Subservicing product; More Consent Orders against lenders

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Before we jump into the "heavy" stuff, next Monday, October 13, is Columbus Day (with all of its Native American controversy) and Tuesday November 11th is Veterans Day - both Federal holidays. Most lenders are open, however. As a reminder, for disclosures and loan funding purposes, the rule is related to whether mail can be received or not. If the post office is closed and there is no mail delivery, it is a holiday. (The list of federal holidays referred to in Reg. Z are New Year's Day, January 1, Birthday of Martin Luther King, Jr., the third Monday in January, Washington's Birthday, the third Monday in February, Memorial Day, the last Monday in May, Independence Day, July 4, Labor Day, the first Monday in September, Columbus Day, the second Monday in October, Veterans Day, November 11, Thanksgiving Day, the fourth Thursday in November, and Christmas Day, December 25.) Both Columbus Day and Veterans Day are federal holidays meaning we don't count them for the purposes of the initial 7-day Reg Z waiting period, the 3 day re-disclosure waiting period, and right of rescission. For the timeframes on initial disclosures, RESPA requires that the initial disclosures be sent within 3 business days.  Business day means a day on which the offices of the business entity are open to the public for carrying on substantially all of the entity's business functions. 

The CFPB and other regulators share a certain percentage of information, much of it from state-level examiners but also from those at the Federal level. For example, here is a HUD OIG Audit involving Cornerstone Home Lending in Houston, Texas involving MSAs and other issues, along with a corresponding story in RESPANews.  

And Georgia is enforcing its rule about felonies. Many people in lending may not know companies can't employ anyone (anywhere in the company) with a felony for (usually) 7 or more years - some never. Even the janitor must be clean. Late last week word spread: "On October 1, 2014, the Georgia Department of Banking & Finance entered into a Consent Order with Hometown Lenders, LLC, NMLS No. 65084, located at 310 The Bridge Street, 4th Floor, Suite A, Huntsville, Alabama, and its owners, William E. Taylor, Jr., William E. Taylor, Sr. and Byron Heath Quick. The Consent Order was entered to resolve a Notice of Intent to Revoke and Orders to Cease and Desist issued to Hometown Lenders and its owners for employing two felons and transacting business with an unlicensed mortgage processing company. (The Department is the state agency that regulates and examines Georgia state-chartered banks, state-chartered credit unions, and state-chartered trust companies.... mortgage brokers, lenders and processors, mortgage loan originators, check cashers, sale of check companies, money transmitters, international banking organizations, and bank holding companies conducting business in Georgia.) 

In the last few weeks I have been in South Carolina, Colorado, Georgia, California, and Arizona. Many people ask me about sub-prime lending. Yes, I believe there will come a time when sub-prime mortgages will make an historical return to the norm in the marketplace. I also believe there will be a time when man walks on the surface of Jupiter's moon Titan, it's just the "when" portion of those statements I have a problem defining. If you missed the short article in the New York Times about this topic, it's worth three minutes of your time. Zillow on the other hand, attempts to quantify the demand (pent up or real) in its Supply and Demand Dynamics in Subprime Mortgage Markets. Using a unique database of loan requests and responses through its Zillow Mortgages (an online marketplace that connects mortgage borrowers and lenders) they use three sets of metrics to assess the underlying demand and supply dynamics driving sub-prime mortgage markets over the period covering June 2011 through April 2014. What does the data suggest? Zillow writes, "...demand has grown most dramatically among borrowers with higher credit scores (640 or higher), nearly tripling between June 2011 and April 2014. By contrast, demand among borrowers with slightly lower credit scores-those rated between 600 and 639 who are likely to benefit most if lending standards ease-has grown roughly in tandem with borrowers with credit scores below 600 who are largely excluded from mortgage borrowing regardless of the ease of credit."

 

Let's move on to some upcoming October events of note, in random order...

 

The MBA will hold a special webinar on October 14, 2014 from 2 PM to 3 PM ET with USDA staff who will discuss the benefits of the Automated Loan Closing Systems and answer your questions. Already using the system? Feel free to participate in the webinar to ask questions and improve your knowledge. Access Info: http://mba.adobeconnect.com/usdaga/, (800) 768-2983, code 5572870.

 

The Michigan Mortgage Lenders Association presents its "Mortgage Go Round Workshop" in Grand Rapids 10/16, this round table format has plenty of interaction among the attendees discussing today's hottest topics in mortgage lending. By the way, MMLA members can still get the early bird pricing to attend the MBA Convention in Las Vegas October 19 -22. Just click here to use this registration form to get the discount.

 

Plaza Home Mortgage is offering industry and product trainings. The month of October includes: Ask the Underwriter: Reverse Mortgage Tuesday, October 7 at 11 am Pacific; Loan Prospector®: Interpreting the Feedback Thursday, October 9 at 8 am Pacific or Monday, October 13 at 11 am Pacific; How to Present a Reverse Mortgage Wednesday, October 15 at 11 am Pacific; CFPB Compliance Management System Wednesday, October 22 at 11 am Pacific.

 

AllRegs has the 7 and 8 hour Federal Safe Act CE courses you need to stay licensed and compliant and your credit banking fees are included with registration. NMLS-approved SAFE CE training is just a click away.

 

On the day before Halloween, CFPB updates web seminar on October 30th will help you get a better understanding of the impact of the CFPB's new mini-correspondent guidance and provide practical advice as to how lenders of all sizes can adopt renewal processes, modify business relationships and implement internal infrastructure to remain both competitive and compliant. 

 

Federal Reserve is offering an Outlook Live Invitation on Wednesday, October 22, 2014 at 11:00 a.m. PST (2:00 p.m. EST). Register here as the topics will include a variety of emerging fair lending issues. Speakers at this event will represent the following seven federal agencies.

  

The National Association of Hispanic Rea Estate Professionals, NAHREP, announced its National Convention and Latin Music Festival will take place in Los Angeles, on October 12-14, 2014.  Registration information includes list of events with approximately 2,500 participants expected to attend the conference, which is focused on education, networking, awards programs and entertainment.

 

In partnership with Freddie Mac, Stearns Lending is offering Loan Prospector® training webinars available to Stearns approved brokers. Register for October 14th - topics will include Integration of SNAP / Loan Prospector (LP) and an Overview of Loan Prospector: How Loan Prospector works and interpreting the results.

 

We continue to receive conflicting numbers on the strength (or weakness) of the U.S. economy. It is nearly impossible to argue that we are in a recession as overall things continue to improve, in some cases at least remain stable. On the housing front, I have lost track of what new home sales, existing home sales, pending home sales, the FHFA index, the Case-Shiller Index, etc. have all showed us in the last month. But autumn and winter are rarely times for great appreciation. The impact of rising rates may be minimal as higher rates usually mean a healthier economy, and some experts think that improvements in employment and credit availability will increase the demand and opportunities for first time home borrowers.

 

For the bond market, which includes MBS, we've been in the same range since MLK Day: the 10-year has stayed between 2.80% and 2.35% - (2.65% and 2.35% since May) and we're on the lower end of that. Decent news out of the United States has been balanced against problems overseas which in turn drive money managers to buy our securities. Don't look for that to change this week as we have very little scheduled market-moving news. There is zip today and tomorrow. Wednesday afternoon we'll have the Fed's releases of the minutes from its Sept. 16-17 FOMC Meeting. Thursday is Initial Jobless Claims, along with some inventory and trade figures, and then on Friday some import price indices. The 10-yr's yield at the close of Friday was 2.45% and in the early going today we're at 2.43% and agency MBS prices are better by a smidge.

 

Executive Rate Market Report:

 

Rate markets started unchanged early this morning; the US stock indexes pointed to a strong open at 9:30. No scheduled economic data today, this week’s calendar is thin on data after the stronger than expected Sept employment report last Friday. In the geo-political situations: Honk Kong protestors split on how to continue, with some wanting to move out of blocking commercial streets and consolidating at government buildings; The bombs continued to fall in Iraq and Syria but ISIS so far has foiled the hoped for effect by moving away frm military sites that are the targets, thwarting the bombs’ impact.

More decline in EU economic data; Germany’s factory orders declined to the lowest since 2009. Orders, adjusted for seasonal swings and inflation, fell 5.7% in August, the Economy Ministry in Berlin said today. Economists predicted a 2.5% decline. Export orders dropped 8.4% in August, while domestic demand slid 2%. The World Bank lowered its forecasts for growth in developing East Asia this year. The region is projected to grow 6.9% in 2014 and 2015, down from 7.1% seen in April. That compares with global growth of 2.6% in 2014.

Is the world headed for a currency war? Looks more and more likely that it is; the ECB is on record wanting the euro to decline, Japan also in the mix and now news that China is considering weakening its yuan. Exports in those areas and emerging markets are declining, forcing measures designed to make each country and region more competitive. The US dollar is at a 4 yr high against the euro currency, the stronger the dollar becomes the less competitive for US exports. No one wins in a currency war escalates but economic leaders around the world are without much choice---or so they believe. Economic growth globally is not improving, most economies are slowing. In the US we benefit by being the strongest growth region although we are not setting any records in growth. The US Fed, World Bank, the IMF all continuing to revise growth forecasts lower each time they put out data.

Not much data out this week but what we have is a plethora of Fed officials making speeches. So many speeches from Fedsters that traders are becoming numb to them. Treasury will borrow $61B this week with three auctions. Geo-political issues in the absence of more compelling economic measurements will carry slightly more weight with traders this week.

This morning the DJIA opened at 9:30 +65, NASDAQ +16, S&P +8. 10 yr 2.44% unch; 30 yr MBS price +5 bps frm Friday’s close. US stocks improving on Brazil’s elections that has driven its stock market up 8.0%.

US interest rates little changed so far this morning on lower German rates that fell on weak factory orders; the 10 yr bund rate this morning 0.91%. Last Wednesday the bund yield declined to 0.896%. As long as US interest rates are higher than other key rates in G-7 countries our rates will find support. Still a little safe haven moves but not nearly as strong as a month ago. The technicals still hold minor bullish readings, but since the beginning of Sept the 10 has not been able to break 2.40% or 2.65%, the range in the last month. U.S.-led airstrikes designed to serve notice on Islamist extremists in Iraq and Syria have also delivered a sobering message to Washington and its allies: Breaking the militants’ grip will be every bit as difficult as they feared. At the moment the Hong Kong issue is moderating; the government has been reticent to use force lessening the concerns. Ukraine still smoldering but it too has waned in importance recently.

 

This Week’s Calendar:

Tuesday,

10:00 am August JOLTS job openings (4.71 mil compared to 4.673 mil n July)

1:00 pm $27B 3 yr note auction

3:00 pm August consumer credit (+$20.0B frm +$26B in July)

Wednesday,

7:00 am weekly MBA mortgage applications

1:00 pm $21B 10 yr note auction

2:00 pm FOMC minutes frm Sept meeting

Thursday,

8:30 am weekly jobless claims (+6K to 293K)

10:00 am August wholesale inventories (+0.3%, July +0.1%)

1:00 pm $13B 30 yr bond auction

Friday,

8:30 am Sept import and export prices (imports 0.8% ex ags; export prices -0.1% ex oil)

2:00 pm Sept Treasury budget (+$72B, and the 2014 fiscal total)

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