovations in modeling or data."  A particular area of CFPB interest is the dynamics of households' balance sheets.

 BuckleySandler is offering up a free webinar today from 2-3PM EDT titled, "The CFPB in Privacy & Data Security: Examining the Agency's Role, Authority, and Direction." "Under the Dodd-Frank Act, the CFPB inherited authority over the privacy provisions, including privacy notices, of the Gramm-Leach-Bliley Act and the Fair Credit Reporting Act. The Dwolla enforcement action announced earlier this year showed that the CFPB also intends to be involved in data security issues and financial institutions of all types should take note. Join our panel of CFPB, privacy, and data security specialists as they discuss the authority of the CFPB in the areas of privacy and data security, the actions the CFPB has taken to date in privacy and security, implications of the Dwolla action, and what CFPB actions in other areas may tell us about where the agency could go in privacy and data security." One must register at (Registration is required. Please, no outside law firms, government agency personnel, consulting firms, or media. After registering and being approved, you will receive a confirmation email containing instructions for joining the webinar.)

 Lenders, of course, continue to be impacted and to make changes based on CFPB rules. For example...

 The industry continues to wait for word on the PHH/CFPB case. PHH's share price has fallen sharply in 2016 driven both by poor performance and regulatory concerns (reflecting the ongoing issues with the CFPB, FHA, New York State Department of Financial Services, and other state regulators). Analysts point out that PHH's shares are now trading below 50% of book value, and there is upside as the board pursues strategic actions, including potentially the sale or the liquidation of the company.

 Pacific Union has developed a new Change of Circumstance (COC) Form that will better track requirements under TRID and no longer contains references to pre-TRID disclosure requirements.

 Be advised, while Sun West accepts initial loan application and applicable disclosures executed prior to closing using electronic signature ("e-signature"), documents must be in compliance with the requirements of the Federal E-Sign Act. Utilization of a Signature Vendor from Sun West's list of Authorized E-Signature Vendors available in the HELP section of sunsoft is required. At the time of loan submission, an Audit Trail (such as a Certificate of Completion from an Authorized E-Signature Vendor) must be submitted.

 Fortunately, throughout all of this rates are minding their own business. (As if rates could do that, right?) Yesterday U.S. Treasuries, and to some extent agency MBS prices, ended the session with moderate losses (worse about .125 but mortgages were only off a few ticks). Why? No good reason, so I won't waste your time. Suffice it to say the usual entities were selling (lenders & agencies, primarily) and the usual entities were buying (the Fed, money managers, insurance companies, pension funds). But for folks who like to try to predict the future, according to Fed fund futures, the FOMC is virtually guaranteed to hold rates steady when it meets next Tuesday and Wednesday, but the probability of a September hike is up to 25%.

 On the subject of central banks, the European Central Bank released its rate decision today and no one thought the ECB would move rates, which is exactly what happened. Here in the US we've had this morning's Initial Jobless Claims for the week ending 7/16 (-1k to 253k) and the second-tier Philadelphia Fed survey for July (-2.9). Coming up, for those who are riveted to data from two months ago, is the May FHFA Housing Price Index. And we'll also have June's Existing Home Sales report at 10AM EDT and Leading Economic Indicators. Oh, and at 1PM EDT the Treasury will auction $13 billion in new 10-year TIPS - get out your checkbooks.

 As the folks in New York headed for the subway Wednesday we closed the 10-year at a yield of 1.58%. This morning it is wallowing around 1.60% and agency MBS prices are worse nearly .125 versus last night.

Wednesday, July 20, 2016

New Products Including LE Tool

(Overheard at a local coffee shop.)

"The only math we should teach our children is arithmetic."

"But if we taught them differential equations, they could calculate interest and make investments! If we taught them probability they'd understand polls and predictions. If we taught them logic, they wouldn't be fooled by scams."

"You're making my point for me. If they understood differential equations, they wouldn't max out their credit cards. If they understood probability, they'd never buy lottery tickets. If we taught them logic, they wouldn't buy products that do nothing. In short: If people understood math, the economy would tank immediately."

"Holy smokes! I never realized innumeracy was the major driver of economic growth."

"Try to explain America any other way."

Remember when someone was "fired" instead of "managed out?" Then there's a good old-fashioned purge like what Turkish President Erdogan did yesterday to over 15,000 education officials from the government. Personnel changes happen all the time, but I don't know when candidates starting naming their cabinet nearly four months before an election, yet it happened. In this case there is a tie-in the mortgage biz: Donald Trump has said he wants former Goldman Sachs banker and IndyMac owner Steve Mnuchin to serve as Treasury secretary in his administration. Mnuchin has his bases covered...he reportedly has donated sizeable chunks of money to Hillary Clinton and Barack Obama.

In wholesale news Freedom Mortgage launched a new online Loan Estimate (LE) tool! This new online technology now provides a higher-quality user experience starting with enhanced, intuitive functionality on a single page, streamlined data input process with real-time data checks, continuous visual display of the LE submission deadline, and Click and Scroll navigation. According to Keith Bilodeau, SVP Freedom Wholesale, "Freedom Mortgage Clients can look forward to our continuous commitment to technological upgrades and enhancements in the coming months. We understand the need for ease of use and intuitive applications and are committed to these enhancements". If you have any questions, or would like to attend one of the upcoming training sessions please contact a Freedom Mortgage Account Executive, or visit the Freedom Mortgage Website.

 "Have you been looking for the right tool to compete with RocketMortgage and keep your existing processes? With Lendsnap, you can have both. Lendsnap automatically gathers and stores borrower qualifying documents. By linking to consumer accounts, the platform securely and quickly collects W2s, pay stubs, bank statements and full tax returns while reducing fraud risk and putbacks. Lendsnap provides authoritative documents, the actual statements from financial institutions, keeping your loans universally accepted on the secondary market. Lendsnap is a lightweight solution that works with your existing workflow. That means it doesn't require a lot of training like a new LOS. Lendsnap is live: visit its website or contact Cofounder and VP of Business Development, Mike Romano, to learn more.

 The White House spread the word that The Federal Housing Administration would approve mortgages on properties with energy-related home improvements financed through special tax assessments. The FHA said it would insure mortgages with PACE (Property Assessed Clean Energy) assessments that are subordinated to the mortgage lien. PACE loans, however, will retain a first-lien position on foreclosed properties or for delinquent PACE obligations. Property Assessed Clean Energy (PACE) obligations allow homeowners to finance energy-efficient upgrades and renewable energy systems and repay the cost through extra charges on their property tax bills.

 Banks generally dislike PACE loans because they take precedence over mortgage debt in the event of a default, upending a basic tenet of the market. Real estate agents urged the FHA to reconsider the policy, saying the existence of a PACE assessment would make a foreclosed property harder to sell. Six years ago the FHFA directed Fannie Mae and Freddie Mac not to buy mortgages on properties with PACE liens, limiting the salability of such homes. Yet lenders argue that a big attraction of PACE financing is that it is attached to the property, allowing homeowners to pass it on to subsequent owners. Some institutions, such as Renovate America, are quite pleased. Mortgagee Letter 2016-11, Property Assessed Clean Energy, will make it easier for future home buyers to purchase or refinance homes using FHA financing when there is an existing PACE obligation, that meets FHA requirements, attached to the property.

 Angel Oak is now offering business bank statement program.  No tax returns required, LTV up to 80% and much more. Contact Bob Hutchens for details.

 Guild Mortgage has joined forces with FirstREX to empower homebuyers with down payment funding to expand home ownership choices. Under its REX HomeBuyer program, FirstREX can contribute up to half of a 20 percent down payment for a home purchase. FirstREX's contribution to the buyer's down payment is an investment, not a loan, so there are no interest or monthly payments on the money.  Instead, FirstREX hopes to earn a return on its investment from a portion of the appreciation when the homeowner eventually sells. A homeowner can also buy out the agreement after three years. The REX HomeBuyer investment combined with a Guild Mortgage loan will empower prospective homebuyers to buy the home they really want with unprecedented opportunity, flexibility and control. More information is available on the Guild Mortgage website.

 Marketplace Home Mortgage has rolled out its on-time closing guarantee in the eastern United States.Marketplace Home Mortgage now offers the service to customers in its Eastern Division, which includes markets in South Florida, New Hampshire and Maine. The program guarantees that a mortgage will close on or before the new home's closing date, or the home buyer and seller will each be entitled to compensation. If Marketplace misses the closing date, the customer is eligible for up to a one-time $1,500 mortgage payment and the seller will be eligible to receive a $5,000 benefit. Visit the Marketplace website for more information on the company's Closing Guarantee.

 The Mortgage Partnership Finance (MPF) Program and Redwood Trust, Inc. announced increased loan limits on mortgage loans for the MPF Direct product, which will become effective during the third quarter of 2016. The new single-family loan limit will be $2.5 million, up from $1.5 million previously. In addition, hybrid adjustable rate mortgages (ARMs) will become eligible for delivery. ("The MPF Direct product allows members of a Federal Home Loan Bank that participate in the MPF Program to deliver eligible jumbo mortgage loans through the MPF Program's operational platform to a subsidiary of Redwood Trust. This arrangement adds private capital to the secondary mortgage market. Six FHLBanks have been approved by their regulator to offer the MPF Direct product: Atlanta, Boston, Chicago, Des Moines, Pittsburgh, and San Francisco.")

 In reference to loan purchased on or after July 12th, Wells Fargo is expanding its Non-Conforming Loan policy to allow additional types of title changes. Examples include domestic partnerships, civil unions, court-ordered changes not limited to death or inheritance, and transfers to and from Limited Liability Corporations (LLCs) when borrowers match the members of the LLC.

 Starting Monday, July 18 AmeriHome's Core Jumbo, Non-Agency Hybrid ARM, and Expanded QM Non-Agency loan transactions must be in an active Rate Lock at the time the loan is submitted for Eligibility Review. The Rate Lock should have at least 15 calendar days remaining. A new Eligibility Review User Guide is now available on SellerWeb. The user guide provides updated details and instructions for the Eligibility Review process, including the new Rate Lock requirement. 

 Pacific Union Financial, LLC (Pacific Union) is discontinuing the Jumbo Series O product due to the investor's elimination of their Jumbo program. In addition, Pacific Union issued a reminder, all collateral for Correspondent Delegated and Non-Delegated loans should be delivered to Deutsche Bank, collateral custodian for Pacific Union Financial, LLC.  Documentation should be sent in a manila folder marked with the Pacific Union loan number.

 Ditech announced that effective immediately properties located in declining markets are not eligible for the Piggyback Closed End Second EE Product. The appraisal report and corresponding Clear Capital CDA report must be reviewed to determine the stability of the property values in the subject neighborhood. If either report indicates that the market is declining, the loan is not eligible. Any conflicts between the original appraisal and the CDA must be resolved with Clear Capital prior to submitting the loan for review.

 As of Monday, July 18, Flagstar Bank is on board with the Fannie Mae change to its HomeReady product limiting income to 100% of the area median income and properties located in low-income census tracts will continue to require no income limit. These updates will be implemented in DU over the weekend of July 16th and will apply to all DU Version 9.3 loan casefiles submitted, or resubmitted, on or after that date.

 In addition, Flagstar Bank announced an update to the Freddie Mac Home Possible and Home Possible Advantage program (Freddie Mac Home Possible and Home Possible Advantage, Doc. #5335). It is no longer necessary to obtain a signed consent form from the Borrower authorizing the release of the Borrower's information to a counseling agency in the event of a delinquency. As such, the product description has been updated to remove the requirement for Borrower's Authorization for Counseling, Doc. #3233. Borrower income disclosed on the 1003 Application will be considered for loan qualification for the ability to repay and to apply the income limits. The requirement to provide full tax returns and all schedules has been removed unless required by Loan Prospector.

 Shifting to interest rates, overall Tuesday was a pretty quiet day in the electronic U.S. bond market. U.S. Treasury prices moved slightly higher (the 10-year was +.250), probably because they didn't want to go lower. (Trader humor.) The 5-year T-note and agency MBS prices both improved slightly. We did have U.S. housing starts increase to 1189K in June from 1135K in May although May was revised downward. Building permits totaled 1153K in June but was also revised down in May.

 We've already had all the scheduled news we're going to see today. The MBA, at 4AM PDT via CNBC, sent out its survey of retail application data for last week: apps -1.3%, refis accounting for 64% of them. If you're guessing where rate sheets are going to be, we closed the 10-year Tuesday at a yield of 1.56%; this morning both it and agency MBS prices are pretty much unchanged.

Tuesday, July 19, 2016

Secondary Marketing Activity of Note Picking Up

One day I overturned my golf cart. Elizabeth, a very attractive and keen golfer, who lived in a villa on the golf course, heard the noise and called out: "Are you okay, and what's your name?"

"It's John, and I'm okay thanks," I replied.

"John, forget your troubles. Come to my villa, rest a while and I'll help you get the cart up later."

"That's mighty nice of you," I answered, "but I don't think my wife would like it."

"Oh, come on," Elizabeth insisted.

She was very pretty, very sexy and persuasive...I was weak.

"Well okay," I finally agreed, and added, "but my wife won't like it."

After a few restorative Scotches and waters, I thanked Elizabeth: "I feel a lot better now, but I know my wife is going to be really upset. So I'd better go now."

"Don't be silly!" Elizabeth said with a smile: "She won't know anything. By the way, where is she?"

"Probably still under the cart," I replied.


Summer time... barbeques, time in the sun, fun on the water - unless you're in Michigan and you believe that rivers flow in circles and one spends three days on it!

The Massachusetts MBA spread the word that Karl "Chip" Case passed away. He was recipient of the MMBA Lifetime Achievement award, and was Professor Emeritus at Wellesley College. He was also a founding partner of the Case Shiller Index of home prices, and was well-known both regionally and nationally for his pioneering research on the housing market.


Upcoming training & events? You bet -


Are you going to be at Western Secondary in San Francisco next week? "If you are, come visit Model Match at The SQUARE on Wednesday the 27th from 8:00 - 8:50 am, we will be speaking on the topic of how to Grow Production Organically: The Model Match Process. Model Match is an innovative technology platform that supports individual and team hiring goals for companies in the Mortgage and Financial Services Industries. We cracked the code to enable your leadership, management, and business development teams to recruit and retain stronger and more productive production talent (individuals and teams). We have pioneered the Science and also train in the Art to organically recruit and retain production. Through proprietary work flows and processes, we help you define your ideal "Model Match." This is coupled with training to unify the messaging and communication of Value Propositions to be better equipped with a clear and consistent message when it comes to recruiting. Our clients have been able to organize and execute more effectively with our disciplined approach to production recruiting. To learn more you can request a demo. If you are going to be at Western Secondary and would like to meet up, reach out to Steve Rennie to coordinate.

 MBA Education's FHA Multifamily Underwriting Training Program is the most extensive and rigorous curriculum of its kind in the Industry. It is designed to set the standard for skills required by multifamily underwriters in the field of FHA lending. If you ready to take your training to the next level, Apply today or visit online to learn more. MBA Education is accepting applications for participation in the FHA MAP program.

 California Mortgage Associationhas upcoming Seminars providing content-rich educational information relating to the mortgage industry and private lending. The next seminar is July 28th and 29th in San Diego. Additional information can be found on the CMA website.

 On 8/2 Colorado's CoAMP will host a one-hour webinar featuring Greg Plunkett with Credit Plus. This webinar will cover everything you need to know about Fannie's new Trending Credit Data.

 If you're in California, Summer CAMP 2016 will be held at Napa's Westin Verasa. Summer CAMP 2016 provides attendees the opportunity to meet exclusive vendors and learn from the best in the business. Registration opens on-site on Sunday August 7. The Expo Courtyard opens Monday, August 8 and closes Tuesday August 9. Keynotes and break-out sessions also take place Monday, August 8-Tuesday, August 9.

 Get ready to inspire your team on August 12th at the CMLA's Developmental Leadership Forum in Colorado. Deadline to participate is Friday, August 5th.

 Save the date for California MBA's 21st Annual Western States Loan Servicing Conference, August 14 - 16 in San Diego. Sneak peek details can be seen on the California MBA website.

 The Mortgage Collaborative'sSummer Lender Member Conference will take place August 21-23 at the Four Seasons Hotel & Resort in Denver, CO. The conference will feature a powerful agenda filled with presentations from top industry leaders, relevant educational breakout tracks, and a series of peer-to peer networking sessions and events.  For more information, contact Rich Swerbinsky.

 In light of increased and more sophisticated cyber threats, the Federal Financial Institutions Examination Council (FFIEC) has developed an assessment tool to help companies understand, mitigate and manage potential cyber threats. Join the MBA and leading cybersecurity experts for an interactive conversation on how to successfully implement and use the tool for your unique business needs. Register now for FFIEC Cybersecurity Assessment Tool Deep-Dive Workshop September 27 in Los Angeles.

 Vendor news of note? It never stops, especially as the reliance upon vendors continues to increase.

 In vendor news, Alight Inc. announced that Evergreen Home Loans and First Guaranty Mortgage Corporation (FGMC) have selected the Alight Mortgage Lending platform to streamline branch interaction, support volume goals and increase productivity. Alight Mortgage Lending is the mortgage industry's only platform for real-time multiple scenario analysis. Alight connects to a lender's general ledger and loan origination systems and to capital markets providers to feed data directly into firm financials. Management can run limitless numbers of scenarios and see them ripple through the entire value chain to P&L, balance sheet and cash flow to then make decisions based on an informed, forward view of enterprise financials and operational metrics.

 And STRATMOR is pleased to introduce STRATMOR Insights, a free monthly Report that will provide interesting, data-driven articles delivering insights from STRATMOR's mortgage industry surveys, programs and consulting experience. The articles in the report are filled with excerpts and charts from STRATMOR's proprietary mortgage industry research - and provide valuable information to help identify and benefit from the latest trends. The featured article for the July report is a piece written by STRATMOR Group Senior Partner Garth Graham and takes a fresh look at the evolution and outlook for the Digital Mortgage.  To view and download the July Report, Click Here. If, you would like to receive STRATMOR Insights, on an ongoing basis, Click Here to Register.

 Recently Secure Insight was named by National Mortgage Professional Magazine as one of the top "Visionary Technology Organizations" in the mortgage industry.  SSI popularized the phrase "vetting" in the industry and was the first company back in 2012 (then known as Secure Settlements) to develop and manage a process to evaluate and monitor settlement agents for risk. Company CEO Andrew Liput said that SSI will be launching "version 2.1" of its vetting tool sometime this quarter which he claims will include technology enhancements incorporating first-to-market vendor evaluation concepts not previously available from any other vendor management firm. The company also expects that its database will surpass 50,000 settlement agent records by 12/31 which Liput believes is "critical mass" that allows the SSI database to be viewed as an industry utility.  

 Switching gears to the markets, by now most everyone knows about BREXIT, in which the UK decided to leave the EU. This set off waves in global financial markets and raised concerns that the turmoil could lead to a global recession that would trip up the U.S. economy as well. Wells Fargo believes that these fears are somewhat overblown as they relate to the U.S. economy. Wells Fargo's economists do believe, however, that the move will lead to slower growth in the U.S. during the second half of the year. Brexit will not create any direct problems, but it brings up some indirect problems such as slower growth throughout Europe and around the world which would reduce U.S. exports, and U.S. economic policy uncertainty leading to our businesses being more cautious, therefore less expansion, purchasing of new equipment, and less hiring of additional workers.

 For all the gloom, the U.S economy still looks pretty solid. The third release of first quarter GDP was stronger than expected, particularly gross 10% domestic income (GDI), which rose at a 2.9 percent annualized rate. This is far better than the rest of the world. 

 I went to Chili's recently, and to my dismay, they had changed their $20 dinner for 2 to a $22 dinner for 2. I mention this because I went in not knowing that according to Comerica Economic weekly, the consumer prices for June went up 0.2%. However, on $20 that should only be a 40 cent increase in the meal price... the nerve! On to other news, U.S. data released last week was mostly positive, adding to expectations for a rebound in real GDP growth. This data combined with the rally in U.S. equities diminishes two lingering fears: the fear of a sudden downturn in U.S. job growth, and the fear of a spillover from BREXIT. Instead, they see the economy picking up momentum. The Producer Price Index went up 0.5% in June with a push coming from petroleum products. Retail sales increased by 0.6%, beating expectations. Industrial production also beat expectations, increasing 0.6%. The National Federation of Independent Business Small Business Optimism index increased by 0.7 points in June to 94.5, the third monthly gain.

 Fannie Mae turned some heads yesterday by setting up to sell debt without government backing. In this case it is a $1.3 billion credit-risk transfer (CRT) deal, expected to price today. It is secured by more than 180,000 mortgages totaling $42.2 billion, according to a Kroll Bond Rating Agency pre-sale report.

 Not wanting to be left behind, JP Morgan Chase is out there with a new security as well - about 10% of its new $2.65 billion pool of Chase home loans (Chase Mortgage Trust 2016-2; 55% conforming and 45% non-conforming). The bank is retaining the bulk of the deal and offering only around $270 million of securities for sale. And FirstKey Mortgage also began pre-marketing a new mortgage bond - a rated $975 million securitization of re-performing loans.

 Banks have been very happy sitting on their mortgages, especially those originated through their own retail channel and especially jumbo loans. Not only is the income decent, but the cross-selling opportunities good, AND why pay the cost of securitizing the loans? Analysts at Bank of America Merrill Lynch said recently they expect to see only $51 billion of private RMBS (residential mortgage-backed security) issuance this year, down from $60.4 billion in 2015.

 Of course the demand by investors in the secondary markets determines the pricing for borrowers in the primary markets, and yesterday U.S. Treasuries didn't do much, and what they did was attributed to the "unwinding" of the Turkish coup-based rally. And the announcement of the mega-corporate new issue from Teva Pharmaceutical which was expected to total $15 billion across six tranches which threw off the supply/demand equation somewhat.

 Today for unabashed excitement we had the June Building Permits and Housing Starts figures: +1.5% and +4.8%, respectively, much stronger than expected. We closed Monday with the yield on the 10-year sitting around 1.59%, and after the housing figures we're at 1.56% with agency MBS a shade better.