Sweet home, Chicago...Chicago's City Council published an ordinance that
would require
banks, mortgage servicers and institutional investors to maintain vacant
properties
before the homes have gone through foreclosure. It requires securitization
trustees
to assume liability for the maintenance, security, and upkeep of properties
in their
trusts within 30 days of a property becoming vacant. But Tom Deutsch,
executive
director of the American Securitization Forum, called the ordinance
"illegal," because
it does not require that a borrower be in default or foreclosure as a
condition
of vacancy. Rather, the banks, mortgage servicers and investors will now be
responsible
for determining if a property is vacant even if a borrower is not delinquent
or
has not been foreclosed upon, he said. ASF is a trade group that represents
investors
and servicers.
Of course this is a big deal with servicers: how would a servicer know when
a home
becomes vacant? Under the ordinance, the borrower could still be making
payments,
but if the property is vacant, then the servicer is on the hook for internal
and
external maintenance. There's always the nuclear option - to stop buying
loans
with homes that are secured with Chicago properties! No servicers that I
know of
are contemplating that, but it has been done in the past - when Georgia
passed
some compliance legislation with Assignee Liability. Once again - unintended
consequences.
A mortgage banking conference is not simply a few thousand mostly male
mostly Caucasian
mostly dressed in suits mostly age 35-55 folks standing in the lobby. "A
gathering
of protesters from a variety of community groups congregated late Monday
afternoon
outside the Hyatt Regency in Chicago, where more than 2,100 people in the
mortgage-banking
field are attending their industry's annual convention this week. Protesters
demanded
relief for struggling homeowners, including loan-principal reduction for
those underwater
on their mortgages, said Tracy Van Slyke, co-director of New Bottom Line, a
campaign
that challenges big bank interests on behalf of struggling and middle-class
communities.
The group also thinks banks aren't paying their fair share of taxes and
wants them
to invest more in small businesses, she said. One estimate put the crowd at
250
people, many of them chanting, "Hey, hey, ho, ho, Wall Street bankers got to
go."
Some hoisted signs, including one that read, 'They get rich. We get
foreclosed.'"
It was all very exciting, and some of the folks in the biz glanced up from
their
Blackberries.
The third quarter is over, but word is in from the second quarter that the
eight
national banks and single federal savings association servicing the largest
loan
portfolios reported that first mortgage performance declined across all
categories
of delinquencies during the second quarter of 2011. The information is part
of
the Office of Comptroller of the Currency (OCC) Mortgage Metrics Report
which covers
63% of all outstanding first mortgages in the nation. According to the
report, current
and performing loans represented 88.6 percent of the banks' portfolios in
the first
quarter but declined to 88 percent by the end of the second quarter. This
is still
an improvement from the second quarter of 2010 when 87.3 percent of the
loans in
the portfolios were current. But hey, why take my word for it? Seeing is
believing:
OCCMetrics
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108078792206&s=8721&e=0013n0h9R
9s_tSlRp54AFZyTik0ZOkBvaGNoB3qInvBNS3vlhx0Ww6Q9myRFxDaDw92rG7j7omiBnuKL-RIFS
YnVdPnKJOODvV8cu-ia3mEXx0stXk2Kc5N1oqEF__6hfQOC27FQYAdDZHkgC8QQhj34Wa4tClERB
O6Ezsgd7e0BgV5zl64Ypu7UiM9et9KXS6d].
REIT's continue to be in the news. Residential REIT's constitute a
noticeable portion
of the demand for MBS's, and their health is judged as important to loan
originations.
Losses over the past two days among certain REIT's, however, have been more
than
11% in share price before rebounding yesterday. "While the
repurchase-agreement,
or repo, market for government- backed mortgage bonds that many REITS rely
on for
funding is in 'good' shape, it may face pressure if Europe's banks need to
retrench,"
on executive noted. I know that the article is a little dated, but one can
read
more at: REITTroubles
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108078792206&s=8721&e=0013n0h9R
9s_tSdANK7-j0r7dnGOWqaKdeBRrocEeNXjGv-TNDkfeAJULWjotplDQTO6qK1sPOaO9vSBB0-M5
4YaruYW15MPD6nXMrJGTZpVgtkaYhOJKz65-1lR43kKQmh49_liakFo2SBITgFlvN8UW2axlbAWx
o2v_gffOwrP8RqByognP88fCXg98NyR-F7sSkc0ObNefn43acysFvK-3bcAaKXp69NziA_52BUaX
wWS11Z3lC2kRiJwP6emHXl].
A few years ago, a friend of mine bought a foreclosed-upon home "on the
courthouse
steps." He made quite a bit of money on the deal, much of from the 2nd lien
holder,
in this case a large money center bank, walking away from their $200,000 2nd
in
spite of there being plenty of equity. According to people who do this
regularly,
this is not uncommon ("there are just too many properties for banks to deal
with
out there"), and it made me wonder about the financial situation of any
large holders
of 2nd mortgages. These concerns have definitely become mainstream:
NoMore2nds?
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108078792206&s=8721&e=0013n0h9R
9s_tTv9KM1tJ1W25AkemyAWlVbT3CZ6gTG78SgfdcPmss-ffeDyVPhVKtTZPMyoexi7_9rv4rMEg
VWqJ0PPaeDLFunwr3oRUhR5G2oEIIitHxzWBO2vVaXKBhUd7GSO0qCcK6bbgQpubZbgkGqDxNM_i
aLjnQhnzNZH_xPgsuuv9IRgUhJEEhBA-YzhbcsB-uHnRCvFGQb0187v9Wi30NR8Xal]
For appraisers who like to follow lawsuits, here is a good site passed along
by
Jason Oelrich in Washington (thank you!): IShouldHaveBeenALawyer
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108078792206&s=8721&e=0013n0h9R
9s_tTqncJ0WErVUUNzI0AwP_WWEyi5yJXPKhnojldb4Fn3VeVvYmxspUeaNT48z4Y1K9cJe1K_hI
yM3XprXdQlBHWkqYZzn8cqUzmQCQXkMZdT54Ky-40Fgwe4Lrs60p8cDKA=].
But appraisals determine values and owner's equity. And the Washington Post
carried
an article by Ken Harney addressing equity on a state level
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108078792206&s=8721&e=0013n0h9R
9s_tT39MaGb3WBUEmz5zZMox9P_yeSGajxpwHvqZqEz1s-p_hcvxQhr-jXWtM1d51ItAqPsdfThw
wAn-LpSC4QQI86lRRlTw70kUvqVf8KKmt8sCwtCk_Q1IB9JQA6SfmMpyivyNGMxE37DsesAqimCd
OaOyShfHI_30vXMVP8AcbHK9nzLhVfkdTaqSSVmQ8mbtPoc_VZNan2JXyQN4VdCZyIRWpoNvr7Jd
hSOpzhSHnitcdAAt_uxDdq].
David C. writes, "I've been working in the AMC space on for about 2 years.
I feel
like I drank a lot of cool-aid initially. I really believed the national
AMC's
had the best interests of the industry in mind in the way they conducted
their businesses.
Now having been closely involved I see many of them for what they are, a
bunch
of completely self-serving, poorly managed, liars. I know that sounds harsh
but
the goal in the business is to get the appraiser to do as much work as
possible
at the lowest possible cost. Who cares what the finished product looks like?
I don't
want to come across too commercial but I joined InHouse because they have an
excellent
platform at a fair price for the mortgage banker to self-manage. 8 out of 10
appraisals
flow through the system with relatively few issues, there's no reason
someone needs
to take $150 to $200 for placing and order and getting it to the client.
AMC's
should only be used for the hard to do outliers. Let them earn the spread.
I could
go on for hours, but suffice to say, in a year most originators will be
self-managed
and the mortgage banking industry will be much better off."
What is a flood? I guess Webster's Dictionary isn't adequate, so the U.S.
Government
would like to tell you: 40DaysAnd40Nights
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108078792206&s=8721&e=0013n0h9R
9s_tRVNkTIoccPRfjX0_I5AopCOIsuQI6jlN1s17QqOAAImbBYYKt1h5QkzGCymMQOY9VMMdeZJU
ZK2yi_YQRNdc9VzjhvMGgnaQlBHY3m4wb-C19c6ajPX8zHC5yJJ9Eyjdas-M2tdytogbfCIGT7yf
rBJNeW4GJRZzHzBugRiV_fTA==].
I bring this up because much of our nation is subject to flooding, which
directly
impacts mortgage lending. And those who follow it know that what we have now
only
goes through November 18th, so it is subject to the typical last-minute
whims of
our government: FEMA
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108078792206&s=8721&e=0013n0h9R
9s_tSjeQsu7GMmjZ7ogNHOrSq1rcMDotojivgxMrOCM9ivme2-zrlbl-yHol-avaCSY42K8zL-EY
YAMCk7yfKSQHS5oOwFediBdqRbfIWUIWXTzo3nYds6dZwcbh06rwYC-aQ=].
Turning to investors, all of whom are whom are staying up late at the
conference
in Chicago, Bank of America issued a disaster update for New York.
SunTrust Mortgage revised its guidelines so that "we no longer include a
monthly
payment in the borrower's debt-to-income (DTI) when the credit report shows
a zero
balance. We are also providing additional relief to exclude a debt from the
borrower's
DTI when an account is paid and closed at closing. For credit reports that
do not
reflect a monthly payment but have a balance, we are aligning our non-AUS,
DU and
LP guidelines for best execution. In addition, we have revised the revolving
account
guidance for FHA and VA loans." SunTrust also revised its Homebuyer
Education Provider
guidelines to delete Private Mortgage Insurance (PMI) and Republic Mortgage
Company
as eligible providers for Homebuyer Education.
GMAC sent out a flurry of changes. Its correspondent clients learned of some
changes
to its Veros appraisal ordering platform. Among others, "Correspondent
Clients will
be able to choose an Appraisal Management Company (AMC) within the Veros
application
on Jumbo transactions. The AMCs are displayed on the Orders tab. Select from
the
four options available in the dropdown titled 'Distribution Rule'." And
"The ability
to place a Rush order is no longer available."
"GMAC Bank currently requires that loans sold to GMAC Bank must be
underwritten
and closed in the name of the Client and that Client must have delegated
underwriting
authority for the loans that it underwrites. We have added the following new
representation
and warranty to the Client Guide: On loans sold to Correspondent Funding,
each loan
was closed in Client's name. Each loan brokered to Client for underwriting
and closing
in the name of Client was underwritten by Client and Client had delegated
underwriting
authority for such loan."
GMAC also reminded us that there is a lapse in funding Rural Development
loans ("GMACB
will not fund or purchase any loans with Conditional Commitments "subject
to" availability
of funds") and that the VA Funding Fee changes have been temporarily delayed
until
November 18, 2011.
Ever wondered about the life of a loan? Mountain West Financial is putting
on a
30 minute session tomorrow at 1PM PST about what happens: "Follow a loan's
journey
from submission to funding" (second only to the life a salmon): MWF
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108078792206&s=8721&e=0013n0h9R
9s_tRc-o2IA3tmAQsXDJqbDLKDLM_Lu-JGQz6h3wUxzKxwzGh_g9R2aZcVHSfelh8Ci1T4ZJS6_i
pZCiUDFXTvKvDD_NMUvERTY7sUvIdKOhHjTIOkRpeCNLezdxG4oQgMmKGxQAo85nQ82w==].
A look at the markets shows that rates have crept up a little. We have the
FOMC
minutes today, Wednesday the MBA app numbers. Thursday things "hot up" a
little
with Jobless Claims and some trade balance numbers. Friday we have Retail
Sales
for September, import & export prices, and a University of Michigan
Sentiment number.
Really, aside from the FOMC minutes and Retail Sales, it is a pretty ho-hum
week.
The 10-yr is at 2.15% and MBS prices are slightly worse.
The commanding officer at the Russian military academy (the equivalent of a
4-star
general in the U.S.) gave a lecture on Potential Problems and Military
Strategy.
At the end of the lecture, he asked for questions.
An officer stood to ask, "Will there be a third world war? And will Russia
take
part in it?"
The general answered both questions in the affirmative.
Another officer asked, "Who will be the enemy?"
The general replied, "All indications point to China ".
Everyone in the audience was shocked. A third officer remarked, "General, we
are
a nation of only 150 million, compared to the 1.5 billion Chinese. Can we
win at
all, or even survive?"
The general answered, "Just think of this a moment: In modern warfare, it is
not
the quantity of soldiers that matters but the quality of an army's
capabilities.
For example, in the Middle East there have been wars recently in which 5
million
Jews fought against 150 million Arabs; Israel was always victorious."
After a small pause, yet another officer from the back of the auditorium
asked,
"Do we have enough Jews?"
If you're interested, visit my twice-a-month blog at the STRATMOR Group web
site
located at www.stratmorgroup.com
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1106435366068&s=4179&e=001SVt-lj
bp53436QjxD9vbwURtIPPjV05jEcEKyBN3SjS2forXe0C_foO8RjEV-Uye0N7Z_Sh1il0SRXPx6P
jQauayNXQjni-Hc9Sseu-hhZcR1ujeZyAEpw==]
. The current blog takes a look at Fannie & Freddie & the FHFA, and the
changes
they have in the hopper. If you have both the time and inclination, make a
comment
on what I have written, or on other comments so that folks can learn what's
going
on out there from the other readers.
Rob
(Check out
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=oqdjk4hab.0.epg7qedab.zy6u9cdab.8
721&ts=S0684&p=http%3A%2F%2Fwww.mortgagenewsdaily.com%2Fchannels%2Fpipelinep
ress%2Fdefault.aspx]
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=oqdjk4hab.0.v7uif6dab.zy6u9cdab.8
721&ts=S0684&p=http%3A%2F%2Fwww.thebasispoint.com%2Fcategory%2Fdaily-basis].
For archived commentaries, go to
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=oqdjk4hab.0.fpg7qedab.zy6u9cdab.8
721&ts=S0684&p=http%3A%2F%2Fwww.robchrisman.com%2F].
Copyright 2011 Rob Chrisman. All rights reserved. Occasional paid notices
do appear.
This report or any portion hereof may not be reprinted, sold or
redistributed without
the written consent of Rob Chrisman.)
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