Paddy is said to be shocked,
after talking to the vet, at finding out all his cows have Bluetongue. "Be
Jeysus!" he said, "I didn't even know they had mobile
phones!" Jokes aside, problems can be created by differences in
education, nationality, or age. For example, the ICBA reports 90% of community bankers say their
average customer is between the ages of 41 and 60. The Independent
Community Bankers Association aren't the only ones seeing age differences and
segregation, and many banks & lenders are doing what they can to court
younger borrowers by training LOs in that age group. Much of the formal
training is done by big banks - it seems that most smaller lenders can only
afford someone who can "hit the ground running."
Yesterday Citi announced the
discontinuation of its SRP Schedule and State Adjusters. "We want to
make it easier to do business with Citi. With that goal in mind we are
simplifying our pricing. Effective with new rate locks and Mandatory
Commitments established on or after April 07, 2014 ("Effective
Date"), Citi will discontinue using SRP schedules and general (all
product) state pricing adjusters. For Best Effort & Single Loan Mandatory,
in conjunction with the elimination of SRPs and adjusters for all products in
designated states, on and after the Effective Date, base pricing will be
adjusted and revised, product-specific state adjusters will be added on Citi's
rate sheet. For Mandatory Commitments, for Direct and Assignment of Trade
Commitments, the SRP will now be embedded in the Note Rate Adjusters. The
revised product-specific state adjusters will also apply. For Block Trades,
rate sheet base pricing will be adjusted and the revised product-specific state
adjusters will also apply. Prior to the implementation of these changes,
Citi will provide Correspondents with a sample template for the new rate sheet
layout giving you the opportunity to update your pricing models to accept and
incorporate the new rate sheet and pricing format." (Editor's note:
these adjustments will be included in the base price, of course, and Citi
discusses how a large bulk trade settling in some future month will be priced.
But a client might find price comparisons difficult when one doesn't know the
make-up of the loans to be delivered.)
This week the news broke of a
new MI consortium (USMI) which includes all the major MI companies except
United Guaranty. Donna DeMaio, CEO of United Guaranty, noted, "United
Guaranty has declined participation in the new trade organization USMI at this
time. As a part of a larger organization, we leverage AIG and United
Guaranty internal resources both in DC and with state regulators.
However, we do stay in regular communication with the companies that
participate in USMI as well as participate on specific projects, such as the
development of an industry capital solvency model."
We all
knew it was coming: another proposal regarding Fannie & Freddie!!
The leaders of the Senate
Banking Committee outlined plans for a bipartisan proposal to wind down Freddie
Mac and Fannie Mae and replace them with a new government reinsurer. A key
element of the plan is the involvement of private companies in that the first
10% of mortgage losses would be assumed by non-government entities. The
bipartisan measure, drafted with input from President Barack Obama's
administration, would replace the U.S.-owned mortgage financiers with a
government insurer behind private capital, Senate Banking Committee Chairman
Tim Johnson and Senator Mike Crapo said in a statement yesterday. The bill
would require most borrowers to make down payments of at least 5 percent in the
new housing-finance system.
The new measure, which is not a
bill yet, is based on a bill introduced last year by Senators Bob Corker, a
Tennessee Republican, and Mark Warner, a Virginia Democrat, with some
additions. "A new system of federally insured mortgage securities in which
private insurers would be required to take initial losses before any government
guarantee would be triggered." The Johnson-Crapo plan would set specific
benchmarks for transitioning from Fannie Mae and Freddie Mac to the new system.
They will introduce the bill "in the coming days" and begin
fine-tuning it with other members of the committee in the coming weeks, and
just like any other bill, any legislation would need to pass in both the House
and the Senate to become law. Analysts consider major reform unlikely to take
place before the next Presidential election in 2016.
What does it mean for anyone?
Nothing initially - although it
certainly gives us the flavor for what politicians are thinking. The
Realtors were quick to respond. "NAR welcomes the proposal from Sens.
Johnson and Crapo to restructure the secondary mortgage finance system. There
are many aspects of the proposal that mirror NAR's long-standing Principles for
Restructuring the Secondary Mortgage Market and Encouraging the Return of
Private Capital. NAR applauds the efforts of Senators Johnson and Crapo to
preserve the government guarantee and include provisions to ensure that middle
class and first time homebuyers will continue to have access to affordable
mortgages with reasonable down-payment terms." It certainly was an ugly
day for the common stock of Fannie Mae and Freddie Mac. Fannie shares dropped
as much as 44% Tuesday and Freddie's stock fell 39% at their lows.
Of course, considering these
issues relate to Washington and the housing market, the bill most likely has a
long road ahead before getting passed - if at all. Isaac Boltansky with Compass
Point Research & Trading LLC put out a piece titled, "GSE Reform
Agreement Announced, Action Ahead but Passage Remains Unlikely."
"While we continue to believe that there is neither the legislative
bandwidth nor the market capacity to undertake GSE reform in this Congress,
this effort will advance the discussion in D.C. for the next Congress. At its
core, this proposal echoes Corker-Warner which calls for the liquidation of the
GSEs, the creation of a Federal Mortgage Insurance Corporation (FMIC) which
would operate in a manner similar to the FDIC and wrap covered loans with a
government guarantee, and mandate a 10% first-loss requirement for private
capital.
"Despite the lack of
specifics in this announcement, a number of elements stood out to us: 1. The
Corker-Warner proposal's 10% first-loss requirement for private capital is
maintained in the Johnson-Crapo proposal despite calls to lower the threshold;
2. The Johnson-Crapo bill would set underwriting parameters for covered
mortgages similar to the CFPB's Qualified Mortgage (QM) rule but would also
include a 5% down-payment requirement (3.5% for first-time buyers); 3. The
Johnson-Crapo bill will "eliminate affordable housing goals" but will
include a 10bps user fee for the new guarantor which would be directed to
ensuring that there is "sufficient decent housing available." We note
that the most significant concern for affordable housing goals is not the
funding mechanism, but rather deciding which entity sets and monitors the
goals; 4. The release highlights the creation of a "mutual cooperative
jointly owned by small lenders" which is included to facilitate market
access for smaller lenders, a priority of many on the Senate Banking Committee;
5. Despite a lack of specifics regarding the multifamily market, the release
did include the following supportive language: 'Maintain a vibrant multifamily
market by building upon successful risk-sharing mechanisms and products and
providing access to a broad range of markets.'"
Turning to the markets,
yesterday I wrote that I wasn't going to waste your time - not much had
happened Monday. Well, not much happened yesterday either, and the 10-yr closed
at 2.77% - still almost unchanged from Friday's close, although MBS prices
improved a mite*. (*mite is a technical term.)
Not much happened over night,
and today we've had the MBA applications index for last week (apps were down
about 2%) - there is not much else to move the markets until the $21 billion
10-year note auction at noon CST. This morning the 10-yr is slightly
improved at 2.75% and agency MBS prices are a shade* better. (*shade is a
technical term meaning 1-2 32nds.)
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