Servicing continues to hit the markets

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"For the fifth year in a row, the Federal Housing Administration (FHA) violated federal law by failing to meet its minimum capital standard of 2 percent-equal to about $22 billion on its $1.1 trillion book of insurance in force. The 2013 Actuarial Study found that the FHA had an economic net worth of -$8 billion, up from -$13.5 billion last year but still $30 billion short of the 2 percent statutory standard, "
The quote was taken from Ed Pinto's FHA Watch. As many in the industry know, Mr. Pinto is a perpetual proponent of dismantling the FHA and scattering its ashes into a volcano. In December's issue you can read about several things including the FHA's persistently high delinquency rates (in November, 14.96% of all FHA loans were delinquent). This according to the report is "up from 14.70 percent in October 2013 and down from 16.48 percent in November 2012. The FHA's overall delinquency rate is stubbornly high, notwithstanding the declining unemployment rate, the multiyear addition of what it describes as lower-risk loans to its insurance book, and the sale in 2013 of a substantial number of delinquent notes."
Many companies understand risk, but there are only a handful of pipeline hedging (risk management) companies out there, and one of them also is a provider of pricing and accounting solutions for the mortgage and financial services industries. One of them, MIAC, is looking for a Secondary Marketing Analyst for its Charlotte, NC location. (It is also handling the sale of a large block of servicing - see a few paragraphs down.) Candidate should have approximately two years of loan pricing experience, basic secondary marketing and Mandatory lock desk experience; there is no relocation package. MIAC has been around since the late 1980's, and is well known in the mortgage business.
Yesterday the commentary discussed Home Ownership Counseling, and I received several notes. This daily commentary is not meant to be a compliance manual, but it appears to be a timely subject. Here's one that cut to the chase regarding loans that require Home Ownership Counseling: "While I appreciate the information, you may want to revisit the definition of a federally related mortgage loan for a better understanding of the rule." I like the directness!

From another part of the nation, John Norman, Chief Compliance Officer with Academy Mortgage writes, "RESPA applies to federally related mortgage loans except loans on property of 25 acres or more and business purpose loans. (See, 12 CRF 1014.5) Almost all loans made on residential real property (1-4 unit housing) in the U.S. today are federally related mortgage loans. (See, 12 CFR 1024.2)"

And this is taken from one bank's compliance manual: "Do we have to provide the Housing Counseling List on all Mortgages or just when the loan will be secured by a Primary Residence? The Housing Counseling List must be provided on all loans within 3 days of Application Date, even if the loan is not a HOEPA Loan. The Housing Counseling List and the Homeownership Counseling Acknowledgment will be sent with the initial disclosures."

And, "We know that if the APR exceeds the APOR by 6.5% or more, a first mortgage is considered to be a HOEPA Loan. What happens if the APR is within the 1.5% tolerance, but the Points & Fees exceed 5%?" It's a HOEPA Loan, which is a loan secured by the Borrower's Principal Dwelling and the APR exceeds the APOR by: 6.5% (First Mortgages) or 8.5% (Second Mortgages) OR the total points & fees will exceed $20,000 or more (5% of the Total Loan Amount) less than $20,000 (8% of the Total Loan Amount) or $1,000 - if the loan is secured by a Primary Residence and determined to be a HOEPA Loan, the Borrower must be provided with additional disclosures and we must ensure the Borrower receives additional protections, including Homeownership Counseling."

Austin Miller from CMG Financial writes that the home ownership counseling disclosure applies to all "federally related mortgage loans" which is defined as anything HUD-related or the GSEs. From the definitions section of the Reg X text:

Federally related mortgage loan means: (1) Any loan (other than temporary financing, such as a construction loan): (i) That is secured by a first or subordinate lien on residential real property, including a refinancing of any secured loan on residential real property, upon which there is either: (A) Located or, following settlement, will be constructed using proceeds of the loan, a structure or structures designed principally for occupancy of from one to four families (including individual units of condominiums and cooperatives and including any related interests, such as a share in the cooperative or right to occupancy of the unit); or (B) Located or, following settlement, will be placed using proceeds of the loan, a manufactured home; and (ii) For which one of the following paragraphs applies.

The loan: (A) Is made in whole or in part by any lender that is either regulated by or whose deposits or accounts are insured by any agency of the Federal Government; (B) Is made in whole or in part, or is insured, guaranteed, supplemented, or assisted in any way: (1) By the Secretary of the Department of Housing and Urban Development (HUD) or any other officer or agency of the Federal Government; or (2) Under or in connection with a housing or urban development program administered by the Secretary of HUD or a housing or related program administered by any other officer or agency of the Federal Government; (C) Is intended to be sold by the originating lender to the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation (or its successors), or a financial institution from which the loan is to be purchased by the Federal Home Loan Mortgage Corporation (or its successors)...

I could go on at the risk of losing 99% of the readers, if I haven't already, but do your homework at BankersOnLine1 or BankersOnLine2.

Turning to the markets, volumes continue to be slow; demand is still good due to the Fed and other buyers. We've had December Retail Sales and December Import Prices, +.2% (versus +.4% in November) and unchanged, respectively. That pretty much sums it up! Monday the 10-yr.'s yield closed at 2.83% and this morning we're sitting around 2.85% and agency MBS prices are worse "a hair."