Of course you put in your
neighbor's address, not yours, for privacy but through the wonders of the internet you can see it snow at your house. Many parts of
the nation would rather have a site where they see the sun shining on their
house...
About a week ago the
commentary mentioned a concern that Ellie Mae's Encompass users might have
over the data fields used when a loan is cancelled or expired. I received
this note from Susan Chenoweth Scarth, Ellie's SVP of Marketing. "When
creating custom reports in Encompass, Ellie Mae clients have the ability to
pull various fields to analyze their data based on their business
needs. With over 1,500 different clients and 92,000 users using our
end-to-end solution, these needs are quite diverse. When creating reports,
it's important for clients to choose the appropriate fields that will deliver
meaningful and accurate results. The referenced lock cancellation report
included a field that is not intended to be used for reporting when a lock
cancellation is performed. The data in Field 762 (Lock Expiration) is cleared
in order to prevent unnecessary triggers and communications after a lock is
cancelled. Encompass, in fact, does retain detailed snapshots of all lock
request data (including request date, number of days, expiration date,
etc...) and, therefore, the data is always available in the secondary
marketing solution.
I hope this helps. On
another note, I wanted to let you know that Ellie Mae is delivering
regular monthly webinars on compliance that have been very well received
with between 1,500 - 3,700 attendees. Your readers may be interested in
attending next week's complimentary webinar, entitled "Get Ready
for ATR/QM". The webinar is on Wednesday, December 18th
from 11AM-12PM PST: Register."
Regarding the data file field
issue above, Jonathan Yosha, VP at Matchbox LLC,
writes, "On your note re: MIAC/Ellie, I was working with MIAC on
this and after working on dozens of Secondary Review projects we've seen two
concerning themes among lenders when it comes to reports. The first is that
LOS systems have thousands of inter-connected fields and often reports are
developed by an admin, which doesn't REALLY appreciate the importance of
necessary data (e.g. Encompass has at least 2 fields for lock date, and
arguable more between buy side requests & confirms and sell side
execution.) Some Secondary managers will create their own reports
without understanding all of the field options and functionality.
Either way, many lenders are left with reports that can cause exposure due to
user process flow within the LOS and reporting rules/filters. And the second
is that rarely do we see lenders/secondary groups running a reliable audit
on their pipelines. It is great to have a hedging/risk management firm
highlight a concern, but these discussions usually come after the problem has
been festering for weeks, months, or longer. It's very scary to think that
lenders may not have a close handle on their own locked pipelines, but if the
reports are flawed to begin with, it's tough to know your pipeline. I have
found lenders with 10-30% of their pipeline exposed simply due to inaccurate
reporting."
Here is a quantitative
assessment of the recent gfee increase announcement.
"Rob, you mentioned that with the 10 bp gfee increase, if a loan exists
for 8 years, is akin to 80 bps over the life vs 25 bps up front for the
adverse market adjustment. Not really. A 4.5% note rate 30 year amortizes,
so, if we multiply the 10 bps by the monthly outstanding balance and sum
those receipts - the 10 bps is worth $1,313 on a $200k loan over the 84 months.
$1,313 / $200k = 65.6 bps. Further, since a dollar tomorrow isn't worth what
a dollar today is worth, even if we assume a modest 5% discount rate, the
$1,313 is further reduced to $1,110 on a discounted basis. $1,110 / $200k =
55.5 bps. So, apples to apples, it's better to compare 55.5 bps of extra gfee
to the 25 bps of eliminated adverse market fee. Because finance nerds
everywhere are now asking, 'What discount rate reduces the value of the
future gfee stream to 25 bps?" The answer is 35%. At a 35% discount
rate, the 10 bps of gfee is worth 25 bps on a present value basis.
Translation - the GSE's are still killin' it with this change."
A question is often asked, "With
the changes to gfees, and what is happening in the jumbo market, what does
2014 hold for structuring new issue RMBS (residential mortgage-backed
securities)?" Jeff Lewis, Senior Portfolio Manager of TIG Advisors (a
hedge fund) -- $1.8 billion AUM -- Securitized Asset Fund opines, "There
have been a couple of bills attempting to get the process unstuck of figuring
out what happens to the mortgage market post-government dominance. The
critical component is that we don't interrupt credit formation for housing in
the process of finding that new market structure. While there is a lot
of enmity towards the GSEs, we have to remember that they didn't form
themselves. They were formed by the US government with an intended
purpose and were managed and regulated to carry out that purpose. They
can be changed, and have been changed in the last few years. The positive cash
flows being generated by the GSEs are pretty mesmerizing to the government
and seem to be working against the urgency some lawmakers express about
making changes. The sense one gets though is that eventually Fannie and
Freddie either evolve into or are replaced by private insurance companies
taking their position. The key for the mortgage market is that the transition
is managed carefully enough to keep credit flowing and the TBA markets
operating smoothly."
Tom L. writes, "Rob, You
mentioned in one of your articles from about a month ago that Fannie Mae
removed the property
estimate from their DU Refi Plus Findings when it updated to
9.1. You mentioned that the industry was still waiting to see if
Freddie would do the same for LP. So far, I haven't heard any news of
Freddie planning on removing this valuation, meaning it will have to be
delivered in January when the rule goes final. Have you heard anything
from Freddie, investors or other sources that would suggest they are planning
to remove the property valuation before the rule goes final? I have waited as
long as I could, hoping that one day it would just stop showing up on the LP Findings.
However, with a month left and no news I feel as though I have to start
preparing for how we are supposed to deliver this valuation on all files we
run LP. Management here is hesitant to deliver the findings themselves
to the borrower as there is additional information on the AUS they may not
understand. We were thinking about developing an email template that would
say something like "To qualify you for this loan, we ran a
LoanProspector Full Feedback Certificate. The feedback includes an
estimated value of the property which we are required to provide to you per
the ECOA Valuation Rule. LP estimates you property to be $250,000.
This will in no way influence the actual appraised value of your
property." In your opinion, would something like this comply with
the rule, or would we have to send them the actual findings with the property
estimate?"
As it turns out, this is a
timely question with a timely answer. Freddie sent an e-mail to their
customers on Dec 10th explaining how lenders can stop receiving HVE feedback
on their LP feedback certificates. It's easy -- they fill out the form on
this site. Sellers can chose
to stop HVE feedback on all loans or all loans except Relief Refinance
Mortgages (HARPs). Hope this helps.
Regarding some information
this week in the commentary about mortgage servicing rights (MSRs),
Matt Maurer with MountainView Capital Holdings writes,
"Here are my two cents on MSR values. The value is a negative duration
asset that increases in value when rates increase. The increase, however, may
not be as large as some MSR holders are expecting. A large share
of MSR holders have portfolios that are weighted heavily with 2011 through
2013 production. This discount rate production is already modeling at 6
to 9 percent expected lifetime speeds, nearing structural prepayment speeds
(non-interest rate related expected prepayments such as job loss, job
transfer, marriage, kids, death, divorce, etc.). Expected speeds will
still decrease slightly when rates rise but it is important for servicers to
understand how much their MSR portfolio will increase given different moves
in rates. And it is critical that servicers understand how their
economics change given different moves in rates. About 50
percent of the upside on discount rate servicing is tied to expected
increased float earnings on escrow and P&I accounts. If a MSR
holder has negotiated a lower base cost to service in exchange for giving up
the right to receive float income with their subservicer, a MSR holder of
discount product has a potential increase in value given a 100 bps move up in
rates of approximately 9 basis points."
"I told my boss today
I'm terminating my relationship with this company in the NMLS today but would
stay on for the next 30 days to get the loans closed if he would pay
me. He said he was fine with that but was not sure he could pay me
if I wasn't licensed with this company at the time of closing. He
said a couple of months ago an investor refused to buy a loan from us
post-closing because the loan officer resigned 2 days prior to closing and
was thus not a licensed LO at the time of closing. I told him I only
have to be licensed at the time of origination, not closing. He said
that's what he thought but they wouldn't buy it. Do you have any
experience with this?"
That is a legal issue, and I
asked David F. Dulock with Black, Mann & Graham, L.L.P. to
weigh in. "The issue raised seems to have the following separate
components. After the LO terminates his LO relationship with the company is
it permissible to pay the LO: (i) for origination work already performed; and
(ii) for work to be performed? The first component is a matter of contract
law. If the compensation agreement the LO has with his employer specifies
certain origination work to be performed before compensation is earned, then
that will control whether the LO is entitled to compensation for his loans in
the pipeline. If the agreement is silent or ambiguous on that point, then it
is a matter of reasonable interpretation using the rules of contract
construction applicable for your state. Neither the current LO
compensation rule nor the 2013 LO compensation rule to be effective in
January 2014 speak to this issue in either the rule or the official staff
commentary."
Mr. Dulock's note went on.
"The second component depends on what work the LO will be performing for
the company after terminating his NMLSR registration relationship with the
company. If he continues to perform origination work to get the loans closed,
that could be a violation of state licensing law or regulation. As Texas
licensed attorneys, we can't speak with any authority on another state's
law. If, however, the work he performs to get the loans closed is not
origination work under the current LO compensation rule or under a state's
licensing law or regulation, then we see no reason why he cannot be
compensated for that work.
"In either event above,
we believe it would not be appropriate for the LO to sign the loan
application presented at closing for the following reasons: (1) we are given
to understand that some state laws consider signing the loan application an
origination activity; and (2) the official staff commentary to the 2013 LO
compensation rule to be effective in January 2014 states that 'the name
and NMLSR ID of the individual loan originator with primary responsibility
for the transaction at the time the loan document is issued must be
included.'" Thank you David!
Lastly, Ken Perry writes,
"I am not sure everybody is getting the implementation dates right on
the new LO Comp requirements. In September, the CFPB issued the rule amending
their final rules. In the TILA portion of these amendments you will find
this: "(1) the amendments to § 1026.36(d) (other than the addition of
§ 1026.36(d)(1)(iii)) and the provisions of § 1026.25(c)(2) will apply to
transactions that are consummated and for which the creditor or loan
originator organization paid compensation on or after January 1, 2014; and
(2) the provisions of § 1026.36(d)(1)(iii) will apply to transactions for
which the creditor or loan originator organization paid compensation on or
after January 1, 2014, regardless of when the transactions were consummated
or their applications were received." In other words, apps
taken now, if consummated and funded after the 1st of the year, will fall
under the 2014 compensation rule! So, policies need to be in place
immediately and rolled out successfully to employees just as fast as you
can! By the way, we at the Knowledge Coop are recommending that the
accounting department play a huge role in the creation of comp
plans since there are so many documentation requirements in the new rules,
especially if a company has bonuses, trips or prizes that fall into the
10% rule! Email gwen@knowledgecoop.com
for more info or just ask us in the Coop."
As traffic everywhere
increases, there's always...the bus. Quite a clever
ad!
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, "What Do
We Know About the Future of the Agencies?" 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.) |
Saturday, December 14, 2013
File Accuracy
http://globalhomefinance.com
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