|
As the industry waits for
Nationstar's earnings call tomorrow, and hoping all the rumors of this
venture-capital-owned lender shutting down a channel or two are false, it
has turned some attention to Ellie Mae. Ellie reported a
lower-than-expected third-quarter profit, hurt by lower mortgage
volumes and higher R&D spending, pushing its shares down more than 20%
last week. Its net income halved in the quarter ended Sept. 30, and Ellie
warned of lower-than-expected earnings in the fourth quarter. R&D
expenses rose more than 38 percent, and let us not forget its acquisition
of MortgageCEO, a software company specializing in customer relationship
management for the residential mortgage industry.
Meanwhile, other parts of the
industry are expanding. CMG Financial, a California based FNMA and
FHLMC Direct Seller-Servicer and approved GNMA Issuer, continues to expand
its footprint across the country. Wholesale Regional Managers and
Account Executives are in demand in the Northeast, Pacific Southwest and
upper Mid-Western U.S. Branch Managers and Mortgage Consultants
supporting their Consumer Services (Retail) Division are in demand in most
states as well. "CMG Financial is uniquely positioned in the
marketplace today conducting business through 5 sales channels including
Consumer Services, Wholesale, Correspondent, Affinity Partnerships and a
National Builder Division and recently launched its 'Select Partner'
program which provides lines of credit to qualified emerging bankers. CMG
also allows its AEs to continue to support and be compensated on wholesale
accounts that join its retail platform." If you are interested,
submit your resume to Amy Gallow at agallow@cmgfi.com. For
inquiries other than employment interests, contact Dave Herbst, Director of
Marketing, at dherbst@cmgfi.com.
And Flat Branch Home
Loans, one of the largest lenders in the State of Missouri, is expanding
west. The company, based in Columbia, Missouri, is looking for a
producing Origination Manager in the Kansas City market. The
right individual will possess a strong history in the area with the ability
to recruit purchase oriented LO's. Flat Branch Home Loans is
a full service mortgage banking firm and prides itself on hiring the
best LO's and supporting them with an impeccable operations staff. It has
been recognized several times by Inc. Magazine as one of the fastest
growing private companies in the United States. Please send inquiries
directly to Jim Yankee, President at jim@flat-branch.com.
We have a new set of
collector's items: Ally Financial t-shirts and coffee mugs. Ally
Financial has closed the book on the mortgage business. It no longer
offers or services home loans and the pipeline of pending mortgages stands
at zero, according to a presentation by the Detroit-based auto financer.
The company has paid a settlement reached last month with U.S. regulators
tied to its residential lending, and that's the last of any significant
costs, Jeff Brown, senior executive vice president for finance, told
investors on a conference call.
"Rob, you're getting
forgetful in your old age. We were told that there is a 7-year waiver on
the QM stuff (unless FNMA and FREDDIE MAC privatize before the 7 years)
like 43% DTI. You should remind folks." Not so fast. First
of all, the QM comment period for FHA just ended - so the industry is
waiting to hear its stance. And to the best of my knowledge, FHFA directed
Fannie & Freddie to comply on 3 fronts: to only buy loans with terms up
to 30 years, fully amortizing, and 3 points in fees.
Although direction from the
FHFA may change in the future, one way to think about the current situation
is that there is a "Standard QM" (43 DTI, ARMs max interest rate,
and so on) and a "Special QM" (exemption GSE for 7 years - a loan
is QM if eligible for sale to an agency, but this expires in 7 years or if
they come out from conservatorship). To the best of my knowledge there
is no intent to reduce DTI at this point. But why take my word for it -
the agencies have put forth guidance. For example, Fannie has its "Quarterly
Compass" - two pages which list everything that has been
announced, along with upcoming dates. And Fannie has consolidated
everything it has published on QM in three publications: Lender Letter
LL-2013-05 - Qualified Mortgages, Lender Letter LL-2013-06 - Additional
information about ATR and QM requirements, and Announcement SEL-2013-06 -
Updates related to Ability to Repay and Qualified Mortgage (QM). Links to
each of these documents are available through the Fannie Mae Quarterly
Compass, August 2013 edition located at this link.
And folks in the industry
shouldn't forget Fannie's interactive site, the Housing Industry Forum! Fannie
posted an HFI article on ATR and QM
yesterday.
Last week the American
Bankers Association expressed strong support (by way of a comment letter sent to
U.S. regulators; talking points shown here) for the re-proposed Qualified
Residential Mortgage standard. Their proposal aligns QRM with the CFPB's
Qualified Mortgage rule, released earlier this year. "A QRM standard
that mirrors the CFPB's QM rule is a big step forward in strengthening the
housing market," said Frank Keating, ABA president and CEO. "QM
loans will be well underwritten and cannot include risky features, so it
makes little sense to define QRM more narrowly." Contained in the
letter, the revised rule: reduces the risk of default and delinquency,
provides clarity and consistency for mortgage professionals, and ensures
creditworthy homebuyers have access to safe mortgage financing. The ABA
warned that an alternative approach included in the proposal, known as
QRM-plus, which requires borrowers to put 30 percent down, will constrain
the availability credit and encouraged its abandonment.
While we're talking about the
agencies, I received this note. "Rob, we have heard that acting
director Ed DeMarco is on his way out of the FHFA - but what are you
hearing about Mel Watt, and, assuming our politicians stop and take a
breath and he is confirmed, how will that impact my company?" If
Rep. Watt were to win confirmation and take over the FHFA, then his next policy
steps would likely be determined by at least one of two issues outside of
the FHFA's direct control. The first is Congressional consideration of the
Mortgage Debt Forgiveness Act extension, and the second is mortgage rates.
If Rep. Watt is eventually confirmed, and other policy issues go his way,
insiders expect the FHFA to work towards some form of principal reduction
(likely through HAMP) and institute specific changes to the HARP.
Republicans are not wild
about Watt for a couple reasons. First, he has no current experience in the
industry. But more importantly, he has been in Congress for a couple
decades - is a politician the best person to run Fannie & Freddie when
the government keeps talking about lessening its role?
On the principal reduction
front, the HAMP Principal Reduction Alternative (PRA) remains the likeliest
vehicle for Rep. Watt to embrace. This probably would not impact servicers
too much, and might be a slight positive for private mortgage insurers
given its impact on mortgage credit. For specialty servicers, principal
reduction through the HAMP PRA would decrease the fees collected but would
also lessen the cost to service the loan. Most believe that even if Rep.
Watt were to be confirmed, his ability to implement a broader principal
reduction program through the HAMP could be limited as there appears to be
little will in Congress to extend 2007's Mortgage Debt Forgiveness Act past
its January 1, 2014 expiration.
This Act was set to expire at
the end of 2012 but was extended as part of the fiscal cliff deal, and is
crucial to foreclosure mitigation efforts such as principal forgiveness and
short sales. Normally, U.S. law decrees that when a lender forgives all or
a portion of a borrower's debt, the forgiven amount is considered taxable
income for the borrower. This is known as Cancellation of Debt (COD) Income
and must be included in a taxpayer's gross income. This Act, however,
created an exception to this rule under the U.S. Tax Code. The Mortgage
Forgiveness Debt Relief Act allows homeowners who received principal
reductions or other forms of debt forgiveness to not pay taxes on the
amount forgiven. The amount extends up to $2 million of debt forgiven on
the homeowner's principal residence. For homeowner's to qualify, their debt
must have been used to "buy, build, or substantially improve"
their principal residence and be secured by that residence.
HARP is kind of off the front
burner for many lenders, but it could become a discussion topic again if
Watt is confirmed. The likeliest initiative for Rep. Watt to embrace if he
were to be confirmed would be incentivizing cross-servicer refinancings
through the HARP (i.e. implement the Boxer-Menendez bill). This would be an
incremental negative for both mortgage servicers and Agency mortgage REITs
as they would face increased prepayment rates. And he might try to change
the HARP eligibility date - thereby allowing re-HARPing - although it is
unlikely. The FHFA Director is not empowered to expand HARP to
non-Agency mortgages.
All of this chattering is
generally overshadowed by the rate environment. For many lenders, volumes
are down 50%, margins are down, and costs are up. (Let's not forget a
purchase loan is more expensive to originate than a refi.) Given the
expectation for rates to remain at current levels or potentially move
higher, the refinance boom we experienced over the past 12 years has likely
ended.
But John Jacobs with Patriot
Bank Mortgage writes, "I was shocked, as I imagine many other mortgage
bankers were, to see that our mortgage-bankers association (MBA) has
endorsed the nomination of Mel Watt to head the FHFA.
Mel Watt has made his position clear on principal forgiveness and
other anti-lender positions, and is anti-security holder. Given we need
more private capital involvement, if the GSE's are going to be relegated to
a back-seat in the securitization food-chain, this seems counter-intuitive
to endorse an FHFA nominee that apparently does not support a robust and
stable securities market. Principle forgiveness is very egalitarian,
but reduces the value of mortgage-backed securities to their investors
dollar for dollar. The possibility of principle reductions being imposed by
government fiat will weigh on security's pricing at a minimum and may
sideline investors that may have participated in buying mortgage-backed
securities altogether, thus making for a less liquid and higher priced securities
market."
Mr. Jacobs continues,
"Just like the bailout of the auto industry, and the subsequent
government failure to recognize the property rights of bondholders, so too
is principle forgiveness. Mel Watt is an activist that advocates using
housing policy for social engineering reasons, much like Maxine Waters, and
Barney Frank. As you well know, that hasn't worked out well for the
health and vitality of the mortgage-banking industry. This appointment is
so typical of this administration that tries to impose its will on American
business when their legislative initiatives fail. We need the rank-in-file
members of MBA to state their disappointment with this nominee and ask our
leadership to advocate for the mortgage-banking industry and not try to 'play
nice' with big government ideologues."
Rates took it on the chin
Tuesday - mostly attributed to a "second tier" number that
rarely moves the multi-trillion dollar bond market. But the October
Institute of Supply Management number (ISM) came in stronger than expected,
which is interesting given the number was tabulated during the shutdown.
Did the shutdown really hurt the economy? Yesterday's ISM number followed
last week's better-than-projected Chicago PMI and ISM-manufacturing
reports, as favorable data could encourage the FOMC to announce tapering
earlier than the odds favored March 2014.
Suddenly the market shifted.
Traders reported MBS investors were selling certain parts of their
holdings, and mortgage banker supply rose to about $1.5 billion - more than
the daily Fed buying of $2.5 billion. (Heck, what if the Fed weren't buying
anything?) Agency MBS prices worsened about .625 and the 10-yr closed at
2.66%.
It is a new day, and quiet so
far. The MBA told us that apps last week were down 7% - ouch. We will have
September Leading Indicators (+0.6 expected) at 10AM EST. Other events
include the Treasury Quarterly Refunding announcement and details of next
week's auctions of 3- and 10-year notes and 30-year bonds. Rates and the
10-yr are seeing a bounce from Tuesday's close, with the 10-yr down to
2.63% and agency MBS better by .125.
"Woman
stops gator attack with a
small Beretta pistol."
This is a story of
self-control and marksmanship by a brave, cool-headed woman with
a small pistol against a fierce predator. What is the
smallest caliber that you would trust to protect yourself?
A Beretta Jetfire testimonial.
Here is her story:
"While out walking along
the edge of a bayou just below Houma, Louisiana with my soon
to be ex-husband discussing property settlement and other divorce
issues, we were surprised by a huge 12-ft. alligator suddenly emerging from
the murky water and charging us with its large jaws wide open. She must
have been protecting her nest because she was extremely aggressive. If I had
not had my
little Beretta Jetfire .25 caliber pistol with me,
I would not be here today! Just one shot to
my estranged husband's knee cap was all it
took. The gator got him easily and I was able to escape by
just walking away at a brisk pace. It's one of the best pistols in my
collection! Plus ... the amount I saved in lawyer's fees was more than
worth the purchase price of the gun."
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,
"A Primer on Swaps, and the Implications of Change in the Secondary
Markets". 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.)
|
No comments:
Post a Comment