Water water everywhere, but not
a drop to drink. A growing number of Realtors are keenly aware of the
increasing concern about water and its scarcity. And sure enough, along comes a
list of U.S. cities most likely to
run out of water - and they aren't all out west. I doubt
they'll run out - but water will become more costly.
And everyone is keenly aware of
the CFPB's announcements of fines for various offenses. Last week it was
$80 million for auto loans, but the latest came yesterday: "Feds Take
Action Against National City Bank For Discriminatory Mortgage Pricing." In
this case, PNC Bank, its successor, will pony up $35 million.
Originators know that unless
there is demand for a given mortgage product, either by a portfolio lender or
by investors, there is little use in offering it on any kind of large scale on
rate sheets. Ten years ago, it was apparent that the demand by Wall Street and
investors led to products being offered that perhaps should not have, or to
relaxing underwriting or documentation guidelines that perhaps should not have
been relaxed. Of course the demand by the Fed has led to higher prices, and
lower rates...
Everyone (and their brother, as
they say) knows that the Fed has, through QE3, been buying fixed-income assets.
When we think of the Fed's current balance sheet in terms of dollars, the
numbers can be quite large. Let's put this into perspective: the US Federal
Reserve's current balance sheet exceeds the GDP of Germany, which is the
fourth largest economy in the world. According to a recent Bloomberg News
story, it's enough to cover all U.S. federal government spending for more than
a year, and it could pay off all student and auto loans in the country with $2
trillion to spare. The central bank's assets are set to exceed the $4.1
trillion held by BlackRock Inc. (the world's largest asset manager). The third
round of quantitative easing probably will total $1.54 trillion before it ends,
bringing the balance sheet to $4.36 trillion. This has garnered the attention
of elected officials, as risk versus reward rumblings have started. "This
is a stimulus of the first order. It's just unprecedented," Alabama
Republican Senator Richard Shelby said.
But in the last Fed meeting, a
reduction of $10 billion a month in QE3 will kick in, reducing the pace of the
purchases. 2013's word of the year, according to Oxford dictionary, was
"selfie"; a strong case could have been made for "taper"
however, as investors have been speculating on when the Federal Reserve will
begin removing tax payers from the billions of purchases per month in the
fixed income markets. For months investors, and the financial press, have been
paying close attention to the Federal Reserve, and specifically, to the
time-line, and the when and if's of moving away from the QE programs, to a more
supply/demand driven market. Morgan Stanley interest rate strategist Matthew
Hornbach is tired of the incessant chattering about "the taper", and
I don't believe he's alone. A few weeks ago Hornbach wrote, "Investors
should stop talking about tapering and start talking about potential changes to
the rate guidance framework. In our view, the exact timing of tapering should
be a secondary concern. What matters is whether the Fed combines tapering with
a reduction in the Unemployment Rate Threshold or an introduction in a new
inflation floor. The thresholds are all about credibility, so the Fed must
understand how each option will impact the market's perception of its
commitments to remain on hold. Our economist's base case is that the Fed pairs
a modest tapering with a 50bp cut in the URT. In our view, the risk to that
base case is a more aggressive 100bp cut paired with a larger taper."
So where's the smart money
flowing to these days? According to Bloomberg News, not into fixed income
securities. Investors in November poured $31.6 billion into all equity
mutual funds and exchange-traded funds (ETF's), favoring equities over bonds
for a sixth straight month. However, flows into equities moderated from
October, with flows into exchange traded funds picking up, and investors
favored U.S. equity funds over offshore funds. Investors kept selling bonds,
redeeming $21.8 billion from bond mutual funds and ETFs, the biggest outflow
since $36.8 billion in August and the fifth-highest monthly outflow on record.
Four of the six biggest monthly outflows from bond funds have occurred this
year, no doubt part of the reason the S&P 500 is +27% YTD.
I can't think of any witty
transitions, so let's just jump into some recent state updates.
Georgia has
made revisions to its Chapter 80 Regulations. The state Department of Banking
and Insurance has issued final revisions to Chapter 80, which seeks to promote
safe and fair mortgage lending. These revisions relate principally to branch
manager qualifications, loan processors acting as brokers, and fees and
charges. Zachary Pearlstein of Bankers Advisory writes, "The revisions regarding
fees and charges state that the management fees and other charges payable to a
bank holding company (or an affiliate thereof) may be paid by the banking or
trust subsidiary- provided these fees do not exceed the subsidiary's pro rata
share of the administrative overhead of the bank holding company, plus any
direct expenses attributable to the subsidiary. In addition, it must be shown
that the subsidiary has received direct benefit from its relationship with the
holding company." Mr. Pearlstein's full blog posting can be found here.
Texas Senate
Joint Resolution 18, which amends the Texas Constitution, passed last month to
authorize advances under a reverse mortgage for the purchase of a residential
homestead property, is now effective. SJR 18 was approved by the voters on
November 5, 2013, and became effective on November 22, 2013. Click for full
details on SJR 18.
The New Jersey Department
of Banking recently issued two Bulletins concerning high
cost home loans and Residential Mortgage Act 2014 licensing information.
Bulletin No. 13-20 addresses the NJ Home Ownership Security Act of 2002's
required annual review and maximum principal amount adjustment for
determination of a high cost home loan. Effective for completed applications
received by the lender on or after January 1, 2014 the maximum principal amount
for a high cost loan will be $452,288.55. And in Bulletin No. 13-18 which
outlines information concerning residential mortgage transaction license
renewal. The bulletin notifies licensees that the ability to request license
renewal will begin on November 1, 2013 and may be electronically submitted
through December 31, 2013. In the event the Department's review is not
completed by January 1, 2014 for a timely and complete renewal request; the
licensee may continue to engage in residential mortgage lending activity until
a decision has been reached.
Iowa has
made amendments to their
mortgage filing and transfer rules. The state's General Assembly has amended
Iowa's Code relating to the execution, filing and recording of a mortgage
release certificates, as well as revisions and clarifications to provisions and
requirements relating to transfers of interests in real property by
unincorporated business entities, including nonprofit organizations. Both state
Senate File 445 and House File 556, including an expanded explanation to the
rule changes, can be found in the link above.
And let's see what vendors,
lenders, and investors have been up to recently.
Secure Settlements
announced that as January approaches, "we are experiencing increased
interest in our services from lenders looking to develop a compliant vendor
management program to meet OCC, CFPB, HUD and FNMA requirements for closing
agent risk. To help lenders gain a better understanding of our program we
are offering a special deal between now and January 10, 2014. Contact us for a
FREE TRIAL of our vetting services. When lenders give us a sampling of their
closing agents (or any other vendor) we will give them up to 15 free risk
reports to sample our services. No commitment required. Interested banks
and lenders can contact us at info@securesettlements.com.
Sales automation software
provider Velocify has published The Mortgage Purchase Playbook: 7
Winning Plays from Mortgage Industry Experts, an e-book that aims to help
loan originators increase their sales. The book includes several
strategies presented at October's Virtual Mortgage Sales Summit, including how
to motivate borrowers to commit to the lending process, how to recruit referral
partners to boost leads, and how to use technology to boost sales speed and
numbers.
VonkDigital.com, an industry leading mortgage
website company, announced a new centralized content deployment console for
mortgage lenders. Vonk is "focusing solely on helping bringing remarkable
mortgage websites to loan originators. The Vonk hosted website platform allows
independent originators and companies to launch their new mortgage website
quickly and without any technical knowledge. Some notable features include a
testimonial engine with 5 star rating that encourages positive feedback on
social sites like Yelp and LinkedIn, mobile sites, landing pages, blog, and
multiple TCPA (Telephone Consumer Protection Act) compliant lead capturing
forms. If you are considering re-branding or launching a new mortgage
website for 2014 you should consider Vonk digital." For the
larger mortgage lenders with multiple braches that are trying to manage online
compliance and originator trust; Vonk has developed a solution that will cater
to both and make online web monitoring an easy process. (New customers can use
the promo code: "ROB" to receive their first 30 days free.)
Homeowners Choice Property
& Casualty Insurance Company, Inc., a Florida based provider of
homeowners insurance and wholly-owned insurance subsidiary of HCI Group, Inc.
(NYSE:HCI), has been approved by the Florida Office of Insurance Regulation to
offer flood insurance coverage to its Florida policyholders. Many Florida
homeowners, most of whom have never filed a flood claim, are anticipating
substantial increases in their flood insurance premiums under the National
Flood Insurance Program as a result of the federally mandated Biggert-Waters
Flood Insurance Reform and Modernization Act of 2012. In some cases, rates
under the federal program may increase by as much as 25% per year. To provide
rate relief to its existing policyholders, Homeowners Choice plans to offer
flood coverage as an endorsement to its homeowner's insurance policies. The
additional flood coverage is expected to be priced similarly to what Florida
residents were paying before the Biggert-Waters Act.
The good news, apparently, is
that the economy continues to move along in the right direction. The bad news,
of course, is that rates are sliding higher. This week, and next, is more
"thinly" traded, due to the holidays. But rates are where they are,
and anyone locking has to deal with them. Thursday's Initial Jobless Claims
gave us yet another measure of the jobs market picking up: applications for
unemployment benefits dropped by 42,000 to 338,000 as continuing claims rose.
And those stock markets continue to do well and set records. Of course, stock
and bond markets don't always in opposite directions, but in this case the
belief is that the economy is improving, and therefore companies will do
better, and therefore earn more revenue for their owners. And in theory the
demand for capital increases, and so rates should go up.
This doesn't make it any easier
to deal with LOs, brokers, or borrowers who didn't want to lock in a month ago,
but it may help push some folks off the proverbial fence. Thursday's close
showed the 10-yr. yield up to 2.99%, and in the early going today we're at
3.00% with agency MBS prices worse a shade.
A man walks out to the street
and catches a taxi just going by.
He gets into the taxi, and the cabbie says,
"Perfect timing. You're just like Frank."
Passenger: "Who?"
Cabbie: "Frank Feldman... he's a guy who did everything right all the time. Like my coming along when you needed a cab, things happened like that to Frank Feldman every single time."
Passenger: "There are always a few clouds over everybody."
Cabbie: "Not Frank Feldman. He was a terrific athlete. He could have won the Grand-Slam at tennis. He could golf with the pros. He sang like an opera baritone, and danced like a Broadway star. And you should have heard him play the piano! He was an amazing guy."
Passenger: "Sounds like he was somebody really special."
Cabbie: "Oh, there's more". He had a memory like a computer. He remembered everybody's birthday. He knew all about wine, which foods to order, and which fork to eat it with. And he could fix anything - not like me. I change a fuse, and the whole street blacks out. But Frank Feldman, he could do everything right."
Passenger: "Wow, some guy then."
Cabbie: "He always knew the quickest way to go in traffic and avoid traffic jams. Not like me, I always seem to get stuck in them. But Frank, he never made mistakes, and he really knew how to treat a woman and make her feel good. He would never argue back, even if she was in the wrong; and his clothing was always immaculate, shoes highly polished too. He was the perfect man! I never knew him to make a mistake! No one could ever measure up to Frank Feldman."
Passenger: "An amazing fellow. How did you meet him?"
Cabbie: "Well... I never actually met Frank. He died, and I married his darn wife."
He gets into the taxi, and the cabbie says,
"Perfect timing. You're just like Frank."
Passenger: "Who?"
Cabbie: "Frank Feldman... he's a guy who did everything right all the time. Like my coming along when you needed a cab, things happened like that to Frank Feldman every single time."
Passenger: "There are always a few clouds over everybody."
Cabbie: "Not Frank Feldman. He was a terrific athlete. He could have won the Grand-Slam at tennis. He could golf with the pros. He sang like an opera baritone, and danced like a Broadway star. And you should have heard him play the piano! He was an amazing guy."
Passenger: "Sounds like he was somebody really special."
Cabbie: "Oh, there's more". He had a memory like a computer. He remembered everybody's birthday. He knew all about wine, which foods to order, and which fork to eat it with. And he could fix anything - not like me. I change a fuse, and the whole street blacks out. But Frank Feldman, he could do everything right."
Passenger: "Wow, some guy then."
Cabbie: "He always knew the quickest way to go in traffic and avoid traffic jams. Not like me, I always seem to get stuck in them. But Frank, he never made mistakes, and he really knew how to treat a woman and make her feel good. He would never argue back, even if she was in the wrong; and his clothing was always immaculate, shoes highly polished too. He was the perfect man! I never knew him to make a mistake! No one could ever measure up to Frank Feldman."
Passenger: "An amazing fellow. How did you meet him?"
Cabbie: "Well... I never actually met Frank. He died, and I married his darn wife."
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