Monday, September 30, 2013

Mortgage Jobs and Oppurtunities

http://globalhomefinance.com

"Rob, I attended a seminar last week, and one of the speakers mentioned something called 'Freddith Mae'. Ever heard of that?" Nope - either I'm out of touch & confused, or someone else is and you should ask for your money back. But one thing I am confused about, and it is probably only me, is what a "rule" is. When I was growing up, a rule was a rule. Now, since the industry is subject to the CFPB's rulings, we seem to have a rule announced, then time for public comment, then a final rule, and a public comment period, and then amendments, with public comments, and then changes to those. Look how many times Reg. Z has been changed - maybe I am the one who is confused.

Private mortgage insurance company Genworth Financial is seeking candidates for an Account Executive position in Northern California. The person hired will be expected to provide the highest level of internal and external customer service, manage customer relationships and develop growth strategies for assigned accounts, develop calling plans to cover all assigned accounts, monitor branch volume and calling activity and take necessary actions to achieve account volume goals, execute and lead implementation of Genworth products and initiatives, identify and communicate new opportunities to provide solutions to customer needs, etc. The ideal candidate will have 2+ years of experience in a regional or territorial sales role, have a college degree or equivalent industry/sales experience, great presentation and communication skills, and have the ability to work flexible hours with occasional overnight travel. Candidates should contact Jen Phillips at jen.phillips@genworth.com and for more information on the company visit Genworth.

A Private Equity firm is looking to acquire residential mortgage banking company.  All geographic locations will be considered, although Western U.S.-based banker is preferred.  Fannie, Freddie (seller/servicer) and Ginnie Mae approvals are highly desirable but will also consider candidates based on factors such as size, product mix, channel diversity, etc.  Principals only, and direct communication with Seller required, and the buyer will execute appropriate NDA(s).  Please email mortgageacquisition@gmail.com for more information and interest.

The big news for today comes from HUD and the FHA, which has announced it will need a $1.7 billion bailout from the Treasury to cover projected losses in its reverse mortgage programs (currently at $5 billion). Plenty of industry observers have been predicting this day. Federal Housing Administration Commissioner Carole Galante told Congress in a letter that her agency will withdraw the money from the Treasury before the fiscal year ends today, although Congressional approval is not required. The FHA suffered big losses when many reverse mortgage borrowers took large payments up-front and later ran into financial problems, often due to falling home values during the financial crisis. As we have all heard, the FHA is required by law to maintain reserves equal to 2% of the total amount of home mortgages it insures. The 2% capital reserve ratio is aimed at covering projected losses over the next 30 years in the agency's Mutual Mortgage Insurance Fund.

Galante said her agency needs more money from the Treasury now because higher interest rates have discouraged borrowers and reduced loan volume for the FHA in recent months. Of course, we're seeing that with the entire industry - and few can say that they did not see the market (especially refis) tailing off as time went on. About a year ago we had warnings about the FHA's finances when an independent audit showed an estimated $16 billion in losses. But the agency's finances have since improved due to changes the FHA has made, including insurance premium increases and changes to the reverse mortgage program. Improvements in the housing market have also helped boost the agency's finances. And Republicans have complained that the FHA contributed to the housing meltdown by providing loans to many unqualified borrowers who ended up defaulting. They have called for ending the FHA's backing of reverse mortgages and for limiting the agency's role in the housing market. In fact, House Financial Services Committee Chairman Jeb Hensarling, R-Texas, is pushing a housing finance overhaul bill that includes a provision that would limit the FHA to insuring loans only for first-time and lower-income borrowers.

With all the transition going on in the industry, especially with loan officers, here is an interesting question I received last week. "What is the law regarding paying loan officers on deals they sourced and originated but the LO leaves to another company prior to funding. Is the LO still legally due their commissions?" I am not sure that there is "a law," and from what I understand it will depend on the agreement that the LO signed with the company. But this does lead to a related topic...

Here is a different note: "When a LO or a company joins a platform and later leaves that company, should the LO be able to have access to their data if the data is self-generated and not company supplied? I believe that it's an industry standard that when an originator terminates from their company (banker, broker, bank) that they should be entitled to all regulatory compliant data, meaning, all client lists for marketing purposes. Some believe otherwise, but only if you are a top producer. I do believe it's an industry standard that originators have 'Point Central' downloaded on their laptops and retain 'all' client data when moving from company to company.  The Point files are essentially their entire business careers wrapped into one hard drive. Is a company entitled to this data for a self-generating originator?"

While some companies state any and all data/information obtained "on their clock" is theirs and not the LO's, many lender's view is that the originator has the relationship with their customers and to that end, all contact information (the "database") is theirs to keep/take. One seasoned veteran told me that the "big guys" are more protective of data which was added or changed during an LO's tenure at the particular institution, even if it was the adding of customer contacts or prospects.

And Kurt Reisig, the CEO of American Pacific Mortgage Corp. in California, writes, "Questions like these really point to the overall culture of the company.  While all companies should look at how they define this so as not to break any regulations regarding the handling of consumer data, any prudent LO should look carefully at their employment agreements and/or branch operations agreements before joining a firm.  Unfortunately for many producers, we have observed over the years that client data for any purposes is often retained by the employer, sometimes rather sneakily. In recent years, the proliferation of 'retail' by banks, call center operators and larger mortgage banks who covet data ownership over originator rights has left many a loan officer fighting for her client data.  Legally, all that matters is the agreement. Philosophically the company 'attitude' is nearly as important.  A little due diligence goes a long way - the best way to find out how a company acts is to ask around."

And a follow up question dealt with ownership and freedom. "If a branch joins a larger banking platform/branch, and later terminates, how does this 'divorce' get separated? For example, one would hope that if the smaller branch has been in business for many years and joins a larger banking platform and later leaves, they would be able to leave in a civilized, well-thought out manner. But I have seen examples of the larger banking company 'cutting the head off the snake,' occupying the lease for 30 days (which is standard compliant method of leasing) only to tarnish the names of the branch managers, and offering great terms for LOs electing to remain. Is this legitimate? It seems like it is, but only if the branch managers didn't pay attention to their contracts, especially the solicitation or non-solicitation of their own people. Contracts need to be taken seriously. If any branch is looking to join a banker, they had better think twice before signing their 'best china' away."

Once again, Mr. Reisig from APM writes, "This gets to the core of a company culture and one that can be answered by due diligence on agreements and past business practices.  Recently, since the market shift, we have also seen a spike in the aforementioned practice by some large operators.  Whether they are desperate for production or simply have a 'fatal attraction' complex, it is categorically and ethically wrong for them to pursue the 'assets' of any branch or originator that chooses to leave. That said, it does happen and the best defense is a fair contract. Additionally, the best course is to conduct oneself with utmost integrity and adherence to the contract. Companies have a right to an open pipeline in a branch and a right to assure that operations are wrapped up in a way that leaves the company without an operational loss as the separation is completed. We counsel those who join us to adhere to their contracts and take the high road at every juncture, basically asking people who join us to treat their former employer in the same way we would hope to be treated in those occasions an originator leaves our company.  In a nutshell what I tell producers is to conduct as much due diligence as possible on a firm they join....at least as many hours as it takes to originate and close a loan...which is a lot!" Thank you Kurt!

The focus continues to be on the government shutdown. For example, Guild Mortgage alerted its clients, "In anticipation of a possible federal government shutdown it is advised that you complete the following to the extent possible prior to October 1: execute 4506T IRS transcript requests; run CAIVR's and LDP/GSA searches; complete SSI validations; request FHA and VA case numbers; etc."

CNN tells the public about the impact of a government shutdown here.

And on Friday Dave Stevens, president of the MBA, wrote, "As Congress continues to negotiate legislation to fund the federal government in FY2014, federal agencies are preparing for the possibility of a government shutdown when the current continuing resolution expires at midnight on Monday, September 30, 2013. If the House and Senate are unable to resolve their differences by the midnight deadline, there will be a shutdown that will furlough certain federal employees and cause a significant curtailment of operations at several federal agencies. It is difficult to quantify all of the impacts of a government shutdown. However, lenders processing loans that need tax transcripts, social security number verification, or FHA loans, should anticipate delays and reduced functionality from HUD, IRS, and the Social Security Administration. A shutdown lasting a few days would slightly inconvenience lenders in processing loans; however a longer delay would have more serious impacts. Purchase loan volume could shrink and impede the recovery of the housing market. Additionally, long-term furloughs may disrupt time-sensitive mortgage transaction deals by interfering with borrower lock agreements and causing interest rate disparities from the time of closing to the time the loan is securitized. MBA has prepared a detailed analysis of how we expect many government agencies and other entities integral to real estate finance may be affected by a shutdown. MBA will keep you informed in the days ahead during this fluid situation. Please don't hesitate to contact me with any questions."

But we do have some news this week! Today we'll have the Chicago PMI, tomorrow an ISM Manufacturing Index number, Thursday is the usual Jobless Claims, and on Friday are the unemployment numbers. For now, rates are pretty quiet with the 10-yr sitting around 2.60%.


The American Medical Association weighs in on ObamaCARE!
The American Medical Association has weighed in on Obama's new health care package. The Allergists were in favor of scratching it, but the Dermatologists advised not to make any rash moves. The Gastroenterologists had sort of a gut feeling about it, but the Neurologists thought the Administration had a lot of nerve. Meanwhile, Obstetricians felt certain everyone was laboring under a misconception, while the Ophthalmologists considered the idea shortsighted. Pathologists yelled, "Over my dead body!" while the Pediatricians said, "Oh, grow up!" The Psychiatrists thought the whole idea was madness, while the Radiologists could see right through it. Surgeons decided to wash their hands of the whole thing and the Internists claimed it would indeed be a bitter pill to swallow. The Plastic Surgeons opined that this proposal would "put a whole new face on the matter". The Podiatrists thought it was a step forward, but the Urologists were pissed off at the whole idea. Anesthesiologists thought the whole idea was a gas, and those lofty Cardiologists didn't have the heart to say no. In the end, the Proctologists won out, leaving the entire decision up to the a****es in Washington.


If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog is, "Reverse Mortgages: Companies Need to Know What is Changing". 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://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx or www.TheBasisPoint.com/category/daily-basis. For archived commentaries or to subscribe, go to www.robchrisman.com. Copyright 2013 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)


What is on the agenda for this week?
Date
Time (ET)
Economic Release
Actual
Market Expects
Prior
30-Sep
9:45 AM
Chicago PMI
-
53.7
53
1-Oct
10:00 AM
ISM Index
-
55.1
55.7
1-Oct
10:00 AM
Construction Spending
-
0.40%
0.60%
1-Oct
2:00 PM
Auto Sales
-
NA
5.6M
1-Oct
2:00 PM
Truck Sales
-
NA
7.0M
2-Oct
7:00 AM
MBA Mortgage Index
-
NA
5.50%
2-Oct
8:15 AM
ADP Employment Change
-
170K
176K
2-Oct
10:30 AM
Crude Inventories
-
NA
2.635M
3-Oct
7:30 AM
Challenger Job Cuts
-
NA
56.50%
3-Oct
8:30 AM
Initial Claims
-
315K
305K
3-Oct
8:30 AM
Continuing Claims
-
2825K
2823K
3-Oct
10:00 AM
Factory Orders
-
0.30%
-2.40%
3-Oct
10:00 AM
ISM Services
-
57.4
58.6
3-Oct
10:30 AM
Natural Gas Inventories
-
NA
87 bcf
4-Oct
8:30 AM
Nonfarm Payrolls
-
183K
169K
4-Oct
8:30 AM
Nonfarm Private Payrolls
-
180K
152K
4-Oct
8:30 AM
Unemployment Rate
-
7.30%
7.30%
4-Oct
8:30 AM
Hourly Earnings
-
0.20%
0.20%
4-Oct
8:30 AM
Average Workweek
-
34.5
34.5

We have a very important week for economic data with big-time reports such as ISM Manufacturing and Servicing, ADP Private Payrolls and the Non-Farm Payroll report.

But, this week is all about the new fiscal year for the U.S. and the potential government shutdown tonight.  If there is a government shut down we may not even get some of the economic releases such as Non-Farm Payrolls since their departments could be closed.

There are no major Treasury auctions this week.
We do have Chicago PMI this morning and a strong reading may provide some head-winds for bonds. The Senate is supposed to start to take up Congress' bill at 2:00EDT and if they do not approve it then we may have some volatility.

Friday, September 27, 2013

Don't Ignore The BSA

http://globalhomefinance.com

All the McDonalds and Burger King workers in California are rejoicing: the minimum wage is heading to $10/hour. This, coupled with the tax increases voted in last year, is making it a more interesting economic situation in the state of fruits and nuts: HowMuchIsMyBigMac?. I only use Mickey D's as an example of a minimum wage job - but in some states it is not! With the oil boom in the Dakotas, BusinessWeek reports that anyone going to work at McDonalds receives a $300 signing bonus. "It's not uncommon for signing bonuses to proliferate during boom times. In the late 1990s Burger King offered managers a $5,000 signing bonus in a variety of cities to try to poach them from other fast food chains, according to a 1998 New York Times report...At Williston Sate College in Williston, North Dakota, students are dropping out, lured by the possibility of making $100,000 working on oil rigs, driving trucks or maintaining oil wells...The boom isn't only boosting the salaries of workers directly involved in the oil industry. With thousands of men moving to Williston to cash in on the boom, they're attending more strip clubs and strippers in the area have seen their salaries soar...strippers claimed they could make $2,000 to $3,000 in tips in Williston." (Rumors of the CFPB sending in teams of examiners are unfounded.) God Bless America.

Although she is blind, Justice never sleeps, and any company's management who thinks it can skirt the Bank Secrecy Act might be in for a rude awakening. Yesterday's commentary discussed the huge penalty TD Bank is facing. I was also reminded of a closed NJ bank hit with BSA penalties. The Saddle River Valley Bank, of Saddle River, New Jersey, opened for business on June 1, 2006 and lasted for six years. A year prior to closing it was issued a C&D by the OCC for its deficient BSA/AML program...the bank late-filed more than 190 SARs on over $1.5 billion in transactions...and were presented with a $8.2 million combined fine which will wipe out most of the remaining assets of the bank, which were reported at $10 million as of June 30, 2013. Details on the announcements and links to the Orders and Civil Complaint have been added to the BankersOnline page

"Rob, if everyone's residential volume is down 50%, and the Fed keeps buying its daily billions, won't that impact the supply & demand teeter totter?" You bet it will! The last reputable research piece I saw from Wall Street calculated that it made no sense for any investor to "short the basis", meaning selling agency MBS and buying Treasury securities - especially the current coupons that the Fed is buying. Fed purchases hit a high of 55% of gross issuance in September and Q4 it will only go up if/when production continues to stagnate. Given the usual purchase tail-off that occurs in the last quarter, the estimates were Fed purchases, as a total percentage of gross volume, being Oct 62%, Nov 67%, and Dec 69%. The smartest guys in the room are paying very close attention to how & what supply hits the market, and what the Fed is buying.

Nationstar Mortgage, which has seen its share of criticism in purchasing turn times (apparently due to growing pains) is being cited by investment banking sources as the winning bidder on a $41 billion package of legacy mortgage servicing rights offered up by Wells Fargo recently. (Here is a piece on the background.) It's no secret that Nationstar has been an active bidder on MSRs the past two years, absorbing some huge packages of product, including much from Bank of America. But servicing is not only sold in bulk - it is also sold in flow packages, a little every month. For example, Phoenix Capital sent out a "pleased to present the following $70-105 million/month conventional and government flow servicing offering for your consideration. Seller is a well-positioned independent mortgage banker, with a uniquely strong history of operations dating to the early 1970s. Seller is interested in entering into a forward commitment to sell and transfer their relevant production on a monthly basis." I am not going to list the attributes or details, but if you're interested contact Stephen Fleming at sfleming@phnxcap.com.

While we're talking about selling, so how exactly does the U.S. Treasury sell its preferred stock holdings of companies purchased under T.A.R.P.? Typically, by way of modified Dutch auctions to (a) "qualified institutional buyers", (b) certain domestic institutional "accredited investors", or (c) certain directors and executive officers of the respective issuers of the Capital Purchase Program Securities. Basically, don't expect to see a 'Buy It Now' button for them on your eBay home page. Recently the Treasury opened auctions to liquidate the holdings of six more banks purchased under TARP by way of CPP: Centrue Financial Corporation (Ottawa, IL); DeSoto County Bank (Horn Lake, MS); First Banks, Inc. (Clayton, MO); RCB Financial Corporation (Rome, GA); Reliance Bancshares, Inc. (Frontenac, MO), and Severn Bancorp, Inc. (Annapolis, MD). The auctions commenced at 9AM EDT, September 12 and closed at 6PM on September 17. During the auction period, potential bidders for the Capital Purchase Program (CPP) Securities were able to place bids on the offered stock (in increments of whole shares or per $1,000 aggregate principal amount, as applicable) at any price per share or per $1,000 aggregate principal amount, as applicable, and in increments of $0.01 at or above the minimum prices set forth in the applicable bidder letter agreement provided to the potential bidders. Investors may bid on individual or multiple CPP Securities. (If you care about the results, here you go: BigMoney.)

My bet is that it won't happen, or, if it does, it will be resolved quickly. In between now and then, the possible shut down will give politicians plenty of opportunities for posturing, grandstanding, and blathering. An actual shutdown would probably move rates lower since it would have a negative impact on GDP, probably reducing fourth quarter Gross Domestic Product about 1.4% since folks like park rangers and tour guides won't be spending as much money - businesses may hold off on investment and households delay spending. "What we have is a political and not economic maelstrom," said Bernard Baumohl, chief global economist at Economic Outlook Group LLC in Princeton, New Jersey. (Sorry for the delay in sending the commentary out today - I had to find out what "maelstrom" means.)

Let's move to some investor, agency, and vendor updates - and yes, the potential shutdown is starting to be a concern.

"HomeBridge would like to remind brokers that in the event of a government shutdown on October 1, 2013 the processing of IRS transcripts will most likely be delayed. Brokers are advised to order tax transcripts ASAP to avoid any potential loan closing issues."

Mountain West Financial sent out, "In anticipation of a possible US government shutdown, MWF is taking this opportunity to suggest that all broker and corporate departments complete the following immediately: insure as many loans close as possible, including the wiring of funds, run CAIVR's and order VA and FHA case numbers, complete SSI Validations and LDP/GSA searches, order/execute 4506T (for IRS transcripts), order any pending W2 searches, remit upfront MIP payments (Internal)."

Fannie Mae is building up interest in its risk-sharing securities. Will it be the model of the future? "Fannie Mae...will offer better terms than in Freddie Mac's initial deal as the U.S.-backed mortgage companies seek to expand investor participation in the market....Fannie Mae officials are visiting investors across the country, with stops in Boston and Cincinnati this week, as it attempts to sell $675 million of the debt at lower yields than Freddie Mac got in its $500 million offering in July. Under Fannie Mae's terms, bondholders won't suffer losses until delinquencies are higher. The entire story by Jody Shenn can be found here.

As a reminder, The Agencies have announced that they are extending the expiration dates for the Streamline Modification program, HAMP, and the Second-Lien Modification program.  HAMP and the Streamline Modification program have been extended to include modifications with Trial Period Plan effective dates on or before March 1, 2016 and December 1, 2015, respectively (the March 1st deadline applies to 2MP as well).  All HAMP modifications must have a Modification Effective date of September 1, 2016 or before.  In the meantime, for mortgages that meet all other eligibility criteria outlined in the selling guide to be eligible for HAMP, all proposed modifications must submitted through the Treasury Net Present Value model on or after January 1, 2014 and receive a positive test result.

The HAMP "Pay for Success" incentive will be retired effective April 1, 2014 in order to accommodate the tiered incentive increase for modifications with this safe effective date.
In order for servicers to have sufficient time to process their foreclosures, both Freddie and Fannie have extended the state foreclosure timelines by 30 days for properties in Nevada, New Mexico, and Washington.  This is effective for foreclosure sales completed on or after September 1, 2013.

Fannie Mae's updates to the Loan Delivery Test Environment are now in effect.  The changes give users access to the test environment using Loan Delivery production credentials, new DU test data, and new Appraisal Document File Identifier test data.

Version 9.1 of DU will not apply the additional maximum DTI and minimum representative FICO score requirements to HARP case files that have an increased principal and interest payment; however, a message will be issued for all DU Refi Plus files stating that the lender must indicate whether the loan is considered a higher-priced mortgage loan as defined by Regulation Z and apply the relevant DTI and FICO requirements as necessary.

Fannie has updated the reporting requirements for repurchased loans subject to a HAMP permanent loan modification or HAMP Trial Period Plan such that the responsible party must now cancel the related record accessible through the online HAMP Reporting Tool.  As a general reminder to servicers, Fannie is not legally responsible for any losses incurred due to repurchase action and has the right to recover all previously paid incentives in connection with the cancellation of HAMP permanent mortgage loan modification records.

Last week PHH received a letter from activist investor Orange Capital late last week in which the latter issued four recommendations, the first being financing MSRs through a captive vehicle, the second repurchasing $150 million worth of shares, the third spinning out the fleet business, and the fourth tender for the 2017 converts. Keefe, Bruyette & Woods' assessment is that financing prime MSRs would be the most difficult of these recommendations on which to act, considering that there have been no transactions of any major scale in the prime market.  Furthermore, if the MSR piece of the plan were unsuccessful, the rest would be difficult to implement as well, as there would not be enough capital to buy back shares, and a tax-efficient spin of the fleet management business would run the risk of not generating enough cash.  An outright sale could also prompt a large tax bill, and at the end of the day, bidding on the coverts might limit further dilution as the shares move up but would not add any economic value.  To read the full report, see KBW.
 
US Bank is now allowing occupant co-signors for all products provided that they occupy the subject property as either a primary residence or second home, are the spouse or domestic partner of another borrower who will be in the title, and meet all other Agency requirements.
With regards to trust vesting, US Bank has clarified that properties previously or currently vested in a trust may close in the trust so long as the property title is in the borrower's name for at least 30 days prior to the date of the initial mortgage application.  The 30-day period is measured from the recording date of title transfer.

As a reminder, US Bank will not purchase refinance loans on properties that have been listed for sale by the current owner within 90 days of making the loan application.  Loan files for such refinances must include a recently listed copy of the canceled listing agreement in the underwriting file in order to be eligible for purchase.

Effective immediately, Bank of the Internet has updated the cap structure for its Portfolio ARM products from 2/2/6 to 6/2/6.

United Guaranty will updating its issued Commitments and Certificates for all loans insured on and after November 1st to include additional loan transaction and premium information, including borrower, property, mortgage, and underwriting data. In terms of tracking data, the version number and date/time stamp will be included in the footers.

Flipping over to the markets, yes, rates have come down, and seem pretty content where they are now. (As if they have their own personality, right?) The Fed is buying about $3 billion a day, mostly 30-yr agency MBS filled with mortgages between 3.75%-4.625%. The economic news has mixed, as it always is. Yesterday's weekly Jobless Claims declined to 305K, far below the consensus of 330K, and very close to a six-year low - no computer glitches this time. Second quarter GDP remained unchanged at 2.5%.

Although the press is focused on our government, as predicted, grappling with a possible shutdown of non-essential components, we did have two pieces of data: August Personal Income & Consumption (+.4% and +.3% respectively), and will have final September Consumer Sentiment at 9:55AM EDT. In the early going MBS prices are pretty much unchanged from Thursday's close, and the 10-yr is sitting around 2.63%.


Most of the time there is a little humor here. Today, however, is a link to an incredible set of award-winning action photos that make me feel even worse about sitting on my rump doing nothing every day: InMyDreams. Yes, there are other things besides QM and debt ceilings.


If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog is, "Reverse Mortgages: Companies Need to Know What is Changing". 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://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx or www.TheBasisPoint.com/category/daily-basis. For archived commentaries or to subscribe, go to www.robchrisman.com. Copyright 2013 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)


Today's Rate Volatility: NEUTRAL



What happened yesterday?
Mortgage backed securities (MBS) lost -24 basis points from Wednesday's close which caused 30 year fixed rates to move slightly higher.

The FNMA 3.5% Benchmark Coupon lost a little ground but pricing remained at fantastic levels.

The third and final revision to the 2nd QTR GDP was 2.5% and matched the last revision and market expectations. This did not impacting your pricing as it was expected.

But Weekly Initial Jobless Claims hit 305K vs the consensus estimates of 325K and the prior reading which was originally thought to be under reported was revised to only 310K. 

Pending Home Sales were down -1.6% which was a little lighter than the consensus estimates of only -1.0% but it was not enough of a miss to materially impact rates.

We had a 7 year Treasury auction.  Results: $29 billion at 2.058% with a bid-to-cover ratio of 2.46 which is a pull back in demand from the recent average of 2.63, this was negative for pricing.

But in the end, the 100 day moving average which had been providing strong resistance, has now provided strong support causing the sell off in MBS to be very limited.


What is on the agenda for today?
Don't miss out on the mortgage industry's premiere insight and commentary. Subscribe to RateAlert Executive today and get today's lock advice, complete market commentary and forecast for today, and watch the full Morning Coffee Update video with Bryan McNee - all available only to our Executive subscribers.

Thursday, September 26, 2013

How a Government Shut Down Impact Lending

http://globalhomefinance.com



Today's Rate Volatility: NEUTRAL



What happened yesterday?
Mortgage backed securities (MBS) gained +35 basis points from Tuesday's close which caused 30 year fixed rates to move slightly lower.

Durable Goods Orders came in at 0.1% vs estimates that ranged from 0.0% to 0.2%. But the prior reading was revised downward to a dismal -8.2%. Still, it was an O.K. reading and close to expectations, the bond market was not materially impacted by this reading.

New Home Sales 421K vs est of 420K, this was a 7.9% gain from the much weaker prior period. This was not enough of a beat to materially impact pricing but it is good news that sales are up during a period of increasing mortgage rates.

5YR Treasury Auction results: $35B at 1.436% with a bid-to-cover of 2.67 vs recent avg 2.7, fairly decent demand but not a block buster. Not a big factor in rates either.

So, we had three events and none of them were enough of a variation to market expectations to influence bond prices. Yet, bond prices have steadily improved today...why?

Answer: Its the showdown on the shut down. Treasury Secretary Jack Lew stated today that we would run out of cash a little later than originally thought (October 17th). This could give everyone more time to negotiate an extension to keep the government open. But the market is still betting that there will be a government shut down and that is why MBS pricing is rising (better rates for you) and Treasury yields are falling.

Also, our friends overseas are helping to drive up our pricing (rates moving inversely...or lower - so that is good) as the European Central Bank (ECB) President Draghi has said they are ready to pump more cash into the banking system and are considering other stimulative measures.

Bottom line, rates are improving but not due to U.S. economic forces.


What is on the agenda for today?
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Does anyone really retire anymore? Most seem to adapt to re-careers, heading off to other pursuits. But still plenty of U.S. citizens retire, and are paid a pension - just look at the expenses incurred by the U.S. Postal Service, or places like Detroit or Stockton. But where do governments invest the funds used for funding retirements? The Census Bureau loves this stuff, and puts out a quarterly survey (formerly known as the Finances of Selected State and Local Government Employee Retirement Systems Survey). It provides national summary statistics on the revenues, expenditures and composition of assets of the 100 largest state and local public employee retirement systems in the United States. These 100 systems comprise 89.4 percent of financial activity among such entities. This survey presents the most current statistics about investment decisions by state and local public employee retirement systems, which are among the largest types of institutional investors in the U.S. financial markets. To see the financial transactions of these 800 pound gorillas visit PensionStrategy.

On the hiring front, First National Bank is searching for mortgage loan originators (MLOs) in the Cleveland, Pittsburgh, and Baltimore areas as it continues to expand. First National Bank is an affiliate of F.N.B. Corporation, a diversified financial services company with over $12 billion in assets and services including banking, trust, consumer finance, and insurance. The Mortgage Originator is responsible for the generating residential mortgages, which includes working with existing customers with residential mortgage needs and developing new business from external sources. This position will also need to provide the highest quality of customer service to both internal and external customers. "We offer a competitive commission structure, 401K, medical, dental, vision, stock purchase program, and much more!"  Please visit FNB's careers website to complete an online application.

Once again we can all follow the inability of our government to come to a decision, or an agreement, about its fiscal responsibility. What happens to the process of making a home loan if the government actually shuts down? Too bad the government doesn't produce a single source, but here is a good start. It will give the patient reader enough of an idea of what portions of day to day functions can continue and which cannot, and lenders will be especially interested in the Department of Housing and Urban Development and IRS: ContingencyPlans.

But I went back to an issue of the commentary I wrote in April 2011 (remember LO comp?), figuring that much of it is still applicable. "If the government shuts down today, every non-essential government employee should wake up really late and smile. After all, they are lucky. When private companies have budget problems, the people on the non-essential worker list don't get a three-day weekend. They get a six-month 'vacation' of filling out resumes, eating Ramen noodles, worrying about their mortgages, and looking for a job. In comparison, the furloughed government workers will have some time to enjoy autumn in D.C."

Back then, Caroline Baum wrote a notable blurb, "What if the U.S. government shut down and no one noticed? Even worse (or better, depending on one's point of view), what if all federal workers went on furlough and the public realized there were benefits, not just costs, to smaller government? Essential services will be maintained, including the distribution of Social Security checks. Employees involved in the military, national security and law enforcement will stay on the job. Non-essential workers will be furloughed. President Barack Obama says a shutdown would further reduce confidence in government. Guess what? It can't go much lower. The approval rating for Congress dropped to 18 percent last month, near the lowest in the Gallup poll's 37-year history of tracking the trend."

From 2011: "Word has it that since it doesn't rely on Congressional funds, the Federal Reserve (central bank) would remain open for business as usual, with normal staffing levels. The Fed would therefore be able to continue with its day-to-day operations. The SEC is expected to continue operations as well. But lenders and vendors were out warning originators about possibilities. CoreLogic told clients that, "If the government does a shutdown...we will make every effort to transmit orders to the IRS and SSA as quickly as possible once received. All SSN orders will be processed during standard business hours and may not be affected by the shutdown. In the event of a shutdown, we will still continue to submit all 4506-T Direct and SSN orders but service time is expected to be affected due to the IRS and SSA being unavailable to respond."

Also from 2011 research: "NMLS offices will remain open during any government shutdown and NMLS staff will continue to report to work...candidates should not expect their appointments to be cancelled or be affected by a shutdown of federal government agencies."

In 2011 Franklin American suggested clients, "Run CAIVRS' checks immediately on all loans that you want to close in the next week or two in case the shutdown does occur.  A CAIVRS' problem is likely the most immediate impediment to obtaining insurance once the loan the program is reinstated. Remit any collected MIP as FHA Connection will not be available if a shutdown occurs. Complete the insuring of any closed FHA loans. If the government does shutdown, we expect FHA to publish a FAQ and answers on their website to address program operations.  However, we wanted to give our lenders some notice of items they could do to avoid any penalties or process interruption of their government loan production."

Back then Plaza Home Mortgage told producers, "We have been advised that VA will continue business as usual during the shutdown. Therefore, we anticipate that the WEB LGY (formerly TAS) system used to order VA Case numbers and Appraisals will be available, and so will the issuing of VA Loan Guaranty Certificates." And Stearns Wholesale warned brokers, "To best prepare in the event the government moves to enforce a temporary shutdown, Stearns strongly recommends that any pending Case Number, LDP, GSA, CAIVRS, 4506T, and SSI Validation be ordered as soon as possible. If a shutdown does occur, FHA Connection and VA Information Portal may or may not be available, 4506T, IRS Transcript processing and SSI Validation will not be available. To avoid any delay in closing your loans, we strongly recommend you ordering any pending FHA, VA, IRS, or Social Security items today."

But this is all 2 ½ years old... there is still a lot of jawboning to be done by politicians, regulators, and the press. What a great use of our energy! I am sure the agencies, and investors, will be forthcoming with 2013 policies and procedures as the time nears for them to kick the can down the proverbial road again.

Let's continue to catch up on investor, lender, vendor, and agency changes. These will give you a sense of the trends out there, but as always, read the actual bulletin for details.

Stearns Wholesale is now allowing LTVs of up to 95% on Conforming and 90% on Super Conforming 5/1 and 7/1 ARM transactions, both of which have a maximum adjustment of a fixed 60 months.  Cap structures for 2/2/5 for 5/1 loans and 5/2/5 for 7/1 loans.

Private MI company Essent let clients know that for MI apps received after October 21 it is updating its underwriting guidelines and rate cards. Eligibility Expansion and Rate Change Highlights include the elimination of DTI overlay and restrictions on Florida condominiums within Essent's Clear2Close guidelines, improved eligibility and pricing for properties in Alaska and Hawaii with loan amounts greater than $417,000, eligibility for Construction-to-Permanent transactions for loan amounts greater than $417,000, publication of new BPMI Refundable Singles rates, and the introduction of its new Affordable Housing Program - Effective November 4, 2013. Details of these changes can be found in the full announcement.
  
First Mortgage reminded its correspondent clients that it offers minimal overlays on government loans: FHA and VA loans with maximum financing down to 580 FICO, 90% LTV on FICOs down to 500, FHA 'streamline' refinances with no overlays to 4155, i.e. No FICO, no appraisal and no AVM (mortgage rating on subject property only), non-traditional credit borrowers (zero FICO), property flip loans < 90 days-even those with over 120 percent appreciation that meet FHA guidelines, FHA manufactured home loans, and 4506 W2 validation only for wage earners unless construction workers, truck drivers, sales, commission earners, etc. This West Coast investor buys closed loans in the following states: AZ, CA, CO, ID, IN, NV, NM, NC, OR, TX, UT & WA.  (For more information contact Sharon Magnuson at smagnuson@firstmortgage.com.)

Just what we need - yet another report to follow! LendingTree announced the release of its "Credit Accessibility Report." This report, measured monthly, measures the likelihood of borrowers gaining access to credit for home loans based on LendingTree data. According to the report, borrowers had an easier time accessing mortgage credit in August compared to prior months. Doug Lebda, founder and CEO of LendingTree, observed, "Lenders are easing down payment and credit score requirements while still adhering to conforming loan guidelines. And as the private securitization market starts to bounce back, borrowers who didn't qualify in the past may now have that opportunity."

PennyMac has updated its selling guide to clarify the types of Power of Attorney documents that it will accept for purchase.  These include Durable Power of Attorney; Military Power of Attorney; Specific, Special, or Limited Power of Attorney; and General Power of attorney.  All POAs must indicate that the mortgagor is appointing an attorney in fact, the name of the attorney being appointed, and that the appointed attorney is the same person signing the note on behalf of the borrower; be signed and dated by the borrower and notarized in turn; take effect prior to or on the document date of the note; be recorded prior to or concurrent with the security instrument; and contain both a statement of the borrower's name as it appears on closing documents and a recorder's stamp if previously recorded.  Attorneys-in-fact may not be the seller, appraiser, broker, etc. or have any other financial interest in the transaction.  For VA loans, the POA must contain the borrower's written consent to the specifics of the loan, and the lender must verify that the borrower is indeed alive and not missing in action using PennyMac's verbiage (available in the selling guide).  As a reminder, Power of Attorney cannot be used for Jumbo transactions or properties held in a trust.

PennyMac has clarified its guidelines for acceptable forms of trusts, which include Inter Vivos Revocable, Family, Living, and Revocable Living Trusts.  These may be used in connection with all property and occupancy types; for primary residences, at least one trustor/settlor must occupy the security property in order to sign the loan documentation.  The loan file should include a copy of the trust agreement or Trust Certification that discloses the identities of the grantor/trustor/settlor, beneficiaries, and trustee; the powers given to the trustee; that the property is held as part of the trust; the revocability of the trust; that the trust was created and became effective during the lifetime of the original grantor/trustor/settlor; that the primary beneficiary of the trust is the settlor; and that one or more trustees will hold legal title to and manage the subject property.  Irrevocable, Qualified Personal Residential, Institutional, Corporate, Testamentary, Land, and Blind Trusts will not be accepted; nor will Survivor Trusts that are no longer revocable or trusts established under the laws of any entity other than 50 states or Washington DC.

Yesterday the MBA confirmed what many lenders out there knew: residential mortgage apps were up last week 5.5%. It reported that the average loan size for refis jumped from $186k to $200k, which should bode well for HARP. Conventional refis increased by 6% and GNMA refis fell by 1.5%. Overall, the 90-day moving average only declined 4% week over week.

On top of that, we saw mixed Durable Orders data. August Durable Orders rose 0.1% from July, which was slightly above the consensus. The results fell short of expectations, however, when the volatile transportation component is excluded. And as a reminder, any government shut down will have a negative impact on GDP, which in turn will push rates lower. Should we be rooting for that? Regardless of your preference, agency MBS prices did very well yesterday, rallying about .250 in price and the 10-yr closing at 2.61%.

Today we will be savoring weekly Initial Jobless Claims, second quarter GDP revisions, and Pending Home Sales. And the results from the 7-yr Treasury auction will come out at 1PM EDT. In the early going rates are nearly unchanged from Wednesday's close.


Researchers for the Massachusetts Turnpike Authority found over 200 dead crows near greater Boston recently, and there was concern that they may have died from Avian Flu.
A bird pathologist examined the remains of all the crows, and, to everyone's relief, confirmed the problem was definitely NOT Avian Flu.
The cause of death appeared to be vehicular impacts!
However, during the detailed analysis it was noted that varying colors of paints appeared on the bird's beaks and claws. By analyzing these paint residues it was determined that 98% of the crows had been killed by impact with trucks, while only 2% were killed by an impact with a car.
MTA near Boston then hired an Ornithological Behaviorist to determine if there was a cause for the disproportionate percentages of truck kills versus car kills.
The Ornithological Behaviorist very quickly concluded the cause: when crows eat road kill, they always have a look-out crow in a nearby tree to warn of impending danger. They discovered that while all the lookout crows could shout "Cah", not a single one could shout "Truck."


If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog is, "Reverse Mortgages: Companies Need to Know What is Changing". 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://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx or www.TheBasisPoint.com/category/daily-basis. For archived commentaries or to subscribe, go to www.robchrisman.com. Copyright 2013 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)