Even dumpsters can be turned into homes - but what about the comps? IsThereRoomForTheRat?
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107611491782&s=8721&e=0011nQtOptUiudUptXCxPLkPC9xGec1J0wpQEOimwNzDJ4MEphFMvSkkoPW7HevImIWh0-vmOOogWb2ptmbAviYvwfAWKV3FDnSCVggjILqdFdv_HpmM-xyb2pI0MyNtB1EEBRMXhYoaGt3n19WVH1MBcYMq6RBfrPo9gucKYCXBJmHx2Lk17Mqvq15RLn5Utal]
Rates are great, but no experienced loan originator, of sound mind and body, believes
that a mortgage company should not make a profit on a loan. But in order to cover
the extreme volatility in the last month, profit margins per loan have grown, and
thus, as I am often asked, movements in the MBS market are not directly transferred
to changes in rate sheet pricing. In addition, besides the volatility increasing
the hedge cost, given how the cost of originating each loan has increased due to
underwriting, regulatory, and compliance issues, margins have indeed gone up. GoodRatesBut
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107611491782&s=8721&e=0011nQtOptUiudS8o4S0nIId-KMgJhtzTbl6zb0pK_4tZltp8F72ln5dpbvdHEN1tWfgIGq_481wxzNtWOkRGTMxPWSPADxJl5taDPjwsvFyRKpZ1oGztY7RDiX8aUg6aI1vcK-2BOanyiLLIizpCxw5kv0KDr6u7hsK1L2achiqOq0FhkqA-iDsUsBzebfZzYC]
If you're a senior, and you read USA Today, what was your takeaway on reverse mortgages?
WhatThePublicReads [http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107611491782&s=8721&e=0011nQtOptUiueaZka3bhNqbfuF2aHFAavMPpf06pRX0NHziOIK92Bp9r_-no35QUMgKCRjgdGQzQO_kWY1UU4ChflvvtqL4Ql7oijzR1YzquspieB5jb3MrPrkm41xjftoVmmu4x3zguwsbeKQr1iA0dG-Tova24Sd0fJx9rJ4yL52ItBpXA9ckMmg_hxwh8wMdhZ2wQcLjCQ0KE7cjJclB29fAbV2Oo4T]
If you're wondering about the latest on Mike Perry and Indymac (aka IndyMac), see
Indy [http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107611491782&s=8721&e=0011nQtOptUiud6Cyfa0j7Sbz1g4y4s6cwXS9LCei40VEiQhthOswxEBZqKWKdHryNLnJPZXiMmYEox9LnDmbCeRZlm_6ZO3or3tdRSCIqlvsIPai1vU8z-4g==].
There are a couple big conferences coming up. In New England, the 24th annual New
England Mortgage Banking Conference (NEMBC) is next week in Newport, Rhode Island.
"Thriving in a Challenging in Market" is the theme ("Together we will navigate through
the maze of industry challenges while identifying areas of opportunity. Learn more
about the top regulatory issues facing our industry today such as Dodd-Frank, MLO
Compensation and the Consumer Finance Protection Bureau and regulatory issues.")
For more information contact Melody Bohl, Conference Director, at Melody@MelodyBohl.com
[mailto:Melody@MelodyBohl.com] or go to http://www.nembc.net/ [http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107611491782&s=8721&e=0011nQtOptUiud61a5yQ9HrT3WSPAF58IhNgOfDcZRRLt5mR9nCHVSw2nOtZdl0qvxvOm3JtY4Q6kWmYXUczsUST01f8hTVTnlLkJXs1LKUGsg=].
Another is the Mortgage Bankers Association of the Carolinas 56th annual convention
titled, "News You Can Use", in two weeks in Myrtle Beach, South Carolina. Contact
Rhonda Marcum at rbm@mbac.org [mailto:rbm@mbac.org] for more information. Details
are available at www.mbac.org [http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107611491782&s=8721&e=0011nQtOptUiudC5cm_qS-EtNkfX3xEACJFNDuu-tuDQG_keeOqIL-j-hZ9QCthJ6TLTXiOKZ9NwDnH31QyVK2ayTh4WtGrcM7yyNKGekWoV6Y=]
at "Upcoming Events". And the MBA is having its annual conference, of course, in
Chicago in early October.
Basel III is back in the front page financial news. JPMorgan Chase's Jamie Dimon
called the Basel III capital rules "blatantly anti-American." "He was referring
to new capital requirements that call for banks to hold core tier one capital that
equals 7% of risk-weighted assets. That number climbs to 9.5% for systemically important
financial institutions like JPMorgan Chase, Citigroup and Bank of America." For
a complete write up visit ForbesChaseBasel [http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107611491782&s=8721&e=0011nQtOptUiucAr1VcZAYCjNdjefzWDS_-7_LbJ6DBXd0pwf_Af2L_i9o4qW7yVisr8TGkrgZrAP3tOE7jmlN9f2VOggo19-BlWLkeaX14N73WOvsQoVhRuLLM6hXKQBYfUK9Nqa-w8DeLphn3axUmEn_95SWlMw9xgtpqC0u5Mi6qPqrNKRvDz7g4ZpU3RTPSXzFXaCA2jMfMjRF4_D7d6hGBgecT06KKttljYVlo1VX1vAtuaynypg==].
Many in the industry are waiting and watching for news on Bank of America's correspondent
channel. There are the usual rumors about a buyer (Nationstar, Fortress Investment
Group, HSBC, a REIT to be named later, etc.) but in the meantime a regional BofA
rep sent a note out to clients addressing some key issues. "1. BAC's announcement
to sell the Correspondent channel is due to two key points. First, BASAL III - regulated
financial institutions worldwide are being held to universal standards set forth
in the recently announced BASAL III accord. US banks are particularly affected
by Mortgage Serving Rights (MSR's) levels as a percentage of BASAL III calculated
Tier I capital. In addition to the MSR segment, there are two other segments that
come into play individually and all three segments together are measured against
Tier I capital as well. With each of these segments, as well as the three combined,
there is dollar limits for each segment AND all three combined. If you exceed calculated
individual and/or combined segment dollar limits, the institution has to hold additional
capital.... In short, this becomes extremely expensive, extremely unlikely. Each
financial institution will be unique in their management of these segments. The
second key point and in concert with #1, in BAC's decision to sell Correspondent
Lending is our relationship to the ultimate borrower/consumer. With pressure from
the BASAL III accord, BAC and other financial institutions have to decide how to
allocate capital to meet each institutions short, mid and long term strategies
and plans. BAC is committed to the consumer and deepening this relationship. With
these two points in mind, BAC decided that challenges presented from BASAL III accord
and consumer growth could best be met through the Retail channel going forward."
The note goes on. "2. The BAC Correspondent channel has value and active discussions
are taking place on its sale. Clearly this is a very sensitive topic and I cannot
go any further at this time. I will ask for your trust on this and leave it at that
for now. 3. For those that we Warehouse, everyone has asked about what will happen
with the Warehouse group and function. It's business as usual. I know you would
want to hear more, but it really is true, business as usual. As clients come up
for renewal today, we are processing, reviewing and approving these renewals as
I write this note to you. 4. Lastly, I want to emphasize that loans locked with
BAC Correspondent today and in the future will be honored. Any decision about Correspondent
Lending will protect and honor current and future pipelines and give plenty of time
to decide how you want to handle future business." (Be advised that I cannot say
whether or not this is an official BofA notices, or one person's thoughts.)
Perhaps some of the 30,000 folks who may be laid off from Bank of America could
find a position with Quicken Loans. But only 500 of them, and they must move to
Detroit [http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107611491782&s=8721&e=0011nQtOptUiufMlh6IY8Y912QpZNyTTqMCjc4dgFaPwnOQLZ0ynXKcBdjXT5NSk3lWhufz0006lZEwgB0VdhwSkR6AvpD7SfPRBPGaPa8P2z0E5fShdxMoSl-bkdwf_ADIKBtUOh6uzmUxxS92UMvWtKxDr2PH9xsopauDh6TElj5o0JXQ_2TZbA==].
Bank of America's correspondent clients, and yes, there are still clients and a
business channel, were reminded that, "Per current United States Code (Title 38,
Chapter 37, Section 3729) and recently passed Public Law 112-026, VA Funding Fees
are set to decrease for VA transactions funded after September 30, 2011." As lenders
know, the fees and their changes are dependent on loan purpose, whether the borrower
is in the military or in the reserves, the down payment, and whether it is a first-time
user of the VA program or a subsequent user. BofA's clients were told that "effective
September 1, 2011, VA will accept UAD compliant reports. Effective immediately,
Clients may use appraisals that are in either UAD or non-UAD compliant formats when
delivering FHA and VA loans to Correspondent Lending for purchase. Clients are required
to comply with the UAD requirements for FHA loans effective with case numbers assigned
on or after January 1, 2012. Correspondent Lending will announce further UAD requirements
for VA loans upon release of the official VA Circular. Clients are responsible to
ensure that all appraisals and properties meet HUD and VA requirements."
GMAC Bank Correspondents were told that "all Conforming ARM products will no longer
be able to offer a 40 year amortization term. The maximum term will be 30 years."
GMAC's clients were also told that, "On transactions where the loan originator is
paid by the lender, GMACB will permit a Principal Curtailment on purchase and refinance
loans (in certain conditions) as a result of excess premium rate credit. The excess
premium must be identified on the HUD-1 Settlement Statement and is limited to the
amount of the excess premium rate credit (listed)." GMAC's bulletin went on to describe
the details, and it is best to read it.
MetLife had the servicer-quality rating on its home-loan business cut by Moody's
Investors Service. "The rating downgrade is mainly due to deterioration in call-center
metrics for the customer-service department, indicating an insufficiently staffed
customer-service call center," Moody's said today in a statement. "Abandonment rates
in 2010 reached 30 percent for customer service, performance levels that are significantly
worse than its peers." But the company is trying to expand, and in June, for example,
the company agreed to supply KB Home with loans for first-time buyers. MetLife's
servicer-quality rating was cut to SQ3+ from SQ2- by Moody's. The rating firm said
it also withdrew the grade at MetLife's request: MetLife [http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107611491782&s=8721&e=0011nQtOptUiudYhoddxyBfxO-kx7K5pmOMMdw3hCqs0ftQb96QS8_vfteKpgsBHfAyDyfvYh8_RUF1fzDWWURyYi_nc1udRjTd-k_wrZCgZpBwrJBF8PZWAfL_6nwaWa4qrzL_k4qh2cvNyT4dIwWXQhxZFV7Ycrg236vZtYVcrd8zsL_4k6i8CAdR4318MK_eWBr4qvuPJcwQJTTVognO6Od1FX2g03y6mMIDcqpOeA9Ns7j20ijAYIaiBqNzdz0hGD78d1qDNyo=].
How about this economy? Last Friday the yield on the US 10-yr. Note hit 1.88%, based
on a variety of factors. Really, are minor US economic releases really important
when entire countries are in danger in Europe? Thus we find our low rates as investors
continue to flock to US debt, in spite of the downgrade by S&P some time ago. Market
concerns over Eurozone sovereign debt default and a weak U.S. employment report
for August are certainly keeping rates low.
We still have this week's $66 billion sale of 3- & 10-year notes and 30-year bonds.
The US Treasury's 3-yr Note auction went fairly well, and it is certainly worth
taking a step back from and reminding ourselves, "Investors are tying up their money
for 3 years at a yield of only .334%." 10-yr notes ended yesterday roughly unchanged
at 1.93%, and MBS prices were roughly unchanged as well. Today's economic news is
limited with just Import Prices for August at 8:30AM EST and a Treasury auction
of $21 billion 10-year notes at 1PM EST. So far the focus in on Europe and the 10-yr
is at 1.95% with MBS prices worse by about .125.
A pirate walked into a bar, and the bartender said, "Hey, I haven't seen you in
a while. What happened? You look terrible."
"What do you mean?" said the pirate, "I feel fine."
"What about the wooden leg? You didn't have that before."
"Well," said the pirate, "We were in a battle, and I got hit with a cannon ball,
but I'm fine now."
The bartender replied, "Well, OK, but what about that hook? What happened to your
hand?"
The pirate explained, "We were in another battle. I boarded a ship and got into
a sword fight. My hand was cut off. I got fitted with a hook but I'm fine, really."
"What about that eye patch?"
"Oh," said the pirate, "One day we were at sea, and a flock of birds flew over.
I looked up, and one of them pooped in my eye."
"You're kidding," said the bartender. "You couldn't lose an eye just from bird poop."
"It was my first day with the hook." 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-ljbp53436QjxD9vbwURtIPPjV05jEcEKyBN3SjS2forXe0C_foO8RjEV-Uye0N7Z_Sh1il0SRXPx6PjQauayNXQjni-Hc9Sseu-hhZcR1ujeZyAEpw==]
. The current blog takes a look at the recent news sweeping the MBS investor market
regarding a new mass refi plan by the government. 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 [http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=gohumrhab.0.epg7qedab.zy6u9cdab.8721&ts=S0672&p=http%3A%2F%2Fwww.mortgagenewsdaily.com%2Fchannels%2Fpipelinepress%2Fdefault.aspx]
or
www.TheBasisPoint.com/category/daily-basis [http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=gohumrhab.0.v7uif6dab.zy6u9cdab.8721&ts=S0672&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=gohumrhab.0.fpg7qedab.zy6u9cdab.8721&ts=S0672&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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