Trends in the LO Job Description; Studies of Mixed Picture for Building & Lending

http://globalhomefinance.com

 

When I was on a pipeline hedging trading desk, we were often expected to

have a crystal ball about where the market was going. None of us had one,

although we did have coins to flip about where rates were going to be the

next day, but the California Public Employees Retirement System(CalPERS-the

 largest state pension fund at $283 billion) has already told us something

about the future. The fund adjusts its asset allocation model every 3 years,

 and in June 2014 CalPERS will reduce its allocation in stocks from 50%

to 45%. Sorry - I am sure that news is already in the market.

 

Mortgage loan originators (MLOs) everywhere know that the deadline for the

stand  alone Uniform State Test (UST) is in 25 days.  LO's that were

licensed prior to  April 1, 2013 need to pass or register for the exam by

that date if they wish to originate in a participating States after April 1,

2014.  If LO's don't do the stand alone UST, and they want to originate in a

participating State after the deadline, they will have to retake the full

National exam including UST. Mortgage Training  Today is offering 2

conference calls to present the material that will be covered in the test;

the calls are scheduled for March 19th and 26th from 1-2:30 CST.  The cost

of the conference call is $75 which includes a study guide and unlimited

sample tests for the exam.

 

HARP production has slowed down, but while going strong it provided a good

wage to some LOs. But perhaps the LO of 5 years ago is a dying breed,

similar to that  of the typewriter repairman, or the numerous travel agents

that dotted the United States. And how will LOs deal with Millennials? Are

we moving to a low cost environment?

Possibly - I am hearing of moves toward lower commissions while at the same

time  LOs are becoming counselors to their clients rather than order takers

if they want to add value. And Ed Conarchy (contributing faculty of Vantage

Productions and Cherry Creek MLO) writes, "I am truly a counselor to my

clients. I give holistic financial advice to all my clients to make sure

they choose the correct mortgage to complement their holistic finances and

financial goals. 'Americans devote the largest portion of their incomes to

housing. Consequently, how you handle the purchase (financing) of your home

will have far reaching implications on virtually every facet of your

financial life, including your ability to save, pay for college, and plan

for your retirement.' So today I first educate consumers on the importance

of saving for retirement as soon as they can - that time is their friend

when it comes to wealth creation. That they should focus on prepaying their

401k vs prepaying their mortgage.

 

A recent study shows that 94% of US workers are

not maxing out their pre-tax retirement account contributions to the IRA max

allowed. My goal is to get MLOs to see there is more to our industry than

being a mortgage order taker, that you can really help consumers out focused

on fiscal literacy, that education (and not sales) makes you bond with the

consumer.

The longer I am around this biz, the more I realize I don't know. I'd never

heard of "Black Knight", but it is part of LPS, and it told everyone

yesterday that "January Mortgage Data Shows Further Declines in Loan

Originations and Fewer Refinance Prospects."

 

Not to be outdone in the research department, CoreLogic told us that home

prices, including sales of distressed homes, increased nationally by 12

percent in the 12 months ended in January (That's easy to remember.) This

was the 23rd consecutive  month in which the company's Home Price Index

(HPI) showed prices up nationally  on a year-over-year basis.  Excluding

distressed sales, prices rose almost 10%.

But it doesn't stop there: the CoreLogic Pending HPI indicated that

February 2014 home prices, including distressed sales, were projected to

increase 12.5% Y/Y.

"In January, our overall demand score ticked upward for the second

consecutive month, following sequential declines in the prior four months,

signaling still-solid absolute levels of demand and continued confidence in

early 2014. The uptick in confidence would align with the positive order and

traffic trends highlighted in our most recent homebuilder surveys

However, our demand indices by lot type were more mixed, with finished lot

demand down slightly from December and raw land demand relatively flat. The

choppy trends across our demand indices show that despite the reversal of

the mid-2013 decline, a more consistent upward trend in demand for land will

be contingent on further confirmation of a strong spring selling season and

clarity around the direction of the market in 2014.

 

Here's an optimistic outlook from the MI sector tied to shift to purchase

mortgage market, combined with a little self-promotion. John Clifford, SVP

of Commercial Operations at Genworth MI, said the company increased its NIW

by 35 percent in 2013, in part by offering the most expansive underwriting

guidelines in the industry.

"Our expansive guidelines and very competitive pricing should help lenders

approve more borrowers as the mortgage market continues its shift from

refinance to home  purchase activity. After recording our first full-year

profit in several years in 2013, we're focused on accelerating this growth

through 2014 and beyond, while continuing to focus on prudent underwriting

and strong risk management."

 

But United Guaranty Corporation has been ranked the number one mortgage

insurance company by sales (defined as first-lien new traditional mortgage

insurance written, or NIW) and market share for each of the past two years,

according to Inside Mortgage Finance. United Guaranty set a corporate record

in 2013 with NIW totaling nearly  $49.4 billion, with 28.1 percent market share,

 according to the February 21 issue of Inside Mortgage Finance. In 2012,

 United Guaranty topped the same list with NIW of just under $37.3 billion and

market share of 28.4 percent.

 

 

Yesterday, when reciting some Parkside underwriting guidelines for its

non-QM product, I noted, "All transactions are subject to a maximum LTV of

80%, and DCR exceptions will be permitted on a case-by-case basis." That is

not LTV - CLTV is correct. "Parkside offers a non-QM product for NOO

properties that qualifies on Debt Coverage Ratio

(DCR) instead of DTI. 3/1 & 5/1 - qualify at Note Rate; qualify with 100%

of rents when using rental survey or lease, "We now go to: 50.01 - 60% LTV

with DCR = 1.3,

40.01 - 50% LTV with DCR = 1.2, <= 40% LTV with DCR = 1.1; Max CLTV is 80%

in all cases. Exceptions on DCR will be looked at on a case-by-case basis."

 

As noted in the commentary yesterday, lock desk folks have been saying that

apps  have picked up. Sure enough, this was confirmed by the MBA's weekly

report (that covers 75% of retail lending) which showed its seasonally

adjusted index of mortgage application activity rose 9.4 percent in the week

ended Feb. 28. Refinancing applications rose 9.6 percent while purchase

applications rose 9.4 percent.

 

As opposed to the last few weeks when volatility took a vacation, it has

come back this week. Most agree that we'd rather have peace in Europe and

Asia (and anywhere else) than low rates. So it is a good thing that global tensions

 eased after Russian President Putin sent troops back to bases after recent military

exercises near Ukraine, right? But Monday's "flight to safety/flight to

quality" improvement reversed itself in the stock and bond markets. The

10-yr T-note shot up to 2.69% and agency MBS prices dropped about .5.

 

Today we've had ADP for February, which does not include government jobs.

The expectations were for +158k and it came in at +139k. We'll also have ISM

services for February; ISM non-manufacturing is expected at 53.5 versus 54

previously. And at 2PM EST the Federal Reserve releases its Beige Book which

provides economic anecdotes from around the country in preparation for the

FOMC meeting on March 18-19. Rates are little  changed this morning; the

10-yr closed at 2.69% and this morning it is sitting around 2.69% and agency

MBS prices are unchanged.

 

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