Happy Father's Day!
We're racing toward the Summer
Solstice, with the most daylight in the Northern Hemisphere, but Happy Friday
the 13th AND a full moon! This combination won't happen again in
North America until 2049, another thirty five years. Maybe by then some of the
current mortgage bankers and Realtors may have retired. But probably not.
The
European Space Agency is developing a Doomsday Arc on the moon. This
"ark" would be a database containing information on things like
language, crop growing, and modern technology. Ideally, the base would allow
remaining earthlings access to information ensuring the survival of the human
race. The Consumer Financial Protection Bureau contributed its most recent Semi-Annual Report to the
cache of items to be located on the moon. I can't even grow herbs in my kitchen
window, and scientists believe we could colonize the moon? Back to
mortgage....although there's nothing too earth shattering in the report, one
statistic did catch my eye: of the type of complaints being logged by
consumers, 73% of complaints are Incorrect Information on credit reports;
more specifically: information is not that of consumer, account terms, account
status, personal information, public record, reinserted previously deleted
information.
Of
some interest to GNMA issuers is the recent mortgage letter HUD Issue ML 2014-09.
The purpose
of the letter is to inform lenders about changes to FHA's systems that alter
the way lenders execute post-approval updates and complete FHA's annual
recertification process. The primary change detailed in HUD's letter (which
became effective May 27th), is with the deployment of the Lender
Electronic Assessment Portal (LEAP). LEAP, which is accessible through FHA
Connection, will affect the way originators go through post-approval updates
& business changes, annual recertification, financial data templates, and
agreed upon procedures. And while we're talking about GNMA issuance, more than
$21.66 billion in Ginnie Mae II single-family pools were issued in April, while
Ginnie Mae I single-family pools totaled nearly $449 million. In addition,
Ginnie Mae issued nearly $1.66 billion in multifamily MBS in April. Issuance
for the Ginnie Mae Home Equity Conversion Mortgage-Backed Securities (HMBS),
included in Ginnie Mae II single-family pools, was $395 million.
Residential
mortgage-backed securities may make a comeback as demand increases for home
equity lines of credit. Basel III requires high levels of capital to be held on balance
sheets for these loans, so lenders are turning to securitization and exploring
investor interest: Reuters/International Financing Review.
And
congrats to JMAC Lending, the #1 lender in WinWater Home Mortgage's $250
million residential jumbo deal. Yes - finally some news in non-agency issuance! Kroll
Bond Rating Agency has issued its pre-sale report WinWater's first
securitization offering (WIN 2014-1). WinWater is "a residential mortgage
conduit aggregator focused on opportunities in the non-agency jumbo
sector." The pool is 306 loans with an average balance is $815,247,
average FICO score of 753, and an average LTV of 71%. 65% of the loans are on
California properties (about 19% each from LA and SF areas), 8% from
Washington, and 3% from Texas. Not surprisingly Kroll notes that the
concentration of loans in California is a concern of the deal. But heck, it is
hard to put together a jumbo deal without California loans, and most of the
loans come from California-based lenders: JMAC Lending: 14%, RPM
Mortgage: 13%, and Opes Advisors: 10%, followed by Guaranteed
Rate, Paramount, and Texas' PrimeLending. Cenlar services
nearly all of the loans, and the master servicer and custodian is Wells Fargo.
Redwood
Trust announced that it had entered into an agreement with the Federal Home
Loan Bank of Chicago (FHLBC) to create MPF Direct, a new mortgage product
offered by the Mortgage Partnership Finance (MPF) program. The program will
allow FHLB members that participate in the MPF program to deliver eligible
high-balance loans to Redwood. Under the agreement, Redwood will be the only
investor in MPF Direct loans for three years. The MPF Direct program will allow
FHLB members that participate in the MPF program to deliver eligible
high-balance loans to Redwood Trust. The MPF program was set up by FHLBC in
2000 to provide an alternative for its members who did not want to fund
mortgage loans on their own balance sheets and other FHLBs subsequently joined
the program. These loans are retained on balance sheet by the FLHB so it
manages interest rate risk and prepayment risk.
The
participating financial institution (PFI) that sells the loan enters into a
risk sharing agreement which obliges it to cover losses after they reach a
certain level. The FHLB also has a newer program called MPF Xtra through which
the PFI can transfer all risk including credit risk. The new MPF Direct program
will focus on high loan balance loans (the traditional MPF program is only for
conforming or government loans). These high-balance loans will now be acquired
by Redwood, therefore creating a new way for Redwood to very efficiently
acquire jumbo loans. Analysts believe that one of the strongest selling points
of this program is that Redwood, unlike most buyers of jumbo loans in the
secondary market, is not a potential competitor for the customers of the member
banks.
The
Consumer Financial Protection Bureau ordered a New Jersey company, Stonebridge
Title Services Inc., to pay $30,000 for paying illegal kickbacks for referrals. CFPB Director Richard
Cordray stated that, "Kickbacks drive up the costs of getting a mortgage
and put law-abiding companies at a disadvantage. The Consumer Bureau will
continue to take action against companies that seek to attract consumers
through illegal schemes." The Bureau charged that Stonebridge paid
commissions to more than twenty independent salespeople who referred
title insurance business to Stonebridge. "Stonebridge solicited people to
provide it with referrals of title insurance business, offering to pay
commissions of up to 40% of the title insurance premiums Stonebridge itself
received. These practices violated Section 8 of the Real Estate Settlement
Procedures Act (RESPA), which prohibits kickbacks and payment of unearned fees
in the context of residential real estate transactions. Paying commissions for
referrals is allowed under RESPA if the recipient of the payment is an employee
of the company that is paying the referral. In this case, although the
individuals received W-2 tax forms, the Bureau's investigation determined that
these individuals were independent contractors and not bona fide
employees."
Let's
see what is happening with relatively recent lender and investor news - it just
doesn't stop.
This
summer, LoanSouth Mortgage will begin marketing as BankSouth Mortgage, a
name it legally adopted in 2011 after forming a joint partnership with
BankSouth to continue the growth of residential mortgage services in greater
Atlanta and the southeast. When LoanSouth became a wholly owned subsidiary of
BankSouth, it continued doing business as (DBA) LoanSouth Mortgage.
"Nothing about LoanSouth Mortgage or what customers have come to expect is
affected by this transition," said Kim Nelson, CEO of LoanSouth Mortgage.
Franklin
American Mortgage Correspondent Lending has lowered its minimum FICO on
conventional conforming fixed rate products from 640 to 620 on one unit, owner
occupied properties with LTV >80%, effective with locks on or after 5/30/14.
Its Minimum borrower contribution on conventional high balance transactions has
also been updated. Effective immediately, borrowers required contribution has
been reduced to 5% of their own funds for purchase transactions, as opposed to
the previously required 10% of borrowers own funds. Delayed financing, flood
zone determination, appraisal requirements, and other expansions, reminders and
changes have also been updated. Contact your representative for full details.
CMG
Financial
is offering an Asset Based Jumbo Program for self-employed borrowers.
Self-employed income is not verified, and is for primary & second Homes.
This is a "No Income verified program" for self-employed borrowers.
Liquid assets (including business), are verified for qualifying purposes, and
is not an asset depletion program. There are specific minimum asset
requirements for each loan tier. CMG's asset based jumbo
product requires no income documentation for self-employed borrowers, and
borrowers are underwritten by verifying the required liquid assets (business
accounts as well). At least one of the borrowers must be self-employed.
Salaried borrowers will have their income verified if part of the loan. For
more information contact Joe Brockman jbrockman@cmgfi.com.
Mountain
West Financial Wholesale announced changes in reference to CHDAP and allowable broker
compensation. CalHFA recently announced
that for all new CHDAP reservations subordinate to any first mortgage made on
or after June 2, 2014, the first mortgage maximum allowable fees charged by a
lender may not exceed the greater of 2% of the first mortgage loan amount or
$3,000. As
a result, borrower paid maximum compensation will be limited to 1.5%; Lender
Paid Compensation is unavailable for CHDAP at this time.
And
MWF wholesale has also released information regarding multiple underwriting
additions and changes on its VA, FHA and Conventional products. Updates include
LP maximum number of financed properties on conventional products, and
refinance transactions with property listed for sale. FHA high balance VOR/VOM
updated guidelines to indicate: mortgage history of no lates in 12 months to be
applicable to Refer and Manual UW only.
Say
all you want about the US economy - sudden overseas events quickly remind us
how our markets can be moved by non-U.S. news. We did have a
disappointing May Retail Sales report, but concern about military and political
events in Iraq drove a flight to quality and an increase in oil prices. And
higher oil prices produce a drag on the economy, also leading to lower rates -
but I am sure every lender would rather have an economy that is doing well. But
hey, the 10-yr rallied nearly .5 in price and current coupon agency MBS rallied
.375. Remember that prices are determined by supply and demand, and if demand
for loans is strong, and the supply is down, that tends to push prices higher
and rates lower on a relative basis.
AM Tracking
Quote
FNMA 4.0% 105.00 now -21 bps:
09:34 -21
Open 105.21
Should you Lock or Float? Contact me for Lock Advice!
Open 105.21
Should you Lock or Float? Contact me for Lock Advice!
This
morning the scheduled news wrapped up with the Producer Price Index. PPI, a
measure of inflation, for May was expected at +.1% and came in at -.2% - there
just isn't a lot of wholesale inflation out there. Later we'll have the
preliminary June Consumer Sentiment number, generally regarded as "second
tier". Currently the 10-yr is 2.61% after a 2.59% close Thursday, and
agency MBS prices are worse about .125.
Yesterday
markets were rattled on news out of Iraq that militants were gaining control of
northern cities and were moving toward Baghdad. It is an ethnic issue
between Sunni extremists eclipsing the power of Iraq's Shiite-dominated rulers,
Shiite Iran sprang into action to aid its besieged Arab ally. It deployed
Revolutionary Guards units to Iraq. US stocks fell, but the indexes were
already suspect; crude oil increased over $2.00 on knee jerk reaction that oil
supplies may be impacted. From what we hear Iraq oil may be threatened but with
increased oil production in the US since the Iraq war has increased enough that
a shortage is unlikely. For the moment, similar reactions in financial markets
similar to Ukraine/Russia is supporting the bond market, also like
Ukraine/Russia the fear factor will abate unless the US sends ground troops,
and that is extremely unlikely. The 10 yr yield fell 4 bps on the news
yesterday, early this morning its yield is up 2 bps from yesterday, suggesting
little concern at the moment. In the wider perspective though, the situation in
the Mid-East is gaining increase concern in the political sphere.
….”A
militant Islamist group that has carved out control of a swath of Syria has
moved into Iraq, conquering cities and threatening the Iraqi government the
U.S. helped create and support with billions of dollars in aid and thousands of
American lives. The group—known as the Islamic State of Iraq and al Sham—isn't
a threat only to Iraq and Syria. It seeks to impose its vision of a single
radical Islamist state stretching from the Mediterranean coast of Syria through
modern Iraq, the region of the Islamic Caliphates established in the seventh
and eighth centuries….” WSJ
At
9:30 the DJIA opened +20, NASDAQ +15, S&P +3; 10 yr at 2.63% +3 bp and 30 yr MBS
prices down 23 bps from yesterday’s close. Yesterday in the last hour of bond
and MBS trading (4:00 to 5:00 pm) MBS prices declined about 10 basis points
from the levels we reported at 4:00. Given the trading in stocks and treasuries
so far this morning, the knee jerk reaction yesterday on the Iraq news has
waned.
The
last of the data at 9:55; the U. of Michigan consumer sentiment index was expected to have
increased to 83.0 from 81.9 at the end of May. The index fell to 81.2, not what
the bulls would like to have seen but t is a very volatile series. The initial
reaction took the DJIA from unchanged down 10 points. So far this morning, and
it is early, there has been no directional movement in the stock market. The 10
yr note yield and MBS prices have gained a little from 9:30 levels.
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