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Today's
Rate Volatility: NEUTRAL
What happened yesterday?
Mortgage backed
securities (MBS) gained +28 basis points from Friday's close
which caused 30 year fixed rates to move slightly lower.There were no major economic reports or Treasury auctions for the bond market to react to. We did have two "talking Feds" but neither said anything new nor did they surprise the markets. The benchmark FNMA 4.0 October coupon traded in a very narrow range that was only about +28 BPS wide. But we did manage to break above our 100 day moving average mostly due to concern over a government shut down.
What is on the agenda for today?
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Given the change in the MBA's
logo, David Frase writes, "I love the new MBa logo! It emphasizes
the loss of 'capital' experienced by our industry this season." Plenty
of banks and mortgage banks don't want to lose the capital they accumulated
in 2012 and the first half of 2013, and are cutting FTEs. The latest
example is Citigroup, which will reportedly cut about 1,000 jobs in its
mortgage business (760 in Las Vegas, 100 in Irving, TX, and a scattering
elsewhere. The job cuts represent about 8 percent of Citigroup's workforce in
its mortgage division, which has about 13,000 employees. When you add that to
Wells' 4,800, Chase's 1,800, and BofA's 2,100 announced cuts, plus the
thousands from other lenders, you're talking real numbers.
While some companies continue
to shrink and lay off employees, Mortgage Solutions Financial continues to
expand their market share. Based in Colorado, Mortgage Solutions Financial is
a direct Fannie, Freddie, Ginnie, and FarmerMac seller/servicer, and boasts a
remarkably broad product offering. MSF is hiring strong DE
underwriters across the country, as well as experienced account executives
for wholesale and mini-correspondent. It is also aggressively
seeking strong inside sales teams and experienced TPO Area Sales Managers. On
the retail side, branch opportunities are available in all 32 states
in which MSF is licensed. Submit all inquiries to greg.grandchamp@msfhome.com and to
learn more about the company visit MSF.
Bill C. writes, "Rob is it
allowable for a branch manager to paid commission on loans produced and a %
of the monthly profit?" Gee, one would think so - aren't most other
industries in the world compensated based on that? But nope! Attorney Ari
Karen answers, "No. Further, starting in January, no branch manager will
be able to receive profit off the loans of the branch regardless of whether
he/she originates."
In fact, many LOs are
wondering just how much they will get paid once the new CFPB rules on points
and fees in Qualified Mortgages take effect. Alternatively, many of
my readers who are responsible for paying their loan officers, are
wondering just what they can pay them to remain competitive and without
attracting sanctions. Needless to say, nothing quite focuses the mind like a
threat to income! Because of this, you may be interested in knowing
that the Community Mortgage Lenders Association ("CMLA") and
American Mortgage Law Group ("AMLG") will be hosting a
complimentary webinar on this very topic and which is scheduled to be
given this Thursday at 11:00 am PST / 2:00 pm EST. If interested in
attending this complimentary webinar, you can contact attorney James Brody to
learn more (jbrody@americanmlg.com) or
simply register now by clicking on the following link: QM.
I am not an underwriter - it
has become way too complex for me, and frankly I don't know how they keep up.
But one question that seems to come up occasionally is regarding maternity
leave, and this may fall more into the Fair Housing category. Are lenders
violating statutes by requiring new mothers, out on Maternity Leave, to
return to work before giving them their loan? After all, many lenders say
they have overlays for needing a paystub showing that the mom or dad has
returned to work. But there are plenty of compliance people who will tell you
that underwriting overlays do NOT pertain to federal law, and Fair
Housing is a law. But don't take my word for it - here is a link to
HUD's Maternity Leave info. And it
apparently does not matter if it's paid or unpaid maternity leave. There
are plenty of cases out there where lenders were fined on this issue (for
example, here is one a couple years old
but still applicable), and the law applies to paternity leave as
well. Don't mess with Moms!
What is a wine frig? It is a
refrigeration storage unit that doesn't get that cold - kind of like the
broken frig in your college dorm. I bet a lot of people didn't know that. And
maybe, it seems, a lot of people don't know that they can refinance. But Fannie
& Freddie's shepherd - the FHFA - is here to not only help but to use
some of its advertising budget in doing so, and says that as many as 2
million borrowers with mortgages backed by Fannie Mae and Freddie Mac can
refinance with HARP. "There's a perception among some that you've
got to be delinquent in order to have some government-sponsored program that
can help you," Edward J. DeMarco, acting director of the FHFA, said in
an interview. "What we want to do is correct that misperception."
Any company based on
refinancing (and that has found that purchase business is a lot harder to
find than they thought) should be very interested. After all, the MBA tells
us that refi biz is down 65% from May, and HARP applications, which account
for 40 percent of all refinance activity, fell 54 percent in the same period.
So depending on interest rates and home prices, the FHFA estimates that there
are between 1 and 2 million borrowers eligible for HARP who are paying
above-market interest rates and who have little or no equity in their homes.
But many lenders never saddled up to the HARP trough, are quick to
remind realtors and private bankers of that fact, so may be indifferent. To
refinance through HARP, borrowers must be current on their loan payments and
have Freddie Mac- or Fannie Mae-backed mortgages that were originated before
June 1, 2009. Borrowers also can't have more than 20 percent equity in their
homes. The program ends in December 2015. And no, there is no chatter about
changing the 2009 date.
While we're on the agencies, I
received this note. "Rob, over a month ago you wrote of the possibility
of a reduction in maximum loan amounts by Fannie & Freddie, as
dictated by the FHFA. We are hearing more about this, so it should not
surprise anyone. But what will happen to FHA & VA loans?"
That is a good question. Remember that those programs fall under HUD's
jurisdiction, and I have not heard anything about HUD changing loan amounts.
If F&F move their loan amounts down, let's say starting in January, the
FHA super-conforming ceiling would be roughly $130,000 higher than the
conventional ceiling. And just like the push or pull effect of conventional
conforming gfee changes on volumes, a drop in loan limits would push more
volume toward FHA products, and therefore create more Ginnie Mae
jumbo-conforming pools (made up of high balance loans that might have gone
conventional). Using that reasoning, this would be especially pronounced for
loans with high LTVs, DTIs, and lower credit scores. Which begs the question,
is this product that FHA wants, or that Ginnie wants in its pools? Banc of
Manhattan, in a recent research piece, points out that, "One could
expect that market spreads for super-conforming Ginnies will expand. This
will worsen the pricing of FHA super-conforming loans, albeit not
enough to diminish volumes (since many of these loans will have no affordable
alternative). At the same time, a drop in conventional super-conforming
production will tighten spreads on pools containing these products. We would
not be surprised to see the concession for conventional super-conforming
loans narrow to roughly ½ point by early 2014 from its current level of
roughly 1 ¼ to 1 ½ points."
By the way, how much pull does
NAR (not NRA!) have with Fannie & Freddie? We might find out sooner than
later, since NAR has sent out a public letter suggesting that the FHFA
does not have the ability to change loan limits or gfees. Battle of the
Titans: NAR.
Let's play some catch up on
recent lender & investor updates!
Virginia's Cardinal
Financial announced that its third-quarter mortgage loan originations had
declined by roughly 40% from the second quarter, and that "the
marketing gain percentage for mortgages sold has decreased during the third
quarter due to increasing competitive pressure related to the changing market
conditions." Cardinal also said "Expense reduction and revenue
enhancement measures have been and will continue to be implemented to offset
the decrease in mortgage production and the decline in the marketing gain
percentage," but that the bulk of the benefit of the cost declines
wouldn't be realized until the fourth quarter.
Mountain West Financial has
announced that closing agents no longer have to deliver ink-signed original
loan documents, as it is transitioning to accept all documents in electronic
format, with the exception being the original note. Ink-signed
documents were accepted until September 15th, after which point
signed documents and funding conditions should be delivered electronically
via the loan documents upload link. The original note should still be
delivered to the Collateral Department at the Redlands, CA address.
MWF has switched its Freddie
Mac and Conventional 5/1 ARM caps from a 5/2/5 structure to a 2/2/5
structure.
Affiliated Mortgage reminds
lenders that, following the updated FHA MIP requirements effective for case
numbers assigned on or after June 3rd, the verbiage in the
"FHA Mortgage Insurance Premium" section of the FHA Informed
Consumer Choice Disclosure Notice issued to borrowers should align with that
of HUD Form 92900-A ("Addendum to Uniform Residential Loan
Application"). Worth noting as well is that the option to drop MIP once
the LTV reaches 78% is no longer available for all applicable case files.
Per one report, US Bank
is now accepting FHA Back to work program, wholesale and correspondent. Other
top 10 lenders could very well announce their policies in the upcoming week
as they allocate project resources on it. The requirements of the program
make it such that there couldn't even be an application until 9/17, which is
30 days after the HUD announcement. The programs requires consumer
training takes place no less than 30 days prior to mortgage application. Are
you listening, LOs? Consumer training: HUD. #13-26, page 10
(out of the 15).
Bank of the Internet is now
allowing manual underwriting for its Portfolio ARMs, available for
transactions from $300,000 up to Jumbo products.
Western Bancorp, a
wholesale and retail mortgage lender, today announced the launch of a new
loan management system, LMS Xpress. LMS Xpress was released to the company's
account executives and brokers, who now use the platform for wholesale loan
origination. LMS Xpress was created to help mortgage originators
improve productivity in today's highly regulated and rapidly changing
mortgage market. The platform was designed for simplicity speed, and complete
loan management from application to funding.
Freddie Mac will be
updating the income documentation feedback message issued through LP to
include loan-specific information customized to the exact income type in
question and to eliminate the return of messages that do not apply to the
subject loan's income types. The new messages will also include
underwriting guidelines specific to the income type. These changes are
scheduled to take effect on October 27th.
Wells Fargo reminds
sellers that the fees all loans represented and warranted to comply with
Regulation Z of TILA must be properly disclosed to borrowers. Loans for
which the APR and/or finance charge are under disclosed due to the omission
of prepaid finance charges are at risk for being ineligible for
purchase. For a list of fees that should be disclosed, refer to Newsflash
C13-047.
Atlanta has a new metric for
measuring the health of the Atlanta residential real estate market,
thanks in part to Georgia's largest non-bank mortgage lender Southeast
Mortgage. The "Cal-Culator report" will be distributed to media
outlets prior to being published on Southeast Mortgage's Thought Leadership
blog on SaportaReport.com, Atlanta's authoritative civic website. The monthly
Cal-Culator number rating will be based on a variety of factors including
mortgage rate trends, single-family housing starts, the inventory of Atlanta
homes, consumer confidence and the Atlanta economy. Staff will be consulting
numerous sources, such as the S&P Case-Shiller Home Price Indices,
Atlanta's On Numbers Economic Index, the Conference Board Consumer Confidence
Index and more. The Cal-Culator for August 2013 can be viewed here.
There seems to be enough going
on without worrying about rates, and sure enough, there was not much
happening in the markets Monday although bond prices did improve slightly. Traders
continue to report that supply from mortgage bankers is slow - everyone is in
the same boat, and everyone is squeezing their margins to go after business
that just isn't there. (And by the way, it isn't only at the corporate
level where margins are coming down - regions, branches, and LOs are all
being asked to contribute.)
Today we have some minor
economic news, which, given how quiet it has been, might just move the
markets. At 6AM PDT we have the FHFA home price index (expected higher to 8.0
vs. 7.8 last) as well as S&P Case-Shiller HPI (12.4 vs. 12.1 prior). At
7AM PDT is September's Consumer Confidence (expected to drop), and later is a
2-yr note auction ($33 billion) at 1pm and a couple of speakers from the
Federal Reserve. For numbers, the 10-yr closed Monday at 2.71% and in the
early going we're down to 2.69% with agency MBS prices a shade better.
A man walks into a bank and
asks for a $10,000 loan to install a bathroom in his house.
The banker says, "We at
the bank are not familiar with you, where have you been doing your
business?"
The man replies, "In the
woods."
If you're interested, visit my
twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog is,
"Reverse Mortgages: Companies Need to Know What is Changing". 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 or www.TheBasisPoint.com/category/daily-basis. For archived commentaries or to subscribe, go to www.robchrisman.com. Copyright 2013 Chrisman LLC. All rights reserved. Occasional paid job listings 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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