Mortgage News and Market Snapshot provided by:Global Home Finance Inc.: August 2013

Friday, August 30, 2013

MBA's Per Loan Profit Numbers

http://globalhomefinance.com

I have an aging dog, and was asked if I was going to buy joint medication

for her old hips. I replied that I didn't think she would qualify for a

medical marijuana card. That has nothing to do with anything, aside from

finishing up the string of Colorado humor this week at the bottom.

Speaking of "finishing up", Radian announced it has entered into an

agreement with Freddie Mac on a pool of delinquent loans which eliminates

credit risk on 9,756 delinquent loans, 12.6% of delinquent inventory. RDN

paid $255 million to Freddie Mac and deposited $205 million in a collateral

account. The latter amount, less any offset related to successful rescission

and denial activity, will be paid to Freddie Mac. The agreement relates to

a pool of 25,760 loans that were delinquent as of December 31, 2011. The

agreement eliminates credit risk on 9,756 loans that were delinquent as of

July 31, 2013 and on 4,586 "re-performing" loans. The settlement reduced the

company's delinquent inventory by 12.6%.

Before all the folks out there working on other settlements start

calculating percentages, remember that Radian had previously paid $370

million of claims on this pool of loans. As part of this agreement, the

company paid $255 million to Freddie Mac and deposited $205 million in a

collateral account. The latter amount, less any offset related to successful

rescission and denial activity, will be paid to Freddie Mac.

As of July 31st, Radian had completed $10 million of loss mitigation

activity that was deemed final under the agreement. Another $140 million of

claims had been rescinded, denied, or curtailed but were not considered

final under the agreement.

And residential lenders have a little less money to settle buybacks. The MBA

released figures from its study showing that in basis points, the average

production profit (net production income) was 75 basis points in the second

quarter, compared to 86 basis points in the first quarter. So volumes are

down, and lenders are making less on it. Secondary marketing income declined

to 263 basis points in the second quarter, compared to 274 basis points in

the first quarter. One last thing before you click on the site: total loan

production expenses (commissions, compensation, occupancy, equipment, and

other production expenses and corporate allocations) increased to

$5,818 per loan in the second quarter, from $5,779 in the first quarter.

Here you

go: ReadItAndWeep

[http://r20.rs6.net/tn.jsp?e=001WDTh6q6defqbA8N56WghKY8fFOyyb2X67EuyLnZ_fRPj

MFLT26IkKy73KiyaaVYiBAes5NQE48iKLuz4jk5NFcrcwfxv_2fqXqDpQEGolI15MeMoVzEidQtT

GZ25Stl99osLmrzJrzhFTnRvHqPIGpatdtcxVAIVVbgN2PJ1eBY69-J2q3CKog==].

With their eye on margins, companies are very focused on paying the right

amount to the right employee, at the right time. This is fundamental to

ensuring that your organization hires and retains the best talent while

simultaneously controlling costs and justifying compensation to your

stakeholders. Did you miss participating in STRATMOR's Compensation Survey

earlier this year? By popular request, STRATMOR has added a TPO Sales module

and is reopening all of the original modules (Retail Sales, Retail

Fulfillment, Executive Management) for a second round of evaluation.

Be armed with compensation data from 40+ participant companies as you head

into budget season. The results will be cumulative from both rounds. For

full details, visit the 2013 STRATMOR Compensation Survey

[http://r20.rs6.net/tn.jsp?e=001WDTh6q6defp8LTawcgbRyE_pT-ouuidvgcuMTMigNVmL

n_Nm2s2i4cFZKFFb5AnrV9ZpVOAQaNy0zEPsQiLA0Q4doV5Ny-G4KLJ0P3dX8o18P5FRcigz81GY

Qobo6z6a]

website or email nicole.yung@stratmorgroup.com

[mailto:nicole.yung@stratmorgroup.com]

for more details.

Another thing that is not helping the lending industry is the continued

proof that all-cash purchases are on the upswing: CashIsKing

[http://r20.rs6.net/tn.jsp?e=001WDTh6q6defod0DqePpQsOlsnRw63iGTbr4YhmQx9KYDF

7lkYKbIjvSte-kwou41PlesVFPLruRNa1-bPEmIj0jvtutHzlDeOmb9Q4h9mXWGlUWxoB1O1Te_L

zXDy6EwtuEEgFmWa78hxHQnuKiD2zSU0q0sh417Iw-PI_BQvDJnt59re3rY4U8XADDlhaTQsyXRR

Bbq-2M_fFHt22E9Ch4y0Bg7lVByXMIBjMzBCLnWwOOmoTYcmYw==].

Yes, cash purchases are very high, but how long does it take to save up a

30% down payment, on average? Someone sent me an ad, which I can't verify

the accuracy of, with a photo of a house with a handicapped ramp and rail

leading up to the porch with the caption, "With a 30% down payment and

taking 25.2 years to accumulate a down payment, we will have to have grab

bars and ramps in first time homebuyer homes."

And in spite of more and more home buyers not having monthly payments, there

are still trillions of dollars of servicing out there, and pieces are

bought and sold all the time. But servicing doesn't always trade in large

blocks - some investors want smaller, bit-size pieces in the form of flow

deals. For example, "as exclusive representative for Seller, Phoenix

Capital, Inc. (PCI) is pleased to present the following $50-75

million/month Fannie Mae flow servicing offering for your consideration.

Seller is a well-positioned independent mortgage banker. Seller is

interested in entering into a forward commitment to sell and transfer a

portion of their production on a monthly basis, with opportunity for future

growth. Characteristics of the portfolio include (all figures are

approximate): $50-75 million per month, 100% Fixed, Wavg FICO 763, Wavg LTV

75.2%, Average Balance $265-275k, Top States: CA (56.4%); WA (14.9%); OR

(11.8%), 85% Owner Occupied, 76% Retail originations, 45% Purchase loans

(55% in July). Obviously these numbers are for past production. The written

bids are due Wednesday, September 4, 2013 by 2:00pm EST - contact Brady

Dupuis at PhoenixCapital

[http://r20.rs6.net/tn.jsp?e=001WDTh6q6defrzG4D-nNnawdBJ9VNuVSuTsleFjjWHNMPb

HhMoJsQM1L-B7pII65I5XxI4VXweKYPtOEs3XryO0jBm9uX-w-31zBSAQV4EVZRFEfrVr4KAsA==

].)

Do you wonder what happens to ex-CFPB folks? In this case legal firm

Morrison & Foerster LLP picked up Leonard Chanin (former Deputy Director for

rulemaking at CFPB), and he has been joined by Tom Noto (formerly Associate

GC at BofA for mortgage and before that GC of Ameriquest) and Don Lampe

(ex-Dykema) in M&F's Mortgage and Fair Lending Team with about a dozen other

attorneys. Here is the release for more

information: Talent

[http://r20.rs6.net/tn.jsp?e=001WDTh6q6defo0EVIhpZh2Kl-lCo71TMOWHMer9QYIS78F

Eidy0C6sNzSTtj_t6IVFTxhrzLUXQ6TBWEawVKxNg7EuxDtohATcRlkfzjs8sFeY0at1cwakXrSX

5LnHYQE4XlaImY7mI3U0DbjZCWedfsf9MTz4URmlyv2d3s6i81UyAHNK0A9YHgmEUKIsAuFcopG-

_W3ZsVZl8X23AGZKCBwT235FqbogDlbvzJAv1ptXUKW7RD-lOw==].

How about some upcoming events, lender & investor news, and agency news?

The Mid-Atlantic Lender Conference is coming up, hosted by the Mortgage

Bankers Association of Metropolitan Washington, on October 9. If you're in

the DC area, you should check it out

[http://r20.rs6.net/tn.jsp?e=001WDTh6q6defpdAxCuFsC7soQBfakC9i3V3l2SCXZ4Apsx

98SzqtB9eYn1wYIg7rWiT_1nvestP2ybbwzJHQodkXc-tZBgp13yL74c_4qz4JUkUDQMWdQjjQ==

Premier Nationwide Lending (PNL) rolled out its "Lock and Shop" program

through its retail origination channel. CEO Brad Sullivan stated, "With the

'Lock and Shop'

program, we will credit approve a home buyer and lock in their interest rate

before they find the property they want to call 'Home.'" With the "Lock and

Shop" program from PNL, if rates go up, the borrower is protected. If

mortgage rates decrease, the homebuyer will have an option to 'float down'

to the lower rates. John H. P Hudson, Production Manager and Vice-President

of Regulatory Affairs for PNL, said, "The threat of increasing interest

rates stripping away a borrower's loan approval is removed from the

equation. This means less fallout and a greater opportunity to deliver

excellent service to our borrowers and referral partners. In addition, loan

professionals want to work for a company that offers these types of

innovative programs. Prospective employees are drawn to the ability to offer

the 'Lock and Shop' program." (To learn more about Premier Nationwide

Lending or the new "Lock and Shop" program, visit Premier

[http://r20.rs6.net/tn.jsp?e=001WDTh6q6defoCUpd8OXWCLK-AGbGY3t86R68RgWxesSQa

dxAaW-vpZg_S-wjL-1tvRvFXRSFMeUuv_JypaHj75ugwXi0E7P6aRx-onV5TPoPYihFinMhjNqKg

XlVvIuUC].)

Turning to jumbo loans, Keith L. did some digging, and found as lenders

release Jumbo products, some will NOT allow you to use them if an Agency

High Balance loan is available - even if the agency jumbo is priced higher

than the true jumbo. "Investors that allow HB loans to ran as Jumbos in

counties that qualify for HB: Wells Fargo will not allow - must use Agency

HB if fits; Chase will not allow - must use Agency HB if fits; US Bank - you

may use Jumbo in HB Counties as long as it qualifies; Flagstar - you may use

Jumbo in HB Counties as long as it qualifies; SunTrust - you may use Jumbo

in HB Counties as long as it qualifies." Thank you Keith!

Prosperity Bancshares, Inc. (NYSE: PB), the parent company of Prosperity

Bank, announced the signing of a definitive merger agreement with F&M

Bancorporation Inc. (OTC:

FMBC) and its wholly owned subsidiary F&M Bank & Trust Company ("F&M Bank")

headquartered in Tulsa, Oklahoma, whereby F&M Bank will be merged with and

into Prosperity Bank.

Congrats KBW.

The Fannie Mae Lender Record Information application (Form 582) has been

published on the website and is now available 24 hours a day, as is an

updated accompanying job aid. As a reminder, lenders that submitted their

fiscal year on June 30, 2013 are required to submit their annual

certification via this form, along with their audited financial statements,

by September 30th. A new REOgram job aid is also available on the FNMA

business portal, which provides guidance on entering a REOgram as well as

manual and bulk uploads; see the "Job Aids" section of the Servicing

Learning Center for access.

US Bank is now pricing its Home Possible products using the standard

Conforming 30-Year Fixed pricing, with no additional hits for LTV or credit

score. As a reminder, Freddie has reduced the Home Possible delivery fee

from 150bps to 75bps on 1-unit primary residence purchase transactions.

Per additional MI disclosure requirements, Fifth Third has restricted the

maximum LTV for second homes and investment properties on all products to

80%. All relevant loans with LTVs over 80% will be required to fund by

December 1, 2013. As a general MI reminder, Fifth Third guidelines state

that the coverage must be the more restrictive of the AUS findings and the

applicable product guide, and reduced coverage mortgage insurance is not

permitted.

PennyMac will be updating its pricing grid for the USDA Guaranteed Rural

Housing program and an LLPA for the 203(k) product, neither of which will

be available to lock as of August 26th due to the fact that they are still

in the process of development. These will be launched at a later date; in

the meantime, lenders are encouraged to monitor the updates in anticipation

of the release.

Effective immediately, PennyMac has aligned its assumability requirements

for the Freddie Mac 3/1 ARM product with those of Fannie Mae, which allow

for an assumption during the life of the loan after the initial fixed

period.

Franklin American has announced that, effective immediately, when locking

Conventional FHLMC loans where LP is selected as the underwriting type, the

system will require that the DTI ratio be entered in order to proceed.

FAMC has updated its principal reduction guidelines such that loans where

the compensation is paid by the borrower on a brokered transaction, the

reduction result in a loan modification, or the reduction is not applied

before the documented first payment due date are not eligible for purchase.

FHA and VA loans must comply with the requirements of their corresponding

agencies, while Conventional and USDA loans must meet the FAMC requirements

(USDA loans are also subject to the Rural Development guidelines).

For loans on properties in Texas, state law allows principal reductions for

the amount of closing costs paid outside of closing up to $1000. All loans

need to have the HUD-1 Settlement Statement reflect the reason for the

principal reduction and amount, and in cases where the reduction is applied

after closing but before the first payment is due, must be accompanied by a

pay history disclosing as much.

Rates go up a little, down a little - yesterday bond prices improved and

rates dropped slightly. But right before Labor Day, does anyone care about

rates...is anyone going to lock in a loan and lose three days? Maybe... we

all know rates have gone, and the Fed's weekly release of its QE3 purchase

stats confirmed that: for the week ending August 28 there was no buying in

30-year 3% securities for the first time since it began purchases in that

coupon in February 2012, while 4.5s put in their first appearance at $1.7

billion, or 11.6 percent, since QE1. Meanwhile, 30-year 3.5s made up 21.6

percent and 4s 51.4 percent of total purchases.

This morning we have a new batch of economic chowder. There is no official

early securities market close, but I wouldn't want to try selling an MBS

for a pipeline hedge after noon PST. We've had Personal Income and

Consumption, expected +.2% and

+.3% respectively, and were +.1% and +.1% - slightly less than expected.

+Later we'll

see the Chicago PMI and Consumer Sentiment. Thursday the 10-yr closed at

2.75% and in the early going is sitting around 2.76% - don't look for much

change on the MBS prices that help set rate sheets.

Part 4 of 4 of YOU MIGHT LIVE IN COLORADO IF...

Your bridal registry is at REI.

The pet dogs eat better than their owners.

You are still mourning the loss of the Broncos/Ravens playoff game and some

are still trying to thaw out from being at the game (and actually hate Joe

Flacco more than Tom Brady).

Stores offer His and Hers matching bike or ski outfits.

Every mountain town has its own Micro Brewery.

Formal is a collared shirt.

Red rocks amphitheater does not allow beer to be brought in to the stadium

yet pot venders go up and down the aisles.

In Colorado there is an additional season: "Road Construction."

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?e=001WDTh6q6defrZSLKl-0RG8ruMC52Kb2oLgoC2ItkUNIcN

PNZmZUWhARxDAwZBy8ePAUJ4SUdcvL_TsSiwSZrzQbkvyrPuNIT2zO5k3I95GEP_qNJzyYbPwHlQ

tL688hQr].

The current blog is, "A Little Primer on Reverse Mortgages"." 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

Thursday, August 29, 2013

Primer on GDP

http://globalhomefinance.com

Affordability has a strong impact on homeownership. Not surprisingly, per

the NRA, I mean the NAR, four of five states with the lowest homeownership

rates in the US are characterized by markets with high prices. Washington,

DC has the lowest homeownership rate at 45.3%. At the opposite end of the

spectrum, West Virginia, New Hampshire, Michigan, and Maine have among the

highest affordability and homeownership rates.

More information about state homeownership rates is available in the Local

Market Reports for the 2nd quarter of 2013

[http://r20.rs6.net/tn.jsp?e=001B7-5bzUK8jWAWrw3NPqta6bblraoaR7kEBIoQ6VKWAys

-g0sHvGsKJahstiwyYg0_tn-viesj8OVurU4MAGKmaayVTatTJxnV0S26n-icmkv-UdUOjqBxDYP

aNRqBhK-9nSxNzSwgzlbMQsOSO_JG95pCDtnagQ8iuBRh2Y5jq7g8CuWIwg50kYlfujocx4MfVD6

8dIGC8ZRuzRoiq2dL1C45YhKh5WzWOMN4hwO-GI=].

(In a related story, certainly the MBA's application figures continue to

show the impact of higher costs, higher rates, and greater restrictions. It

reported yesterday that mortgage apps were off 2.5%, with purchases up 2.4%

-2nd week up in a row - and refis off by 5.4%. Refi's dropped to 60% of

total loans, a new recent low.

Conventional refis were off 4.8% and GNMAs were off by 8.5% which reverses

last week's difference between the two.)

How many people are in the banking industry? Two million, that's how many.

At least that is what the American Bankers Association says it represents,

which I read when it sent out the response by Frank Keating, ABA president

and CEO, to the QRM news yesterday. "We applaud the proposed Qualified

Residential Mortgage rule released by federal regulators today. Gratefully,

the proposed rule aligns the QRM definition with the existing Qualified

Mortgage rule. This will encourage lenders to continue offering carefully

underwritten QM loans, including those with lower down payments.

As a result, it will help the economy and ensure the largest number of

creditworthy borrowers are able to access safe, quality loan products at

competitive prices.

'The proposed rule removes unnecessary risk retention and capital

requirements, which would reduce the availability of low-risk loans.'"

Not so fast! I don't know what "final" means anymore, and the 500-page QRM

verbiage is subject to a 60 day comment period (the first rules issues in

2011 have received

10,000 comments) - until almost Halloween: SpeakUp

[http://r20.rs6.net/tn.jsp?e=001B7-5bzUK8jV6IcF5KdkuoQKxsjt36ZPTdn1z4i5DAviW

L6_uvHhVTF2TXHILYnBNNCim62TX77Zeqn-g5zwPzdCziqzTP4OQx2sFDn3pstQhK_K59wRJldlE

8x3ErGzTUy1-Kvyk7uRJHnYVJZAeKL2QetsLL4KzXHbbG5TInwpWW9PfaQJeecEtAQvG4D65].

Regulators originally said banks and bond issuers would have to keep "skin

in the game," or hold part of securitized loans on their books, for all

loans except mortgages that included a 20 percent down payment. After

backlash from housing and consumer groups, regulators decided to drop the

down payment requirement.

Practically everyone in the alphabet from the ABA to the SEC seems to be

behind it, basically saying, "If we have to have QM and QRM, they

may-as-well match up."

"An eased version of a rule requiring lenders to keep a stake in risky

mortgages that they securitize, a restriction designed to discourage the

kind of lax underwriting that contributed subprime credit crisis, will be

proposed by U.S. regulators today.

The 500-page draft regulation written by a panel of six agencies will

replace a more stringent proposal for the Qualified Residential Mortgage

rule. The first version, which was released in 2011, drew protests from

housing industry participants and consumer groups who said it would be too

restrictive of home lending. The plan would require banks to retain a slice

of mortgages when borrowers are spending more than 43 percent of their

monthly income to repay their debt. The earlier proposal would have required

banks to keep a stake in loans when borrowers were spending more than 36

percent of their income on all loan payments and in loans with down

payments of less than 20 percent."

The agencies involved in the rulemaking are the Federal Reserve, Federal

Deposit Insurance Corp., Department of Housing and Urban Development,

Federal Housing Finance Agency, Office of the Comptroller of the Currency,

and Securities and Exchange Commission.

Don't forget that the CFPB is behind QM.

Dave Stevens with the MBA wrote, "Today, six regulators, including the FDIC,

Federal Reserve, SEC, OCC, HUD, and FHFA re-proposed the Risk Retention Rule

[http://r20.rs6.net/tn.jsp?e=001B7-5bzUK8jXDk9sVWxUfkmKBNMc2a2ra9LEtMCESRQ9k

NF9PY7dc3LFdusF7VYF1zNhKJjlHXx4DD9u1hXl-F53DCOriJKwaRmEqbhKzc7aS1-kYXrffG1Wl

QqJeE6yBxpE5wVJk0reHs-5qQDBwQuzxE16CcB4Dzf9Qww2ITIE=].

The re-proposal is a clear response to MBA, and others in the consumer and

real estate finance industry, who voiced concerns about key provisions in

the rule. Recognizing its importance, I wanted to share with you summaries

of this re-proposed rule that affects both residential

[http://r20.rs6.net/tn.jsp?e=001B7-5bzUK8jUatf29Jw7JcfSz3JUIKPrKvlySeYihAz77

k56nmLt9wDmzDO_CXZkfD3PRJI8nzo2_0L8ruwGs3BzmbI6Fed7dnaIvhhkkJLLsSYDr2NMqXHC8

avZ2OcJxtJA-AZVblysjT0c-8kVOAmZKO7lG7g8k7YmvRJTvcuD-zDuZ0oW1dA==]

and commercial/multifamily

[http://r20.rs6.net/tn.jsp?e=001B7-5bzUK8jVWE4sQ89_X_DuRfu2wK13qTsolr2D8yEQS

hLG4A1k9bKTdjwUBT575GeHw-aT-J7MCd1xKLrwORBfE2I55n3BF0D9QaAhbx4Tz-xR2n6abDDZW

si7nE79OVznOg3ce5NxPydODFsPvGlMYUn2dhUSVjh8a8suBOTQ-NEzUdgCUAw==]

members...In particular, there are five main points to highlight: 1. The

re-proposal aligns the Qualified Mortgage (QM) and Qualified Residential

Mortgage (QRM) definitions for risk retention purposes. The QRM definition

includes both safe harbor and rebuttable presumption QM. MBA supports this

decision and is extremely pleased the regulators restructured the rule to

include this distinction. 2. The re-proposal seeks public comment on an

alternative option that would add a 30% down payment or equity requirement

to the QRM definition. MBA strongly disagrees with this decision because it

would severely impair access to credit. We will seek to have this provision

removed from the final rule."

Mr. Stevens' bulletin goes on. "3. The Premium Capture Cash Reserve Account

(PCCRA) was eliminated from the re-proposal. MBA has strongly advocated for

this decision because the PCCRA would have virtually eliminated the

financial incentive for issuing CMBS. 4. The re-proposal is also responsive

to MBA's recommendations on additional flexibility in risk retention

structures, a modified duration/hold period, and modifications to the

"operating advisor" proposal for CMBS. 5. A notice and comment period for

the re-proposed rule was issued for 60 days and will end October 30, 2013.

MBA will be working with its members to develop comments and ensure that our

concerns and comments are communicated to the regulatory agencies.

But things are never straightforward any more. Industry critic Edward Pinto

noted in his writing why a Qualified Residential Mortgage is not the same as

a Qualified Mortgage (Pinto

[http://r20.rs6.net/tn.jsp?e=001B7-5bzUK8jX2qg0TAIo88U1mJTz-RUaNh-9n7i_kCLjV

iY9cgJjPTzdpESVyCpH-ko4OszzwP_VeVmN4pfVBGuFFp2_n3DtKZBFVVdcYppEoS5GPjRjndfs4

4s8YcFM5OVJGy8qGNlEM1z6AXa1ASi2eyXL6grBI63QHZJsGyP-qGS2ltnyM75dg3tst2Wtpx_sV

tsc7L_ZlkMBAmlVHHAmqtxmKpz8xwzUI0DQSHnA=]).

"Defining these two terms is required by the Dodd-Frank Wall Street Reform

and Consumer Protection Act. However, the proposed QRM definition turns the

statutory language and the agencies' earlier analysis upside down. A QM was

intended in Dodd-Frank to define a minimum loan standard, not to define a

low risk loan. Certainly the CFPB's QM definition demonstrates this-a QM

may have no down payment, a 580 FICO credit score (a score in the bottom

one-eighth of all scores), and a 50%+ debt-to-income

(DTI) ratio (if approved by Fannie, Freddie, or FHA). A loan with these

characteristics is certainly not "prime," yet the CFPB would call such a

loan prime."

He goes on. "A QRM was intended to set a standard for loans placed in a

mortgage backed security (MBS) that have a low credit risk as evidenced by

their past performance.

In their earlier March 2011 proposed QRM rule, the six agencies defined a

QRM as a loan with a 'low risk of default even in a stressful economic

environments that combine high unemployment with sharp drops in home

prices'. They concluded based on substantial and rigorous research that to

be a low risk loan, it needed demonstrate three qualities: a substantial

down payment of 20% (or low loan-to-value on a refinance loan), a clear

demonstration of credit worthiness, and a DTI ratio of less than or equal to

36%. "QRM = QM" clearly does not pass muster under any low risk standard.

The long-term credit performance of the housing mortgage market can only be

as sound as the underwriting practices used to originate a preponderance of

loans in that market. It is axiomatic that a sound market requires that

the preponderance of loans be prime or low risk loans. By caving in to the

demands of the lobbies representing the Government Mortgage Complex, both

the CFPB and the six agencies are committing a grievous error. Calling QMs a

prime loan and making QM = QRM gives risky loans an imprimatur they do not

deserve. This is a repeat of the false comfort Fannie and Freddie gave to

the definition of a prime loan. As we now know there was little that was

prime in most of their prime loans."

Where does all this put the poor LO? For now, there are no changes. Non-QRM

loans and non-QM loans are not against the law. Nor are they "bad" loans -

just ask ex-CFPB officer Raj Date who has created an investor for non-QM

production. The qualified mortgage, or QM rule, contains no down payment

requirement. For loans in which borrowers are spending no more than 43

percent of their income on debt, the QM rule protects banks from being sued

by investors or homeowners for faulty underwriting. And that is the crux of

the matter - in this litigious environment lenders want to stay away from

potential lawsuit liability years down the road. So banks mortgage banks are

going to lend in a box that keeps them from being sued in some class action

lawsuit.

But we can expect quite a bit of development at the lender and AUS level

over the next four months leading up to January 10th. One has to believe

that soon, when a loan is entered into DU or LP or an automatic underwriting

program, it will either be a QM or not, in which case the bank or mortgage

bank will either allow it or not. But non-QM loans are not bad loans, in

which case, where will they go, and at what rate and price? Will there be

compensating factors, like the old days? And as rates stay high, loan level

price adjustments remain high, and documentation requirements prove onerous

for some borrowers including first time home buyers, will the resulting

impact on residential lending push the government or an agency to change the

rules yet again? Stay tuned!

Today we had the GDP numbers. Remember that GDP is the total output of goods

and services produced by labor and property in the US and this information

is compiled and reported by the Bureau of Economic Analysis (BEA). The BEA

divides GDP into four sectors of the economy - consumer purchases (Real

Personal Consumption Expenditures), business investment (Real Nonresidential

Fixed Investment), government spending (federal, state and local) and net

exports. (Exports add to GDP, imports subtract from it.) The process begins

with an advanced estimate about a month after quarter end, then a second and

third estimate. The BEA even cautions that the first number for a given

quarter is an advance estimate and based on source data that are incomplete

and subject to further revision.

But this week we've seen some volatility, mostly based on the impact of a

military strike in Syria will have on our economy. (Now apparently it is

delayed in order to build more support - a kinder, gentler attack?) Tuesday

we had a flight to safety, yesterday it went away. Tuesday the price on the

10-yr T-note improved by .75, yesterday it was down a half. Agency MBS

prices tagged along. Mortgage originations and locks and sales continue to

be below the recent moving averages. No lender is saying their back office

is backed up, and any company built around refis has seen (per the MBA) refi

biz dropping for 11 weeks in a row.

Today we had the second reading on Q2 GDP. It was expected higher at +2.2

percent from the advanced print of +1.7 percent. It came out at 2.5%, +.7%

on the revision, and much stronger than expected. Also reported was weekly

Initial Jobless Claims which was expected to decline by 4k to 332k. It was

-6k from a revised 337k to 331k, also stronger than expected. (Later we'll

have a $29 billion 7-yr note auction.) After this news, the 10-yr is sitting

around 2.81% after closing at 2.78%, and agency MBS prices are worse about

.125 than Wednesday's close.

Part 3 of 4 (yes, it grew) of YOU MIGHT LIVE IN COLORADO IF...

You are 82 years old and take up snowboarding.

Your real Y2K fear was running out of Celestial Seasoning tea and trail mix.

You get depressed after one day of cloudy weather.

You think formal wear is ironed denim.

North means mountains to the left; south is mountains to the right; east and

west are where all those liberals keep moving in from.

You go anywhere else on the planet and the air is "syrupy' and notice the

sky is no longer blue.

You consider a 3-piece suit to be a pair of shorts, sweatshirt, and Tevas.

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?e=001B7-5bzUK8jXPolfilc5YQrALda4MsqUb73SwJ0C0qMNH

xa9yeymrkMFxKETLTS46w47A2XAWfVRNiyoXva1eZmPTcVo9U1Fw2cftTUJbipoC-aA5POWU3ECM

bsNH-Vri].

The current blog is, "A Little Primer on Reverse Mortgages"." 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

Wednesday, August 28, 2013

Warehousing For Brokers

http://globalhomefinance.com

There are lots of training videos out there. But there aren't many 0% down

payment programs from the government - the USDA is about it. Here is one

AE's video on the USDA program (among other topics) to his brokers:

CanYouDoUSDAinDetroit?

[http://r20.rs6.net/tn.jsp?e=001qBBPQ-CMkDUXXhtS8bIy8nO6DtQwIqCwq37NpivHy9LR

amULIXNmIhRotM_A7EnTgac8zsCAC9dWzFVYrpa4sBYeNMNLp5buEoGN603xEeQqorx_K7DFEehv

9iWrhxoZBUOkOpd8Y2EbV4w6BQ22BEPHI6O41dVjq98wKKqHMalztcqUiiO561WbI9VcnLI-GSl8

t1SpYMI=].

LOs need to stay up on things! And it is tough to keep up with the job

market. For example, we all know that there's been a slowdown in mortgage

origination that has pushed companies like Wells Fargo & Chase to announce

thousands of mortgage-related job cuts. (The MBA estimates refinancing

activity will drop 22% this year given higher interest rates, and the fact

that most people who could refinance did, which certainly influenced Wells

cutting 20% of its 11,406 LO work force.) But Wells Fargo said it will hire

about 5,500 people nationwide to support growth in its brokerage, private

banking and retirement business lines. Same skill set? Perhaps.

But today in mortgage-land we have an established regional Appraisal

Management Company seeking a Vice President. "The primary focus of the Vice

President will be to build, manage, market, retain and mentor a professional

appraisal management staff. The candidate will also be tasked with managing

the day to day operations of the AMC from appraisal coordination,

accounting, marketing, business development, QC, dispute resolution,

appraiser interaction and client relations/retention. Commencing starting

salary will be $60,000 (DOE) per annum. In addition to salary, the AMC

offers an existing staff reporting structure, robust appraisal management

software platform, per unit 'New Account' bonus opportunity, ability to

affect change in a growing organization and to prepare Vice President for

higher level executive position within the company." The candidate must be

located in or be willing to relocate to the Reno, Nevada, area. Please send

resumes to rchrisman@robchrisman.com [mailto:rchrisman@robchrisman.com]. (I

am in meetings and traveling today, so please excuse delays.)

And Florida Capital Bank Mortgage recently streamlined its Operation's and

Production areas in alignment with future market conditions expected in the

industry. These changes are designed to allow the company to offer improved

pricing to those customers who can consistently deliver quality monthly

volume. FCBM is also greatly expanding its warehouse programs to both

brokers who need to become lenders as well as to those customers who are in

need of traditional warehouse lines. At this time, FCBM is looking for

several top performing Mini-Correspondent and Warehouse Sales Executives who

can cover larger territories. Interested Sales Executives should contact

Tommy Adkins at tadkins@flcb.com [mailto:tadkins@flcb.com].

Brother, can you spare a dime? That was a song title during the Great

Depression.

But in JPMorgan Chase's case, it may take $6 billion - that is the amount

that the FHFA is seeking as it claims Chase misled Fannie & Freddie:

HelpUsRecoverTaxpayerMoney

[http://r20.rs6.net/tn.jsp?e=001qBBPQ-CMkDVsC-Qqx1Th7cH34EY6HcXFAAuRVWo9fpQn

LqIfGERk0EEKC3nxOmJL2mt4nAELZKswIs3WrNyeoQIce8gq6cO8XAA6jI1L6SZfMnEF9UYJmOLq

uafXOGaVA_f88Wk_TA-6YMmA5eQ1w8Sjto-p7y4j_vZvO2eoIplsbibZ1A5dWMyStMT3egA8GOzq

qPb5c2A=].

I'm worried the courts won't have anything to occupy their time with, once

mortgage litigation backs away from its six-year highs. In July the 8th

Circuit Court of Appeals, joined the 10th Circuit (remember there are 13

judicial circuits, in case the question ever comes up at dinner), in ruling

that "notice alone within the three-year period is insufficient to validly

exercise a right to rescind." Ballard Spahr writes, "While it held that the

borrowers had not preserved their right to rescind because their lawsuit

seeking rescission was not filed within the three-year period, the Eighth

Circuit nevertheless ruled that the borrowers had a cognizable claim for

damages based on the bank's refusal to rescind. According to the court, even

though the borrowers' right to rescind was extinguished, their failure to

rescind cause of action accrued when the borrowers requested rescission and

the bank denied their request. Since the borrowers filed their lawsuit

seeking damages within one-year of the denial, the court found their

damages claim was timely. However, the court ultimately denied the

borrowers' damages claim because they had not established TILA violations

entitling them to rescind their loan."

Speaking of lawsuits and lawsuit potential, according to an American Bankers

Association survey, at the end of June 60 percent of vendors had not told

their banker clients when they will be ready to comply with the Consumer

Financial Protection Bureau's new mortgage rules. The survey was aimed at

senior mortgage executives of ABA member banks to learn more about their

overall implementation efforts and the progress that their vendors have made

in delivering applicable technology. "This survey confirms what we've been

telling regulators and Congress all along: banks need more transition time

to implement these mortgage rules," said Robert Davis, executive vice

president of mortgage policy at ABA. "Community banks in particular have

indicated that updated software, programming and training are big concerns,

and training can't occur until systems are operational." Most banks, 79

percent, will use vendors to create software and systems that will allow the

bank to continue making mortgage loans in compliance with the rules released

earlier this year by the CFPB. Twenty-four percent of bankers said help will

not be available until November 2013 or later. Once banks receive materials

from their vendors, they will need additional time to adjust and test the

vendor product and train staff. Eighty-two percent of banks expect to take

two months or more to fully integrate the vendor's products once they are

made available to the institution. "There simply is not enough time. Without

a transition period, we will see fewer mortgage loans made available,

jeopardizing the housing and economic recovery," said Davis. Here is the

full write-up: YouCan'tSayTheABADidn'tWarnUs

[http://r20.rs6.net/tn.jsp?e=001qBBPQ-CMkDVvjuGZiPrVpQIldhbDYtcnpTqyXfbVfm1K

td_GXh1VAv1TUQcz-LMXbyVL_blzKihLsmF2eCqtOg8g_EPjuAoPy9p3J1PBaKFCBTTCdM6kLDkz

dqjXPyyYhXoBfP911HMxLJjEMpDYDzj8KOQGqKHyCZs-wvXju8Nab8W8c8Tp6ONFOm_0C1_sL4Q_

wP93igBiQQWR4SvUkWdVwnWtqPpJjKf8yGOTlsm7AZdC-mWzcg==].

Last week this commentary took a swipe at providing information on lenders

"renting"

space from real estate brokers, but there continues to be interpretations of

what the government's rules say. Teri Hodgett sums it up by saying, "Paying

higher than market rental fees in exchange for referrals is a clear

violation of Section 8 of RESPA. From the link below: 'HUD, therefore,

interprets Section 8 of RESPA and its implementing regulations to allow

payments for the rental of desk space or office space. However, if a

settlement service provider rents space from a person who is referring

settlement service business to the provider, then HUD will examine whether

the rental payments are reasonably related to the general market value of

the facilities and services actually furnished. If the rental payments

exceed the general market value of the space provided, then HUD will

consider the excess amount to be for the referral of business in violation

of Section 8(a).' More here: HUD

[http://r20.rs6.net/tn.jsp?e=001qBBPQ-CMkDWRDAhFZJ-ua7WyWVVI12pOtJtIj39sJESl

T5weRiMQK3XuE3xM91j0cDECBZGBTcl98w4YtwfLlKFpZHQUysMfFNelPPMjeTE-YvL5EvQZYj0n

yQjGIwfuBkLG2wjoaBQxwBXGm8RpzG8cees531Hm3vhreg4V56svOhNQIEwS1q8KasXs0QWDeERM

rG2w557yy3jubMmDVVmaQMNAaar6]."

Thank you Teri!

Let's move on to some bank, agency, and vendor news.

Heritage Bank USA ($978mm, KY) and Heritage and Sumner Bank & Trust of

Gallatin ($184mm, TN - where my grandfather was born!) have agreed to

terminate their merger agreement, due to Sumner's failure to meet a certain

performance requirement under the merger agreement.

But in Texas, Independent Bank ($1.8B) will buy Live Oak State Bank ($124mm)

for $20mm (50% cash and 50% stock).

KBW announced that The Boards of Directors of 1st Constitution Bancorp

(Nasdaq:

FCCY), parent company of 1st Constitution Bank, and Rumson-Fair Haven Bank

and Trust Company (OTBB: RFHB) announced that the companies have entered

into a definitive agreement and plan of merger, pursuant to which Rumson

will be merged with and into 1st Constitution Bank, with 1st Constitution as

the surviving bank holding company.

And Mercantile Bank Corporation (NASDAQ: MBWM) and Firstbank Corporation

(NASDAQ:

FBMI) jointly announced the signing of a definitive merger agreement under

which Mercantile and Firstbank will merge to create one of the largest

banking institutions headquartered in Michigan.

Accurate Group Holdings, Inc., a Cleveland-based, technology-enabled,

outsource provider of real estate transaction services to mortgage lending

and loan servicing clients, announced today it has closed on the acquisition

of Preferred Appraisal, Inc., based in Northbrook, Illinois, for undisclosed

terms. While Accurate successfully resold the Companies' products for years,

this deal provides Accurate ownership of the industry leading Desktop

Appraisal Solutions known as ValueNet, ValueNet Plus and ValueNet Ex. (Inc.

magazine has ranked Accurate Group NO. 867 on its seventh annual Inc.

500|5000, an exclusive ranking of the nation's fastest-growing private

companies. Accurate Group also ranked No. 26 of the fastest-growing private

companies in the real estate sector.)

Way out in Northern California, Luther Burbank Savings announced plans to

open a new division in Southern California that will issue mortgages

directly to home buyers. Previously, the company made home loans through a

network of independent brokers (wholesale) or concentrated on apartment

loans. The company has set a goal to originate $1 billion in loans through

the new division by its second year of operation - an amount that would be

roughly equal to the total loan business that Luther Burbank will conduct

this year, per CEO John Biggs. LBS ($3.6 billion in

assets) hired Jay Robertson, former president of First Capital Mortgage in

Los Angeles, to run the new unit. In an interesting twist, the new division

will offer not only Luther Burbank mortgage products but also arrange loans

from other companies.

Fannie Mae released its STAR servicer rankings yesterday, and to see if

you're company is on the list, here you go: GoldStarFromTheTeacher

[http://r20.rs6.net/tn.jsp?e=001qBBPQ-CMkDX3H1ySphfbn8W1MG7KzNNxGouQHNkFVn4g

H0SNKsAfeTD5H3d17vRbLrDhVSWeXJaHaYTmDECwKW2Jfjk-jobocgg5zFD2EpHVPeb_yZJw3et0

qyYYAOUOqCMo-STFCigmTy2R0FLe4exEEIWjSbSqyqBiFciwzIrmn8gUqrD6JcalV3JO7NCnaaTc

Ad2Y2vmhriXuRoRPRPzmlQqZxMIhCFTcLJGNalrBj_tJwxywQap5nI5KbtVDwIR2ZN6hjga8zv5F

qt8puiY1CTnTmikFFEGFxpuVxX-ZL7kNA_fzhw==].

On to the markets! Frequent readers of the daily commentary already know

that our cat Myrtle is a supply-side contrarian, but should note that our

other cat Gusto is an aggregate-demand Keynesian (you should hear some of

their arguments). However, they both agree on one thing: bond market

volatility is rarely economically beneficial to either discipline. So they

both lifted their heads from the food bowl when I read aloud a recent bond

market report: http://libertystreeteconomics.newyorkfed.org

[http://r20.rs6.net/tn.jsp?e=001qBBPQ-CMkDW9hCtau_P_TYv3EWkiE_8f4xOAIl5WEHYS

Q6_gR9SkVlt2wbrd3CPYsnUUPvSb4U9oRFYFXxn2dIiJFTkrSYT3PTOfuVn1sc69BpuE92gYJLQr

ey7pzMdvksP1Ea3lKKnq6HpaF_VYIg==].

Taper, taper, taper. It is already priced in to the markets? Probably, but

we may see a small shock higher when they actually do it. Right now the

smartest minds in the room think the $85 billion a month will drop by $10

billion in Treasuries and $5 billion in agency MBS. And the timing of the

scaling back isn't the most important policy decision due out of the Fed.

Instead, we should really be asking at what pace will tapering take place?

During his recent public remarks, Bernanke suggested a somewhat linear rate

of cuts wrapping up by mid-2014. The Fed clearly is watching mortgage rates

closely (this was acknowledged in the FOMC statement this week and Bernanke

has remarked on the importance of the housing rebound several

times) which is leading some to think Treasuries may be tapered first so as

to maintain the purchase pace of MBS for the time being. And is the Fed

watching loan level price adjustments, which have also contributed to higher

rates?

Yesterday morning the financial markets reacted to the risk of increased US

involvement in the conflict in Syria. (Here we go again?) The resulting

flight to safety helped MBS, and the bond market in general, and hurt

stocks. Oil prices have increased as well. The Conference Board's index of

U.S. consumer confidence increased to 81.5 in August from 81 the prior

month, better than forecast. We also had the S&P/Case-Shiller Index, with

its two-month lag, showing home prices increased in June - property values

climbed 12.1 percent from the same month in 2012 after rising 12.2 percent

in the year ended in May, the biggest gain since March 2006. In Nevada "Lost

Wages"

was up 25%!

Despite supply and demand, yesterday MBS prices could not keep up with the

Treasury rally, and near the close of business Tuesday prices on 30-year

FNMA 3s through 4.5s ranged from +.625 to +.250 (3.5% Fannie is back above

par - 100) while the 10-year Treasury note improved .75 in price. Per

Thomson Reuters, Tradeweb reported volume in mortgage-backed securities

remained below normal at 81 percent of the 30-day moving average.

Here on Hump Day, as folks gear up for the Labor Day Weekend, there isn't

much scheduled market-moving news although we have a $35 billion 5-year

T-note auction at 1PM EDT.

We'll have July's Pending Home Sales at 10AM EDT. And we'll have the MBS's

applications numbers. In the very early going, rates have moved a little

higher, and the yield on the 10-yr., which closed Tuesday at 2.72%, is back

to 2.74% which suggests MBS prices will be worse about .125.

Part 2 of 3 of YOU MIGHT LIVE IN COLORADO IF...

Having a Senator named "Nighthorse" doesn't seem strange.

A full moon has never kept you awake.

You have an $800 stereo in a $300 truck.

Knowing that Texas and California are downstream gives you a certain feeling

of satisfaction when you flush.

You carry your $3,000 mountain bike on top of your $500 car.

You have an MBA and are frying burgers at a McDonalds in Vail.

You own a big dog named Aspen, Buck, Cheyenne, Tex, or Dakota who wears a

bandana.

You think a pass does not involve a football or a woman.

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?e=001qBBPQ-CMkDVN8w2a7tx6N8MWXmKgA_GBfI7FWljxpzDq

e9PbOKoeS8F1dzW7H8GtacnFORCJeOKa0bl42_m1m9YjUYxz90oeD3uRph4PFQOiQ_z8lkeVMmq7

5njQek99].

The current blog is, "A Little Primer on Reverse Mortgages"." 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