Friday, July 1, 2016

Conventional Conforming Developments, Private MI Changes



The Fourth of July is Monday...the date of the Declaration of Independence (quibble all you want about late signers); the next commentary will be Tuesday. The U.S. Census Bureau tells us when the U.S. became an independent nation on July 4, 1776 there only 2.5 million people living here; last 4th of July there were 321.4 million. And everyone is talking about the UK & Brexit: $114.1 billion was the value of trade with the UK. Back in 1776, they were our enemy; now they are our 8th leading trading partner.

A quick correction to a note yesterday in the commentary fortunately pointed out by several readers. BHLB, the buyer of First Choice Bank, is not Berkshire Hathaway. It's Berkshire Hills Bancorp in Western Massachusetts.

 Are there changes in the Freddie Mac, Fannie Mae, and investor conventional conforming policies and procedures? You bet there are!

 First of all, Fannie Mae and the Mortgage Bankers Association (MBA) released updated forecasts. Fannie's updated forecast reflects slightly higher single family new home purchase origination estimates for 2016, and slightly lower origination estimates for 2017 relative to the May forecast. Fannie Mae expects single family purchase originations of $1 trillion in 2016, representing a YoY increase of 10%. According to Fannie Mae, "Housing activity is gaining strength heading into the summer, with pending home sales rising to a decade high." The MBA kept its $1.01T and $1.05T 1-4 family purchase mortgage origination estimates for 2016 and 2017 the same relative to the May forecast. New home purchase mortgage originates are the primary driver for mortgage insurance volume given the 4x penetration rate relative to refinance volume.

 And housing & banking groups announced opposition to the Fannie and Freddie recapitalization plans.  The battle over the future of housing finance is heating up.  Five major housing and finance trade groups on Wednesday sent a letter to Federal Housing Finance Agency Director Melvin Watt, urging him to reject recent calls for his agency to take actions to allow Fannie Mae and Freddie Mac to build capital. (The FHFA is the regulator of Fannie and Freddie.)

 The 25 stakeholder organizations including real estate, financial, and consumer organizations who have called on the FHFA to take action on overly burdensome fees charged by the GSEs (Fannie and Freddie). The letter itself asks Director Watt to direct the GSEs to reduce or eliminate loan level price adjustments - another effort to make conventional mortgage credit more affordable for consumers. The consensus contained in the letter is that G-fees have increased sharply since 2009, and that when combined with LLPAs, GSE income has increased substantially without achieving broad access to credit. The result is arbitrarily high prices for consumers, which are felt particularly by minority, young and first-time homebuyers with low-and moderate-incomes.

 The letter argues that LLPAs aren't necessary to cover risk that is already covered by g-fees and other forms of risk sharing. I'd also note the diversity of opinions included here and the tremendous number of stakeholders who have signed on in agreement.

 For example, NAR President Tom Salomone wrote, "If the FHFA is serious about reducing the burden on creditworthy borrowers trying to enter the market, then it's time to address the fees that Fannie Mae and Freddie Mac charge consumers looking to purchase a home. Loan-level price adjustments and g-fees simply lock too many creditworthy borrowers out of the conventional mortgage market, particularly minority, low-income, and first-time homebuyers. FHFA can direct the GSEs to reduce or eliminate those fees right now, in recognition of the good work that's been done to manage risk at the GSEs. We believe that should happen so more responsible borrowers can take the step towards homeownership."

 In a recent bulletin, M&T Bank noted it prefers all condo properties to be prepared on Form 1073 (even Fannie/Freddie site condo properties), Fannie and Freddie will accept Form 1004 or 1073. Note - if using Form 1004, the appraiser must include an adequate description of the project and information about the homeowner's association fees and the quality of project maintenance.  M&T also sent a reminder that on FNMA HomeReady HomeStyle loans that utilize non-borrower income (as a compensating factor to exceed 45% DTI), the non-borrower income worksheet and certification (Fannie Mae Form 1019) is required.

 Fannie Mae made the following updates in June: updated the Guide to simplify the way income limits are applied for HomeReady, updated policy on self-employed income, removed the policy that limits refinances of restructured mortgage loans, and updated the policy on project insurance specifically as it relates to mortgagee clause on a project master policy.

 Flagstar Bank is now offering the Freddie Mac Home Possible program, Doc. #5335.  This program includes enhanced borrower eligibility and improved mortgage insurance requirements. The program incorporates a general income limit of 100% of area median income (AMI) and provides no income limits for properties located in designated underserved areas.

 The Fannie Mae HomeReady program is available in Pacific Union's FLOW and can now be accessed by Quick Pricer in Price My Loan and Lending QB. 

 As everyone knows by now, Desktop Underwriter Version 10.0 release has been rescheduled for the weekend of September 24, 2016. More information on DU Version 10.0 can be found in the Release Notes and other resources on the DU web page.

 Fannie Mae's The Principal Reduction Modification Servicer FAQ document has been updated and posted to the business portal. Question 16 has been added.

 In order to enhance policy, Fifth Third Mortgage's refinance transaction requirements have been clarified including, but not limited to the following: escrow account requirements when proceeds are used to pay real estate taxes for both rate and term and cash-out transactions. Property Assessed Clean Energy (PACE) loan payoff requirements for rate and term transactions. Refinance of previous cash-out transactions within 6 months. Living trust irrevocable eligibility provision for continuity of obligation (Freddie Mac Only). Refer to its Correspondent Underwriting Guidelines for additional information.

 Fannie Mae's Quarterly Compass is now available highlighting news and updates for Q2 2016. This edition summarizes what's new with several Uniform Mortgage Data Program (UMDP) initiatives, the summer launch of its new integration platform, plus Fannie Mae Connect news, HomeReady enhancements, and more.

 AmeriHome's Fannie Mae program guides are updated to support changes announced in Fannie Mae Desktop Underwriter Release Notes - DU Version 10.0, dated February 23, 2016, and last updated June 10, 2016.

 Fannie Mae continues to provide enhancements to make Connect easier and more efficient. Recent enhancements include its Report Survey Tab which allows users to provide quick feedback on report content and usability. Export and Print Instructions providing informative details about how to best optimize each report's view. Interactive Quick Tips Demo to view instructive tutorial to navigate users through Tableau reporting functionality.

 M&T has received updated communication from Fannie Mae that HomeStyle kitchen renovation work plans may include the following appliances: Ranges/Ovens/Cook tops - free standing or built in. Refrigerators, free standing or built-in. Built-In microwave ovens (affixed to wall/over stove/etc. and built in dishwashers. If any are not included at the time of the original work write-up, eligible appliances may be purchases with contingency funds at the end of the project.

 Franklin American Mortgage clients be advised that effective Monday, June 27th the LLPA on FHA/VA loans with FICO's between 620-639 is increasing from -1.750 to -2.000.  This applies to all best effort locks and loans registered to trades Monday and beyond. Also noted, all manual chapters under its Compliance heading have been reviewed and updated with new formatting and a table of contents to improve ease of use. Conventional products have been updated to include the release of FNMA's HomeReady Product, expanded maximum LTV/CLTV/HCLTV limits for High Balance products and updated guidelines to follow the current VA policy for student loans in repayment.

 PennyMac announced non-delegated Eligibility Review will be available for conventional loans with Best Effort locks as of May 23rd. Applicable LLPAs for non-delegated loan will be made available on Best Effort rate sheets only. An executed Underwriting Service Agreement is required for all sellers that wish to participate in the program.

 PennyMac announced non-delegated Eligibility Review will be available for conventional loans with Best Efforts locks, effective Monday May 23, 2016. Read more here.

 And although the share of overall originations covered by private mortgage insurance products only ranges around 15%, the products are tied in to conventional conforming business.

 Arch MI will support and insure eligible loans that are approved through Fannie Mae 10.0 Score Card via its EZ Decisioning program which will incorporate the additional guidelines applying to borrowers with non-traditional credit.

 Essent announced the launch of its new online tool designed for loan officers navigating the next generation of homebuyers. EssentIQ shows millennials and other first-time homebuyers how Essent MI can help them become homeowners now so they can start building equity faster. Using a data-driven design, the tool: shows the opportunity cost of waiting to save 20% down vs. buying now with Essent MI, calculates the monthly payment for a loan that has Essent MI, and projects how quickly homeownership will build equity and wealth accumulation

EssentIQ also creates personalized, easy-to-understand presentations that can be saved, printed and shared via email. 

 MGIC is spreading the word to its customers about "Deep Coverage." "Deep Coverage Mortgage Insurance" refers to extending the use of mortgage insurance, both by using deeper coverage on loans that currently require mortgage insurance (loans with less than a 20% down payment) and by using MI on loans that do not currently require it. There are many obvious benefits to this approach, including: Mortgage insurance pricing is transparent and available to all lenders, regardless of size. Competition among 7 mortgage insurance companies brings an immediate increase in competition for pricing mortgage credit risk.  Deeper coverage brings an immediate decrease in taxpayer risk, putting substantial additional private capital in front of taxpayers before the GSEs purchase the loans. Deep Coverage Mortgage Insurance can play a significant role in bringing additional private capital to housing finance, reducing taxpayer risk before the loans arrive at the GSEs.

 Yup, today is a Friday, Monday is a holiday, and today is a shortened trading day in the bond market. Lenders may price conservatively since locks can't be hedged, although many will make estimates about afternoon volume and sell a portion this morning. But who the heck would lock in a loan's interest rate on a summer Friday afternoon? I'm sure some will...

 With one week after Brexit analysts are already talking about the EU making some concessions to the United Kingdom about wooing them back, and the UK being receptive. Yesterday news made the rounds that the ECB was considering moving away from the capital key (which governs how much of each country's bonds are bought in Quantitative Easing), citing the lack of available float which set off a rally in peripheral EGBs - and nudging U.S. Treasury security prices down (.125 on the 10-year) and rates up (closing at 1.49%).

 For news today there are no "first tier" numbers normally out at 8:30 AM EDT, but we will see the Markit Manufacturing PMI at 9:45AM EDT, and at 10AM the June ISM and May Construction Spending. Rates sheets will be better; the 10-year is back down to 1.41% with agency MBS prices +.125-.250.

Thursday, June 30, 2016

IRS Extends Deadline, Austin and SF Job Market Stats



(Thanks to Stephen S. for this one.)

At the end of the college year, a star football player celebrated by attending a late night campus party.

Soon after arriving, he became captivated by a beautiful coed and eased into a conversation with her by asking if she met many any "potential dates" at the party.

"Oh, I'm much more attracted to the strong academic types than to the party animals," she said. "What's your G.P.A.?"

Grinning from ear to ear, the jock boasted, "I get about 25 in the city and 40 on the highway."

The last day of June, and 2016 half over? How did that happen? (Regarding time flying Linda B. writes, "Thank the Good Lord, I am Benjamin Button.") June for me included time spent in Dallas, Albany NY, Northern California, Las Vegas, New Orleans, Kansas, and now Hawai'i for the MBAH conference. I continue to see hard-working, conscientious, competent people in all ranks of residential lending doing their jobs well. And yet we, as an industry continue to pay the price, both in the press and financially, for problems from years ago. And if you don't think regulators are teaming up, think again - just ask BancorpSouth (details on its $10.6 million settlement below).

Lenders One, the largest mortgage banking cooperative, is hosting its annual Summer Conference August 7-10 in L.A.  Originators from across the country will come together to share best practices, learn from top industry experts and help shape the future of the industry. Kyle Manseau, Vice President of Operations at Allied Mortgage Group, shared that "L1 conferences are by far the most organized, structured and productive conferences that I have attended in my 22+ years in the industry."

 Save the date for the 21st Annual Western States Loan Servicing Conference and Golf Tournament, August 14th - 16th in San Diego. Details are available on the California MBA website.

 Find out the possible effects of "Brexit" regarding implications for Securities and other Financial transactions. This program will provide an overview and discussion of the possible effect of a so-called "Brexit" on EU issuances of securities and transactions in other financial instruments. Register for the July 7th webcast with Peter J. Green and Jeremy C. Jennings-Mares of Morrison & Foerster LLP who will discuss the impact of a Brexit.

 Speaking of Brexit, and upheaval, the Fed released the results on its annual stress tests of 33 large US banks that have more than $50 billion in assets. Do non-bank residential lenders have stress tests? No. The stress tests examine what would happen if a bank, or economy, ran into trouble. Last year only Deutsche Bank and Banco Santander did not pass the stress test.

 This time around nearly all of the largest U.S. banks are on steady enough footing to increase payouts to shareholders. The two banks that failed - Deutsche Bank Trust Corporation and Santander Holdings USA, have "broad and substantial weaknesses" that persist in their capital planning processes, the Fed said. The Fed also criticized some elements of Morgan Stanley's capital planning process - but still allowed the bank to move ahead with plans for a $3.5 billion stock repurchase program and a quarterly dividend hike while it rectifies the issues.

 Analysis by the World Bank finds banks in some countries still need to close branches to boost profits. Some interesting data points by country of the number of bank branches per 100,000 adults are: Columbia #1 (256), Peru #3 (121), Spain #7 (70), Italy #9 (60), Brazil $12 (47), Belgium #17 (40), France #19 (38), Japan #27 (34) and US #31 (32). Of note, the UK is at 25 branches per 100k and Germany is only at 14.

 Certainly we've seen consolidation in the financial world. On the banking side of things, Steve Brown with PCBB (Pacific Coast Bankers Bank) writes, "As of the end of 2012, there were 7,083 financial institutions and as of the end of Q1 2016, there were 6,122. That is a decline of 961 over 14 periods or about 73 per quarter based on this simple calculation...the total number of financial institutions operating in the US is continuing to decline. Over the past 3 years, the rate of decline has been about 1% or so from the prior quarter, which is historically about the same level as it has been going back even as far as 10 years or more.

 "Therefore, in projecting forward year by year and assuming the 4% decline (i.e. 1% per quarter vs. prior quarter) continues, the industry should shake out something like this in the coming years. As of the end of 2015 there were 6,182 financial institutions (in this case, banks) operating in the US. At the 4% annual decline rate, we would project something around 5,906 at the end of 2016. Looking forward using the same methodology you can logically expect the industry to be 5,643 by the end of 2017; 5,391 by the end of 2018; 5,151 by the end of 2019 and 4,921 by the end of 2020...You cannot count on the past to predict the future, but at least in banking this number continues to holding up quite well."

 Along those lines, in the last week it was announced that in Montana the State Bank of Townsend ($58mm) will acquire Dutton State Bank ($56mm). In Georgia First National Bank of Decatur County ($120mm) will acquire Citizens Bank ($33mm). Canada's 5th largest bank, Canadian Imperial Bank of Commerce (CIBC) will acquire The PrivateBank and Trust Co ($17.7B, IL) for about $3.8B in cash (40%) and stock (60%). American National Bank ($3.0B, NE) will acquire Stonebridge Bank ($209mm, MN). First Midwest Bank ($10.6B, IL) will acquire Standard Bank and Trust Co ($2.5B, IL) for about $365mm in stock. Dollar Bank, FSB ($7.4B, PA) will acquire Bank @LANTEC ($112mm, VA). (And yes, that is its name.)

 Berkshire Hathaway (BHLB) announced the acquisition of First Choice Bank, in an all stock deal valued at $112 million, representing 109% P/TB, a 1.4% core deposit premium and 18x P/E (2016). This deal brings BHLB to the brink of the $10 billion asset threshold. People's United Bank ($38.9B, CT) will acquire The Suffolk County National Bank of Riverhead ($2.3B, NY) for about $402mm in stock or about 1.95x tangible book.

 But Mississippi's BancorpSouth, Inc., the holding company for BancorpSouth Bank, is going to be $10.6 million lighter going forward - although it had already set aside (reserved) more than enough for the settlement. The bank entered into a settlement through the agreement to a consent order (the "Consent Order") with the U.S. Department of Justice ("DOJ") and the Consumer Financial Protection Bureau ("CFPB") related to certain alleged violations of the Fair Housing Act and Equal Credit Opportunity Act. The settlement will fully and finally resolve all previously announced claims by the DOJ and CFPB against the Bank. BancorpSouth has not admitted to any of these allegations or to any liability.

 "Since 2012, the Bank has taken a number of steps to enhance its compliance management systems, reduce its fair lending risk, and increase its lending in minority areas. The settlement is an opportunity for the Bank to avoid protracted litigation with the DOJ and CFPB...BancorpSouth has previously announced numerous enhancements designed to further strengthen its commitment to promote affordable lending products in low to moderate income and minority areas including a new Director of Community Lending to oversee ongoing outreach efforts in all markets, including the Bank's continued lending efforts in minority neighborhoods, a Chief Fair Lending Officer who is responsible for developing, evaluating, and implementing its fair lending program, a Community Development Lending Manager within the BancorpSouth Mortgage team, and opened a new branch in Memphis, Tennessee.

 "These enhancements, combined with the Bank's centralized underwriting process and pricing, further strengthen the Bank's commitment to develop and promote affordable lending products, in low and moderate income areas and minority areas."

 In some temporary good news, the IRS has extended the re-verification deadline for existing clients of IVES vendors from July 1, to midnight July 15. The MBA reports that, "IVES vendors tell us that meeting the July 15 deadline remains a challenge, but this is a significant improvement...(we) have encouraged our members to proactively reach out to their vendors. We appreciate the extension and urge MBA members to complete the re-verification process as soon as possible. If you have already been contacted by your IVES vendor(s), you should continue to make it a priority to complete the process quickly. If you have not yet been contacted by your IVES vendor, you should immediately call your vendor and obtain the re-verification requirements."

 While we're on the IRS, Pacific Union Financials' Correspondent Lenders are advised to have established the appropriate security protocol for ordering tax transcripts via the 4506-T as part of the proper delivery process. Per IRS enhanced guideline requirements, 4506-T vendors are required to certify that all of their subscribers comply with new requirements or must disable any subscriber accounts that do not certify their users to the new requirements by midnight on July 15.

 Aside from holidays, every Thursday we receive the weekly Initial Jobless Claims figures from the prior week. The flip side, of course, is employment. The Census Bureau's county business patterns says that there are 50 counties in the United States that account for 34.7% of all U.S. employment. Among those 50 counties, San Francisco, CA and Travis, Texas (think Austin) lead the nation in employment growth. Both San Francisco's and Travis's employment grew 5.7%. In San Francisco, the information sector grew 13.6%, the construction sector grew 10.4%. In Travis, the real estate and rental and leasing sector grew 22.3%, and the utilities sector rose 14.6%.

 Travis also lead the 50 largest counties in the rate of growth of business establishments, growing 3.6%.  It seems that large California counties are leading the charge in employment growth. 3 of the top 10 large counties with the highest rate of employment gains were in California: Riverside (4.4%), Alameda (4.1%), and Santa Clara (3.9%). In fact, California has the most establishments (889,646), employees (13.8 million), and largest payroll ($797 billion).

 And yes, this morning we had Initial Jobless Claims. They were +10k to 268k. Yesterday agency MBS prices ended lower in price and the 10-year note closed .125 lower in price (settling at 1.48%). Yes, since a week ago mortgage rates have moved lower, but not as much as some expected given the Brexit turmoil. Trading desks are seeing prevailing 30-year mortgage rates around 3.5% which would put the primary/secondary spread at 113bps. Fannie's trading desk reports that, "While some lenders have posted 3.375% and 3.25% GNRs on their rate sheets, volume has been understandably limited given the recent market rally...With just roughly $9 billion of available float in the 2.5% coupon, liquidity should improve if we stay at these levels."

 Later this morning we'll have the Chicago PMI, projected to rise back above 50 to 50.5 vs. 49.3 previously. For numbers, after Jobless Claims we're at 1.50% on the 10-year and the agency MBS prices are actually slightly better than Wednesday's close.

Wednesday, June 29, 2016

Free Training Across The Nation and FHLBs Enlist In MPF For Ginnies



Dan was a single guy living at home with his father and working in the family business. When he found out he was going to inherit a fortune when his sickly father died, he decided he needed a wife with whom to share his fortune.  

One evening at an investment meeting he spotted the most beautiful woman he had ever seen. Her natural beauty took his breath away. "I may look like just an ordinary man," he said to her, "but in just a few years, my father will die, and I'll inherit 20 million dollars."

Impressed, the woman obtained his business card and three days later, she became his stepmother.

Women are so much better at estate planning than men.

Huh? People burned while walking across fire at a Tony Robbins event in Texas? Imagine that! Speaking of incendiary activities, an amendment passed the Senate Appropriations Committee would bar federal banking regulators from preventing or penalizing banks for providing financial services to state approved marijuana businesses. This will now head to the Senate floor for a vote. I am sure that the alcohol lobbies are dead-set against it, but using income from such businesses for loans bound for F&F or the big banks could make things less complicated for underwriters.

BOK Financial Correspondent Mortgage Services would like to remind banks and credit unions it purchases construction to permanent mortgage loans utilizing a single closing that meets Fannie Mae guidelines. Borrower benefits include time and cost savings, eliminating multiple loan applications, fees and closing costs. We offer extended rate lock options for up to 360 days, with a 90-day float down, allowing the lock in rate on permanent financing when construction begins. Single-closing transactions may be used for both the construction loan and the permanent financing of a home if the borrower wants to close on both the loan and financing at the same time. For more program information, contact clientrelations@bokf.com or call 855.890.1485.

 LoanCraft can turn a pile of tax returns and K1s into a clean, uniform analysis, typically in less than four hours. Typically, you get a full analysis of tax returns for personal and business for $25.  It's especially helpful given the recent changes around K1 distributions. They also don't have a minimum monthly commitment. Contact Ron George for more information.

 In 2013, LendingQB first released an interface to MCT's HALO-Link, which automatically transferred loan pricing and pipeline data from the LendingQB LOS to MCT in order to improve the accuracy of hedge positions. Today, the two companies completed an enhancement to the HALO-Link interface that adds the capability for MCT to update the LendingQB LOS in real-time with key investor information, such as confirmation number, confirmation price and expiration date. The result is a comprehensive and efficient secondary marketing process that provides pricing and hedge risk transparency throughout the mortgage loan life cycle. This joint effort demonstrates how collaboration between an LOS and a risk management firm produces tangible operational benefits to mortgage lenders.

 Franklin American Mortgage Company announced it is now offering Fannie Mae HomeReady Fixed Rate Product.

 Overture Technologies has integrated trended credit data into its automated underwriting system, a move that enables lenders and investors to gain new insight into the credit risk of their non-agency loans. The enhancement to the industry's leading independent automated loan underwriting system (AUS) follows Fannie Mae's recent announcement regarding use of expanded credit data in its Desktop Underwriter AUS. Trended credit data records a consumer's use and repayment of revolving credit over time and provides important insight into consumers' evolving ability and willingness to repay a new debt obligation. Lenders, particularly those specializing in loans to borrowers with previous bankruptcy or housing defaults, can leverage this data to understand how consumers have managed their use of credit as they re-establish their credit history.

 United Wholesale Mortgage (UWM), has introduced a new proprietary Settlement Agent Portal, which enables settlement agents to submit their closing changes electronically to UWM. The new portal will streamline the closing process and speed up the response time for UWM clients and their settlement agents. The portal will enable settlement agents to review the preliminary closing documents and submit their changes electronically, placing the file directly into the closing queue. This process eliminates the need for multiple emails and waiting for a Closing Specialist to reply to an email. UWM produced a tutorial video to highlight the increased efficiencies the portal makes possible.

 On the flip side, effective 6/30/16, Mountain West Financial, Inc. (MWF) will discontinue the 203K Standard and Limited Wholesale Programs. MWF will accept registrations up to 6/30/16 and all loans must fund by 8/31/16.

 And recently the IRS notified vendors who provide tax transcripts (such as IVES vendors) that they would need to implement new requirements in order to continue providing tax transcript services. These new requirements are intended to better protect taxpayer information. The updated requirements include certain new assessments and certifications for vendors and lender clients. The MBA's president Dave Stevens sent out a note saying that, "While the IRS has not made their new certification requirements available to the public, we have learned they will include items such as a requirement that lenders provide their vendors with the Social Security numbers of any individual authorized to use the tax transcript process. Some of the new requirements must be implemented by July 1 and thus demand your immediate attention. Other requirements must be implemented within 45 days.

 "The MBA has asked the IRS to delay the implementation date and is working for further clarity around the requirements. The IRS, however, as of this writing has refused to delay the implementation. I strongly recommend that you reach out to your vendor today to obtain the requirements and complete the necessary certifications and assess the impacts on your business operations. According to the IRS, vendors will be required to suspend access to the transcript service for any lender that fails to complete the required certification by midnight, Friday, July 1. If you have any questions, please contact Rick Hill, Vice President, Industry Technology at (202) 557-2718.

 In better news, The Mortgage Collaborative, the industry's only privately held cooperative, has surpassed $100 billion in estimated originations in 2016 with the addition of its 59th preferred member, Movement Mortgage. "This is an extraordinary milestone for us" said David G. Kittle, CMB the Collaborative's Vice Chairman.  "As we move into the second half of 2016 and towards our August Summer Conference in Denver, we'll be discussing how TMC will monetize this production in 2017. are member companies estimated to do that volume in 2016?

 For some training and events coming up, some as soon as today...

 The new Summer 2016 edition of Arch MI's Housing and Mortgage Market Review® (HaMMR) will be released next week. Following its release, author Ralph DeFranco, Arch Capital's Global Chief Economist, will present two complimentary webinars on HaMMR and the latest findings of the Arch MI Risk Index® (the probability of regional home prices being lower in two years). Register now for either Wednesday June 29th webinar or Thursday June 30th webinar.

 Learn how to minimizing risk exposure & liability with a free recorded webinar from Bilzin Sumberg. Join a panel of experts as they discuss data security and privacy concerns in the private sector, as well as best practices for minimizing exposure and liability. If you would like to register, email Philip R. Stein, attorney at law.

 Essent invites you to register now for one of its July training webinars. "There are so many vital topics being addressed by Essent's training team, that you may have a difficult time choosing which one to take first."

 On July 19th in New Orleans, the FHA is providing a free one-day training course covering FHA underwriting procedures.

 Valuation Expo, the largest conference for real estate appraisers, is rapidly approaching. It will be held at the Baltimore Marriott Waterfront, July 11-13. "We will hear from industry who's who such as Joe Tracy from the NY Federal Reserve; Jim Park, Director of the Appraisal Subcommittee; Zach Dawson, Chief Valuation Officer at Fannie Mae, and a panel of bank regulators from OCC, FDIC, NCUA, and FRB. In addition to 14 hours of continuing education available there will be a trade show with software companies, E&O providers and lots of AMCs and lenders."

 In security news, American Banker reports that the Federal Home Loan banks of Topeka and San Francisco have signed up to participate in a Mortgage Partnership Finance program that pools and securitizes government-backed loans via Ginnie Mae. "We now have a new option for selling your government mortgage loans into the Mortgage Partnership Finance program...MPF Government MBS product is geared to make you successful with competitive pricing in both servicing retained and released options," a memo told members.

 "The Chicago Home Loan Bank created and continues to run the MPF program. The Chicago and Atlanta FHLBs have sold the most loans through the program, which is also used by the Boston bank. The San Francisco bank has also joined. The MPF program allows for the sale and securitization of Federal Housing Administration, Department of Veterans Affairs and Rural Housing Service loans." Although the program is less than a year old, so far the MPF Government MBS program has securitized $271 million in single-family loans through May.

 Keeping on with the security markets, Tuesday was a bit of a yawner although the treasury market recouped earlier declines despite the bounce in risk assets. As ThomsonReuters put it, "By the close, retail MBS volumes were near recent averages and biased to better buying." But we were close to unchanged.

 For rates we closed the 10-year with a yield of 1.46%. Today we've already had the MBA's weekly update on mortgage applications for the week ending June 24 (-2.6%). We've also had May personal income and spending (+.4%, +.2%). The Pending Home Sales Index will be released at 4AM Hawai'i time. In the early going the 10-year's yield is hovering around 1.48% with agency MBS prices worse a shade.

Tuesday, June 28, 2016

Our Economy During Election Years



Deep in the back woods of Tennessee, a farmer's wife went into labor in the middle of the night and the doctor was called out to assist in the delivery. Since there was no electricity, the doctor handed the father-to-be a lantern and said, "Here. You hold this high so I can see what I am doing." Soon, a baby boy was brought into the world.

"Whoa there," said the doctor, "don't be in such a rush to put that lantern down. I think there's another one coming." Sure enough, within minutes he had delivered a baby girl.

"Hold that lantern up, don't set it down there's another one!" said the doctor. Within a few minutes he had delivered a third baby.

"No, don't be in a hurry to put down that lantern, it seems there's yet another one coming!" cried the doctor.

The farmer scratched his head in bewilderment, and asked the doctor, "You think it might be the light that's attracting them?"

How could it have been 30 years since everyone was watching "Top Gun" in the theaters? Yes, time flies, and before you know it, well, you're old. Where's the best place to be a reverse mortgage originator? I guess some place where older people want to stay put. The nation's only county with a majority of the population age 65 or older remains Sumter, Fla., where 55% had reached retirement age and had a median age of nearly 67 years on July 1, 2015.

The world is focused on Europe and Brexit, but recently Wells Fargo's economic team wondered, "Does U.S. economic activity slow in election years?" It has been well documented that the stock market is affected by who is newly elected. When Obama took office in 2009, the S&P 500 and the NASDAQ fell around 5% the day of his inauguration. Most believe, however, that that while the economic backslide may have seemed to indicate that the American public was less than confident in their newly elected leader, the dip was instead widely credited to continued lack of confidence in the failing economy left behind by the previous administration. Either way, confidence in a new leader, and the ability of a market to digest change in a new leader, lead to volatility in the market in the first year after election.

 With that in mind, there hasn't been much research on the performance of real economic variables during presidential election years. The general argument is that the uncertainty of who will become the next president and how that will affect the economy results in slower economic activity. Wells Fargo's economics group findings "suggest that the general argument that uncertainty during presidential election years results in slower economic activity does not hold water. In fact, based on our analysis, we find that real GDP growth, real consumer spending growth, real business fixed investment growth, real disposable income growth and industrial production growth are actually stronger during presidential election years compared to non-election years."

 To prove this and put it into numbers, Wells Fargo took a look at how economic outcomes differ between presidential election and non-election years; they examined the performance of the U.S. economy in presidential election years over the past half-century. They utilized a set of key economic indicators including real GDP, real disposable income, employment and industrial production from 1960 through 2015 on a quarterly basis. Their economists found that median real GDP growth during presidential election years is 1.25% higher than during non-election years.

 Wells Fargo also looked at if there were any outside factors affecting the results. To do that, they performed a sensitivity analysis adjusting the time period to the "modern era" (1980's and beyond). Another possibility was a differing number of recessions during presidential and non-presidential years. The final factor of possible influence was who controlled the White House. Looking at each of these areas individually, they found no statistical differences that would change the results. In conclusion, Wells Fargo did not find any evidence of adverse effects on economic activity in presidential election years. Now, make sure to vote because what is slow is the voter turnout rate of 60%.

 Switching gears to investor updates...Nature bats last, and lenders & investors react to disaster news with reminders of their lending policies.

 Amerihome regularly updates information regarding counties in disaster areas. For a current list of affected counties and re-inspection requirements, log in to its website.

 Pacific Union issued an alert reminding clients that its policy for properties located in disaster areas as published in its Correspondent Lending Guide.

 But nature also can help us out. Mountain West Financial Wholesale is requiring any property with a solar panel system lease or Power Purchase Agreement (PPA) must have the solar panel system lease or Power Purchase Agreement reviewed for eligibility prior to the file being submitted for underwriting.

 And appraisal requirements continue to evolve.

 Effective as of June 1 Nationstar Mortgage will maintain and distribute a monthly Nationstar Mortgage Appraiser Exclusionary List in an effort to continue to ensure collateral quality.  Correspondents are encouraged to review the Nationstar Mortgage Appraiser Exclusionary List prior to submitting a loan to Nationstar Correspondent for loan purchase.

 In a previous announcement, Nationstar Mortgage inadvertently provided the incorrect UCDP Aggregator ID.  In order for Correspondents to take advantage of the appraisal-sharing functionality, Correspondents must set up their "Aggregator profile" within the UCDP web portal and then select the aggregator(s) with whom they will choose to share appraisals.  Please use the corrected UCDP Aggregator ID as listed below: Please select Nationstar Mortgage from the selection criteria within the profile: KSJ363 UCDP Aggregator ID Nationstar Mortgage.

 All U.S. Bank clients be advised that all appraisals for new originations must be submitted to FHA through the portal for all FHA case numbers assigned on or after June 27. Non-Delegated Correspondents must provide a first generation PDF of the FHA appraisal report in the underwriting submission package to your assigned Underwriting Center.  Our Underwriting Group will then upload the appraisal to the FHA EAD Portal and the SSR report will be uploaded to the iDoc file along with the Appraisal Logging. This is a temporary procedure as FHA will open up the EAD Portal to clients that we Sponsor, or act as their Authorized Agent, on July 21, 2016. Additional information on this process will be forthcoming.

 Pacific Union Financial posted a reminder that effective with all case numbers assigned on and after June 27, the Electronic Appraisal Delivery (EAD) portal must be used for electronic transmission of appraisal data files and reports for all FHA loans.Only appraisals that comply with FHA's Appraisal Report and Data Delivery Guide may be uploaded to the EAD portal. Users will be provided a confirmation of successful upload or informed that the appraisal requires correction and re-submission. Once an appraisal report is successfully uploaded to the EAD portal, FHA Connection (FHAC) will pull EAD appraisal data and pre-fill certain data fields in the Appraisal Logging screen.

 Beginning this month, the Collateral Underwriter (CU) Appraisal Findings report will be available exclusively through Fannie Mae Connect™. The report can be accessed by going to the Underwriting section of Report Center. Additional information accessing CU reports in Fannie Mae Connect is provided in the CU Reporting Overview document.

 NYCB Mortgage posted seller guide updates. In reference to permissible use of land policy - accessory unit, the appraisal section has been updated to specify that if the property contains an accessory unit that complies with zoning, the property is eligible if the appraisal report can demonstrate that the improvements are typical for the market through analysis of at least one (1) comparable property with the same use. Also updated is its Seasoning Requirements section regarding Borrowers with No Obligation on Existing Mortgage to be Paid-Off. Specifically, that the borrower(s) may be eligible if they have been on title for at least 12 months, but is not obligated on the existing mortgage(s) that is being refinanced, if they meet at least one of the following requirements: The borrower has been residing in the property for at least 12 months, the borrower has paid the mortgage for at least 12 months, or The borrower can demonstrate a relationship with the current obligor (for example, relative or domestic partner). Note: The loan must be structured as a cash-out refinance.

 Turning to the markets, and the topic of the last month - Brexit - Brian L. writes, "Personally, I like the following additional Eurexit monikers: Austria La Vista, Swedyonara, Luxembyerg, and Deutsche let the door hit you on the way out." There's a lot of humor out there, but in the secondary markets none of it is coming from broker-dealers and investment banks when queried about "renegotiating" the prices of any mortgage-backed securities sold to them by lenders hedging their pipelines. It just doesn't happen in the secondary markets. But in the primary markets LOs and brokers give it their best shot - a money losing prospect for lenders.

 Monday U.S. Treasuries rallied again as Friday's Brexit-induced risk aversion trade rolled onward. While there was little U.S. economic data released, investors had plenty of news to digest as banking stocks in the U.K. and Italy sank. The Brexit vote may well move Europe's financial center from London to the Continent or Dublin. And Italian lenders' non-performing loan problems will not be made better by the Brexit turmoil. Italy's government is said to be considering a bailout plan for its banking system but would need a waiver from the EU to avoid a new regulation which requires investors to take heavy losses before the state can provide support.

 Today we've had the third look at the first quarter's GDP numbers (revised higher to 1.1%, still the lowest in a year). Coming up later is more "old" news: the April Case-Shiller 20-city Index (3AM Hawai'i time) and June Consumer Confidence at 4AM HDT. The yield on the 10-year is "back up to" 1.47% and agency MBS prices are slightly worse than Monday's close.