Overheard at a table of
middle-aged gals having lunch. "I don't want to brag or make anyone
jealous or anything, but I can still fit into the earrings I wore in high
school."
At Happy Hour tonight, besides
talking about refis, you can throw this one out: the number of homes worth $1 million has doubled in the last 4
years. Of course 2012 was pretty much the bottom of the real estate market,
and it has been the big urban areas like San Francisco and Manhattan that have
led the charge higher. Heck, in San Francisco, the median home price is over
$800k. (One bedroom apartments in San Francisco rent for $3648 a month.)
Seems like a little toppy - but rates are helping...
As servicing values continue to
slip, and companies question whether or not they want to own a servicing
portfolio and who is a natural buyer of servicing if banks stop, New York
imposed new requirements yesterday on mortgage lenders to maintain abandoned
houses before foreclosure. Viewed as a blow to servicers, the law
signed by Gov. Andrew Cuomo threatens banks with civil penalties up to $500 a
day for failing to maintain residential properties once they're aware of
vacancies. The new law also establishes an electronic statewide registry of
abandoned homes and a state hotline where neighbors can report them, and
requires notices to mortgage borrowers emphasizing their right to stay in
houses until foreclosure. And a related measure establishes a State of New York
Mortgage Agency fund to buy and sell abandoned properties at below-market rates
and demolish those beyond repair.
On top of that, the CFPB
urged mortgage servicing firms to upgrade their technology to reduce errors and
improve efficiency. The CFPB Mortgage Servicing Report is a special
edition of its supervisory highlights report focusing exclusively on mortgage servicing. The CFPB
found that "some mortgage servicers continue to use failed technology that
has already harmed consumers, putting the company in violation of the CFPB's
new servicing rules." The report did not break new ground but it did serve
as a reminder of the structural importance of mortgage technology firms under
the new regulatory regime.
"Mortgage servicers
have failed to make significant investments in technology and compliance
systems, resulting in substantial harm to consumers," according to the
report. It is recent stuff, reflecting a detailed look at supervisory exams of
mortgage servicers between January 2014 and April 2016, found that outdated and
deficient technology can lead to greater risks for borrowers.
CFPB financial reporter Kate
Berry wrote, "The CFPB found that some servicers failed to honor loan
modifications after a loan gets transferred. Borrowers also faced substantial
delays in receiving permanent modifications because of incompatible systems,
the report found.
'Mortgage servicers can't hide
behind their bad computer systems or outdated technology,' CFPB Director
Richard Cordray said in a press release. 'Mortgage servicers and their service
providers must step up and make the investments necessary to do their jobs
properly and legally.'
"The CFPB will be
conducting targeted reviews this year of mortgage servicers' compliance with
fair lending laws. The reviews will include looking at servicers that are
creditors, such as those that participate in a credit decision about whether to
approve a mortgage loan modification... Mortgage servicing has been a top
concern for the CFPB since it first began examining financial institutions, but
examiners continue to unearth problems. CFPB examiners found problems with loan
modification acknowledgement notices, including notices sent too late, with
incorrect information or deceptive statements.
"The report cited at
least one servicer that failed to send any loss mitigation acknowledgement
notices to borrowers due to a 'processing platform malfunction over a
significant period of time.'
'The magnitude and persistence
of compliance challenges since 2014, particularly in the areas of loss
mitigation and servicing transfers, show that while the servicing market has
made investments in compliance, those investments have not been sufficient
across the marketplace,' the report stated. The agency also updated its
mortgage servicing exam manual, which includes a section on how servicers
handle complaints and requests by troubled borrowers."
As servicers wonder if
it's worth it, the government continues to collect fines, contributing to its
bottom line, the latest to write a big check is Ocwen - "New Co"
spelled backwards. Do you think servicing loans is something you'd really want to
do? Ocwen Financial Corp. agreed to pony up $30 million to resolve lawsuits that claimed it
didn't properly include disclosures for loans it was servicing. (After the
announcement the stock rose slightly, but is still down over 80% in the last
year.) "The lawsuits, which were brought by Michael Fisher and the U.S.
Justice Department, alleged that Ocwen didn't make required disclosures in
connection with the Home Affordable Modification Program, a government program
introduced after the housing crisis to help struggling homeowners avoid foreclosure."
Speaking of regulators
and mortgages, last week the MBA filed a petition for exemption with the Federal
Communications Commission (FCC) seeking an exemption for mortgage servicing
calls from the prior express consent requirements of the Telephone Consumer
Protection Act (TCPA). The MBA is seeking this limited exception in
order to continue to encourage proactive communication with mortgage loan
borrowers and early engagement with financially struggling
homeowners. "Following the financial crisis, many federal regulators
- among them the CFPB, FHFA, FHA and Department of Treasury - have mandated
protocols for reaching out to borrowers through outbound communications when a
homeowner is delinquent. States have enacted similar
requirements. These communications can provide the homeowner with critical
information about their options to save their home. In today's
environment, this often means through outbound calls or text messages to a
consumer if the outreach is going to be effective.
"Unfortunately, the
TCPA can frustrate these communications by imposing the threat of significant
liability for making outbound communications to cell phones. Congress
recognized this and passed an amendment to the TCPA late last year exempting
calls made to collect a debt owed to or guaranteed by the government from the
prior express consent requirements. The FCC has promulgated a proposed rule in
response to the amendment. MBA appreciates this exemption and filed our comments on the rule."
This "federal
debt" exemption, even if construed as broadly as possible, will not extend
to all residential mortgage loans. FHFA recognized that a mortgage
servicing exemption is appropriate and necessary to ensure that all borrowers
are able to receive communications they need through a method likely to reach
them. The FHFA comments on the FCC's rule call for just such an
exemption. MBA agrees that these communications are vitally important for
both borrowers and their communities. Thus, MBA has submitted a petition
for a limited exemption from the prior express consent requirements for
mortgage servicing calls."
And, in another PR black
eye for the industry, Ben Lane with HousingWire reports that, "According to the FTC, a
California-based law firms bilked millions of dollars out of homeowners who
were facing foreclosure by telling them that they could join a 'mass
joinder' lawsuit against their respective mortgage note holders that could
discharge their mortgage entirely, provide monetary relief, or both."
Fannie Mae has
made the following updates to the Servicing Guide: Retirement of
Delinquency Counseling Requirements for Community Lending Mortgage Loans,
Fannie Mae HAMP Modification Termination, Foreclosure Title Costs, Further
Reduction of Servicing Requirements for Florida Acquired Properties, Property
Insurance Reimbursement Limits, Mortgage Release Policies and Procedures and
other Miscellaneous Revisions. Please read the Announcement for details.
Freddie Mac issued
a recent servicing bulletin focused on HAMP, lender-placed
insurance, and reporting a short sale to the IRS.
In somewhat
servicing-related news, Black Knight Financial Services announced that it is
continuing its recent expansion efforts with the acquisition of Motivity
Solutions, which provides customized mortgage business intelligence analytics
to mortgage lenders. The Sherman's Motivity Solutions offerings will be
integrated with Black Knight's LoanSphere Product Suite, including the
LoanSphere Data Hub, which will provide clients with insights into their
origination and servicing operations and portfolios.
With the Brexit vote
passing and the United Kingdom voting to leave the European Union, now what? A
"leave" vote as led to plummeting stock markets around the world,
plunging rates, will prompt Britain to renegotiate its relationship with the
EU, and immediately caused the fall of Cameron's government. It puts our Fed on
hold about a rate increase and could also lead to an interest rate cut in
Europe, a sharp depreciation in the value of the British pound, as we have
seen, and some short-term capital outflows out of the U.K. It doesn't matter
that yesterday the 10-year note closed .5 lower in price to yield 1.741%, and
5-year T-notes, a better proxy for actual MBS prices, worsened .25.
The other news - U.S. new
home sales falling more than expected in May - took second stage. It is
generally thought that the housing market remains relatively healthy and
continues to recover. Initial jobless claims also beat estimates and remain
near historic lows, so that data series is not confirming the deterioration in
the labor market at which that the Labor Department's monthly employment
reports have been hinting. Lastly the Conference Board's Leading Economic Index
fell 0.2% in May, partially reversing April's 0.6% increase.
We've already today's big
data, prior to folks wanting to leave early on what could be a week's vacation
ahead of the 4th of July. Overnight the results of the British vote
showed all the Brexit chatter has come to fruition - but be careful what you
wish for. Capital markets' staffs are reminding LOs that a rate lock is a
rate lock while at the same time brushing off their renegotiation policies.
Not surprisingly, MBS spreads are opening substantially wider with treasury
prices soaring. Volatility is also up, and anyone hedging a pipeline is
wondering about margin calls from their investment banker counterparties - and
they don't renegotiate.
Looking to the very near
term, the Fed will provide some moderate support to help offset some of the
likely jump in supply as refinancing activity picks up with the 10-year yield
down in the low 1.50s. The higher MBS prices will push investors to the
sidelines or to take profits, though spread buyers could step in. As noted
above the Brexit vote has eliminated a July rate hike by our Fed, and I imagine
the Fed reinvestments continuing beyond 2017.
In this country we've had
May Durable Goods Orders (-2.2%) and Durable Goods Orders ex-transportation
(-.3%). Later is the second-tier number: June Michigan Sentiment. We closed
the 10-year Thursday at 1.74% and this morning its at 1.54% with some agency
MBS prices better by over a point.
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