Yes, the mortgage industry has
matinee idols - even in the large aggregators. In this video, Wells Fargo
voices its stance on the upcoming regulatory changes: TheCoach&QM. (More
than 50% of internet usage is videos, by the way.)
On the jobs front, Digital Risk,
"the largest vendor to the mortgage banking industry (touching 40,000
files per month)," is seeking several key additions to their National
Operations team to help lead their explosive growth. These
professionals will help lead Digital Risk Mortgage Services, the entity that
provides end to end and component fulfillment for top mortgage originators
across the industry. These individuals must have a current track record
of success in leading large mortgage operations and P&L's as well as
possessing the unique ability to successfully operate in a fast-paced,
results-driven organization where results are truly rewarded. To learn
more about these positions located in Orlando, FL or to confidentially submit
your resume, please contact Randy Lightbody at rlightbody@digitalrisk.com or visit
DigitalRisk.
And Impac Mortgage which
is retail licensed in over 35 states and is a direct Fannie Mae, Freddie Mac
and Ginnie Mae lender with niche products including 203(k) and Reverse is
aggressively building a strong national sales team across retail, wholesale and
correspondent lending channels. Impac Mortgage's Retail team has
immediate openings for Branch Managers and Loan Officers across AZ, CA, GA, ID,
NV, OR, WA while their Call Center is looking for Loan Officers who hold
multiple state licenses and will be located physically in either Irvine, CA or
Denver, CO. The Wholesale team is also growing its national sales force
and openings exist for AEs for its Broker Direct unit based in Irvine, CA and
for top Account Executives in CA, CO, FL, GA, ID, IL, MI, NC, OR, TX, VA, WA.
The Correspondent team focused on mortgage bankers, community banks and
credit unions across the country is currently recruiting AEs for coverage
nationally. In addition, Impac is searching for a National Correspondent
Sales Executive who specializes in credit union business. Interested and
experienced candidates should submit their resumes to Careers@ImpacMail.com. To
learn more about Impac Mortgage, check out a recent article published in Forbes which describes
how this direct agency lender made its triumphant re-emergence into the
marketplace.
If electricity always follows the
path of least resistance, why doesn't lightning only strike in France? There
are plenty of jokes about the likelihood of the French retreating, but the CFPB
is certainly not retreating. In fact, given its latest press release, not only
is it not taking any prisoners, but will give renewed reason for many lenders
to contemplate taking their chips from 2012 and 2013 off the table and
contemplate another occupation. (And if lender ranks drop dramatically, is
the borrower better off?) "The Consumer Financial Protection Bureau
(CFPB) announced a proposed consent order in its enforcement action against
Castle & Cooke Mortgage, LLC, for allegedly steering consumers into
costlier mortgages. The Bureau has asked a federal district court to approve
a consent order that would provide more than $9 million in restitution for
consumers and obtain $4 million in civil money penalties against Castle &
Cooke and two of its officers for allegedly paying loan officers illegal
bonuses." Here is what the public saw: C&C.
A $13 million fine against a
company doing about $100 million a month is really a head-turner. The
resolution of the lawsuit that the CFPB filed against Castle & Cooke
Mortgage and its officers in August appears to be exactly that - a
resolution. A consent order reflecting the settlement was filed in
federal, and under the order the company and its officers admitted no
wrongdoing. It is believed that senior management knew of the monetary
figure two months ago and agreed to it rather than spend money fighting it,
allocating the money at that time. And according to inside sources, "It
is full speed ahead here at C&C, and we're going to continue with our
track record over the last several years of greater than 80% purchase business.
And in fact, if one takes the time to look at the proposed consent decree
(found in a link near the bottom of CUInsight) it is
indicative of a company that cooperated with the CFPB in this matter.
Five states over in Michigan, Flagstar
Bancorp, the holding company for Flagstar Bank, FSB, announced that it has
entered into an agreement with Fannie Mae to resolve repurchase requests and
obligations associated with loans originated between January 1, 2000 and
December 31, 2008, for a total resolution amount of $121.5 million. After paid
claim credits and other adjustments, the Bank will pay $93.5 million to Fannie
Mae. At September 30, 2013, Flagstar's total representation and warranty
reserve was $174.0 million and the amount of the reserve specific to the loans
covered by the agreement was sufficient to cover the payment amount. The
agreement covers the bulk of the loans originated between January 1, 2000 and
December 31, 2008 and sold to Fannie Mae, regardless of whether Fannie Mae has
made a repurchase demand on any particular loan to date.
And Fifth Third Bank is not
immune from legal action. "The
U.S. Justice Department and Department of Housing and Urban Development's
Office of Inspector General are investigating Fifth Third's practices related
to loans that were insured by the Federal Housing Administration."
I often receive questions
about the mortgage-backed securities market, especially the size of it. The
recent prepayment speed numbers provide some indication into current production
trends. The total agency MBS production for October was $52 billion, down $45
billion (47%) versus last month. Breaking that down, 30-yr production was $38
billion, down $37 billion (49%) versus September while 15-yr production was $10
billion, down $6 billion (37%). Remember, there's an 8-10 week lag between
primary mortgage rates rising & homeowners closing on their purchase/refi
and the loan being put into a security. But investors watch these numbers, as
clearly the refi machine began to shut down starting in May when the 10-yr
Treasury started its move toward 3.00% and the 30-yr conventional mortgage rate
shot from a low of 3.25% to 4.75%.
The Fed, however, remains a
strong technical demand force currently. It is buying nearly $3 billion a day
compared to mortgage banker supply which is running between $1-1.5 billion per
day (about half of where it was six months ago). The Fed's buying is heavily
concentrated in 30-year 3.5s and to a lesser extent in 4s - pretty much
mirroring current production. I have spoken to traders who deal with the Fed,
and say that their purchase methods aren't particularly complex or
sophisticated. Maybe they don't have to be...
I am also occasionally asked what
a "swap" is, and why anyone should care. I say that it has nothing to
do with your friend's marital practices, and is an important tool for banks
that don't necessarily want 30-yr fixed-rate assets stacked up against very
short term deposits. I penned "A Primer on Swaps, and the Implications
of Change in the Secondary Markets" to give folks some elementary
education on them, and why they should care. It can be found along the
right-hand column at www.stratmorgroup.com.
"Rob, are you hearing
anything regarding the change in margin requirements for TBA's? I have
heard rumors. And my Capital Markets guy says that, if true, this is a
significant change by Fannie and we will no longer be able to avoid margin
calls on our trade lines like we've done in the past - the threshold amounts
will determine the impact. What's up?"
Excuse the litany of acronyms,
but yes, you are correct, there are some changes being made to the way agency
TBAs (To Be Announced securities, the favorite MBS vehicle used to hedge
pipelines and protect companies, and borrowers, from interest rate movement)
will be margined. The TMPG (Treasury Market Practices Group) has required all
primary dealers to incorporate bi-lateral margining in their MSFTA's (Master
Securities Forward Transaction Agreement), and has recommended that all parties
do the same.
Dan McPheeters, who is the MBA's
Policy Advisor, Public Policy & Industry Relations Manager, wrote,
"FINRA is embarking on a re-write of Rule 4210 and will tackle, among
other things, positions in agency TBAs. I expect their revised rule proposal to
come out for comment in early December. We have been actively engaged with
FINRA for the past 3+ months on this issue, and they will be speaking on
this topic on a panel during MBA's IMB conference in December. FINRA is in the
middle of an extensive rewrite of their margin requirements and the early
reviews were not good for mortgage bankers. The MBA has built a very good
dialogue with FINRA, and they are aware of the problems of an 'all best
efforts' world, and are much more familiar now with the business model. So I
would say things are looking much better than they were a couple months ago.
That said, it takes time and a LOT of money to build out scalable margin exchange
and compliance systems, so my guess is much of the chatter is from those who
have invested early in these systems. There is also a lot of misunderstanding
concerning what rules are going into effect when, so never underestimate the
fact that folks just may not know." (If you have questions on current
developments, write to Dan at dmcpheeters@mba.org.)
And Fannie's Trading Desk
mirrored this information in a note to its clients. "In November 2012, the
Treasury Market Practices Group ("TMPG"), an industry group sponsored
by the New York Federal Reserve, issued a recommendation that industry
participants begin exchanging variation margin on forward-settling agency MBS
transactions (see NYFed). The
TMPG-proposed implementation date for these changes is January 1, 2014. Fannie
Mae intends to follow the TMPG's recommendation and implement the ability to
exchange bilateral margin with lenders who transact with our Capital Markets
Sales Desk. This change will be implemented by a Selling Guide Announcement
that will update and amend section C3-7-01 of the Selling Guide. This
section of the Selling Guide, which sets forth various requirements and
procedures around establishing an MBS trading account with Fannie Mae, will be
updated to incorporate these new margin requirements, including pre-set
threshold amounts and minimum transfer amounts relating to exchanging variation
margin. We intend to make the Selling Guide Announcement in December 2013
in order to have these changes go effective January 1, 2014."
What does all this mean to
rate-sheet prices? If the various regulators and regulations further crimp,
or make more costly, the hedging activities of residential lenders, this cost
will be passed on to borrowers. What if an LO couldn't give a 30-day rate
lock to a borrower? So it is indeed important - we wish Dan McPheeters and the
MBA success.
"Rob, do you have a
simple explanation about rates go down when bond prices go up, and vice versa,
and what 'duration' means?" I'll give it a shot. If rates move higher,
existing bond prices call since investors will be able to purchase new issues
that pay better rates, making existing bonds less attractive and reducing their
market value. Everything else being equal, why would anyone pay $100 for a
30-year bond yielding 2.00% if they could pay $100 for a 30-yr bond yielding
2.50%? But they might pay $97 for that same bond yielding 2.00%, thus making
the yield 2.50%. (The opposite occurs when interest rates fall and new issues
pay lower rates. When this happens, investors are willing to pay higher prices
for existing fixed-income securities - like mortgage-backed securities - that
pay better rates than new issues.)
Duration has a
couple different meanings but try to avoid equating it with
"maturity." (Remember the old joke - why are men like bonds? They
don't pay much interest and they rarely mature.) To an analyst or investor,
duration takes the relationship between interest rates and bond prices a step
further by measuring the sensitivity of a bond's price to a change in interest
rates. More specifically, duration can be used to estimate how a 1% shift in
interest rates may affect a particular bond's market price. The longer
(higher) the duration, the more a bond's price should fluctuate as interest
rates rise or fall. For example, the price of a bond with a duration of five
years would be expected to fall 5% for every 1% increase in market interest
rates. Conversely, a bond with a duration of ten years should rise 10% for
every 1% decrease in rates. Treasury 10-yr notes might have a duration of 8.80
at a yield of 2.50% versus 30-yr bonds having a duration of 18.50 at a yield of
3.50%. Traders and pipeline hedgers are very focused on duration - long term
bonds tend to have longer durations and their prices can fall quickly when
interest rates increase. But the impact on MBS prices is influenced not only by
that, but also by the likelihood of a borrower to refinance, and/or the value
of servicing for that mortgage or pool.
Yesterday we had the GDP news
(Gross Domestic Product rose at a 2.8% annualized rate, much stronger than
expected) which was balanced out by Consumer Spending (up 1.5%, the smallest
increase since 2011). The numbers continued to indicate steady growth but there
isn't much in the U.S. economy to get excited about. By the time the dust
settled Thursday agency MBS prices were better by about .125 and the 10-yr
closed at 2.61%.
But today we've had the October
employment numbers. Nonfarm payrolls were expected +125k, but came out at +204k
with a back-month revision of +60k. (The unemployment rate stands at 7.3%.) In
addition, we had October Personal Income (expected +0.3 versus +0.4 last) and
Consumption (expected +0.2 versus +0.3). The very strong employment numbers
has the fixed-income market back on its heels. The 10-yr closed Thursday at
2.61% and today it is at 2.73% and agency MBS prices are worse by 1 point!
And hey, don't forget that the bond market is closed Monday for Veteran's Day -
so even for the investors that might be open, don't expect cutting-edge
pricing.
Morris Schwartz is dying and is
on his deathbed. He is with his nurse, his wife, his daughter and 2 sons,
and knows the end is near. So he says to them: "Bernie, I want you to take
the Beverly Hills houses."
"Sybil, take the apartments
over in Los Angeles Plaza."
"Hymie, I want you to take
the offices over in City Center."
"Sarah, my dear wife, please
take all the residential buildings downtown."
The nurse is just blown away by
all this, and as Morris slips away, she says to the wife, "Mrs. Schwartz,
your husband must have been such a hard-working man to have accumulated all
this property."
Sarah replies, "Property
shmoperty...the schmuck has a milk route."
No comments:
Post a Comment