Credit Availability Increasing; CFPB's Supervisory Highlights and student debt!

http://globalhomefinance.com

I don't know where this topic falls, somewhere between "That's mildly interesting", and, "So what?" Although I bike a lot, I might fall into the, "I can't believe someone got paid to compile this" camp, though. The Census Bureau's most recent report, "Modes Less Traveled - Bicycling and Walking to Work in the United States: 2008-2012," shows that walking to work has remained unchanged since 2000 after steadily decreasing since 1980. In 1980, 6% of workers walked to work, and that rate declined to 3% by 2000. However, from 2008-2012 the rate of walkers remained statistically unchanged from 2000. Among larger cities, Boston had the highest rate of walking to work at 15 percent.

"Adversity can cause some mortgage lenders to break, while others will break records.  In continuing to exceed its volume records month-over-month, ClearVision Funding, based in Orange County, CA, celebrates yet another record month. The company has the unique full offering of FHA, VA, (including FICO scores down to 560) JUMBO, FNMA and FHLMC loans and have direct relationship with the agencies, GNMA, FNMA, & FHLMC. CVF also offers a Non-Delegated Correspondent program with warehouse lines to help take their client's business to the next level."

The MBA announced that mortgage credit availability increased in May, according to the Mortgage Credit Availability Index, which analyzes data from the AllRegs Market Clarity product. A good chunk of this was due to the jumbo loan sector, and banks adding portfolio products to their line-ups.

The old saying "I don't know much about art, but I know what I like," can certainly apply to the CFPB and what they are looking for in compliance departments. One could certainly argue that the Bureau would never find fault with too many procedures or with too many employees...or could they? On May 22^nd, the CFPB published its 2014 Supervisory Highlights, the fourth such report for the Bureau. A large portion of the report summarizes supervisory findings at nonbanks, particularly with regard to consumer reporting, debt collection, and short-term, small-dollar lending. However, a small blurb on Compliance Management Systems (CMS) is worth a read, the CPFB write, "As CFPB has described in its Supervision and Examination Manual, CMS is how an entity: establishes its compliance responsibilities, by determining the regulatory requirements applicable to its business operations; communicates those responsibilities to employees; ensures that responsibilities for meeting legal requirements and internal policies are incorporated into business processes; reviews operations to ensure responsibilities are carried out and legal requirements are met; takes corrective action; and updates tools, systems, training, and materials, as necessary." So does the CFPB believe there are common attributes to successful management of responsibilities? You bet....(1) a Board of Directors and management oversight, (2) a compliance program, (3) a consumer complain management program, and (4) an independent compliance audit. 

Late last year I ran into a portfolio manager I know who told me about the growing number of funds out there betting against student debt. He summed up the situation like this, "kids financing 4, 6, 8 years of education...all to end up working as the over-night manager at Target? Something has to give." I don't know. All I know is student debt has reached mortgage-like proportions in terms of originations. Recently, CFPB Director Cordray addressed the Boulder Summer Conference on Consumer Financial Decision Making, commenting on this very issue, saying that student debt is "a pressing problem and a matter of grave importance to public policy in America." Student loan debt is the second largest debt category in the nation, which has reached $1.2 trillion. Ballard Spahr writes, "According to Director Cordray, the "overhang of high student loan debt" is affecting not just borrowers, but the housing market, small business development, retirement savings, household formation, and rural communities. For example, he referenced a recent survey by the National Association of Realtors, which stated that 49 percent of Americans cited student loan debt as a "huge obstacle" to homeownership." Betting against student repayment rates is the equivalent of walking up to a busy craps table on a Saturday night and starting to play the "Don't Pass" line...it may be the smart play, but it sure doesn't make you many friends at the table. 

Let's continue on with news from lenders, investors, agencies, and upcoming events:

 

The pricing is certainly heating up out there. The latest example comes from 360 Mortgage Group. "During the entire week of June 9^th, 360 Mortgage Group is running a Friday the 13^th pricing special for their wholesale/broker business channel. ANY conventional loan locked during the week of June 9^th receives an additional 50bps above the published rate sheet price. The price adjustment is built in to the locking system so brokers will immediately see the results. The special expires with the close of business on Friday, June 13^th. 360 offers the full suite of FHA, VA, USDA, Fannie Mae and Freddie Mac loan products including unlimited LTV HARP and no overlay standard conventional products.  Additionally they specialize in niche government ARM products which have no price adjustments and can be used on VA IRRRL and FHA Streamline transactions." 

AllRegs reminded clients of its loan guidance checklists and matrices covering topics such as state required disclosure matrices, permissible fee matrices, and state compliance checklists are part of this package. You can directly print these documents, or export them to MS Excel, print and insert them in front of every loan file and use them to be sure your file is compliant. 

Penny Mac Correspondent has posted a lending announcement 14-29 regarding Fannie Mae evaluation of large deposits. Effective immediately on DU conforming purchase transactions, large deposit is defined as a single deposit that exceed 50% of the total monthly qualifying income. Contact your sales representative to discuss or review the announcement in its entirety. 

Planet Home Lending, LLC announced the launch of its correspondent division. Planet will offer competitively priced FHA, VA, USDA and FHLMC fixed-rate loans, and will accept flow, mandatory, bulk and mortgage servicing rights from its clients. "Planet has streamlined the purchase process of closed loans to within 48 hours of receipt of electronic file by leveraging cutting edge technology." (Founded in 2007, Planet Home Lending is a privately held, national residential mortgage lender with multiple business channels.) 

TRI Pointe Homes announced it will be acquiring Weyerhaeuser Real Estate Company, bringing Pardee Homes, Maracay Homes, Quadrant Homes, Trendmaker Homes and Winchester Homes under TRI Pointe during the 3^rd quarter. Operating the six brands under one umbrella in California, Pacific Northwest, Nevada, Arizona, Texas, and Washington D.C. markets, the company expects that the merger will position TRI Pointe as one of the top 10 largest public homebuilders in the United States. 

New Penn Wholesale division rolled out E-Sign initial disclosures on June 2^nd; contact your Account Executive for the specifics. Guideline updates have been posted reducing overlays such as FHA and VA minimum FICO with foreclosures and/or bankruptcies removal and the addition of FHA compensating factors. Conventional guideline updates include removal of overlays on FL condos, revised overlays on eligible properties, and minimum FICO on escrow.  

Ellie Mae announced that it has integrated Encompass Flood Service™ into its Total Quality Loan™ (TQL) program to provide mortgage lenders with the accurate, efficient and consistent ordering of required flood certifications from one centralized tool in their Encompass® mortgage management solution. "Using Encompass Flood Service, Encompass users can now order basic and life-of-loan flood certifications directly from the TQL tool without leaving the loan file or logging into another provider's website."

 

Executive Rate Market Report:

AM Tracking Quote:
FNMA 4.0% 105.41 now -18 bps: Have a great day.
09:32 -18
Open 105.59
Should you Lock or Float? Contact me for Lock Advice!

Interest rate markets started weaker early this morning; US stock indexes in pre-open trading were about flat. Last Friday’s May employment report was about as markets were expecting, the initial reaction rallied treasuries and MBSs but by the end of the day MBS prices and the 10 yr note were unchanged from Thursday. Today there are no economic reports scheduled but there are three Fed officials on tap later, at 9:3 St. Louis Fed Pres. Bullard, at 12:45 Fed governor Tarullo and at 1:30 Boston Fed Pres. Rosengren. Not sure if any of them will have anything new but it is not likely.

This week the Data that is critical doesn't happen until later in the week (see calendar). Treasury takes the lead this week with $62B of auctions beginning tomorrow with $28B of 3 yr notes, Wednesday a more significant $21B 10 yr auction and Thursday $13B 30 yr auction. Both the 10 and 30 are reopens of issues in May.

Are US interest rates too low, or just right and may head lower? A very interesting multiple question; the debate continues within the fixed income markets. On the more obvious side, at least as most see it, with the economy improving interest rates are very likely to increase. History is on that side of the question, and with US Treasury rates so low the demand isn’t likely to continue. There is no longer a safety bid in treasuries over the Ukraine/Russia situation that pushed rates at one point to 2.40% (briefly). The global economic outlook is still mushy and has been a motivation into US treasuries; that view is a slippery one, with each report from the EU, China and emerging markets the outlook changes a little. There are though, some things to consider in the debate over the level of rates:

• China is buying US treasuries to accumulate dollars and weaken their currency. China bought $55.8B of treasuries in Q1, last year the country bought $81.1B in the entire year so the pace of buying has increased substantially.
• In Q1 US banks increased treasury holdings to $237B the highest level since 1995. Banks adding treasuries to meet capital and liquidity standards required by the Fed .
• Mutual funds and ETFs saw inflows of $21.7B in May, for all of this year $64.6B.
• US interest rates are higher than interest rates in most other key economic countries; Germany 1.31% on its 10 yr bund, Japan 10 yr 0.60%, Spain’s 10 yr, a not so strong economy, is at a very low 2.65%, Italy at 2.77%; the higher US rate remains attractive to global investors.
• The supply of new treasuries is shrinking; the total amount of new treasuries this year is going to be about $680B, last year new issues totaled $836B last year and hit $1.56trillion in 2010.
• The annual budget is shrinking as increased tax dollars cut into the debt as the economy has slowly improved; the CBO is forecasting the US budget deficit this year at $490B the lowest since the recession began.

These are a few of the issues that are holding rates down; how long they will continue to play into low rates is where traders are today.

At 9:30 the DJIA opened unchanged as did the other key indexes; the 10 yr at 9:30 2.62% +3 bps and MBS prices -14 bps.

Nothing yet from St. Louis Fed Pres., Bullard speaking on the US economic outlook.

This Week’s Calendar:
       Tuesday,
          10:00 am April wholesale inventories (+0.3% from +1.1% in March)
                        April JOLTS job openings (4.025 mil from 4.014 mil in March)
          1:00 pm $28B 3 yr note auction
      Wednesday,
          7:00 am weekly MBA mortgage applications
          1:00 pm $21B 10 yr note auction
          2:00 pm May Treasury budget balance (-$139B)
      Thursday,
         8:30 weekly jobless claims (309K -3K from previous week)
                May retail sales (+0.6%, ex auto and truck sales +0.4%)
                May import and export prices (imports +0.2%, exports +0.2%)
        10:00 am April business inventories (+0.4%)
         1:00 pm $13B 30 yr bond auction
      Friday,
         8:30 May PPI (+0.1%, ex food and energy +0.1%)
         9:55 am U. of Michigan mid-month sentiment index (83.0 from 81.9)

Last week the trade in treasuries and MBSs turned technicals from bullish to bearish as the tight trading continues. The 10 yr note that sets the direction for MBSs has not closed above 2.60% since May 12th, this morning the yield at 2.62% will keep traders awake. There is a valid down trend line on the 10 yield chart that has held any recent selling in check, that trend line is in play today.

http://globalhomefinance.blogspot.com