Council? I
must admit that I hadn't, until it released its latest report which
includes statistics
on the number of active, licensed mortgage lenders. To no one's surprise the
number
is down for the fourth year in a row. In 2006 there are nearly 9,000, and
now there
are less than 8,000 - and now folks are saying, "Less competition rarely, if
ever,
benefits the consumer." You can read the entire report here:
GutFeelingVerefied
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107836367595&s=8721&e=001w6Imkc
WyJ1wbsCExp7WkaB7NLM0uw7-P1o744RLClUeUsiJF9bMyd2SYR4JVGQBA_NUjpcxZfpQO4DAupf
Z9y7j_Cwis47tqmiWXQLprh2-1KgGmJRYxjNU1hQuIE6xL-XoGrfRqtK8=].
Sometimes banks grow weary of being sued by the U.S. Government, and decide
to sue
back. In this morning's case, BB&T, Wells, and a few others are suing the
government
over tax credits. I knew that I should have been a lawyer: BigMoney
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107836367595&s=8721&e=001w6Imkc
WyJ1yXQQQjBHsXT24YEDzPah9UW9MIOc9Pa_jsUtG5hMAknfME-vKXN8UTy0XiZnttID03FgFMgK
EDsgP6dvuFnqMX8iHgYTX_xuP03OFs7uPX40uHKyTqY7aGOCufb3_6LzrN1gJYlVmZAioFoiTRTm
7kZoGA4ujrmyc6csp6MhL2A-FbBVchmTRb].
KB Home announced earnings for the 3rd quarter: a loss of almost $10 million
versus
a loss of $1.4 million a year earlier. These results, for its quarter that
ended
in August, include $1.2 million in charges for inventory impairments and
land option
contract abandonments, revenue down 27%, and a drop of over 30% in home
deliveries
(although the average sales price was up 6%).
Fortress Investment Group owns Nationstar, and it seems it is the front
runner for
acquiring Bank of America's correspondent channel. Critics are asking,
"Given what
makes up a 'correspondent channel,' what will Fortress be buying, exactly,
since
it seems that many in that unit have either left or are actively seeking
employment
elsewhere?" The latest
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107836367595&s=8721&e=001w6Imkc
WyJ1wEg7jParnZNtNtAGQ_slM7A9KJBZIqx_Ij0jn68DxeCT9LNTgiUB80B10r6zsU1MnJkLbMpW
T2OwMK7bSxiD8sIhLdlhpJcVDQFqtYEDQK_pkWmtJRneifHKzooDnQVxLbk0j1nF80_FhjWw8QP4
ABZjkbceINc8pPRL2Urbvs5JY6OzyK-iMMlmhjhRlfi9wXWgM3FMZdQ9_CIX5OmA_P].
As it continues to shed assets and manpower, BofA has reached an agreement
to sell
approximately $880 million of commercial mortgages at a discount of 20% to
25% off
the face value. The buyer is a joint venture of Square Mile Capital
Management LLC,
Invesco Ltd. and a fund managed by Canyon Capital Realty Advisors LLC. The
deal,
which includes a mix of performing and nonperforming loans tied to 32
properties,
ranks among the biggest commercial mortgage portfolio sales this year.
Bank closings picked up on Friday, with the Bank of the Commonwealth (VA)
going
to Southern Bank and Trust Company (here in the Carolinas), and out in
California
Citizens Bank of Northern California going to Tri Counties Bank. These are
government-sponsored
closures, but we've all heard of "too big to fail," but what about "too big
to merge?"
The Independent Community Bankers of America asked federal regulators to
launch
a moratorium on bank mergers and acquisitions involving financial firms with
$100
billion or more in assets. (This would put a crimp into the Capital One-ING
Direct
USA deal temporarily.) Community bankers believe that new mergers and
acquisitions
are adding risk to an already shaky financial system while concentrating
power in
larger institutions that effectively cut into the market share and
opportunities
for smaller institutions - basically that Dodd-Frank is not having its
intended
consequences. Imagine that.
Huh? What's this? Regulating agencies don't have the manpower to regulate
Fannie
& Freddie? RegulatorStaffing
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107836367595&s=8721&e=001w6Imkc
WyJ1xEWBtGVMeNumzNVhFw_GteklqW10ioiJyftuMmJRG9A5sZeNSvJY_m2pqudVjDdMDr6tb-_7
iHUHknt6gXVX0KCI-GGmJ3wbOlXyCi8PMF120tPZU7p5LuY2N3-x_F689WlrVV4XFyWPefT90dnQ
HT0As4EdD7lDMUik7NyON6X3XS8TmLx-vEMNIJSGqUd7M7yDceFHE_GQq2EOZXsM_tgWB3Z9BWkK
kXuslF5-GxDA==].
Investors in mortgage-backed securities are keenly interested in the
prepayment
speeds of new and old securities - why would someone pay a 3 point premium
for a
loan that is going to pay off in 4 months? Analysts expect that prepayment
speeds
across the various non-agency sectors should increase as mortgage rates
continue
to go lower. In particular, fixed-rate and longer resetting prime mortgages
should
be the most responsive to the lower rate environment as a relatively higher
percentage
of borrowers are "refinance-eligible" in those sectors. In addition, some
jumbo
prime borrowers will have a significant refinance incentive for the first
time as
the mortgage rate reached historically low levels, and these borrowers
should be
most responsive to lower mortgage rates. Some borrowers have tried to fund
high-balance
loans prior to the 10/1 loan limit date, and others are attracted to the
overall
level of jumbo rates with a 4% handle, low 3's for a 5/1 ARM. Since closing
costs
have increased, most now assume that a borrower currently needs at least a
75 basis
point rate incentive to refinance - this population has more than doubled
since
the first quarter. Approximately 10% of outstanding prime fixed and
longer-reset
hybrid borrowers have become newly refinanceable from a rate perspective,
and are
refi-eligible according to CLTV and payment history criteria. One should
expect
that these borrowers should be most responsive to the lower rate
environment, even
with tighter underwriting (especially on 5/1 products).
The latest move by the Fed - to reinvest mortgage payoffs back into
mortgages -
has analysts racing back to their calculators. (I still have my 25-yr old
12-C!)
In recent years the Fed has mostly been interested in owning conventional
securities
(Fannie & Freddie) and thus investors see less demand for Ginnie Mae
production
backed by FHA & VA loans. But a good percentage of GNMA's come from new home
sales,
which show few signs of gearing up. So if the supply is poor, and demand
holds steady,
the prices should do just fine. And overall, even though the 10-yr yield has
really
dropped, and mortgage rates have as well, the MBA refinancing index has
consistently
surprised to the downside - folks just aren't rushing in to refi.
Barclays notes that, "While the main reasons for this benign refinancing
activity
have been well documented, notably, rep and warranty risk, tight
underwriting standards,
declining HPA, friction in the HARP program, and the absence of alternative
credit
in the non-agency market, two new factors have emerged, which we believe
play an
integral role in explaining the reduced refinancing activity. First,
borrowers
refinancing their home seem to be getting a higher mortgage rate than those
purchasing
a home. This behavior has been observed for most originators and is the most
pronounced
for the largest originators including Bank of America, JPMorgan Chase, and
Wells
Fargo. Second, even though primary-secondary spreads seem tighter this
time, originator
margins are at their widest, suggesting that originator capacity is still
limited,
and that borrowers are not obtaining as low a mortgage rate as they would if
capacity
were not an issue."
For the first time in seven quarters the level of outstanding
commercial/multifamily
mortgage debt grew in the U.S according to information released by the MBA.
The
Association said that total debt rose $3.5 billion (0.1%) in the second
quarter
of 2011 to a total of $2.4 trillion. The last time total debt increased
was in
the third quarter of 2009. Anyone who loves big numbers should check it out
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107836367595&s=8721&e=001w6Imkc
WyJ1zTzE5OIA5lNRRt2JPjZfOiYHCf8D0P8IEEVy4ZXjr-EF2cmdM3UA2rf2OThUMVB9ZHuo8Fig
dRs93_kGCC9GWL6wRyoDxi4jI2nDjBp6wI6Qjl28YqeVvkLpPqn94i9SHc8ZGzm9biRxzbmZTimz
0l].
While we're on the MBA, it and MERSCORP (parent of MERS) announced that
management
of the Mortgage Industry Standards Maintenance Organization (MISMO) will
transfer
to MBA on December 1. Folks I spoke with believe that it is for the best at
this
point, and the rationale makes sense: RockOnMISMO
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1107836367595&s=8721&e=001w6Imkc
WyJ1xHGN6eKl4DvO0Ckj2hJzMC5cbBufupaTrdCHNnKAPnk_d-4cevVZhlNufG831DybzftkcFd2
QQJPg8L6q3C8BHXW609qKrJErE6F8oYfc4dd7hB-up7Qnx-nrdB7eXEJI0gt17O_uniKbK8zfBXF
6k].
Franklin American spread the word to clients that, "Mandatory Trades for
USDA products
are now available...USDA loans cannot be comingled with other loan products
in a
trade, but aside from that all other mandatory delivery rules and policies
apply."
With the low rates come renewed updates on renegotiation policies. Stearns
notes,
"Float downs must lower the interest rate to the Borrower and Compensation
cannot
be increased regardless of whether the Broker is keeping it or passing it
along
to the Borrower. Loans may be relocked for a one-time maximum of 14 days.
Loans
must be ready to have docs drawn. Pricing will be renegotiated based on the
original
lock term and will use the pricing for that lock term with the following
adjustments
(to lower the rate .125% to .25% the charge will be the original lock term
pricing
minus .50 pt., to lower the rate .375% the charge will be the original lock
term
pricing minus .625 pt., to lower the rate .500% the charge will be the
original
lock term pricing minus .875 pt.). Any requests beyond a rate reduction cap
will
be handled on a case-by-case basis. Float downs are not allowed on FHA
Streamlines,
Jumbo, ARM or Specialty Product programs." And so on - check its bulletin
for exact
details and info on extensions.
Interbank's VP of Operations sent out this note to brokers on Friday: "We
are incredibly
behind in all team inboxes, as well as with condition uploads; Therefore, I
have
decided it is much more important to get the conditions uploaded as fast as
possible
so they can be cleared over the weekend. We have pulled the LCs off the
mailboxes,
and are having them help with condition uploads. The mailboxes will continue
to
be behind. I'm going to put a message on the portal that we are behind in
our responses,
if their problem is of a CRITICAL nature (i.e. is a Temporary High Balance
Loan,
or is a purchase with a lock expiring) that cannot wait until Monday (when
we expect
to be caught up), then they must contact their AE for assistance."
ClearPoint Funding introduced its, "45 for 30 for New Locked Purchase
Transactions
- receive a free 15 day extension on your 30 day pricing after the loan is
locked.
The Fine Print: Applies to new locks only!!! Excludes all arm loans and
fixed Jumbo
loans. Promotion valid through the end of October."
Citi released their periodic (every 3 or 4 weeks) four pages of DU, LP, FHA,
and
VA overlays. "In order to reduce the risk of the loans we purchase, Citi
has credit
overlays in our policy in addition to agency guidelines. The attached Credit
Overlays
listing provides a summary of these overlays to help you better understand
them.
For complete product guidelines, please refer to the Correspondent Manual."
Later this morning we'll have new home sales numbers that are expected to
remain
anemic in August at around 295,000 units on an annualized basis (despite
record-low
30-yr mortgage rates!). New home sales have been slowing since April, but
remain
slightly above the August 2010 low of 278,000 units. New home sales have
never
really recovered from the hangover of the first-time homebuyers' tax credit.
Looking ahead for the week, as originators along the coasts rush to close
high balance
loans, we have some Case-Shiller numbers tomorrow along with Consumer
Confidence,
Durable Good on Wednesday, Jobless Claims, GDP (the 3rd look at the 2nd
quarter),
and Pending Home Sales Thursday, and then Personal Income, Consumption, and
the
Chicago PMI on Friday. In the very early going, rates are up slightly (10-yr
at
1.85% versus the 1.81% at Friday's close) and MBS prices appear to be
slightly worse.
When our lawn mower broke and wouldn't run, my wife kept hinting to me that
I should
get it fixed. But, somehow I always had something else to take care of
first, the
shed, the boat, making beer... always something more important to me.
Finally she
thought of a clever way to make her point.
When I arrived home one day, I found her seated in the tall grass, busily
snipping
away with a tiny pair of sewing scissors. I watched silently for a short
time and
then went into the house. I was gone only a minute, and when I came out
again I
handed her a toothbrush. I said, "When you finish cutting the grass, you
might as
well sweep the driveway."
The doctors say I will walk again, but I will always have a limp.
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 news concerning REIT's, and
the possible
tax implications. 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=lx7cdyhab.0.epg7qedab.zy6u9cdab.8
721&ts=S0672&p=http%3A%2F%2Fwww.mortgagenewsdaily.com%2Fchannels%2Fpipelinep
ress%2Fdefault.aspx]
or
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=lx7cdyhab.0.v7uif6dab.zy6u9cdab.8
721&ts=S0672&p=http%3A%2F%2Fwww.thebasispoint.com%2Fcategory%2Fdaily-basis]
. For archived commentaries, go to
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=lx7cdyhab.0.fpg7qedab.zy6u9cdab.8
721&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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