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There are folks out there that believe doing Sudoku puzzles will stave off
senility and Alzheimer's. I don't do the puzzles, and don't believe the
claim. I...uh...
what was my point? Oh yes...there are some very bright folks out there who
apparently determined the minimum number of numbers (17) required to give a
unique answer to a puzzle. (And you wondered what math majors did after
college): RevengeoftheNerds
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1109080592732&s=8721&e=0014-S_Yj
MCCMuk0m2pItcCD7kqKfEAjvueQVRYzzT0xN3MWHBq68udwBcgyihz_fOMUm1qHWO_2VdJamR1rr
-jMEYkGK8ZOM23050UgEw6K1YToKOhWa2GVYbYuVQ03Lka4JeZ76P31nTN-53ZeN1YIjTIUhU6H9
KyvHCyhaGR3Se9jSBL42LBDIBwqEMeLPBDF1LVeUr0eejwmFUuS44L5A==].
Speaking of bright folks, fair lending enforcement has taken a dramatic new
turn.
Things are heating up in the courts, with the traditional "price
discrimination"
and "red-lining" suits being replaced by the "disparate impact" theory: the
idea that even if lenders don't actively discriminate, they can still be
sued if the cumulative effect of their actions implies discrimination. The
MBA is holding an all-day, in-depth workshop covering this, titled,
"Prepare Now for Fair Lending Reviews and Enforcement" in Washington, D.C.
on January 24th. There will be reps from the DOJ, CFPB and HUD, as well as
attorneys and consultants: PreparePreparePrepare
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1109080592732&s=8721&e=0014-S_Yj
MCCMsiNZjPHz6icgvIbIDArQocoX5MP8O4VNVDCt5hRk10ZXP0NU6xWnxUxv5EgLLO_t4NhLxPQf
7Gfom5oxYnSGLF8-7X9dk5tzo2UFJ0axPkcfEPxJiV6vRs-lz1Bi4oagG1vm6_9fgswGqT9NPldT
ZKGt5VnKsLBH4Q1-9Y2nBZmOeLPRKSQZv9].
Some mortgage companies are scaling back (MetLife comes to mind) while
others continue to expand. Kinecta Federal Credit Union is continuing to
grow its business and is hiring Retail Mortgage Loan Consultants and Sales
Associates throughout Southern California, and is also growing its
Wholesale/Correspondent lending with AE positions open in California, and in
territories covering the Northwest, Southwest, Central, Northeast and
Southeast. "Kinecta FCU is one of the nation's leading credit unions, with
more than $3.5 billion in assets and serving over 220,000 member-owners
across the country." If you are interested, please send a resume to Sue Ann
One of the big trends in the industry is the increased documentation,
especially with regard to appraisals and collateral, and occasionally I am
asked about companies who can help. Mortgage technology company FNC Inc.,
given what I am hearing, seems to be gaining market share in that space: its
clients include the largest mortgage industry lenders and industry leading
appraisal management companies. The website notes that, "FNC delivers deep
expertise in appraisal compliance, workflow best practices, and process
efficiency to: mortgage lenders, servicers, appraisal management companies,
secondary & capital markets, property & casualty insurance companies."
Check it out at FNC
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1109080592732&s=8721&e=0014-S_Yj
MCCMsnR2IH0CUtJUmFvDJ4ti7AS86tymXxK6wYQRUXsc_8UGirXqZnDPMT5XeZTJD_7NJo0yYF7I
t-oAEXABSpAwmY19qEAuksJ0eXQ_rKr8Eo2Q==].
Here's a Friday puzzle: What is about $400 million, filled with loans whose
balances average $932,000, have CLTV's of 65% and borrower credit scores
average 770? How about Redwood Trust's next jumbo residential
mortgage-backed security
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1109080592732&s=8721&e=0014-S_Yj
MCCMtjzdHv5QmYKlB0BloZbHN05XcfVlG9Pw8biHp6Ut61BvzWjYLg2EB-UWRfahHd3zcPFhcmcs
Cyy5po24fx14yElmGjcq1Th5BrsrcfMvhtmSN9AmA06BtJj_KPO0qxq3oshL-XCiEMdmneSKKZyY
anfRmHlXUyGRJNtzd2vGJ5_cbmk_-4T7UUSoVjv84AHVWL3py7Z9GOa9b-HBw-FDlB20zuJQ51yV
5Ycdd_JmYhNg==]?
Fitch Ratings and Kroll Bond Ratings are grading the deal, reportedly,
backed by Credit Suisse.
The recent Fed Paper, and Fed speeches, on suggestions on curing the housing
woes, elicited this note from a reader: "We were struck by how little effort
the Fed put into identifying areas where regulatory action by the Fed and
others could contribute significantly to alleviating the problem. In the
policy recommendations portion of the 28 page paper, the Fed offers just
two paragraphs which I quote. 'Credit Access and Pricing: as noted earlier,
mortgage credit conditions have tightened dramatically from their
pre-recession levels. Lax mortgage lending standards in the years before
the house price peak contributed to problems in the housing market, so some
tightening relative to pre-crisis practices was necessary and appropriate.
The important question is whether the degree of tightness evident today
accurately reflects sustainable lending and appropriate consumer
protection.' And, 'Financial regulators have been in consultation with the
GSEs and originators about the sources of the apparent tightness in lending
standards. Continued efforts are needed to find an appropriate balance
between prudent lending and appropriate consumer protection, on the one
hand, and not unduly restricting mortgage credit, on the other hand.
In particular, policymakers should recognize that steps that promote
healthier housing and mortgage markets are good for safety and soundness as
well.' That's it??? No mention of the QM and the need for a true compliance
safe harbor, rather than a rebuttable presumption of compliance? What about
the QRM? Does the Fed really think that a 20% or 10% minimum down payment
requirement for the QRM will help re-center the credit pendulum? These are
rules that the Fed drafted (in the case of the QM proposed rule) or
participates in the drafting (in the case of QRM). The Community Mortgage
Banking Project urges everyone to stay involved to keep the pressure on the
regulators for balanced and reasonable QRM and QM rules." So wrote Pete
Mills with Mortgage Banking Initiatives, Inc.
Also regarding last week's Fed white paper on housing, The Shirmeyer Report
noted, "This is the first time since our current economic crisis began that
the Fed has reported so comprehensively on how to help the housing and
credit markets although they have made recommendations to policymakers
before. As we have repeatedly said for the past few years, as the smartest
people we know have said for the past few years, you must fix housing and
credit or our own economic recovery will be limited and long. The Fed
recommended boosting the role of Fannie and Freddie as opposed to reducing
their role in the housing recovery as Congress and the Administration has
been insisting. Now is the time to address housing; after all we have
already addressed corporations and banks. What better way to do so than with
the existing entities, Fannie, Freddie and Ginnie?"
On a slightly different topic Michael Frotten wrote, "There were two recent
stories in the news that have interested some people in the industry. One
story regarding the new head of the CFPB, Richard Cordrey reported that one
of his first initiatives involving consumer protection is called, 'Know
Before You Owe!' The second story was that the Federal Government is
mandating that top servicers figure out how to improve communications with
borrowers. For many of us in the mortgage industry I'm sure the first
reaction after reading those stories in the news was to reach for the
closest bottle of Tums! However, there is an underlying issue that can be
improved upon since both of these issues are connected. 'Know Before You
Owe'
is designed to improve the experience for consumers before they take out a
mortgage loan, and the Fed's mandate is designed to improve communications
with consumers after they have closed on the same mortgage. The real issue
and challenge isn't just improved communication - its enhanced consumer
comprehension through the entire process! (Anyone with teenage children like
me knows the difference between the
two.) We created a company to help the mortgage industry improve the
consumer experience through the use of video and achieve a higher level of
consumer education and comprehension.
Vidverify will help mortgage bankers enhance the level of compliance,
consumer education and comprehension, grow relationships, reduce errors, and
deliver communication that is consistent and easy to understand." If you'd
like to hear more contact Mike at mfrotten@vidverify.com
Maybe Chase will offer it to help their bottom line mortgage profits. The
company reported its 4th quarter earnings and revenue (close to
expectations): net income was $3.7 billion, or $19 billion for the year,
while revenue was $22.2 billion, or nearly $100 billion for 2011. For Basel
fans out there, Basel I Tier 1 came in at 10.0%, and estimated Basel III
Tier 1 at 7.9%. Chase's credit reserves stood at $28.3 billion, with loan
loss coverage ratio at 3.35%. Turning to mortgages, the picture is not so
rosy. "Mortgage production and servicing reported a net loss of $258
million, compared with net income of $330 million in the prior year.
Mortgage production pretax income was $161 million, a decrease of $392
million, or 71%, from the prior year. Production-related revenue, excluding
repurchase losses, was $1.1 billion, a decrease of $269 million, or 20%,
from the prior year, reflecting narrower margins and lower volumes.
Production expense was $518 million, an increase of $82 million, or 19%,
reflecting a shift to higher-cost originations within the retail channel as
well as enhanced underwriting processes. Repurchase losses were $390
million, compared with repurchase losses of $349 million in the prior year.
The higher losses were primarily driven by an acceleration of Agency
demands."
Chase's servicing numbers showed a pretax loss of $586 million, compared
with pretax income of $14 million in the prior year, largely due to mortgage
servicing rights
("MSR") risk management loss. The prior-year servicing expense included $374
million related to foreclosure-related matters. MSR risk management was a
loss of $377 million, down $667 million compared with the prior year. The
current-quarter MSR risk management loss included an $832 million decrease
in the fair value of the MSR asset, partially offset by $460 million of net
gains on the associated derivative hedges." What a great business...
On the trading side, JPMorgan Chase alerted its broker-dealer clients of a
change in respect to its trading in several securities types including
mortgage-backed securities. Specifically, "the Treasury Market Practices
Group (the "TMPG") and the Securities Industry and Financial Markets
Association ("SIFMA") have published the "U.S. Treasury Securities Fails
Charge Trading Practice" and the "Agency Debt and Agency Mortgage-Backed
Securities Fails Charge Trading Practice" at SIFMA
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1109080592732&s=8721&e=0014-S_Yj
MCCMsKSYSBqysvjZ5sBJWgHj8CYxbVFzwA-68L6VkDMswHHW6vMRQhivh4w0nEW6LqnjMbHnMJCz
QmSSYH7I2D0Ll_n7J46j3PdJM6SPqwr3zD3QIYMRw5VGUftohiTKFnNwjKyP04ihbQklk01kidac
9lWe0u2aB_thh58TuLMFGOCzG0YfpUl0jmsrawW-1vpLb8KMMdL701h2dVxK2PVZ-p7lOEQAEBIi
3scB4WJj-nuI-NiC4dkFuYFN-gyXPL6WkE9xUgO4hKRg==].
J.P. Morgan Securities LLC and its affiliates have decided to adopt these
Fails Charge Trading Practices for purposes of our transactions starting
February 1."
For those not involved in the securities trading, (very) basically these
practices standardize what happens when a client fails to deliver a security
after they agreed to deliver it. Just don't let it happen...
Fortunately volatility in the interest rate markets continues to be minimal.
Thursday the markets were nudged by successful bond auctions in Spain and
Italy, and here in the U.S. by weak Initial Jobless Claims and Retail Sales
reports. When the day finished the 10-yr settled at 1.94% and MBS prices
were a smidge better. Things don't appear to be changing much today: the
only news out so far were some trade balance figures (which rarely move
markets) that showed import prices dropped .1% and that the trade balance's
deficit increased slightly to $47.8 billion. Later on we have a preliminary
January Michigan Sentiment Index at 9:55AM EST. After the trade numbers the
10-yr is at 1.90% and MBS prices are, once again, a smidge better.
Most of the time a joke is posted here. But sometimes there are some short
(about a minute and a half), clever ads out there worth passing along:
IfYouAreReadingThis
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1109080592732&s=8721&e=0014-S_Yj
MCCMschUj8uC-PtP3LdtLyiBOhl5eBfBlgjDi--oA9iS9Xt8pLqRcYJmELSoNuVouIL60JvwFmwU
qJBDMXg03jKZiEAfmWR0f_DGawnlXfdWwkpsR5HF6w3r7zFA7c4NUb5LZa9ae8lreeEAuMdp1DGt
4uurH-Q2z62O8=].
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 discusses the time frames for borrowers returning to
A-paper status after a short sale or foreclosure. 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=7kuvf6iab.0.epg7qedab.zy6u9cdab.8
721&ts=S0720&p=http%3A%2F%2Fwww.mortgagenewsdaily.com%2Fchannels%2Fpipelinep
ress%2Fdefault.aspx]
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&t=7kuvf6iab.0.v7uif6dab.zy6u9cdab.8
721&ts=S0720&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=7kuvf6iab.0.fpg7qedab.zy6u9cdab.8
721&ts=S0720&p=http%3A%2F%2Fwww.robchrisman.com%2F].
Copyright 2012 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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