Here's a little more
informal/off-the-record chatter from the conference. First, there is a
general sense of optimism among the participants although the MBA revised their
2014 estimates down to about $1 trillion. Sure, March and April were good
months, and May is showing a lot of promise with lock numbers - but anything
compared to January and February has to be better, right? Citi "says"
it wants more biz - we'll see. (More below.) Fannie & Freddie reps are
going about their jobs, with perhaps a little more of an "attitude"
than in previous years. They will eventually come out from under the
government, but it will take years. And they are making money - although much
of their earnings have come from settlements, and that is not a sustainable
source of income. Between that and being under conservatorship, well, the big
parties they threw in the past are long gone: hosting a big party attended by
individuals from companies they took settlement money from isn't kosher.
Poor
MERS can't catch a break. Over the last few years have come repeated
court challenges to its business model - and MERS continues to do business in
every county in every state. And now...it has a disease named after it! More
accurately, there is a disease that shares its acronym. MERS, the
disease, has spread to 18 countries, and is a viral respiratory illness caused
by a type of coronavirus, according to the US Centers for Disease Control and
Prevention. It was first reported in 2012 in Saudi Arabia. One write-up I saw
humorously noted that "the virus has similar traits to other viruses such
as Dodd Frank and other ridiculous regulations. Those infected with MERS start
off with symptoms like high stress, baldness with potential development
of comb over, weight gain causing a tighter waistline,
tiredness from over regulation and inefficient requirements, and loss of
income from high expenses. More than 500 cases have been reported worldwide,
and about 30 percent of those infected have died from MERS, Reuters reports - but the disease,
not the Mortgage Electronic Registration System.
Besides the large number of
training guides produced by the MBA and others, there are some other books
that LOs or secondary marketing folks might find of interest.
Casey
Fleming, an industry veteran of 35 years and trainer and mentor to mortgage
originators, has published a new book aimed at consumers of real estate finance
services called The Loan Guide: How to Get the Best
Possible Mortgage. The book teaches readers how to think
about whether to get a mortgage at all, how to determine what loan product and
pricing is best for their specific situation, how to manage their debt over a
lifetime, and a great deal more. Casey is offering consumer-oriented
seminars based on the book that can be used to help originators build
relationships with Realtors and to build their business.
Lenders can't spend a single
day without thinking about compliance - which is fine until it negatively
impacts the access to credit by borrowers. Part of that includes, especially
for banks, include FinCEN. In February, 2012, the Department of the
Treasury's Financial Crimes Enforcement Network (FinCEN) issued a Final Rule
requiring non-bank residential mortgage lenders and originators (RMLOs) to
comply with the provisions of the Bank Secrecy Act by establishing anti-money
laundering programs. The Final Rule stated that RMLOs must have a compliant
AML program established on or before August 13, 2012. The Final Rule contained
"4 pillars" that an AML program must contain, one of which was
qualified AML training for all relevant employees.
Specifically,
there must be provisions for initial, new hire and ongoing training; an
adequate system to verify that each employee took the training; and that
records be kept documenting the type of training, the presenter, the material
covered and the test results. Exchange Analytics, Inc. is a leading supplier
of Anti-Money Laundering compliance training services to the mortgage lending
and mortgage origination industry. It offers a web-based AML training course
designed specifically for employees of RMLOs. Exchange Analytics' services also
provide for the specific documentation and record-keeping requirements of an
AML program. To learn more contact Larry Israel at lisrael@xanalytics.com.
Let's
keep playing catch up with some relatively recent investor news.
Impac
Mortgage Corp. has announced Vermont is now an eligible state. It has updated
the matrices for the Freddie Mac Conforming Fixed and ARMs to include 5/1 arm
product both conforming and super conforming. HPCT (higher-priced covered
transaction) qualification for 7/1 and 10/1 ARMs have been clarified. Matrix
pertaining to manufactured homes has been updated as well including the
elimination of the overlay on FHA manufactured with respect to derogatory
credit waiting periods on manufactured home loans as they will follow FHA
guidelines. Matrices for Fannie Mae products have been updated as well.
Limitations have been set to new mortgage insurance contracts to either
Borrower Paid monthly premium or Lender Paid Single Premium Guides are also
available for viewing.
Impachas lowered the minimum credit score for all of its VA
products to 620, including the new 3/1 and 5/1 VA ARMs. For FHA
transactions, the minimum FICO is 580, including the new 3/1 ARM, with certain
restrictions pertaining to 580-619 scores.
For the Jumbo Platinum product, Impac has updated the guidelines
on appraisals, business funds, the use of authorized user accounts and
non-traditional credit as trade lines, gaps in employment, VOEs for
self-employed borrowers, pricing on loans without escrows, eligible property
types, qualifying rates for ARMs, and fraud.
First
Community Mortgage has expanded its wholesale lending territory into West
Virginia. Numerous changes have been made to their guidelines. Conventional
products will require full property tax rate and for qualifying PITI. Assets
and reserves modifications regarding borrower contribution amounts when using
gift funds, donations from entities, or employer assistance have been
updated. Sourcing large deposits in single or multiple aggregated
non-payroll deposits or VOD variances that represent amounts in excess of 25%
of the borrower's gross monthly income is also addressed. Other topics are
outlined as well such as mixed use/non-residential use property, added condo
guidance, Non-Permanent Resident Alien ineligibility, FHA manual underwriting
credit score, DTI, and compensating factor requirements additions, and VA
requirements to name a few. Please see the full guidelines at WHOLESALE PRODUCT
& PRICING BULLETIN 2014-03b for specific details regarding these changes.
On the
lack of news rates in the U.S. have been pretty steady this week, although Wall
Street traders are seeing a pick-up in agency MBS volume. Yesterday rates
decided to improve despite the pick-up in volume, and current coupon
mortgage-backed securities improved about .250. The move was mostly attributed
to comments from FRB Cleveland President
Plosser who said the strengthening economy could mean the Fed would have to
hike rates sooner versus later.
You
know it's a slow day when the only news for the morning is the MBA's
application numbers. Apps were up slightly last week (.9%) with refis up almost
4% and purchases down about 3%. But we will also see the minutes from the last
FOMC meeting - don't look for any surprises. The 10-yr is sitting around
2.53% and agency MBS prices are down/worse about .125.
The market giveth, and the market taketh away…. Yesterday the
MBS price jumped 32 bps, early this morning the MBS price at 9:00 -7 bp; the 10
yr yield fell to 2.51% yesterday down 3 bps, this morning +3 bps back to 2.54%.
Yesterday the DJIA dropped 138 points, this morning the index is better as are
the NASDAQ and S&P. No continuity or trend at the moment ahead of this
afternoon’s FOMC minutes from the 4/30 FOMC meeting. At 9:30 the DJIA opened
+81, NASDAQ +16, S&P +8; 10 yr 2.54% +3 bp and 30 yr MBS price down 5 bps
from yesterday’s close.
Weekly mortgage applications
increased a little last week, +0.9%. The Refinance Index
increased 4% from the previous week. The seasonally adjusted Purchase
Index decreased 3% from one week earlier. Nice for the re-financers but the
decline in purchases isn’t encouraging; purchase applications -12% from the
same week a year ago. The refinance share of mortgage activity increased to 52%
of total applications from 50% the previous week. The adjustable-rate mortgage
(ARM) share of activity remained unchanged at 8% of total applications. The
average contract interest rate for 30-year fixed-rate mortgages with conforming
loan balances ($417,000 or less) decreased to 4.33%, the lowest rate since
November 2013, from 4.39% with points decreasing to 0.20 from 0.22
(including the origination fee) for 80% loans. The average contract interest
rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than
$417,000) decreased to 4.24%, the lowest rate since May 2013, from 4.29%, with
points decreasing to 0.1 from 0.16 (including the origination fee) for 80%
loans. The average contract interest rate for 30-year fixed-rate mortgages
backed by the FHA decreased to 4.06%, the lowest rate since October 2013, from
4.09%, with points decreasing to -0.39 from -0.17 (including the origination
fee) for 80% loans. The average contract interest rate for 15-year fixed-rate
mortgages decreased to 3.43%, the lowest rate since October 2013, from 3.48%,
with points increasing to 0.15 from 0.12 (including the origination fee) for
80% loans. The average contract interest rate for 5/1 ARMs decreased to 3.14%
from 3.17%, with points increasing to 0.29 from 0.24 (including the origination
fee) for 80% loans.
We remain bullish on the bond and mortgage markets but we have to accept
that the bellwether 10 is still not able to fall below last November’s low
(2.48%). 2.50% on the 10 at the moment is finding resistance until there is
another soft economic report. Investors, as noted above , are seeking higher
yields in corporate debt and other higher risk debt issues. The belief that
drives investors to risk is that even if treasury rates decline there won’t be
any serious economic decline or geo-political event that will shake markets too
much. It is another example of money chasing yields and willing to risk it.
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