Genworth
U.S. Mortgage Insurance recently released its survey that was conducted
at the MBA conference in Las Vegas in October of over 300 industry executives.
About 61% of executives believe lenders have underwriting standards that are
too rigid, whereas 25% believe standards are not overly restrictive and 14%
believe the standards are fitting. More than half (53%) believed if guarantee
fees increased, it would result in fewer loans being closed and an additional
23% believe it would increase the demand for FHA loans. Almost two-thirds of
respondents (64%) believe that low-income borrowers with strong credit do not
have appropriate access to credit markets when purchasing a home and 38% of
respondents are labeling the potential return of piggyback lending as a threat
to the stability of the housing industry.
The
First Community Mortgage Delegated
Correspondent lending channels continues adding Best Efforts Sellers and loan
volume at a record pace. "We continue to partner with Sellers who are looking for
an investor who makes a difference in their business," says Dennis
Patchett, Nationals Sales Manager. "Our pricing is consistent and our
communication and speed separates us from competition. We've built a
'best of breed' delegated platform, but we've been selective in choosing who
gets the benefit of the platform. This selective methodology allows our
true partners to experience something completely unique and beneficial,"
he adds.
The role of the LO is changing. One
of the sessions yesterday at the MBA conference covered how top producers and
veterans are now struggling to maintain their success due to a suffocating
regulatory environment and business development hurdles. In order to be
successful in this industry today, you must be comfortable with compliance and
operations. Along with having to mold to emerging industry standards, success
for any company will also be driven by recruiting the right talent. Yesterday
at the MBA's IMB conference, during the session on recruiting, the panelists
raised the importance of retaining employees and hiring synergistic talent. As
it is becoming increasingly more difficult to predict an employee's success,
the panelists encouraged companies to look for employees who are excited about
the industry, eager to learn and have excellent interpersonal skills. Companies
should also be open to the idea of taking risks on current employees and
training them in order to proliferate their career. The panelists also raised
the issue of hiring bank employees, as they tend to be more acquainted to a
structured working environment, a deviation from the level most IMBs provide.
Companies should also engage in employee-building relationships such as monthly
meetings with top producers to understand how they are being successful,
providing an office lounge, and building a testimonial book that can be used as
a tool for recruiting.
Turning
to product news, Tom Davis from PMAC writes, "On
December 1, 2014 the USDA's new guidelines (CFR) Part 3555, "Single
Family Housing Guaranteed Loan Program" (SFHGLP) became effective,
replacing 7 CFR 1980 Subpart D. The new regulations, technical handbook,
and respective forms can be found at the USDA
Rural Development's Regulation and Guidance page.
The new guidelines address the requirements of Section 502(h) of the Housing
Act of 1949, as amended, and include policies regarding the origination, servicing,
holding and liquidation of SFHGLP loans. All loan applications that do
not have a conditional commitment issued by USDA prior to December 1, 2014 are
subject to the new guidelines. For guideline updates, program
information, potential map changes, lender contacts, recorded origination and servicing training
sessions visit USDA Guaranteed Rural Housing LinkedIn
Group.
While
we're on underwriting, tongues are wagging about the article Dodgy
Home Appraisals Are Making a Comeback. Home appraisers are inflating the value of some properties they assess,
often at the behest of loan officers and real-estate agents, in what industry
executives say is a return to practices seen before the financial crisis. In
response Mike Perry writes, "Statement 514, available on
my blog, notes, 'If one in seven appraisals are currently inflating home values
by 20% or more, why aren't Fannie, Freddie, FHA, and VA stepping up lender
buybacks and instead recently announced policies that act to reduce them? And
why aren't the banking regulators doing more than "reviewing the issue'? I
will tell you why..."
Fannie
Mae has announced its new appraisal quality tool, Collateral Underwriter. (You can obtain it from
clicking on the link for free.) Many lenders and AMCs are worried about what it
means for them and how it will change their pre-funding quality assurance
strategies. There's a new white paper out with an overview of Fannie Mae's
plan, what lenders and AMCs need to do to be prepared for the January 26th
rollout, and a full list of regulatory issues relevant to appraisal quality
control. The paper also has solution strategies and a list of industry
resources on effective QC.
Turning to the markets there is
just not much going on that has moved rates. In fact the 10-yr T-note closed
Tuesday and Wednesday at the same yield: 2.29%. We did, however, have some news
yesterday. First, the ADP National Employment Report shows 208,000 jobs were
added in November. The MBA Weekly Mortgage Applications Survey for the week
ending November 28 dropped over 7% with refis dropping 13% (hitting 60% of all
applications) but purchases increasing 3%. Further slicing and dicing showed
the ARM share decreased to 6.7%, the FHA share decreased to 9.3%, and the VA share
decreased to 9.4%. Nonfarm labor productivity increased at a 2.3% annual rate
in 3Q2014, Unit labor costs in the nonfarm business sector fell 1.0%.
Lastly, the Institute for Supply Management's non-manufacturing index rose to
59.3, the second-highest level since August 2005, from 57.1 in October. After
the dust settled there were some small inter-coupon moves along with some
differences between Fannie, Freddie, and Ginnie bonds, but nothing
earth-shattering.
Rate
Market Report:
Mortgage prices better early, treasury markets quiet also
slightly better. At 8:30 weekly claims were in line with forecasts, down 17K to
297K. The four-week moving average, which smooth’s out the data, increased by
4,750 to 299,000. The U.S. labor market reached its longest stretch of job
creation since at least World War II in October and is on pace to post the best
yearly gain in employment since 1999; most low paying but markets don’t care, a
job is a job as far as economists are concerned. The fact that the high
majority of jobs are part-time, or low paying, or both, is reality but is best
ignored by investors. . That is it for data today.
Most attention this morning is on the ECB; the
bank left interest rates unchanged and said policy makers will reassess
stimulus next quarter. Draghi said the ECB could alter “early next year the size,
pace and composition of our measures” after policy makers kept interest rates
unchanged today, in line with analysts’ estimates. Europe’s stock markets
declined on the ECB news on disappointment that the bank didn’t add more
details to its asset-backed purchases. Draghi is slowing down his comments
about more asset purchases and waiting until next quarter to, as he said
“reassess” additional stimulus. He is taking fire form Germany and other ECB
members. He is holding his press conference now. The ECB’s challenge is that as
EU governments struggle to convince their electorates of the need for economic
reforms and haggle over fiscal stimulus, it is left as a lonely defense against
further deterioration.
Tomorrow is employment day; cyber-data day. Estimates
are unchanged form earlier this week; non-farm jobs +225K, private jobs 230K;
non-farm private jobs if they match estimates would be 16K better than growth
in October. Unemployment unchanged at 5.8%, average hourly earnings +0.2%.
The ECB and Mario Draghi are roiling the markets this morning with
comments that swing both way; more stimulus but maybe not, and not now. Germany
is holding out and is resisting purchases of sovereign debt for EU members;
Draghi trying to ride the center line is causing increased volatility this
morning. Early this morning the 10 was at 2.27% -2 bps form yesterday and MBS
prices were +11 bps. At 9:30 the 1 unchanged at 2.29% and 30 yr MBS price down
5 bps. The DJIA opened -34, NASDAQ -3 and S&P -4.
The 10 has support at 2.30% and is holding after the volatility
over the weekend that dropped the rate to 2.17%. Our
models still holding slight bullish reads, however all of our studies are only
marginally positive. A close over 2.32% on the 10 will turn everything bearish.
We continue to believe rates are not going to increase much through the rest of
this year. Much depends on consumer spending over the holidays, so far
consumers are spending but not as significantly as analysts had thought so far.
PRICES @ 10:00 AM
- 10 yr note: +3/32 (9 bp) 2.27% -2 bp
- 5 yr note: +2/32 (6 bp) 1.60% -1 bp
- 2 Yr note: +1/32 (3 bp) 0.54% -1 bp
- 30 yr bond: +11/32 (34 bp) 2.97% -2 bp
- Libor Rates: 1 mo 0.158%; 3 mo 0.234%; 6 mo 0.327%; 1 yr 0.564%
- 30 yr FNMA 3.5 Dec: @9:30 103.78 -5 bp (+6 bp form 9:30 yesterday)
- 15 yr FNMA 3.0 Dec: @9:30 103.80 -1 bp (-7 bp form 9:30 yesterday)
- 30 yr GNMA 3.5 Dec: @9:30 104.60 -2 bp (+7 bp form 9:30 yesterday)
- Dollar/Yen: 119.90 +0.11 yen
- Dollar/Euro: $1.2378 +$0.0067
- Gold: $1205.90 -$2.80
- Crude Oil: $66.47 -$0.91
- DJIA: 17,864.34 -48.28
- NASDAQ: 4780.05 +5.58
- S&P 500: 2070.60 -3.73
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