Back in the '00s I remember
watching a Discovery Channel show on people summiting Mt. Everest. One of
the amateur climbers matter-of-factly said that he financed his THREE
attempts by taking out a HELOC on his home. I remember thinking, "I
hope I didn't securitize this guy's loan." HELOC's were banished to
the preverbal woodshed over the past few years, but now appear to be back.
In a recent Bloomberg article about $1,000 faucets Kathleen Howley
writes, "Helocs are making a comeback as the housing market
recovers enough to make the junior mortgages a safer bet for banks more
than seven years after the beginning of the housing crash that saddled them
with billions of dollars of losses. The median price for an existing home
probably will gain 11 percent this year, according to the Mortgage Bankers
Association in Washington, after plunging about 33 percent during the
crash." HELOC originations will increase to $91 billion in 2013
and increase to $97 billion next year, according to an estimate by Moody's.
Both are the highest levels they've been since 2008.
We have 21 business days
until QM rules the land, and investors are preparing for it. Right House
Capital, a purchaser and broker for investor fallout loans, has been preparing
for QM for the past several months. Right House will be able to
assist with the liquidation of all loans deemed Non-QM by the primary
investors. Right House will have the ability to deliver these to
the GSEs should a loan be rejected due to an investor's QM overlay, or for
subjective reasons where QM compliance could be interpreted
differently. For loans that are a clear violation of QM, Right House
also has a home for these. They have strategically partnered with true
"scratch-and-dent" buyers who will have an appetite for Non-QM
loans. For more information, please contact your RHC Account
Executive, or Craig Beard, Director of Sales, at craigbeard@righthousecapital.com,
or visit RightHouse.
MenloCompany (www.menlocompany.com) has a client of its mortgage
M&A business that is expanding aggressively in Arizona, California,
Colorado, Maryland and Missouri. "This National Retail
Origination Lender is well capitalized and has set forward to invest,
expand and support local mortgage teams to include all local fulfillment -
underwriting, funding, closing etc. With a strong retail focused,
loan officer supported company culture, this company is looking for
licensed mortgage brokers or teams of mortgage bankers, doing a monthly
production minimum of $2M/month or more; with the right size and
monthly production ($5M-$15M/month), a financial acquisition is possible.
Their stated commitment is to build a lending center around these targeted
teams in these states, to exceed $10M/month." To learn more,
email Rick Roque at rick@menlocompany.com.
Deutsche Bank banned online
chats for foreign exchange FX and fixed income staff - I guess that would
include mortgage backed securities. "Deutsche Bank has prohibited its
foreign exchange and fixed income staff from using online chat rooms,
joining a growing band of lenders who have halted the use of such forums
over concerns of mounting scrutiny from regulators." Read it at Reuters.
The acronym of the day is
"FHFA": the Federal Housing Finance Agency. Last week's
announcement of the major overhaul of mortgage insurance master policy
requirements by Fannie Mae and Freddie Mac turned a lot of heads.
Improvements to policy requirements include changes to loss mitigation,
claims, assurance of coverage, and communication policies. "FHFA has
worked with Freddie Mac and Fannie Mae to revise the MI master policy
requirements to ensure consistent and reliable MI coverage, and support
our efforts to achieve clarity of coverage, greater operational efficiency,
and transparency in the mortgage market. Fannie & Freddie have
"confirmed that the MI companies with whom we do business have
included the new requirements in their master policies. We anticipate that
each MI company will file its revised master policy with the
appropriate state insurance regulator by the end of 2013, with an
implementation date to be announced by Freddie Mac in mid-2014. The
master policies will be effective for all loans originated and sold to us
after the implementation date." Although lenders are discussing the
changes directly with their MI companies, here is the press release.
But there was more to come!
Any lender that specializes, or at least makes a market in, non-agency and/or
jumbo loans, or FHA/VA loans, or private money, received some good news
yesterday. At least the 25 basis point adverse market fee is finally
going away in most states! "The Federal Housing Finance Agency
(FHFA) today took additional steps toward fulfilling the Strategic Plan for
Enterprise Conservatorships that FHFA published in February 2012. That Plan
established a conservator goal of gradually contracting Freddie Mac and
Fannie Mae's dominant presence in the marketplace while simplifying and
shrinking their operations. The basic premise behind the 'contract' goal is
that with an uncertain future and a general desire for private capital to
re-enter the market, the companies' market presence should be reduced
gradually over time. When FHFA set forth the 2013 Conservatorship Scorecard
in March, it also set an expectation that guarantee fees would continue to
be gradually increased in 2013 in furtherance of the strategic plan. Today,
FHFA directed Freddie Mac and Fannie Mae to raise guarantee fees in three
components: the base g-fee (or ongoing g-fee) for all mortgages will
increase by 10 basis points; the up-front g-fee grid will be updated to
better align pricing with the credit risk characteristics of the borrower;
and the up-front 25 basis point adverse market fee that has been assessed
on all mortgages purchased by Freddie Mac and Fannie Mae since 2008 is
being eliminated except in the four states whose foreclosure carrying costs
are more than two standard deviations greater than the national average.
These changes, of course,
will be passed on to new borrowers. If any LO out there is complaining
about Wells or Chase jumbo rates in their branches being better than
conforming rates, just wait until this hits!
Remember that jumbo loans don't have specific gfees, and the implied loss
on jumbo loans is much, much less than the 50 or 60 basis point loss (in
theory) implied by the agencies on their loans. So yes, increasing the
guarantee fee will ultimately make it more expensive for lenders to use
F&F to back their loans and give them an incentive to use private money
instead. I am sure that the FHFA's actuaries have figured out the impact on
volumes, and therefore profits, that the combination of higher rates &
higher gfees and therefore lower volumes will have.
Speaking of volume,
subconsciously there must be some merit to piping in cheerful music while
you grocery shop, because this past week while trying to find the perfect
loaf of sourdough I thought to myself, "you know what, I think I WILL
have a holly, jolly, Christmas." When I find myself too high on life,
I tend to read things which bring me down to reality. Barron's article
"Obama's Next Mess: The Mortgage
Market" is a good tonic this holiday season. (You'll
need a subscription.)
With QM approaching, the
CFPB's definition of "cradle to grave" is expanding and the
penalties are, well, punitive. In the past your biggest compliance
risk started at the GFE. However, the cradle starts at
the rate quote and APR most be disclosed and you must have an audit
procedure in place that ensures APR is being disclosed. Fact is, many
loan officers are still putting their companies at risk by quoting rates
without APR and/or in an inconsistent manner that conflicts with
company policy. Compliance expert Ken Perry (CEO, The Knowledge Coop) and
Dave Savage (CEO, Mortgage Coach) recorded this quick 5-minute compliance
briefing that speaks directly to these issues and how you can easily
achieve company-wide compliance. Click here to watch it.
Let's move on to some
relatively recent lender, vendor, and investor updates to obtain a sense of
the trends out there!
ARM's are not dead, and
here is a sign of the times: Western Bancorp now offers its wholesale
partners an option for jumbo borrowers who want an alternative to rising
fixed-rate loans. With a 1.125 % start rate, a 6.25% life cap and a low
0.5% per-adjustment cap, this loan provides borrowers with flexibility,
cash flow and rapid principal reduction opportunities. Even if this ARM
adjusted straight to the life cap (unlikely) it won't reach current Jumbo
fixed rates for over 3.5 years. Western Bancorp lends in California,
Washington, Idaho and Montana. This product is offered in selected
markets. Contact a rep for details on
availability in your area.
Affiliated Mortgage is
no longer taking locks in Alaska, Delaware, Hawaii, Maine, Maryland,
Nevada, New Hampshire, New Jersey, New York, Rhode Island, Vermont,
Washington DC, and West Virginia.
But Affiliated Mortgage has
expanded its Conventional Conforming guidelines to allow inter vivos revocable
trusts, construction modifications, escrow for completion holdbacks,
borrowers with up to ten financed properties, financed PMI, escrow waivers
on loans with HO6 walls in coverage, and partial escrows. Appraisal
guidelines have been relaxed such that they are not required until 75 days
from closing, the interest credit period has been extended to ten days from
disbursement, and the time period for proof of payment of taxes/insurance
from the closing date has been reduced to 30 days.
For FHA and VA loans,
Affiliated is now allowing escrow for completion holdbacks, expanded its
loan seasoning requirement to 120 days, increased the HPML DTI requirements
to 50% (VA only), reduced the time period for proof of payment of
taxes/insurance from the closing date to 30 days, and removed the FHA
streamline requirement for AVM and the requirement that the borrower names
appear in the same order on the mortgage application as the signed closing
docs.
Mortgage Market Alert (MMA) is
the first mobile service of its kind to provide mortgage professionals real
time market data in the palm of their hands. "No need to sit at your
desk. With our push notification service, you won't miss any
significant changes in the market that may benefit or hurt your clients.
This is an indispensable tool that every professional mortgage advisor must
have to properly serve their clients. Real time market data feeds, push
and/or email notification of real time market movements, quickly email or
text this data to your clients to motivate them to act on their mortgage
needs, and so on." No, this is not a paid ad, but there is a 7-day free trial to
start providing top-notch advice directly from your mobile device.
Mortgage rates are behaving
themselves again. Everyone, and their uncle, knows that the Fed will
eventually reduce their buying of fixed-income securities. Friday's,
Monday's, and (so far) today's improvements seems to indicate that the
markets have become comfortable with tapering - whether it happens this
month or early next year, it is going to happen. And it won't be the worst
thing to happen. ("In the latest Reuters poll of 63 economists conducted
after Friday's employment report, 14 percent said they expect the FOMC to
announce a slowing in its pace of asset purchases at the December meeting;
30 percent said January, while 52 percent think it will be in March.")
Aside from a 1PM EST
Treasury auction of $30 billion three-year notes, there isn't much going
on. (Thursday and Friday we'll see Jobless Claims, Retail Sales, and the
Producer Price Index - but when was the last time inflation was a worry?)
The yield on the 10-yr t-note, a proxy for rates in general,
closed Monday at 2.86% but is down to 2.82% early Tuesday, and MBS prices
are tagging along, up/better by about .125.
Christmas Carols for the
Psychologically Challenged
(1) Schizophrenia -- Do You
Hear What I Hear, the Voices, the Voices?
(2) Amnesia -- I Don't
Remember If I'll be Home for Christmas
(3) Narcissistic
Personality Disorder -- Hark the Herald Angels Sing About Me
(4) Bipolar Disorder (Manic
Episode) -- Deck The Halls And Walls And House And Lawn And Streets And
Stores And Office And Town And Cars And Buses And Trucks And Trees And Fire
Hydrants And.......
(5) Multiple Personality
Disorder -- We Three Queens Disoriented Are
(6) Paranoid -- Santa Claus
Is Coming To Get Us
(7) Borderline Personality
Disorder -- You Better Watch Out, You Better not Shout, I'm Gonna Cry, and
I'll not Tell You Why
(8) Antisocial Personality
Disorder -- Thoughts of Roasting You On an Open Fire
(9) Obsessive Compulsive
Disorder -- Jingle Bells, Jingle Bells Jingle Bells, Jingle Bells, Jingle
Bells, Jingle Bells, Jingle Bells, Jingle Bells, Jingle Bells, Jingle Bells
(10) Agoraphobia -- I Heard
the Bells on Christmas Day But Wouldn't Leave My House
(11) Alzheimer's
Disease/Senile Dementia -- Walking In a Winter Wonderland Miles from My
House in My Slippers and Robe
(12) Oppositional Defiant
Disorder -- I Saw Mommy Kissing Santa Claus So I Burned Down the House
(13) Social Anxiety
Disorder -- Have Yourself a Merry Little Christmas While I Sit Here and
Hyperventilate
(14) Attention Deficit
Disorder -- We Wish You......Hey Look!! It's Snowing!!!
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.)
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