No one said mortgage servicing (or lending) would be any fun. The Las Vegas
City Council, on the 15th, will consider a proposal that would make lenders
responsible for the maintenance of vacant properties in default or
foreclosure, or else face possible fines or jail time. It would force a
mortgagee to inspect properties in pending or actual default and, if vacant,
register them with the city for $200.
The mortgagee would have to then designate a manager to keep up the vacant
property.
The problem is not trivial: one in every 110 housing units in Las Vegas
received a foreclosure filing in September, according to data firm
RealtyTrac. Critics say, "Does this mean, when a borrower stops making
payments, suddenly they receive free gardening & maid service?" The details
can be found at DoYouDoWindows?
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108467368885&s=8721&e=001qwcAkQ
9RHZX3rlSotTnplhPtSVgb6uIXkquXNxLcRKo6haF5Q5oPEpYRFpxxqNPmqTSYWEChnP6H-U4hJv
SKTMN-yxII9wBu_Oe3P34ZMqM3jZoB0GnnR3aDWYRXmLMj5j-9by-6sj_VhkhAa-HWHI5biAv9br
-LTSRyg3rtCujvU70UV5rqtC_MVAflAXNEATTwBnKezoERxRbpERNpvDcjsxvrN_cWBttZwVYR-5
EBCjtpZ1dlQw==]
I find myself in Texas for the TMBA's Educational Seminar early next week,
and just in time to read this story on Texas' FirstPlus Financial. It reads
like sequel to "The Godfather
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108467368885&s=8721&e=001qwcAkQ
9RHZUBIFxcvUEOVKG-kZzkRLCSg1daycZlxCwc5buVt9WRL8Z856gFbvvnnHsyoZ7urSMWeAOStm
MrThb0w4EeBdoACvK6d1uY85hv1GcBnYIV1itajumnr8u44yi2QRJJWBH8jmi2dwpu61j-y9XGBk
lt5WiBLFQUaXWxYJB0VApql2AlYCQkjdSkqnOSfB8E0uYVIPhFDIsZSx1KXniU-GPoC8IDRZ7kqG
A=]".
"Nicodemo S. Scarfo, Salvatore Pelullo and others seized control of
FirstPlus in June 2007 "by threatening its existing management," federal
prosecutors charged in an Oct. 26 indictment unsealed yesterday in Camden,
New Jersey. Scarfo is the son of "Little Nicky" Scarfo, the imprisoned boss
of the Philadelphia-area mob..."
Ally Financial (GMAC)'s correspondent reps must have swallowed hard, as did
their clients, when the CEO said, "The combination of MSR volatility in the
quarter, reduced margins due to regulatory costs and the impending impact of
Basel III has caused us to begin significantly scaling back originations in
the mortgage correspondent segment." Ally reported a net loss of $210
million for the third quarter of 2011.
The decline in third quarter income was largely driven by a $471 million
pre-tax loss related to the negative impact of the mortgage servicing
rights (MSR) valuation, net of hedge, resulting from a decline in interest
rates and market volatility.
Ally will maintain correspondent relationships with its key customers and
will continue to participate in the consumer and broker lending channels,
which are higher margin businesses. The correspondent channel represents
approximately 84 percent of the company's mortgage originations
year-to-date. As a result, Ally's exposure to MSR asset volatility will
decrease over time, and the company will be better positioned to comply with
Basel III requirements.
I am not an expert in mortgage channel cost structures -more on that in a
moment.
GMAC is clear in its announcement that it is about capital, and Basel III.
"I just bought servicing for 2 points, but just had to write it down to 1.5
points because of future capital calculations; I don't have the capital to
book servicing at those levels." The industry is indeed seeing servicing
values drop, for a variety of reasons, this being one of them. And any
smaller lender starting a servicing operation because the servicing is worth
more to it than it is to a large servicer had better make sure that the
calculations and assumptions are correct.
And looking at cost structures, the old general idea was that a good month
for a retail LO is they'd do $1 million and make $10,000, a wholesale rep
would do $10 million and make $10,000, and a correspondent rep would do $100
million and make $10,000. (Please, don't send an e-mail finding fault with
these, saying it depends on the state, LO comp, profit margins, etc., it is
a generalization!) So an investor would pay a correspondent rep $10,000 and
add a good chunk of servicing - IF it wanted servicing. AND the
correspondent counterparties assume the risk through more comprehensive reps
& warrants!
In addition, with the loss of BofA, and now with GMAC "scaling back," where
does that leave the remaining big correspondent investors? And do they
really want all this servicing? Just like with MI companies exiting,
exposing the remaining MI companies to more volumes, and possibly more risk,
do the remaining correspondent lenders want the volume? Do their operations
staffs really need the work on Saturday and Sundays? Certainly smaller
lenders don't need fewer investor options when pricing& selling loans in
the secondary market. The release can be found at WhoWantsOurServicing?
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108467368885&s=8721&e=001qwcAkQ
9RHZWZ3RVXeGE0xK68tGYEtFZcuYdZf5ZZorarZekmdy0LLQyLYByLm0WvSUums0oK_ykEq2XoYy
JdZ0_qFOXwKJHpskAVNfABssEZ5noaXB4cXhghUDmXPx0Liw2oUeeeSC406s3mPQ3Bnw==]
Many originators are hopeful that HARP 2.0 will help, with details coming
out by 11/15. Others are not convinced, and are still confused on the
differences between Freddie & Fannie. I took the opportunity to do a little
write-up on this issue at:
MuchAdoAboutNothing?
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108467368885&s=8721&e=001qwcAkQ
9RHZUPV3UROBQb3hsljRRRUtAPPyIaXgWZBNfABQRNGqNnFK_9aFfD_2bB5KspR_BXew3SpfyqAN
ZQCMWxXXEYVlnefyfNQbXmtshzpeH8zzozOw==]
An owner of a mortgage bank wrote to me, "I'm really becoming more and more
confused with HARP. It seems that if people couldn't refinance using the
HARP program in the past, then not too many more will be able to take
advantage of it now. Maybe this will allow your 80/20, 80/15/5 or 80/10/10
people to take advantage of the program or even those who put down 20% and
are in IO loans, but I don't think the majority of the people are in these
loans. Moving the date (not prolonging the term) that Fannie or Freddie
purchased the property from 5/31/2009 to 5/31/2010, or even to the date the
law goes into effect, would definitely give more people the opportunity to
refinance. Moving the mortgage late from 12 months to 6 months, really, are
you kidding me? A recent mortgage late will kill an individual's credit
score so he/she won't be able to get the best possible rate and a .25 or a
.50 difference might deter an applicant from doing the loan at all."
The industry's four largest mortgage servicers all say they will be taking
part in the revamped HARP: Bank of America, Chase, Citigroup, and Wells
Fargo have each expressed their support of the program.
The Community Mortgage Lenders of America "has been leading the charge in
Congress"
on reversing the expiration of the maximum loan limits by extending the
provision for another two years until the end of 2013. The Senate approved
the amendment, which is now up before the Republican-controlled House. "This
Amendment is critical for those borrowers on both coasts in the so called
high cost states", said Kevin M. Cuff, Executive Director of the CMLA. "The
roll back can both help to stabilize a rocky real estate and finance market
today as well as to assist a borrower who might otherwise be required to
bring tens of thousands of dollars of down payment to the transaction". For
more information on what the CMLA is doing, shoot an e-mail to Kevin Cuff at
In the Carolinas, "MBAC and other state Mortgage Banker/Lenders Associations
were asked to participate in a conference call with MBA on the request for
comment from the FHFA on changes to the servicing fee structure. The FHFA
discussion paper can be found here: Is25bpsTooLittleorTooMuch?
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108467368885&s=8721&e=001qwcAkQ
9RHZXDPPmVPbZMJjXkqCJv1nKR_WKgdlSoNJTNQiCUEhUhZ8DfbortWPkRdT_dOOeUcdEGAYiGLm
bv7IScYGNamNIE6SefbRLfP5NxhVkHDb5xpSmlLn1gPxThqmKdwgVDYIgrYyLvAYk9_VpWneawuf
RXg7pPBpXZ1Zgfit_zH243SSoM8i-fDcN6]
The call is next week, and if you have comments contact Rhonda Marcum,
Speaking of servicing, the HarmonyLoan continues to makes waves. Apparently
it caters to servicers, and gives the lender "greater stability and value in
their mortgage investment. For many portfolio lenders, as mortgage rates
continue to rise and fall, their business strategy is left to suffer the
consequences of a "traditional"
refinance process that exposes them to runoff, high retention costs
including high fee-based loan officer compensation, and a time-consuming
conversion process leading to strained back office channels. But the
HarmonyLoan reverses this by setting up a streamlined retention process
which minimizes costs and significantly reduces the process timeline. The
HarmonyLoan can convert any size/type existing mortgage in little more than
one hour and at a premium return for the lender. Additionally, loss
mitigation efforts for modifications, short sales and foreclosures are
advantaged by homeowners' ability to get interest rate relief without the
limitation of underwriting or appraisal." If you want more information write
to Jay Patel at jpatel@mortgageharmony.com
Taking a quick look at the markets, as if there isn't enough other things to
occupy us, yesterday the Treasury announced it will be selling $32 billion
3-year notes,
$24 billion 10-yr notes, and $16 billion 30-yr bonds next week - the same as
in August. (All told the auction will raise $42.6 billion of new cash.) The
drama in Europe remained front and center, although the FOMC's statement
made a tiny stir
- but did little positive to the markets. It noted some strengthening in
the economy, but that housing is still depressed, and did not mention any
additional MBS purchases which caused a slight worsening in MBS's. In his
press conference, Chairman Bernanke indicated the possibility for further
MBS purchases if conditions are appropriate for such an action. By the end
of Wednesday MBS prices were nearly unchanged from Tuesday's close, and the
10-yr settled near 2.00%.
Tomorrow is the release of the important Nonfarm Payroll numbers, but today
we've had weekly Jobless Claims (a drop of 9k to 397k) and the preliminary
3rd quarter reading for Productivity (+3.1%) and Unit Labor Costs. Later we
have Factory Orders and the ISM Non-Manufacturing Index for October. After
the news we find rates slightly higher with the 10-yr at 2.05% and MBS
prices worse by .125-.250.
(Someone forwarded this letter along. I will let you decide if it is factual
or
not.)
The following letter was sent today by Bank of America to all of its debit
card
customers:
Dear Valued Customer:
As most of you probably know by now, last month we instituted a $5 monthly
fee for all of our debit card users. To say that what followed this
decision was a nightmare would be a massive understatement.
Considering that just three years earlier taxpayers had bailed us out with
billions of their hard-earned dollars, it's understandable that Bank of
America was compared to a person who, as he is pulled from a burning
building, turns and kicks the fireman in the crotch.
That's why we are writing to you today with a simple message: "Our bad."
And to tell you that we are refunding the $5 to you, effective immediately.
All you have to do is pay a simple, one-time $10 refund fee.
You can receive your refund online, or pick it up at your nearest Bank of
America branch, where a teller will hand the money directly to you for a
simple, one-time
$15 handling fee.
If you do visit your branch, feel free to use any of our services, including
our state of the art ballpoint pens and deposit slips. (Prices on
request.) Again, accept our apologies for instituting the debit card fee.
We have learned our lesson, and we make this solemn promise: next time we
squeeze money from you, we'll do it in a way you won't notice.
Sincerely, Bank of America
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 the impact of HARP 2.0 and the
differences in the agency's programs. 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=v6q87kiab.0.epg7qedab.zy6u9cdab.8
721&ts=S0696&p=http%3A%2F%2Fwww.mortgagenewsdaily.com%2Fchannels%2Fpipelinep
ress%2Fdefault.aspx]
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=v6q87kiab.0.v7uif6dab.zy6u9cdab.8
721&ts=S0696&p=http%3A%2F%2Fwww.thebasispoint.com%2Fcategory%2Fdaily-basis].
For archived commentaries, go to www.robchrisman.com
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=v6q87kiab.0.fpg7qedab.zy6u9cdab.8
721&ts=S0696&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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