Who is Deven Sharma? He is the latest person to quit his job. Ordinarily
this wouldn't
be a big deal, but he was the president ofStandard & Poor's - the rating
agency
that stripped the United States of its AAA credit rating. The newspapers
cite people
familiar with the matter (why am I never familiar with any matter?) who say
Sharma's
move was in the works well before S&P downgraded its rating on the U.S., is
purely
due to organizational changes and does not have anything to do with the
Justice
Department investigating whether the agency improperly rated dozens of
mortgage
securities in the years leading up to the financial crisis in 2008.
Citibank's now
ex-COO Douglas Peterson will replace him.
It is hard to talk about the government removing itself from the residential
mortgage
process when one sees a headline like, "FHA Endorses $10.5 billion in
Multifamily
Rental Housing Loans." Demand through the FHA has skyrocketed for
FHA-insured financing
to build, rehabilitate or refinance multifamily apartment properties. FHA
has announced
that it has endorsed 1,100 loans for multifamily rental housing loans since
last
October, with another month-and-a-half remaining in the fiscal year.
HUD sends its apologies to those who traveled to Puerto Rico this week for
FHA training
- it was cancelled due to bad weather. (How come "traveled" has one "l" and
cancelled
has two "l"'s?) But don't worry, there are more sessions on FHA appraisals,
HECM's,
processing, etc.: tomorrow in Portland (OR), 25th Indianapolis, September
7th Anchorage,
21st Birmingham, October 24th Boston... Most of it is paid for by the
taxpayer and
therefore free to the attendee, but for more information go to
HUDFHATraining
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107271229005&s=8721&e=001HodoEa
ObbgY30Kt-oK_Q9W4z646bEVdklSuSOUfd01pSngzPmTOAFrMLBJ2WuEP40xjjUD2JxsNqLonlZx
Wdy9n09i-4eN1wNALc82Pjotm_ZwZwPfOSqc75-4z4mGQD-WM9wIflXIdr6h9VjjvFlqNfyCa-S0
NoFjl6XgDbPQ3n158UcmlrhVPyt5Iy0iXwX1ycI3z7TANPCxirArNEdw==].
I swear that I did not start any appraisal controversies in the press last
week
when I brought up valuation problems, but there was a coincidental flurry in
the
press about the subject. Maybe it was the appearance that NAR keeps blaming
"bad
appraisals" for the lack of appreciation in the housing market. Regardless,
the
Wall Street Journal came out with one article: WSJValue
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107271229005&s=8721&e=001HodoEa
ObbgaOEfXf3HdD0DwmfXi4ubWJTMRABDxtwJuTCOjVKEgvPfvhi6S2qeBI7VnUGyrktwuB8uGMyW
jaazd7fgxMe69OwxgW80AAyHhAtbsEF2pxrQfxzHOFrNjYwS1BiqyPzEHPJ4lme8YoMtSHRLuFUo
WHiHdjVbZ8IOMUkA-PS6MbJzAESfT87-Rd].
At which point the appraisal industry appears to have raised up its head and
cried
out, "Don't blame us, we're just doing our jobs!" ValueofWSJ?
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107271229005&s=8721&e=001HodoEa
ObbgYYIGDx-YTR30Erom4eqXsgGxcCm810sgQZWTAseYZnmtQjZiYiQefhG5Ij8_N0aPitTIwacq
J5ZDam2oqSzPLKKszPoFRPwdUgbwbBBa1InGZmg6N-hiBJtLBuJIT8dV1VSz__szZsTe9zkziaZF
5T]
And regarding RE/MAX's survey of 53 cities, "showing that July home sales
dropped
12.7% from the previous month. RE/MAX blamed tightened lending standards,
concern
about the overall economy and bad appraisals that reportedly killed many
transactions"
I received this note: "Rob, I would like to comment that just because an
appraisal
does not meet the contract price it is not necessarily a bad appraisal. If
more
appraisers had considered the market and just not the contract amount in the
past
we may not have had as steep of a fall in values. A 'good' appraisal is one
that
accurately portrays the market value, which may not always be the contract
price.
'Low appraisals led to 13% of contracts being renegotiated below the agreed
upon
price' is more accurate and leads to a buyer paying the market price and
not an
inflated price. Appraisers have a challenging job these days and too often
are
used as the scapegoat for the loan not closing. Thank you to Vicky Thompson
at
CMI Valuation Management Group
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107271229005&s=8721&e=001HodoEa
Obbgb9oQx7EiFbf22firQdSQKxlKJIrpQycsa9Ggh2T_NPebZ26iw4BObwhctqk2CVTPOboKyvtN
u0hFQDn6mh21T0OiQDF3A73IMuajWduCqOLbXqXqzTZsA-].
After last week's appraisal notes, I received, "One way to nail down pull
through
is to watch appraisal orders and receipt of the appraisal. I needn't
explain the
correlation between ordering an appraisal and pull-through - no appraisal,
no loan.
Additionally, we've found that beyond the ordering, the timing of the
receipt of
the appraisal really dictates when, not if, the loan will close. I never
thought
in a million years I'd be looking at appraisal ordering and receipt as a
gage for
fundings."
"Once Fannie and Freddie have all of the information on your house, and all
of your
neighbor's houses, why would we need appraisers and not just inspectors
confirming
that the house was still standing? Statistically, the larger the group you
take
you're sampling from, the more accurate your results. AND since you are the
one
ultimately determining value and lending the money why would there be any
appreciation
allowed beyond what you had determined was an acceptable amount? Say 1-3%
for flyover
states and 3-5% for the coast?" (Anyone willing to let the government
control the
market for housing to this great a degree, step right up!)
The big story yesterday was that another MI company has stopped writing new
commitments.
"We are writing to inform you of the very recent regulatory decisions that
have
impacted our ability to write new commitments. Specifically, PMI Mortgage
Insurance
Co. ("PMI") and PMI Mortgage Assurance Co. ("PMAC") have been informed that
they
must cease writing new commitments for insurance effective as of the close
of business
on August 19, 2011. PMI and PMAC may issue mortgage insurance policies under
pending
commitments through the close of business on September 16, 2011." There was
the
usual language about "we will support our customers' ongoing policy
servicing needs
and loss mitigation programs. PMI will maintain all systems, processes, and
contact
points for policy servicing, loss mitigation, and claims operations just as
we do
today."
Freddie Mac and Fannie Mae wasted no time. "Effective immediately, we are
suspending
PMI and its wholly-owned subsidiaries as approved mortgage insurers. With
this suspension,
mortgages insured by PMI with note dates before May 19, 2011, or after
September
16, 2011, will no longer be eligible for sale to Freddie Mac. To help
manage your
pipeline, mortgages insured by PMI with note dates on or after May 19, 2011,
and
on or before September 16, 2011, must be delivered to Freddie Mac on or
before
December 30, 2011, whether for borrower-paid or lender-paid insurance."
Freddie reminded clients that there are indeed other approved MI companies:
MIisAlive
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107271229005&s=8721&e=001HodoEa
ObbgZmuuEDu97DaxDONEwOUFVgvZK7MnzmHnUQxgbfYvMg40CiRxjogqodJX7xBPKe3t1_sHJSFM
p-BqmQBM4yZOFmorowo-g-4GFcK77aV8pWCmkVp9CQxK7g2uQrBQldKP5uMNnimToOA835sqw6ZX
nA].
Investors followed. CitiBank quickly spread the word to clients. "In order
to meet
the deadlines set by PMI's regulator, Citi is requiring any loan insured by
PMI
be purchased by Citi no later than September 2, 2011. Reminder: Payments
for any
single premium MI policies must be submitted to PMI immediately upon loan
closing."
U.S. Bank Home Mortgage Wholesale Division wrote, "In-process loans, insured
by
PMI with certificate dates on or before August 19th, 2011, will be accepted
for
purchase under the following criteria: Existing loans in your pipeline, with
certificates
issued by PMI, must be closed, disbursed/funded by August 31st, 2011 and be
delivered
and purchased by USBHM on or before September 9th, 2011. Loans with PMI
insurance
certificates that do not close by the above deadlines will not be accepted
by USBHM
until new MI insurance is obtained from one of our other approved MI
providers:
MGIC, Radian, UG, Genworth, and Essent.
Speaking of UG, it sent news out to its clients that, "We have new appraisal
guidelines
that reflect the new Uniform Appraisal Dataset from Fannie Mae and Freddie
Mac.
We'll be modifying our underwriting requirements guides to reflect these
changes,
effective 9/1: UG
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107271229005&s=8721&e=001HodoEa
ObbgbgvZKoie7TOiiJ-v8YtQbKEoe9Pv84agAshUqfd5YfISBJximYZB5ASSXGalCfGoHA7fwnBb
Z4OUWKX4IKIi_2Zi9fRlJYC_zxNPNs9Gl7RZSYtNle0GWfaSyufFToyoe96nMH8vN2kA0cyNtiH3
oFIyOpTNsOrwu4fTYIqVyaOYBW5LEHIXrYAL_HYwt_rzI=].
Accenture announced its acquisition of mortgage outsourcing provider Zenta.
The
release said, "In a move that puts the global consulting and outsourcing
provider
in the thick of the mortgage origination business and the massive loss
mitigation
efforts ongoing in the mortgage servicing industry." Zenta has 3,700
employees provide
business process outsourcing in mortgage origination fulfillment, servicing
loss
mitigation, as well as portfolio due diligence and management for
investors.
The deal prompted one industry vet to write to me, "Mainstream origination
firms
are clamoring for better LOS technology, not for BPO providers to take over
their
back office. The 'people challenges' involved in end-to-end BPO are huge,
especially
in purchase money transactions where sales compensation is at risk and loan
officers
are loathe to disrupt trusted personal working relationships with their
processing
team. Nor is there a magic fountain of elastic capacity - when the demand
switch
flips and everyone needs scarce talent at the same time, exactly how will
Accenture/Zenta
instantly fill critical high skilled roles any better than anyone else? And
then
there is there is the question of who takes repurchase risk when the
end-to-end
process is shared with a third party and the investor's claim cites a
tangled mix
of defects whose trails cross organizational boundaries? These challenges
have 'undone'
a slew of entrants to the first mortgage end-to-end BPO space who believed
that
superior technology held the answer."
Last week stock markets declined as the euro zone sovereign debt crisis
remains
unresolved. (Germany is opposed to common euro-denominated bonds despite
pressure
from the European Commission and members of the European Union that see this
as
the solution to the debt crisis.) The big problem with euro bonds is that
the European
Union members do not have common fiscal policies. The general consensus is
that
Europe must find solutions for the current debt obligations before they can
work
on how the Union will handle future obligations.
Over in the U.S., of course, rates remain low. A major problem, of course,
is that
current low interest rates are a result of falling confidence in the
economic outlook.
It's cheaper than ever to borrow, but that's because no one wants to borrow!
Current
coupon (whatever that is these days) MBS prices ended the day lower/worse by
.125-.250
while 10-yr Notes were nearly unchanged at 2.09%. News is limited again with
only
New Home Sales for July coming out at 9AM CST, and a $35 billion 2-yr note
auction,
and in the early going the 10-yr is at 2.11% and MBS prices are worse a
smidge.
A tourist in a bar in Florida asks an Irishman sitting at the bar, "Why do
scuba
divers always fall backwards off their boats?"
To which the Irishman replies: "If they fell forwards they'd still be in the
darned
boat!"
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 recent U.S. credit downgrade by S&P,
and
whether it really matters. 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=nsheihhab.0.epg7qedab.zy6u9cdab.8
721&ts=S0660&p=http%3A%2F%2Fwww.mortgagenewsdaily.com%2Fchannels%2Fpipelinep
ress%2Fdefault.aspx]
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=nsheihhab.0.v7uif6dab.zy6u9cdab.8
721&ts=S0660&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=nsheihhab.0.fpg7qedab.zy6u9cdab.8
721&ts=S0660&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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