What is a forint? Besides being a good scrabble or
hangman word, it is the
currency of Hungary. I mention this because, in Hungary,
borrowers can have
mortgages based on foreign currencies, and the government
has embarked on a
plan to have all mortgages based on paying in forints.
Stuff I never thought
of: HowAboutYapStoneMoney?
[http://r20.rs6.net/tn.jsp?e=001njSNrfn8RVMciWhoB7NQq3YOrGUIk3jK5vnDWs1Na3Yj
iXF95Bj8r8EM35nZpunci8MsKILGRth92nFzomv1VievSQ4JamRMo5Y3ovi0ZhmdDVuZwPt1SB5W
Q9kThj9ffbBLEt494-50azVa5_NjZ-8lJ5nCynz8tZiJhRArzLfqa17BPbp4fQIVblMVklSUQmIB
YG6wPpQcxU5729h5-ZhxF3Sr1imggb2fmuOwITE=]
I am fortunate enough to do a little speaking, and in
fact next week am
heading to New York for a Sterling National Bank event.
But I received this
note. "Rob, do you know anyone at the CFPB who can
speak at our annual
meeting?" All requests for CFPB speakers can be
directed to
"Teamwork is essential because it allows you to
blame someone else."
Sometimes banks and mortgage banks work together,
sometimes not. "Rob,
someone told me that bankers want more regulations.
What's up with that?" I
have spoken to a number of bank managers and top brass.
Banks have been
regulated from Day 1, whereas it is hard to argue that mortgage banks
("those cowboys!") had had the same burden. But
everyone knows that mortgage
banks, and their LOs, are quickly catching up - maybe, as
they say, mortgage
banking is as heavily regulated as banking but it just
doesn't know it yet.
But it is little surprise that mortgage banks view the
increased regulatory
burden as anything but a cost to be passed on to
borrowers, although when
pressed management will admit that many lenders and LOs
who should not have
been in the business have left - a good thing. In the
meantime, bankers have
pretty much been saying, "Welcome to our world. Our
residential lending,
policies, and procedures
have been policed for years, and if you'd don't
like it, we'll be glad to take your market share."
That's it in a nutshell -
banks may not exactly want more regulation, but they are
comfortable in the
environment, and have compliance and legal staffing to
absorb it.
Banks, for their part are seen (at least on the
commercial side) taking on
more risk by using a familiar funding tactic that works
fine as long as
rates remain steady - but if rates increase more, watch
out! It is not news
that the average maturity of loans has extended
significantly (especially
true in community banks).
Banks are full of cash and have very low loan-to-deposit
ratios, and are
trying to find decent commercial loans. The number of
loans with maturities
over 5 years for banks under $1 billion in assets has
increased from 14% in
2007 to 27% as of
Q1 2013, according
to Pacific Coast Bankers Bank. "That near doubling has
regulators concerned and bankers are beginning to face
questions about
contingency plans, stress testing and other factors
during recent
exams...Some have begun to utilize FHLB advances once
again to match-fund
longer maturity loans" which helps interest rate
risk management. But when
loans prepay, the bank no longer has that income
generating asset, yet it
cannot unwind the funding without significant cost. And
with FHLB advances,
the bank is using wholesale deposits support loan growth
- and regulators
take a hard look at that since it is not "core"
funding and uses up
contingent liquidity and requires collateral. That adds
pressure and takes
away flexibility.
Unlike mortgage banks, where warehouse costs tend to rise
in a rising-rate
environment, banks tend to "enjoy" the environment
as rates move higher. For
most banks, deposit costs lag the overall rise in
interest rates, and
profitability soars (just look at how well bank stocks have done lately),
as retail deposit costs remain far below the cost of
institutional deposits.
Some banks, instead of going after wholesale deposits, are considering
booking a floating rate asset right from the get-go.
And let's not forget Basel III's impact on many banks.
Changes to regulatory
capital will likely drive larger banks to change the way
they invest. To
address the capital impact of price movement in their
investment portfolios,
look for larger banks to take actions that include
shortening their
duration, moving more securities to HTM, holding more
loans versus
securities, holding more capital, or buying more floating
rate securities.
Larger banks are already doing this, as are community
banks.
While I am yapping about banks, Wells Fargo announced
that it is eliminating
its entire remaining
joint venture mortgage banking affiliates. Is it a big
deal for Wells? Not really - it only has eight nonbank
lenders in this
program which accounted for 3% of the 2nd quarter
mortgage production. But
two years ago it had 100 mortgage JVs. And folks who
think about these
things say the timing is interesting, with the
announcement coming so soon
after the CFPB/Castle Cook news. Remember Wells'
decision to pull
out of wholesale after the Department of Justice
settlement? Wells, and other investors, has been burned
in the past on
behalf of their counterparties, and this channel is not
viewed as scalable.
Winding down the eight joint ventures will take 12-18
months, and it is
believed that
other large aggregators may step in and throw them a life
ring. Wells may actually make a couple traditional
correspondents. (The
eight are Bankers Funding Company, Colorado Mortgage
Alliance, DE Capital
Mortgage, Home Services Lending, Military Family Home Loans, Premia
Mortgage, Prosperity Mortgage, and Priva LLC.) But it is
truly a sign of the
times, given the current regulatory and market
environment, and changes in
state and federal oversight have increased the complexity
and difficulty of
operating these joint ventures. It is rumored that
HomeServices, at $4
billion a year, will move over to Berkshire Hathaway.
I received a few notes saying this reminded readers of
the news that broke
in May regarding Paul Taylor Homes in Texas. "A
Texas homebuilder will
surrender more than
$100,000 to the Consumer Finance Protection Agency under
a consent order
filed on Friday. Paul Taylor, a principal of Paul Taylor
Homes Unlimited and
Paul Taylor Corporation was accused of receiving
kickbacks for referring
homebuyers to Benchmark Bank and to Willow Bend Mortgage
Company for their
mortgages. Under the agreement Taylor is also prohibited
from engaging in
future real estate settlement services including mortgage
origination." As a
reminder: MND
[http://r20.rs6.net/tn.jsp?e=001njSNrfn8RVNm0MdVCev_TP9Wrp8iKiljHvVk8p9YhDUM
iLpLu_7owwsjhm3Coo2fkdWtq8tNoJkgzvNyCsvuzK_Q0IZvphaQ2D_V1KKy7VxHYr1dPjjGhh2l
6kSMn2HT5xTQqWHATiGSNkJpOUuXs-LtXFwdpkzJedbX7yYraEY=].
Three down, fifteen to go. Huh? UBS Americas will pay
$885 million to settle
ongoing litigation with the Federal Housing Finance Agency
(which oversees
Freddie Mac and Fannie Mae) over the bank's sale of toxic
residential
mortgage-backed securities to F&F. The FHFA has alleged that the
various
banks violated federal and state securities laws when
selling private-label
RMBS to the housing agencies. Under the terms of the
settlement, UBS will
pay approximately $415 million to Fannie and $470 to
Freddie to resolve
certain claims related to securities sold to the entities
between 2004 and
2007. You might remember some of these names, as the
settlement agreement
covers claims between FHA and UBS in the following cases:
FHFA v. UBS
Americas, Inc.; FHFA v. Ally Financial Inc.; FHFA v.
Countrywide Financial
Corp.; and FHFA v. First Horizon National Corp. Of the 18
suits filed in
2011, FHFA has now
settled three cases and remains committed to
satisfactorily resolving the remaining
suits: UBS
[http://r20.rs6.net/tn.jsp?e=001njSNrfn8RVNcX_ubH7wtz2Iky2YtRRJiSqTPsqjKMVJh
74XhzGvj-vaV1cX8k6yT9Onl2LUQRtvgUDoDDO2Yp0_zJAMMt6wkp5Earw_zHrQ5MpS7ELRoFT_J
vnkikSiiBMEJGvqn25H3WXnF6u56I50CxH7qkpANpouz6a52uvaobYhcgoxbwo-b3dcMP7th16ck
Y8GMEjgHPnbv8xfAGBWXq0KOg9MOm4EgNZjkS94=].
Under the "two steps forward, one step back"
category, Lender Processing
Services
(LPD) will be reporting a huge spike in the U.S. loan
delinquency rate when
it releases its Mortgage Monitor for June. Mortgage News
Daily reports, "the
total delinquency rate for June was 6.68 percent, a 9.91
percent increase,
month over month, in the rate which includes loans 30 or
more days past due
but not in foreclosure. This jump follows five straight
months of decline.
The company offered no explanation for the surge beyond referring to it as
"seasonal". There were 3,328,000 mortgage loans
in the 30+ delinquent
category at the end of June. Of these loans, 1.3 million
are seriously
delinquent, that is 90 or more days past due."
Let's take a look at some recent vendor, investor, and
agency news - it just
keeps flowing.
Money manager Hank Paulson sure likes Radian, given its
recent stock
performance.
"When Radian Group Inc. sold shares in 2010 to
bolster capital, the buyers
lost more than a third of their investment in just two
months. The mortgage
insurer's offering
in February, backed by money managers including John
Paulson, is proving second chances can work. Radian has
rallied 73 percent
to $13.87 since selling shares for $8 apiece as well as
debt in February.
Rival MGIC Investment Corp. has followed a similar
pattern, slumping after a
2010 offering and surging 45 percent since this year's
$1.15 billion capital
raise." Here you go: RiskReward
[http://r20.rs6.net/tn.jsp?e=001njSNrfn8RVPtp96WqvYpOoRZEcg4vKZDZJdT6_Kq1dqF
5JAAYcRReYaOr6VzpU0H8l6UwXulyTf195P6n9fDuQcZTogfbXF6zexysS4A7ZbkfOVNsWhHFqWy
Ju_nADzPJct_BQsRuZ8sycwi8T6VJlizx5Fgor1n05_Q0Zhm5_Jia5d0Ajmz1PARctIH_C6egoDQ
GseHsJ_xSCGBZ2QY1LDieu8t5Ig4].
Florida Capital Bank Mortgage (FCBM) will now offer
financing to purchase
transactions in the State of Alabama with an unexpired
Right of Redemption
after a Foreclosure.
Documentation to protect the lender from loss should the
right of redemption
be exercised will be required. The required documentation
will depend upon
the difference between the foreclosure sales price and
the loan amount of
[http://r20.rs6.net/tn.jsp?e=001TWE4PRNArIxzxRlHVGvYkNWRNaD4KR2bszxrg-DyQSr2
mJu84IM_INz_4EZTMk8HpTsE8s5g02AvDF_ztxo90H9VCHI-PFIaKY7ZkDVJ3NSIFSno5rxJvw==
].
FNMA has published what appears to be a "just
checking in" memo on the
CFPB's QM and
Ability to Repay regulation, which is scheduled to go into
effect on January 10th of next year. Until the CFPB issues
a final rule on
Refi Plus, DU Refi Plus, and loans sold under written
variances to the
Selling Guide, Fannie will continue purchasing these
loans but will be
monitoring market dynamics in the meantime to assess the possible need for
any underwriting, eligibility, and/or pricing changes.
The post-purchase file review, repurchase requirements,
and/or updates to
the reps and warrants framework are also being assessed
as they pertain to
the new regulations.
For those having difficulty resolving Fatal Edit 72 (the
Appraisal Document
File Identifier
field) when delivering loans to Fannie, a new job aid is
available via the Fannie website.
FNMA has made it a requirement that servicers accept
modification assistance
from a Housing Finance Agency for mortgage loans in
connection with any FNMA
modification, whether or not principal forbearance is
required. In cases
where the borrower completes a Trial Period Plan but the
servicer does not
receive the HFA funds before the due date of the first
modified payment, the
servicer must re-evaluate the borrower's eligibility for a modification,
and loans for which borrowers are no longer eligible must
be sent to Fannie
for a final decision. If the borrower does qualify for a
modification per
the servicer's assessment, the servicer is not permitted
to require the
borrower to complete a new Trial Period Plan, even if the
modified monthly
payment is higher than it would be in a Trial Period
Plan. This policy goes
into effect on October 1st.
Cornerstone reminds its correspondent lenders that it
will allow a maximum
total of 28 days'
worth of one-week extensions. After this, the loan will
be subject to re-locking at the worse of current market
or original pricing
minus the extension fees. Jumbo loans are subject to a
limit of two
extensions that may not exceed 30 day per investor
guidelines; anything that
needs to be extended past this point will be re-locked at
worst case
scenario.
Risk management firm Secure Settlements Incorporated has
begun testing a new
closing table quality control tool that captures closing
table loan date,
re-enforces quality control measures, and offers
resources for educating
settlement agents about best practices and what to look
for in terms of
fraud schemes and money laundering. The mobile app, which
is slated to be
launched within SSI's vetted settlement network on
September 1st, is
compatible with both Droid and Apple.
Well, rates continue to chop around these levels - maybe
consumers will
become accustomed to them, and come back in. Yesterday,
in economic news,
Weekly Initial Jobless Claims rose by 7K in the latest
week to 343K, above
the 340K expected.
Durable Orders had an upside surprise surging by 4.2% in
June, well above the 1.8% expected. And the Treasury
auctioned off $29
billion of 7-year notes.
The increase in jobless claims
was attributed to
annual auto-plant shutdowns. Durable Goods, always
volatile, was the main
culprit in the sell-off - perhaps an increase in demand
will help boost
manufacturing and the economy in the second half of the
year.
By the time the dust settled Thursday, 10-yr T-notes
reached the highest
level in more than a week, and 30-yr T-bonds approached
the highest level in
almost two years.
Prior to that, however, agency MBS prices had improved.
As far as volume was
concerned, mortgage banker supply was near the 30-day
moving average, per
Tradeweb. So if lenders are selling about $1.5 billion a
day, and the Fed is
buying about $3 billion a day, the supply/demand picture
is still pretty
good for mortgages. There is little news of consequence
today. The current
yield on the 10-yr is 2.57%, basically unchanged from
Thursday afternoon, so
don't look for a lot of change on rate sheets this
morning.
Retired person's job interview:
Interviewer: "What would you consider to be your
greatest weakness?"
Applicant: "Honesty."
Interviewer: "Honesty? I don't think honesty is a
weakness."
Applicant: "I don't give a ---- what you
think."
If you're interested, visit my twice-a-month blog at the
STRATMOR Group web
[http://r20.rs6.net/tn.jsp?t=4bt6vynab.0.slt5iqfab.zy6u9cdab.8721&ts=S0936&r
=3&p=http%3A%2F%2Fwww.stratmorgroup.com%2F].
The current blog is, "A Little Technical Knowledge
About REITs." 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
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ault.aspx]
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=3&p=http%3A%2F%2Fwww.thebasispoint.com%2Fcategory%2Fdaily-basis].
[http://r20.rs6.net/tn.jsp?t=4bt6vynab.0.fpg7qedab.zy6u9cdab.8721&ts=S0936&r
=3&p=http%3A%2F%2Fwww.robchrisman.com%2F].
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