We're
staring at 2015 this week and "I want to retire this year!" may be
the refrain from various lenders when asked about New Year's resolutions. But
where are the best places to retire? Other data shows about 17% of the 76
million Baby Boomers have already retired and about 10k will retire every day
for the next 15 years. And note that the stock market has been doing fine in
spite of some forecasts that retirees, in order to cover their living expenses,
would be selling all their holdings thus driving stock prices down. It hasn't
happened.
For
better or worse no one in the industry will disagree that legal outlays and
compliance related expenses have skyrocketed for residential lenders, and these
costs are passed on to borrowers. And the lawsuit news continues to flow.
Many
think that the older rating agencies have not seen the punitive impact of
mistakes made in rating securities. Standard & Poor's Ratings Services
is close to an agreement with
regulators that will settle investigations into its ratings of commercial
mortgage-backed bonds, sources said. The deal could be finalized as early as
January, they said.
At
the other end of things, Credit Suisse lost its bid to have a case dismissed
- the judge said, "Thanks but no thanks" and things must proceed.
Wells
Fargo & Co. has been ordered to pay $54.8 million in
damages tied to a class-action lawsuit alleging that fees charged by two
mortgage servicers were excessive. On Friday, a Manhattan federal jury ruled
against Wells in a suit alleging that late fees charged by now-defunct mortgage
firms The Money Store and HomEq were improper and unlawful.
And
Wells Fargo, HSBC Holdings Plc, Bank of New York Mellon Corp., and Deutsche
Bank AG were sued by an Irish securities firm
that claims the banks failed to protect investors in their role as trustees of
securities backed by home loans that defaulted after the 2008 credit crisis.
Also
of note is that Edward O'Donnell, a former executive at mortgage lender
Countrywide Financial, is set to collect a cool $57.6 million from Bank of
America for his role in exposing fraudulent activity at the firm. As you
may recall a federal jury ruled that Countrywide Financial (now owned by BofA)
had defrauded government-backed firms Fannie Mae and Freddie Mac by selling
them defective mortgages. O'Donnell is entitled to 16% of a $350 million
payment from Bank of America, according to documents filed this week in the
Southern District Court of New York. The payment is a portion of the $16.65
billion settlement that Bank of America has to pay. It's the biggest financial
settlement in history. O'Donnell's piece of the $350 million is equal to about
$56 million. He's also entitled to an additional $1.6 million payment from Bank
of America, to total about $57.6 million, which must be paid within a
"reasonable time," according to the federal court document.
Here's
a doozie. It costs $900 to conduct due diligence on each loan pledged as
collateral for an RMBS. That was the number that was tossed out at SFIG's
ABS East Conference in Miami Beach. If you don't believe it, drop a line
to Eileen O'Grady who attended the conference.
Eileen is a mortgage capital markets veteran, who has signed on as Capital
Markets Business Development Manager at LoanScoreCard. She
wrote, "Nine.Hundred.Bucks. Any volunteers to start looking at loan
files? That's $225,000 per annum. For.One. Loan. Per.Day." Eileen
also captured some other interesting bullets from ABS East, like the big push
for the 15 year "Wealth Building Home Loan" by the Fed and others;
the somewhat baffling AB II regulation, which tries to balance bond data transparency
against borrower right to privacy; and the pressure on Aggregators, Servicers,
Trustees and others in the RMBS industry to spend a lot more money on
technology, so they can stay in a lot less liquid RMBS marketplace.
Dilemma. Email Eileen or hear about it yourself at the ABS West in Vegas
Feb 8 - 11, 2015. (Maybe I can find my sports jacket that I lost at MBA.)
October
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Besides
most lenders going to 97%, let's continue playing catch up with some random
lender & investor news in the last several weeks to check the trends.
Looking at the markets, we're
seeing lower rates so far this morning. The Federal Reserve said it is
suspending until Jan. 2 all agency mortgage-backed-securities operations. And
for now through Jan. 13 the central bank said it intends to buy no more than
$10.8 billion of agency MBS. We have a decent amount of news this week although
it doesn't commence until tomorrow's S&P/Case-Shiller series of
two-month-old numbers (these are for October). We also have Consumer Confidence
tomorrow. Wednesday, the last day of the year, will be the MBA's application
data and also the Chicago Purchasing Manager's survey and Pending Home Sales.
With the market closure on January 1st we can all expect low MBS
liquidity on December 31st. Lastly, on Friday, January 2nd, ISM Manufacturing
Survey will publish the composite index of purchasing managers at 300
manufacturing firms nationwide about the general direction of production, new
orders, order backlogs, inventories and other variables into the manufacturing
health.
For numbers we had a 2.25%
close on the 10-yr Friday and in the early going we're at 2.22% with agency
MBS prices better by .125-.250 depending on coupon and type.
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