Differences Between Broker & Mini-corr; Jumbo Deals & Lender Financing Alternatives

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Some of the big topics here at the CMBA Western Secondary conference are margins, compensation, and compliance. Reports show that bank tellers earned an average of $25k in 2012 and other bankers earned 50% more. I have certainly heard my share of stories about how a lender noticed a pleasant, intelligent teller, and brought that person into residential lending with good success. How about techniques on compensating compliance personnel?

Vendor and counterparty vigilance is becoming the name of the game - it isn't enough to police your own company's activities and financial health; you must also do the same for key companies that your business relies upon. Law firm Buckley Sandler tell us, "On July 1, the Federal Reserve Board announced a joint enforcement action with the Illinois Department of Financial and Professional Regulation against a state bank that allegedly failed to properly oversee a nonbank third-party provider of financial aid refund disbursement services. The consent order states that from May 2012 to August 2013, the bank opened over 430,000 deposit accounts in connection with the vendor's debit card product for disbursement of financial aid to students. The agencies claim that during that time, the vendor misled students about the product, including by (i) omitting material information about how students could get their financial aid refund without having to open an account; (ii) omitting material information about the fees, features, and limitations of the product; (iii) omitting material information about the locations of ATMs where students could access their account without cost and the hours of availability of those ATMs; and (iv) prominently displaying the school logo, which may have erroneously implied that the school endorsed the product. The regulators ordered the bank to pay a total of $4.1 million in civil money penalties. In addition, the Federal Reserve is seeking restitution from the vendor, and, pursuant to the order against the bank, may require the bank to pay any amounts the vendor cannot pay in restitution to eligible students up to the lesser of $30 million or the total amount of restitution based on fees the vendor collected from May 2012 through June 2014. The consent order also requires the bank to submit for Federal Reserve approval a compliance risk management program in advance of entering into an agreement with a third party to solicit, market, or service a consumer deposit product on behalf of the bank." 

Ballard Spahr provided some elucidation on the recent CFPB/min-correspondent proposals, specifically with regard to the questions that brokers will need to answer. "To provide guidance, the CFPB sets forth a number of questions that it may ask to assess whether a company using a mini-correspondent structure is actually acting as a creditor, or is acting as a mortgage broker. The CFPB notes that the questions in the guidance are not exhaustive and that no single question is necessarily determinative of how the CFPB may exercise is supervision and enforcement authority. The questions reflect areas that likely are of concern to the CFPB, including whether the warehouse line arrangement that the mini-correspondent uses to fund loans is bona fide and whether the mini-correspondent is actually performing the functions of a creditor.  Among the various questions are the following. Is the warehouse line of credit provided by a third-party warehouse bank? Is the warehouse bank providing the line of credit one of, or affiliated with any of, the mini-correspondent's investors that purchase loans from the mini-correspondent? How thorough was the process for the mini-correspondent to get approved for the warehouse line of credit? Does the mini-correspondent have more than one warehouse line of credit? Does the mini-correspondent's total warehouse line of credit capacity bear a reasonable relationship, consistent with correspondent lenders generally, to its size (i.e., its assets or net worth)? What changes has the mini-correspondent made to staff, procedures, and infrastructure to support the transition from mortgage broker to mini-correspondent? What training or guidance has the mini-correspondent received to understand the additional compliance risk associated with being the lender or creditor on a residential mortgage transaction? What entity (mini-correspondent, warehouse lender, investor) is performing the majority of the principal mortgage origination activities?" 

Who actually closes the loan is important. Speaking of the closing process, my STRATMOR colleague Garth Graham has a great point on why it's so important to attend closings. Often, loan officers think they are too busy and that closing is a waste of time.  But the person who is NOT at closing is going to get blamed, and too often it's only the closing agents and the Realtors who are present at the closing table.  And it's also a great chance for getting referrals and reinforcing the relationship.  Read GET TO CLOSING for more insights. 

Financing is all the rage! What happened to good old warehouse arrangements? America First Multifamily Investors announced that it has entered into a second long-term secured debt financing facility with Freddie Mac utilizing Freddie Mac's Tax-Exempt Bond Securitization or "TEBS" program. Proceeds from the TEBS Financing totaled approximately $94.7 million which was used to repay a portion of the outstanding balance due on the Partnership's Tender Option Bond facilities. The TEBS Financing is a securitization of 13 of the Partnership's mortgage revenue bonds and essentially provides the Partnership with a long-term variable rate debt facility at interest rates that will reflect prevailing short-term tax-exempt rates. The effective interest rate to be paid on the TEBS Financing is equal to the weekly Securities Industry and Financial Markets Association ("SIFMA") floating index rate plus certain credit, facility, remarketing and servicing fees (the "Facility Fees"). 

And lenders are setting up alternative funding arrangements. The latest news comes from PennyMac, which is entering into a $550 million loan repo facility with Bank of America to help fund newly originated mortgages. It sells the mortgages to BofA, for PennyMac to potentially later repurchase, in a deal fully guaranteed by PennyMac, for loan that Penny purchased from correspondent lenders and were pledged for sale and/or securitization, according to documents filed with the SEC. 

Fannie Mae announced a $2bn risk-transfer deal - its largest risk sharing MBS sale to date. And BlackRock plans to auction off $3.7 billion, in an "all or nothing" deal, of legacy subprime mortgage-backed securities today. Redwood plans to sell its second prime RMBS of the year, Kroll said in a presale report, backed by high quality, prime jumbo mortgage loans. It will have an aggregate loan balance of $306 million, an average loan balance of $699k, with the top originators being Homestreet ( 21.5%), FRB (13.3%), and PrimeLending (9.9%). The servicers include Cenlar (81.9%), FRB (13.3%), and PHH (4.8%), with most of the production coming from California, Washington, and Texas. Interestingly, "only" 87% of loans fall under the scope of the QM. No one ever said non-QM loans are bad loans, and in this pool the weighted average LTV is 71% and the weighted average credit score of the mortgage pool is 768. 

But wait, there's more! Credit Suisse is in the market with a new $368 million jumbo RMBS. These loans come from Quicken, First Republic, Caliber, and Sierra Pacific. 

Up until recently there had been only about 50 prime transactions issued since the market "re-started" in 2010, with most of that volume placed over the past 24 months. Given the lack of commercial lending opportunities there has been strong portfolio demand for high quality mortgage assets, and challenging securitization incentives. But a growing source of supply in 2014 has come from GSE risk transfer programs, noted above. Both Fannie Mae and Freddie Mac have issued multiple transactions in 2014 and all indications suggest they will continue to be active for the remainder of the year. According to the Federal Housing Finance Agency's 2014 Scorecard for Fannie Mae and Freddie Mac, each is expected to execute credit risk transfers on residential mortgages of at least $90 billion of unpaid principal balances. This represents a three-fold increase from last year's scorecard.  In addition, the GSE's are encouraged to explore other transactions types, which can include a senior/sub structure or other alternatives. We're also seeing very strong demand for non-traditional mortgage transactions, including non-performing loans, re-performing loans, and single family rental securitizations. 

Investors have little to complain about, as the performance of the pools has been excellent. Heck, they're filled with creampuff loans, right? The most recent stats I saw said that of the 20,000 loans securitized since 2010, only one loan is currently more than 60 days delinquent. Recent issuances contain higher FICO scores (771), lower combined loan-to-value ratios (68% versus 70%) and more loans that are fully documented (100% versus 64%) than deals that came to market prior to 2005. 

And lenders/investors are also pushing the envelope. AmeriHome Mortgage Company is rolling out a new Core Jumbo Product. For information on this product and other opportunities, visit Amerihome. I spent some time with AmeriHome yesterday at the CMBA conference, and they have a lot of expansion plans in the works! 

Athas Capital Group has lowered rates and fees and expanded subprime guidelines. Some opportunities available for clients include OO LTV's to 80%, NOO to 75% with only a 650 FICO, 12 or 24 months personal bank statements available, Asset depletion program, and Stated income available for business purpose loans. 

Cole Taylor Mortgage recent bulletin included Jumbo Loan Guideline Enhancements. Several helpful enhancements and clarifications have been updated which include: allow new subordinate financing, acreage over 10 acres up to 20 acres allowed in certain circumstances, increase in maximum LTV for specific programs and terms, and decreased minimum allowable FICO on some products. 

Carrington Mortgage Services announced FICO Reduction to 550 on Government Programs. 

Impac Mortgage Corp. Wholesale offers FNMA HomePath loans with credit scores as low as 620, up to 95% LTV for primary residences and up to 90% LTV for second homes and investment properties. "5-10 Financed Properties, Fixed Rate Loans - Fully Amortizing, No Appraisal Required- the Sales Price is Used to Determine LTV/CLTV/HCLTV. No Mortgage Insurance, gifts acceptable and condos allowed." 

Lastly, on the earnings front, JPMorgan Chase reported second quarter 2014 net income of $6.0 billion on revenue of $25.3 billion. Mortgage banking net income was $709 million, a decrease of $433 million from the prior year, driven by lower net revenue and a lower benefit from the provision for credit losses, partially offset by lower noninterest expense. Mortgage application volumes were $30.1 billion, down 54% from the prior year and up 15% from the prior quarter. And period-end total third-party mortgage loans serviced were $786.2 billion, down 6% from the prior year and 2% from the prior quarter. 

There is not much pushing rates one way or the other, resulting in another quiet day for rates Monday although MBS prices worsened about .125. There was no news, unlike today which includes the June Retail Sales number (expected +.3%), the July NY Fed manufacturing survey, and the June Import Price Index. Later we'll have Fed Chair Janet Yellen giving her version of Humphrey Hawkins testimony. The "benchmark" 10-yr closed Monday with a yield of 2.55% and in the early going is at 2.53%, and agency MBS prices are better by about .125. 

 

 The rate markets continue to decline this morning as the stock indexes are better early this morning. Yesterday MBS prices declined 24 bps, at 9:00 this morning down another 5 bps. The 10 yr yield increased 2 bps yesterday, at 9:00 this morning another 1 bp higher in rate to 2.56%. 8:30 data; June retail sales expected up 0.6% were up 0.2%, ex auto sales expectations were for an increase of 0.6%, as reported +0.4%. The headline didn’t look very good but May retails were revised higher by 0.3%, from +0.2% to +0.5% lessening the reaction to the weaker June sales. Also at 8:30 the July NY Empire State manufacturing index was expected to have slipped a little from 19.3 in June to 17.8 in July; the index increased to 25.6. The NY report is a regional one and has been increasing over the last few months; the April index was 1.9, May 19, June 19.3 and now 25.6. A very healthy increase over the last four months. The two data points supported the equity market indexes prior to the 9:30 open. While the data is better overall, not much change in markets ahead of Janet Yellen’s testimony at the Senate Banking Committee.

At 9:30 the DJIA opened +48, NASDAQ +8, S&P +3; 10 yr 2.55% +1 bp and 30 yr MBS prices -9 bp from yesterday’s close and -17 bps from 90:30- yesterday).

Janet Yellen is beginning her testimony shortly. Since her Feb testimony the economy has gained momentum; the unemployment rate was 6.7%, now 6.1% and inflation was 1.2%, less than the 2.0% the Fed wants. Since the Feb testimony inflation has edged up to 1.8% and obviously close to the Fed’s goal. Yellen has said the Fed’s plans for interest rates depend on how fast the economy converges on its goals of maximum employment and 2% inflation. Yellen has been emphasizing recently that the del ne in the unemployment rate is mis-leading and reminds that job creations are mostly lower paying jobs and that 7.5 mil people that are working want full time jobs but can’t find them. “While conditions in the labor market have improved appreciably, they are still far from satisfactory,” Ms. Yellen said in an update on the economy to the Joint Economic Committee in May. After a five-month stretch in which businesses have added 1.2 million positions to their payrolls; she is likely to be questioned on whether she now has a more optimistic outlook.

BREAKING: Yellen’s prepared text is a little more cautious about the economy than most other analysts espouse. The rate markets gained ground from 9:30 levels (see below for MBS 9:30 levels); at 10:10 +6 bp, up 12 bps. Technicals still holding positive outlook, but still trading in tight ranges, no directional trend.

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CFPB Addresses Death; Servicing news; New investors Popping up

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Although Bismarck, ND is a fine city, it did not make Zillow's Best Places to Buy a Vacation Home list. I read many articles during the course of the week but this one is pretty interesting and managed to capture my attention away from Tetris for a while. Zillow created an index, known as the Second Home Index (SHI) in order to surface U.S. cities near popular vacation destinations that are also good locations to buy a second home for seasonal use. This is an interesting index, one which may have merit, as they identified vacation cities near popular destinations, then ordered those cities according to their investment and rental income potential. Spoiler Alert: homes in a number of prices ranges, within five miles of a golf course, appear to only be located in Florida. Go figure.

Will a new HARP ride in and save the refinance business? Probably not, as borrowers seem kind of "tapped out" on the program, but the public relations efforts have been renewed. This week FHFA Director Watt spoke at a town hall meeting in Chicago to publicize the Home Affordable Refinance Program (HARP). The FHFA estimates that as of the end of 2013 there were roughly 676,000 loans still eligible for HARP refinancing. Notably, Director Watt did not use this event to announce an extension of the HARP's current expiration date. Following the event, Director Watt was asked about the extension issue and stated: "It's not even something that I'm looking at right now because we are in 2014 and the existing HARP program doesn't end until the end of December 2015." 

As we prepare for the last round of World Cup Soccer, I would like to refer you to my colleague Garth Graham who recently wrote about comparisons between our industry and the world's favorite game. 

As many know, reverse mortgages are available to homeowners 62 years old and older with significant home equity. They are designed to enable retirees to borrow against the equity in their homes without having to make monthly payments as is required with a traditional "forward" mortgage or home equity loan. Under a reverse mortgage, funds are advanced to the borrower and interest accrues, but the outstanding balance is not due until the last borrower leaves the home, sells, or passes away. Borrowers may draw down funds as a lump sum at loan origination, establish a line of credit or request fixed monthly payments for as long as they continue to live in the home. According to the National Reverse Mortgage Lenders Association, senior home equity has reached $3.60 Trillion (its highest level since 1Q'08) and there are currently more than 575,000 senior households using a reverse mortgage to help meet their financial needs...it's also estimated that there are at least 575,000 children who may be surprised when the will is eventually read. 

Huh? We're being told now that last year Nationstar was restricted by adding Fannie & Freddie servicing? I'm always the last to hear..... 

So you're in the market for a little servicing, uh? Well here ya go...MIAC has two offerings; the first a $3 Billion FNMA/GNMA mortgage servicing portfolio. The portfolio is being offered by a mortgage company that originates loans with a national geographic concentration. The Seller will be providing full reps and warrants for the package: $170,406 Average Loan Size, 95% fixed and 5% hybrid loans, 14% Fannie A/A, 33% Fannie MBS, 18% GNMA I and, 35.14% GNMA II loans; Weighted average interest rate of 4.254%, 21% retail and 79% wholesale, with bids due by July 14th...the second, a $50 Million per month concurrent flow mortgage servicing offering. The flow servicing is being offered by a "well-capitalized" bank that originates nationally. The seller will be providing full reps and warrants for offering: $245k average loan size, 100% fixed rate loans, GNMA - 53.94%, FNMA A/A - 42.66%, Freddie ARC- 3.40%, 100% retail, national state distribution, and average FICO score of 752, with bids due today. 

The only two sure things in life are death and taxes, right? The CFPB issued an interpretive rule to clarify that "when a borrower dies, the name of the borrower's heir generally may be added to the mortgage without triggering the Ability-to-Repay rule. This clarification will help surviving family members who acquire title to a property to take over their loved one's mortgage and to be considered for a loan workout, if necessary, to keep their home. 

For some quick investor & agency news... 

As a reminder, on June 18th, Freddie introduced the Freddie Mac MyCity Modification, a temporary offering within the city of Detroit, Michigan, to assist struggling homeowners by providing a loan modification option that may offer significant payment relief. The goal is to help provide eligible borrowers with more affordable terms so they can stay in their homes. Only Servicers with loans in the eligible Detroit ZIP codes, or those who may acquire servicing of applicable loans in those ZIP codes in the near future, will be impacted by the requirements described in Guide Bulletin 2014-11, related to the MyCity Modification. These specific ZIP codes are listed in today's Guide Bulletin. Servicers must follow the MyCity Modification guidelines and submit their recommendations for borrowers on and after September 1, 2014. For complete information: Bulletin 2014-11. 

Mortgage Master, Inc. announced it has become the first non-depository lender to join the Massachusetts Home Ownership Compact to provide affordable mortgage solutions to lower income first-time home buyers. As a signatory of the Home Ownership Compact, Mortgage Master has committed to make a good faith effort to provide Mass Housing mortgage loans to borrowers below the median household income in 2014. 

Cole Taylor Mortgage announced its offering of LPMI High Balance Fixed Products: 30-year fixed, 20-year fixed and 15-year fixed. The current rate sheet reflects the applicable rate adjustment and is effective for all loans locked on or after June 16th. 

ABA Community Bank Mortgage LLC has selected First Community Mortgage (FCM) as a secondary market investor. With this selection, ABA Community Bank Mortgage LLC owner banks can sell agency-eligible loans on a servicing-released basis to FCM and access their full line of products. 

And it has also selected Five Oaks Investment Corporation as its newest secondary market investor, a move that will allow owner banks to sell non-conforming jumbo loans on a servicing-released or servicing-retained basis to Five Oaks and access their full line of fixed rate and ARM products. Five Oaks is also announcing a private label servicing solution for owner banks. ("Co-owned by the Corporation for American Banking, an ABA subsidiary, and community banks, the ABA Community Bank Mortgage LLC leverages the power of joint ownership for better execution on loans sold into the secondary market.  By aggregating volume, the LLC is able to leverage the quality and total volume of the owner banks' loan production.") 

Bayview Correspondent Lending has updated its Non-QM Portfolio Products. The summary includes **Standard loan amounts up to $1,500,000, Non-Warrantable Condos to 70% LTV on Primary Residences. Primary Residence, Second Homes and Non-Owner Occupied properties Single Family Attached/Detached, condominiums, Planned Unit Developments, Leaseholds and standard agency Rural Properties: Maximum 80% loan-to-value (LTV) on all products (LTV reductions may apply for Second homes, Investment properties and jumbo loan sizes). 

Fifth Third has clarified eligibility and asset requirements on all Fannie Mae products. These clarifications include but are not limited to the following: delayed financing, continuity of obligation and multiple financed propertied for the same borrower. Asset requirement including business assets, life insurance funds, and VOD requirements are also updated. Contact your Sales Representative for complete update information.  

Penny Mac is aligning with recent Freddie Mac changes as outlined in Freddie's 14-12 bulletin in its announcement 14-36. These changes include large deposits, monthly debt payment-to-income ratio requirement, Open Access and Power of Attorney.  Penny Mac announcement 14-35 aligns to Fannie Mae's recent updates regarding Cash-out transactions, Continuity of obligation, multiple financed properties, POA, and other Asset Policies. Announcement 14-34 from Penny Mac discusses availability of employment beginning after close allowed on conforming LP loans.  To view these Penny Mac announcements, visit: gopennymac or contact your representative for complete details. 

The markets did not do much yesterday, but overnight saw quite a move. Wednesday morning was quiet, but we saw some movement after a weak 10-yr T-note auction ("lukewarm demand as the issue tailed by 1.2bps at 2.597%. Stats were weak with 39.6% awarded to indirects, 13.9% directs and a 2.57 bid to cover"). We also had the minutes from the June Fed meeting, indicating that the final QE taper will be $15Bln in October if the economic outlook holds. And of great interest is that discussions are still occurring as to what/how tools will be used to raise rates. So as expected, the FOMC minutes included discussion on the Fed's exit strategy and there is support for continuing reinvestment purchases past the first rate hike. "Many participants agreed that ending reinvestments at or after the time of liftoff would be best, with most of these participants preferring to end them after liftoff." 

That is yesterday's news. In the early going we're seeing a nice rally/improvement in rates. There are a host of "reasons" but this all still feels like a bout of consolidation/digestion in an environment of very thin liquidity and no news. Sentiment began deteriorating earlier in the week although the fundamental landscape hasn't shifted much. There were a few "negative" headlines (China's exports were a touch below estimates, industrial production in France & Italy were light, Portugal worries continue to reverberate through Europe, Japan machinery orders plunged, etc.).

 

Here in the U.S. we've seen Initial Claims (expected at +312k from +315k, it was -11k to 304k, with the 4-week moving average -3,500). The Treasury concludes its latest round of coupon auctions with $13 billion reopened 30-year bonds at 1PM EST. In the early going the 10-yr. is better by .5 and down to a yield of 2.50% after closing Wednesday at 2.55%, and agency MBS prices are better by about .250. 

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Bank Shuts Mortgage Division; CFPB Update; Why you Don't Handling your Remodel!

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"Imagine if all 28,394 of us banned together." "Banded" would be the appropriate word to use there, of course. If anyone from the Illinois Association of Mortgage Professionals would like to change that word, you can see it in the first paragraph on your website. Whereas I am good at butchering it, others should do what they can to preserve the English language...

What has the CFPB been up to lately? For starters, remember that the Consumer Financial Protection Bureau's funding comes not from Congress but from the Federal Reserve. The reasons why Congress didn't want to keep control over its funding aside, last week news broke over the possible seemingly incredible cost overruns in the CFPB's real estate practices.

 

Ballard Spahr's Barbara Mishkin reports, "The ballooning cost estimates for renovating the CFPB's Washington, D.C. headquarters was the subject of verbal sparring between Director Cordray and Republican Congressmen during Director Cordray's most recent appearance before the House Financial Services Committee.  That sparring is likely to become even more heated as a result of a letter issued earlier this week by the Office of Inspector General (OIG) for the Fed and CFPB evaluating the CFPB's renovation budget...The letter indicates that the CFPB's approval processes require major investments to be reviewed by the CFPB's Investment Review Board (IRB) and while IRB approval is not necessary for the CFPB to include a major investment in its budget, such approval is needed for budgeted funds to be available for expenditure. To obtain IRB approval, a CFPB program office must complete an IRB "business case" which, according to the CFPB's internal guidance for making a "sound business case," requires consideration of alternatives, including a comparison of the costs and benefits of alternatives and the rationale for the investment.  It also requires a return on investment to be shown and stresses the importance of a quantitative analysis."

 

Ms. Mishkin's write up continued. "The OIG found that that CFPB did not follow all of its internal guidance when completing the business case for the renovation.  By way of example, the OIG found that while the CFPB listed alternatives in its business case, it did not complete any analyses of those alternatives and did not include any quantitative information or calculations related to a return on investment.  The OIG was informed by CFPB officials that the IRB approved the business case without such information 'because funding approval was viewed as a formality given that the decision to proceed with the renovation had already been made.'  The CFPB, however, was unable to locate for the OIG any documentation of the decision to fully renovate the building."

But holy smokes... $590 per square foot? Of course it is not quite a fair comparison, but when (and where, outside of SF or NY) was the last time you saw a 1,000 square foot home sell for $590,000? 

An industry veteran (and who isn't at this point?) recently sent me an email and asked how many types of reviews the CFPB is conducting. I replied back in scientific notation; she responded with a picture of a cat hanging from a ceiling fan. It turns out she was asking about fair lending supervisory reviews, in which case there currently are three: ECOA Baseline Reviews, ECOA Targeted Reviews, and HMDA Data Integrity Reviews.  

An ECOA Baseline Review helps the Bureau identify possible ECOA and Reg B violations within a particular firm or bank. As it has been explained to me, when such a review is warranted, the Bureau's examiners will rely on the Office of Fair Lending, with help from regional management within the CFPB itself to help determine the scope and breadth of the review, which is dependent on the firm's business practices and assumptions of risk. Such a review normally entails an evaluation of the firms fair lending compliance program, P&P's (yes, those are actually looked at contrary to what the people who write them will tell you), training materials, internal oversight which includes controls and any corrective measures taken place in the past. A Baseline Review may end with administrative actions considering the review is targeting ECOA, and may follow with a targeted review.  

An ECOA Targeted Review is deemed appropriate if the Baseline Review reveals that a particular institution's business model, polices or procedures, present fair lending risks. Targeted Reviews typically include statistical analyses, and possible loan file reviews, in order to evaluate compliance within ECOA and Reg B for a particular line of business. The CFPB will use data analysis and testing at this point in order to detect and assess disparities between borrowers. If disparities are detected, the Bureau will notify the examinee of its preliminary findings and make a formal request for further data. 

HMDA Data Integrity Reviews evaluate the accuracy of a firm's HMDA collections; it's important to note, missing fields and incomplete information, which is historically all too common in the industry, WILL LEAD TO FURTHER IN DEPTH SCRUTINY by the CFPB. With what has been pointed out in the past, if there are substantial data integrity concerns at any level of review, the Bureau may determine (and has) that the examination has been impeded, and will conclude management is solely responsible for having caused such data integrity concerns...which is not a good situation to place your firm. To prepare for such reviews, the CFPB published a HMDA Resubmission Schedule and Guidelines which provides instructions and additional details on the HMDA Data Integrity review process. 

As I wrote recently month, the CFPB and Federal Reserve's jointly scheduled webinar, which occurred on June 17^th, covered the final TILA-RESPA Integrated Disclosures Rule that will be effective for applications received by creditors or mortgage brokers on or after August 1, 2015.  The webinar was the first in a planned series intended to help creditors, mortgage brokers, settlement agents, software developers, and other stakeholders familiarize themselves with the rule's architecture and its substantive and procedural disclosure requirements. The CFPB staff used the initial webinar to provide a basic overview of the final rule and new disclosures. Ballard Spahr writes, "According to the CFPB staff, subsequent webinars on the final TILA-RESPA Integrated Disclosures rule will function entirely as a spoken Q&A to answer questions that have been posed to the Bureau.  This is in contrast to the CFPB staff's previous approach of providing private one-on-one interpretive guidance on implementing the Title 14 mortgage rules concerning the Ability-to-Repay and Qualified Mortgage rules. Although the CFPB staff does not plan to issue written Q&A, the staff believes this approach will help facilitate clear guidance on the new rules in an accessible way. 

Also recently the CFPB opened its first public Consumer Advisory Board (CAB) meeting, with comments regarding implementation and enforcement of CFPB mortgage rules. Within the last year the Bureau has attempted to publicly outline and clarify its expectations for mortgage originators and servicers. The CFPB's initial public position, particularly with regard to the new servicing rules, was that "in the early months" after the rules took effect, the CFPB would not look for strict compliance, but rather would assess whether institutions have made "good faith efforts" to come into "substantial compliance." CFPB Deputy Direct, Steve Antonakes, made news in February when he attempted to clarify that position in remarks to a Mortgage Bankers Association conference. As Buckley Sandler write, "There he stated "servicers have had more than a year now to work on implementation" of "basic practices of customer service that should have been implemented long ago" and that "a good faith effort . . . does not mean servicers have the freedom to harm consumers." However, Mr. Antonakes took a somewhat softer tone in his remarks during the CAB meeting, stating that the CFPB's goal "is not some one-sided aim to maximize consumer protection or industry deterrence at all costs." He cautioned that "there is such a thing as doing too much" and explained that the Bureau's true goal is to find "an appropriate balance where incentives for homeowners, creditors, and servicers are aligned." 

The CFPB recently launched a new eRegulations tool, and wants to show MBA members how it all works in an upcoming complimentary webinar. This new tool includes section-by-section breakouts for each part of Regulation Z, the ability for you to track how this rule has changed, either by legislation or revisions and an explanation of terms and definitions. At the end of this webinar MBA members will be able to read and understand Regulation Z with ease.  

Compliance folks know that in ECOA enforcement action news, on June 19th, the CFPB and the DOJ both announced enforcement actions against a federal savings bank that allegedly violated ECOA in the offering of credit card debt-repayment programs and allegedly engaged in deceptive marketing practices in the offering of certain card add-on products. The CFPB further alleges that its examiners identified several deceptive marketing practices used by the bank to promote five credit card add-on products. The CFPB alleges that the bank's and its service providers misrepresented the products by: marketing them as free of charge when the fee was avoidable only in certain specific circumstances; failing to disclose consumers' ineligibility, causing certain consumers to purchase products from which they could receive no benefit; failing to disclose that consumers were making a purchase, leading consumers to believe they were receiving a benefit or updating their account; and marketing as a limited time offer products that were not so limited. The bank will pay a total of $228.5 million in customer relief and penalties to resolve the allegations. 

Speaking of penalties, it can't be good when "fraud" and "real estate agent" are used to make the headline to a news story; and it's not. According to the Press Democrat, a former Petaluma, California real estate agent is behind a $20 million Ponzi scheme that bankrupted dozens of retired investors, resulting in 73-year old former real estate agent Aldo Baccala being was sentenced to 20 years in prison and ordered to pay a $6.4 million fine. 

The markets?! I won't waste your time: there's not much going on with rates, although agency MBS prices improved about .125 yesterday. For benchmarks, the 10-yr ended last week at 2.63% and ended Monday at 2.62%. And to maintain the "short and simple is better" approach, there is no scheduled news today. In the early going rates are a shade better with the 10-yr.'s yield down to 2.60% and agency MBS prices better by a shade.

Executive Rate Market Report:

Last Thursday’s June employment report headlines were very good, +288K jobs, the unemployment rate 6.1% down 0.2%. The guts of the report however, while not bad, were not good. The labor participation rate at 62%, the U-6 indicated about 24% of those with part-time jobs wanted full time jobs. The reaction as you know sent the 10 yr note rate to 2.69% Thursday morning and ended Thursday at 2.63% up just 1 bp frm Wednesday’s close. Yesterday the 10 fell 2 bps and this morning at 9:00 at 2.58% 4 bps points lower than prior to employment data. We noted yesterday this week is absent of data allowing traders and investors to digest the employment data; the digestion appears to suggest employment may not be as firm as original takes. Adding more perspective; last Thursday after employment the DJIA increased 92 points; at 10:00 this morning the DJIA is down 122 points frm the close last Thursday.

US stock indexes were lower early this morning; in Europe the stock markets continue to sell off. Stock markets in Europe look shaky and may experience a major correction, if that were to happen it would increase the correction outlook here in the US that has gained more attention in the last few weeks. Why do we worry about the equity markets? Because if (when) the equity markets decline the bond and mortgage markets will benefit in terms of price improvements. This year there have been numerous times when the stock and bond markets moved in the same direction (stocks up, bond rates up; stocks down rates down), that will not occur again if equity markets come under sustained pressure.

Today begins the long earnings season with Alcoa reporting after the markets close this afternoon; (Alcoa always starts earnings season). There won’t be lot of earnings this week, I think only four companies report. The majority of earnings floods the market on July 21st week. About everything I have read recently from those who specialize in the equity markets has been positive with the majority expecting better earnings to be reported. It is therefore curious that the key stock indexes were weaker yesterday and starting very soft this morning. At 9:30 the DJIA opened -50, NASDAQ -9, S&P -5; the 10 yr note yield at 9:30 2.58% down 4 bps points and 30 yr MBS price +11 bps. (see below for 10:00 levels).

The only significant data to be reported at 3:00 pm, May consumer credit, expected down to +$17.5B frm April’s +$26.8B. The report generally doesn’t get a lot of attention, at least outwardly, but it is a key measurement of what consumers’ spending patterns are doing. We pay most attention to revolving credit (credit cards) to see whether consumers’ attitudes have firmed enough to begin using credit. The Conference Board’s monthly consumer confidence index and the U. of Michigan’s consumer sentiment index are helpful, but consumer use of credit is where the rubber meets the road.

Treasury will begin this week’s auctions this afternoon at 1:00 with $27B 3 yr note; not much of interest to long end of the curve though. Tomorrow $21B of 10s will be closely monitored as a measurement of demand for MBSs.

Europe’s stock markets continue to decline; in the US the same is happening after the markets were unable to sustain the marginal rally last week on the June employment report. Technically the 10 yr is back testing a key level at 2.56%. The 10 has fallen 12 bps in yield frm its highs Thursday morning after successfully holding its 100 day average. Currently the 10 is back below its 20 and 40 day averages this morning. A break below 2.55% on the note will set up a run to 2.50%. As noted, with earnings reports beginning we don’t expect the stock market will collapse in the long-awaited correction until there is a better look on Q2 earnings.

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Vendor and Mortgage Insurance Company News; The Unemployment data's Impact on Rates

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This weekend, between the BBQ and waiting for fireworks, or dodging hurricanes, don't make the mistake of playing the parlor game of making a list of last names that are the same as occupations. Surnames that match jobs, just in the English language, total more than 600. If a man was a carpenter he might be called John Carpenter and because sons very often followed their father's occupation the surname stuck. Some occupational surnames are obvious, like Smith, Potter, Shoemaker, Cooper, Mason, Tailor or Taylor, Weaver, Miller, Baker, Cook, Fisher, Shepherd, Carter, A fowler caught birds. A waterman rowed a boat or a barge. Some are a little less obvious. A sawyer was a man who sawed logs. A turner was a man who turned wood on a lathe and made things like wooden bowls. A roper made ropes. A shoesmith made horse shoes. A Mercer was a dealer in fine cloth. A chapman and a hawker sold goods at markets. People who sold goods of a certain kind were also called mongers. An inman was an inn keeper. Baxter is an old English word for a (usually female) baker. Brewer and Brewster both, obviously come from brewing. Like I said, there are hundreds; thousands if you throw in foreign languages. 

Speaking of back-office trends, sometimes one has to "bite the bullet" and play major league catch up with all the vendor and MI updates that have crossed my computer in recent weeks. Let's do it! Besides, it seems that vendors make up half the attendance at some of the mortgage conferences anyway. As always, it is best to read the full bulletin for details, but these will give you a feel for what has been going on out there. So in no particular order... 

Remember RMIC? "On June 27, 2014 the North Carolina Department of Insurance issued a Final Order ("Order") Approving the Amended and Restated Corrective Plan ("Plan") for Republic Mortgage Insurance Company and its affiliate, Republic Mortgage Insurance Company of North Carolina (collectively the "Companies"). The Order is available on the Companies' website at www.rmic.com. In accordance with the Order, effective with claims settled on or after July 1, 2014, the Companies will resume payment of all valid claims at one-hundred percent (100%) of the claim amount without further deferrals. Furthermore, the Companies will pay, in full, all deferred payment obligations ("DPOs") which are outstanding as of June 30, 2014. These payments are expected to be remitted to policyholders no later than July 31, 2014." 

NMIH announced a settlement agreement with Arch U.S. MI and the legacy PMI receiver for an immaterial amount to be paid by NMIH and its insurance carriers. Arch will release NMIH and the other Defendants from all alleged claims in the complaint. The settlement of this litigation was largely expected by late summer. However, it appears that the settlement amount will be less than expected. 

Radian Group Inc. completed the acquisition of Clayton Holdings LLC.  As previously disclosed, Radian Group paid aggregate cash consideration of $305 million, subject to customary purchase price adjustments, to purchase all of the outstanding equity interests in Clayton and to repay Clayton's outstanding debt. "Today we welcome Clayton Holdings to our family. The mortgage solutions and capabilities they bring will help diversify our revenue stream and expand our core competencies, positioning Radian for new opportunities as the U.S. housing market evolves," said Radian's Chief Executive Officer S.A. Ibrahim. "The Clayton acquisition builds on Radian's strong heritage and experience in delivering innovative products and solutions that allow our customers to achieve their goals." 

 

MGIC announced New York has now approved both borrower-paid and lender-paid single premium rate changes. These changes, which were put in place for most states last December, will be effective for MI applications received after June 15, 2014. The credit score classifications for standard nonrefundable borrower-paid and lender-paid single premiums are being modified and most rates are being lowered. Below are examples of the new rates in key cells. Complete rate cards with these lower rates are available at MGIC Rates 

National MI joined forces with XEROX MORTGAGE SERVICES' BLITZDOCS®.

Integration of private mortgage insurer and BlitzDocs simplifies process for lenders using the Xerox collaborative network. National MI stated joining forces with Xerox allows its lender customers who use BlitzDocs to transmit their documents easily, another option to offer customers to transmit loan documents electronically and securely. 

Radian has lowered pricing for LPMI single premiums with powerful savings for credit scores of 720+ effective August 11, 2014. And in many cases, Radian's pricing is lower than other MI companies! It created a new 760+ credit band and reduced rates for borrowers within certain LTV bands and credit scores of 760+ and 720-739. Visit Radian website for the complete information premiums eBulletin 2014-4.

 

United Guaranty has a new Master Policy coming in October. UG's new master policy is the only one in the MI industry to include a Policy Commitment Letter-specific to each lender-that clearly defines each party's roles and responsibilities, and clearly spells out policies and practices governing underwriting, claims, and appeals. To view the information, visit the website Master Policy. 

FormFree Holdings Corporation, an award-winning provider of next-generation verification technology for the mortgage industry, has appointed John Sheppard president and COO. Sheppard, who has more than 25 years of senior leadership experience in the consumer goods and technology industries, will be responsible for overseeing the growth of the company and AccountChek, FormFree's proprietary flagship product that verifies a borrower's ability to pay back loans. 

PCLender, LLC has acquired the PCLender loan origination system (LOS) and formed a new company that will focus on providing turn-key mortgage technology solutions for midsized mortgage bankers.

 

Did you know that there is an International Association of Outsourcing Professionals? Me neither! Indecomm, a provider of consulting and outsourcing solutions for mortgage lending, retail banking, and other industries, "has once again ranked among the top global outsourcing companies by the IAOP. The company ranked 54th among the top global 100 companies in the Leaders category for the 2014 Global Outsourcing 100, according to a release. The honor marks the seventh straight year that Indecomm has been recognized by IAOP as a global corporate leader." But wait, there's more! Indecomm was also honored among the Best 5 Leaders in Education, the Best 10 Leaders in Corporate Services, and the Best 10 Leaders in Southeast Asia. The firm also ranked among the Best 20 Leaders category in Transaction Processing Services and the Best 20 Companies in India. 

AllRegs has launched a "procedures product" line designed to provide clear step-by-step guidance to a lender's staff about operational aspects of regulatory-based procedures. Dan Thoms, executive vice president for AllRegs, suggested that, "These procedure templates help support our clients in filling gaps in their regulatory compliance infrastructure. Saying your company will implement a policy isn't enough anymore-you have to be able to show exactly the steps staff members need to take when handling operational tasks, our procedure documents fill that need." Guidance released by the CFPB in December of 2013 specifically addresses policies and procedures. Beyond ensuring procedure documents cover the key components of the Dodd-Frank rules, the regulatory agency suggests having a process in place for keeping documents accurate as regulations evolve. AllRegs Procedure Templates are offered with a one-time purchase price per company. The templates are delivered in MS Word format and can be personalized by the customer or fully customized by AllRegs to include specific customer requirements. Maintenance plans are available to keep documents up to date with legislative and regulatory changes.

 

Vantage Production, LLC, a leading innovator in customer relationship management (CRM), marketing, sales and content solutions, announced that Security National Mortgage Company of Salt Lake City, Utah, has selected its Vantage Integrated Production^SM(VIP) solution to centralize marketing, compliance and sales process management for its national network of retail origination branches. Like many mortgage lenders, SNMC was concerned about standardizing and controlling messaging for Realtors and consumers to ensure compliance with CFPB requirements, as well as making sure that loan officers were utilizing the best possible materials across the country.  SNMC was founded in 1993 as a subsidiary of the Security National Financial Corporation (NASDAQ: SNFCA), which began in 1965 as Security National Life Insurance Company and has invested in mortgage loans for almost 50 years. 

A La Mode Software for real estate professionals offered up TOTAL to enhance and simplify document data entry. For example, a common request for appraisers was to overflow field data in the same order as the major form. One of TOTAL's key addenda features is that it overflows data from the major form to the addenda in the order the fields appear on the form, as opposed to simply the order that the appraiser filled them out. This setting is on by default, so you don't have to do anything to get it working. If you're still using WinTOTAL Aurora and haven't installed TOTAL yet, it's a free upgrade as long as you have any contract with us. Don't have TOTAL yet? Visit the website to view all the tools offered:  a la mode. 

Alight Planning is a fast-growing provider of industry specific applications that help firms transform how they view planning and budgeting and make it a constant and relevant part of their businesses. Alright has announced Alight Mortgage Lending - a new SaaS application that helps mortgage lending firms achieve top financial performance. To learn about Alight Planning, visit the website at: Alight Planning. 

Optimal Blue unveiled new services that included adding the patent-pending real-time lock monitoring functionality, incorporating the "Equivalent Rate" feature, to their Optimal Blue Advantage real-time Fair Lending solution.  When applied to a mortgage lender's locked pipeline, the Equivalent Rate calculations immediately highlight any loans that may not have been priced equally. "Our clients can greatly reduce the chance for rate disparity and pricing discrimination," said Tammy Butler, Director, Fair Lending and Compliance. "They need this now more than ever!" 

Clear Capital was selected by Freddie Mac as Technology Provider for Appraisal Data Validation in Uniform Collateral Data Portal. By providing appraisal data validation services, Clear Capital will offer Freddie Mac additional insight to appraisal quality and accuracy. "What can Clear Capital offer your company? Clear Capital's ClearQC examines Appraisals and BPO's from any valuation provider identifying risky or erroneous reports.  ClearQC's user-friendly interface and seamless integration key benefits include: elimination of secondary reviews or use of third party data sources, customize to meet your specific business requirements with dynamic rule sets, identifies red flags, functions as an internal audit tool and so much more." 

Equifax announced that its Spectrum Verification Services Platform (powered by data from The Work Number, a solution offered through Workforce Solutions, Equifax and the largest collection of payroll records contributed directly from employers) completed more than nine million employment and income verifications in 2013, representing nearly one-third of the mortgage industry's total verifications for the year. "In today's real estate market, instant and increased transparency into a borrower's accurate income levels and employment status is a critical requirement. For lenders, these verifications have historically been manual, time-consuming processes that require confirmations from a wide range of sources. The Spectrum Platform streamlines the loan origination process by providing lenders with a fully automated verification solution that reduces fraud, improves overall loan quality and cycle times, avoids capacity issues and reduces costs."

The markets.... Let's face it - rates have not done much since late January. During that time the 10-yr. seems "content" sitting between 2.45% and 2.80%, and we closed Wednesday smack dab in the middle of that (2.63%). We did have a surprisingly strong ADP number (+281k), and mortgages did better than Treasury prices. In fact, I didn't see many price changes from investors, and for the most part mortgage rates and prices have continually been up a little, down a little. 

But today, ahead of an early close in the bond market and the holiday tomorrow, we've had a spate of employment data. Non-farm payrolls were expected at +220k and the unemployment rate was expected steady at 6.3%, but were +288k and 6.1%, with some improved back-month revisions, while average hourly earnings were +.2% (+2% from a year ago). Soon after the news rates are higher with the 10-yr touching 2.69% and agency MBS prices worse by .250-.375. Jobs and housing, housing and jobs - and this jobs number improvement is going to be hard to fight.

Executive Rate Market Report:

Immediately prior to the 8:30 June employment report the 10 yr was unchanged at 2.63% and 30 yr MBS prices unchanged also. June unemployment rate fell to 6.1% frm 6.3%; non-farm payrolls +288K, with revisions higher for May and April adding an additional 29K jobs to what had been reported; private jobs increased 262K frm 224K in May. The average hourly earnings +0.2% as expected, yr/yr +2.0%. The labor participation rate unchanged at 62.8% At 62.8; the share of population either working or looking for work remains around 30-year lows, a sign that many of the unemployed have given up their job searches. . The unemployment rate is the lowest since Sept.2008. The number of long-term unemployed Americans fell to 3.1 million, suggesting more jobs are becoming available. Factories took on the most workers in four months, while payrolls at private service providers climbed by the most since October 2012. job gains continue to be led by low-paying sectors. Retail added over 40,000 new jobs while leisure and hospitality added 39,000. Higher-paying sectors continued to lag behind in the jobs recovery. Manufacturing added 16,000 new jobs and construction added 6,000. An index gauging the breadth of private-industry hiring in June climbed to 64.8 from 62.9 a month earlier. June marked the first five-month stretch of job creation in excess of 200,000 since the boom years of the late 1990s.

Weekly jobless claims also reported at 8:30 were right on estimates, up 2K to 315K. The May US trade deficit also at 8:30 -$44.4B better than $-45.1B expected. Neither matter though with June employment holding court in the stock, bond and MBS markets.

The ECB didn’t add to last month’s stimulus program. The German 10 yr bund continued to fall in price as a result; down three days in a row, the longest run of declines in four weeks, matching the decline of the US 10 yr.

At 10:00 the final data this week; June ISM services sector index expected at 56.2 frm 56.3 in May. The index slightly weaker at 56.0; the components though were better. New orders index at 61.2 frm 60.5 last month, the employment component at 54.4 frm 52.4 adding more confirmation to the view the economy will likely grow at a 3.5% annual GDP rate after declining 2.9% in Q1.

The bellwether 10 yr note, driver for MBS rates, is trading above its 100 day average for the first time in two months (4/4/14). Obviously all of our technical models are now bearish. One after another, recent economic measurements have been better than expected; possibly as a result of the weak first quarter that had lowered economists’ forecasts. The data is better overall but still not roaring. These days any good news is welcome at the moment. Stock investors enjoying the higher run with the DJIA braking above 17K for the first time ever on the open this morning. At 9:30 the DJIA opened +46, NASDAQ +16, S&P +5; 10 yr 2.68% +5 bp and so far for the week the 10 up 14 bps in rate, 30 yr MBS rate +10 basis points; at 9:30 MBS price down 14 bps on the 4.0 coupon and -22 bps o the 3.5 coupon as investors that bought the 3.5 are getting out of the low coupon. No more 3.5 coupons for the immediate outlook. The 10 yr note rate is the highest since May 13 when Mario Draghi launched another stimulus for the EU and made a point of is concern the EU economies may be headed to deflation.

Markets will have an early close this afternoon ahead of tomorrow’s National Holiday.

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