Oct. 22: Mortgage jobs; ESNT starts trading; agency updates; primer on primary-secondary spread

A lot of people love pizza - they think of it as God's gift to the weekly menu. Thanks to the wonders of the internet, here is something totally un-mortgage related: MapOfPizzaNearYou. I am sure those folks at Chase could use a little quality pie while crunching the numbers on that $13 billion.

Altisource, a leading industry service provider, continues its expansion and is seeking experienced industry professionals for two highly visible Sales Executive positions. Altisource provides a menu of outsourcing services to banks and non-banks, including correspondent pre-purchase review, quality control and advisory services.  With its family of companies, including Lenders One, 2014 for Altisource holds amazing potential. Candidates with mature industry networks, exceptional correspondent and outsourcing knowledge are encouraged. If you wish to learn more, please contact Alex Rathgeb, Recruiting Manager, at alex.rathgeb@altisource.com.

And in an effort to expand their growing retail branching network, Gold Star Mortgage Financial Group is seeking to fill positions for Regional Retail Account Executives capable of recruiting and developing retail branches in AL, CA, CO, CT, FL, IL, IN, MA, MD, MI, MN, NC, NJ, OH, OR, PA, TN, TX, VA, WA, WI. Based in Ann Arbor, MI and founded in 2000, Gold Star has become one of the fastest growing mortgage companies and top 50 lenders in the nation. As an Inc. 500 & Inc. 5000 company they have been recognized 4 consecutive years as a Michigan Top Work Place and more recently recognized by Mortgage Technology Magazine as one of the nation's Top Tech-Savvy Lenders. They are currently licensed to do business in 21 states. The position calls for very experienced, self-motivated individuals with deeply rooted relationships in the industry throughout the respective regions. To learn more, submit resumes and inquiries to Daniel Milstein at dmilstein@goldstarfinancial.com.

I travel to a lot of engagements (this week is Los Angeles, Kansas, and North Carolina, and then to DC for the conference) and am jealous of my colleague Garth Graham who will be speaking at a virtual summit this week - no travel, and he has a chance to talk about the mortgage business and make some jokes in the process. The topic is, "How lenders and brokers must make the most of existing conditions to successfully compete." Don't miss out on Velocify's unique one-day Mortgage Sales Virtual Summit - "Driving Growth through the Market Shift" on 10/23 from 9AM-3PM PDT (12PM-6PM EDT): Velocify.

What is ESNT? It is the New York Stock Exchange symbol for Essent Group Ltd., which announced that it has commenced an initial public offering of 19,710,118 of its common shares pursuant to a registration statement on Form S-1 filed with the U.S. Securities and Exchange Commission (the "SEC"). The Company is offering 17,000,000 common shares and certain selling shareholders are offering 2,710,118 common shares. The Company expects to grant the underwriters a 30-day option to purchase up to an aggregate of 2,956,517 additional common shares.  The estimated initial public offering price is between $13.50 and $15.50 per common share.  The Company intends to use the net proceeds of the offering for general corporate purposes, which may include capital contributions to support the growth of the Company's insurance subsidiaries.

Let's keep going with some aggregator, bank, and vendor news, other than the $13 billion Chase/WAMU/Bear settlement. I think that works out to about $18.94 per loan, but I haven't run the numbers yet. (Seriously, while the overall sum is large, it is chopped up: $6 billion as compensation for investors like pension funds that suffered losses from mortgage securities sold by JPMorgan, Bear Stearns and Washington Mutual, $4 billion will take the form of relief for struggling homeowners in cities like Detroit, $3 billion will represent the only fine in the case and that is for the civil investigation into mortgage securities that JPMorgan itself sold in the run-up to the financial crisis.)

Keeping it local, Ashland, Kentucky's Poage Bankshares, Inc. (NASDAQ: PBSK, "Poage"), the parent company of Home Federal Savings and Loan Association announced the signing of a definitive agreement to acquire Town Square Financial Corporation, the holding company for Town Square Bank.  The combined company will have over $450 million in assets, create the sixth largest bank within the Ashland, KY MSA in total deposits and operate 10 banking offices. Per KBW, as of September 30 the transaction value represents 104% of Town Square tangible book value and 13.3 times Town Square's last twelve months earnings.

Plaza let clients know that, "USDA issued an announcement today that the Guaranteed Underwriting System and the processing of lender submitted loan closings will be delayed until next week. (To read the USDA announcement: MoreThanCropReports. Until further notice: Plaza will continue to fund/purchase USDA loans with Conditional Commitments issued 'subject to commitment authority.' At this time, and barring further Congressional action, current eligible areas for USDA Rural Housing Programs will remain unchanged through January 15, 2014."

In BOK-land, its mortgage company is expanding its origination abilities nationwide. It announced the launch of HomeDirect Mortgage, an online sales channel designed to meet home buyers where they are increasingly shopping for mortgages at home, the office, and on the go. The new channel compliments BOK Financial's mortgage operation that originated about $4 billion in loans in 2012 with the ability to generate new mortgage applications, outside its eight state footprint, to all 50 states. Todd Geiman, previously of National Bank of Kansas City, runs the new channel which is based in Kansas City, KS.

As part of its Risk Management System product suite, Mortgage Capital Management has rolled out Diffusion Analysis, which provides real-time reports of market activity by tracking direction, momentum, and volatility.  For more information, contact Lori Sansoucie at lori@seroka.com.

KBW reports that Capitol Bancorp Limited announced that it has entered into a stock purchase agreement to sell the common stock of its remaining consolidated entities, Bank of Las Vegas, Indiana Community Bank, Michigan Commerce Bank and Sunrise Bank of Albuquerque, to Talmer Bancorp, Inc., a bank holding company located in Troy, Michigan

NY-based Constellation Value Protection has rolled out an interesting offering: through securitization of reinsurance and various capital market participants, it is rolling out a service that promises to protect borrowers from having their property depreciate in value over a specific period of time.  Contact Kenneth Herzberg (kherzberg@constellationvpi.com) to find out more.

Fannie Mae has updated its flood insurance guidelines on attached condo projects to require a master policy that covers the lower of 80% of the replacement cost or the maximum insurance available from the National Flood Insurance Program per unit (currently $250,000).  If any part of the security structure (e.g. any structure securing the mortgage) on the subject property lies within a Special Flood Hazard Area, it too must have flood insurance, and any units that do not comply with this or are not covered sufficiently will not be eligible for purchase.  This policy will go into effect for all loans whose applications are dated February 1, 2014 and after. 

As of January 1^st, Fannie will be assessing each lender an Eligible Lender Maintenance Fee at the beginning of ever calendar year that can be waived if the given mortgage loan delivery, servicing portfolio unpaid principal balance, or DO/DU fee threshold has been met in the previous 12 months.  The mortgage loan delivery threshold will also be changed from $2 million in dollar volume to one loan.

Following up on its January bulletin, Fannie has clarified that inter vivos revocable trust loans securing primary residences will be treated as Ability to Repay Covered loans, while any such loans securing investment properties are treated as ATR Exempt loans.  Both transactions remain eligible for purchase.

Fannie implemented several changes to DU for Government loans that are submitted on or after the weekend of October 19^th.  These include no longer displaying accounts/assets, income types, or underlying attribute triggering the message with zero values (i.e. when the down payment is cash on hand and the down payment is zero) in the DU Underwriting Findings Report.

Freddie Mac has removed the delivery fee for all California condo loans with settlement dates of October 1^st and after.

Along with the fraud prevention training required for employees, Freddie seller/servicers must now train any third-party vendors who perform services related to origination and servicing and have written procedures in place for doing so.  In addition, seller/servicers are required to report fraud in connection with any mortgage sold to or serviced for Freddie "when they first know or suspect" any such incident, rather than waiting until they have "reasonable belief."

Effective for all mortgages whose settlement dates fall on or after March 1, 2014, Freddie will be updating its asset documentation guidelines for large deposits, whose sources of funds will need to be documented if the deposit is over 25% of the total monthly qualifying income.  Sellers will also have to document deposits of any amount if there is an indication that the funds are borrowed, but if the source of funds is evident from the account statement's deposit information (e.g. direct payroll deposits) or other documented income or asset source (e.g. tax refunds disclosed on the tax returns) no further verification is necessary. As for IRS-qualified employer retirement accounts, the loan file must contain documentation of the retirement plan's terms that allow the borrower to withdraw funds regardless of their current employment status in order for the vested amount to be used as reserves. Freddie will also be adding more specific documentation requirements for direct verification of assets but will only be requiring the borrower funds and reserves used in the evaluation to be documented.

Freddie is also updating the underwriting guidelines for borrowers on temporary leave for mortgages currently being delivered.

Effective immediately, Freddie is allowing restructured mortgages to be refinances as Relief Refinances, which may be delivered through a Purchase Contract.  Loans being considered for an FHLMC modifications are also eligible for a refinance under the Relief Refinance program.  Freddie will be retiring the chapter of the Selling Guide that outlines the requirements for Relief Refinances with Application Received Dates before November 19, 2012 (C24); as such, all Relief Refinances whose applications were received before that date must have settlement dates before January 1, 2014.

"Rob, what is the 'primary-secondary spread' my Capital Markets gal keeps talking about?" That is an easy one. MBS investors, capital markets personnel, and originators keep an eye on the difference between the primary markets (rate sheets for borrowers) and the secondary markets (where mortgage-backed securities trade). For example, a recent analysis on "primary-secondary" pricing showed that lenders' buy-sell pricing spreads have been cut by 75-100 basis points since early in the year. Undoubtedly, those spreads had some capacity-managing fat in them during Q1 and part of Q2, but they may have moved beyond cutting out that fat and many lenders appear to be on a real lean diet. Traditionally, folks simply look at the spread between the daily "survey rates" of lender offerings and the effective yield of current mortgage coupons.  That can provide some decent trend indications. Others drill deeper and perform some actual loan sale execution analysis tied to those survey rates, you get what I think is a more granular look at what pricing spreads are really doing. Look at the spreads all you want - companies fearing for their future are cutting margin to the bone, thus making less on fewer loans in an effort to stay in business, which impacts everyone else in that market. Same ol' thing, different decade. Obviously, some lenders are cutting more, and could be gone in the not-to-distant future. Those who have had to cut less will probably weather the storm and gain market share through their competitors leaving the business.

Harsh realities aside, NAR put aside its lobbying efforts long enough to report on Existing Home Sales. It came in pretty much as expected, although August was revised lower, and there is a five month inventory nationwide. First time home-buyers accounted for 28% of all sales, all cash deals were 33% of the total, and non-owner deals (investor) were 19%. The median home price rose 11.7% from last year to $199,200.

That really didn't impact rates on Monday. Rates worsened slightly, and, given nothing else to blame it on, traders blamed it on nervousness about Tuesday's unemployment data. The employment situation for September was released at 2:30AM Hawaii time. Consensus on nonfarm payrolls was +180k versus +169k in August, while the unemployment rate was expected to be unchanged at 7.3 percent. It actually came in at +148k, 7.2%, and July & August were revised. The 10-yr. yield closed Monday at 2.61%, prior to the number was 2.58%, soon after the number was down to 2.54% and agency MBS prices were better by .250-.375.

Planning for the fall football season in the South is radically different from up north. For those who are planning a football trip south, here are some helpful hints, part 2 of 4:

Getting Tickets:

NORTH: 5 days before the game you walk into the ticket office on campus and purchase tickets.

SOUTH: 5 months before the game you walk into the ticket office on campus and put name on waiting list for tickets.

Friday Classes After a Thursday Night Game:

NORTH:  Students and teachers not sure they're going to the game, because they have classes on Friday.

SOUTH: Teachers cancel Friday classes because they don't want to see the few hungover students that might actually make it to class.

Parking:

NORTH: An hour before game time, the University opens the campus for game parking.

SOUTH: RVs sporting their school flags begin arriving on Wednesday for the weekend festivities. The really faithful arrive on Tuesday.

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog is, "Reverse Mortgages: Companies Need to Know What is Changing". If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what's going on out there from the other readers.

Rob

(Check out http://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx or www.TheBasisPoint.com/category/daily-basis. For archived commentaries or to subscribe, go to www.robchrisman.com. Copyright 2013 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)

Oct. 15: Mortgage jobs; MIC cuts back lending due to Dodd-Frank; LO retirement contribution; FHA in the shutdown

Welcome to "National Aging in Place" Week (October 15-21). No, this doesn't mean sitting in that 10-yr old office chair, slouched over your computer while everyone else is being active and videotaping their activities with their obnoxious helmet cams. Reverse mortgage lenders know that it is the annual celebration of the burgeoning movement by aging Americans and their service providers to provide the means for people to age in the comfort of their homes. I love those billboards that say, "The person who is going to live to be 150 has already been born." And then I think...do I really want to be 80 years old for 70 years? Probably not, but I certainly know my share of people in real estate and mortgages that are well into their 70's, and don't want that fixed-income life - because it is pretty ugly. The Department of Labor reported that an individual living on a fixed income over the last 20 years (i.e., from the end of 1992 to the end of 2012) would have suffered a 38% loss of purchasing power over the 2 decades using the CPI as a gauge of his/her inflation. EBRI finds only 17.7% of employers offer retirement benefits vs. 29% in 1997. And the number of Americans at least age 65 is projected to increase +37% over the next decade and by +85% over the next 25 years. Who would have thought that bocce would be a growth industry?

Our industry is certainly in a transition. Although you may see recent layoffs with lenders out there, LoanSifter is a different story. LoanSifter just completed its 29^th quarter of consecutive growth, with growth in each of their business lines, including online consumer point-of-sale, lead generation integrations, automated marketing tools and its robust PPE with 180 investors. LoanSifter is actively seeking professionals with product management, underwriting and compliance experience. It is also looking to continue to grow their marketing and bank/credit union sales teams. If you're qualified and interested, email your resume to resumes@loansifter.com.

A direct lender that I have previously followed in this column is iServe Residential Lending.  In addition to its continued expansion, there is a great deal of fanfare surrounding iServe's new GNMA direct VA product line. iServe is hosting Realtor breakfasts in a number of markets, the next on October 30^th in Seattle to discuss its new VA options.  Whether you are a Realtor or an interested prospect, contact Allen Friedman at afriedman@iservelending.com for more information or RSVP at http://iserve-seattle.eventbrite.com/. You can also visit iServe at the NAMB National Conference in Las Vegas this weekend. 

Maybe some of the folks at MIC will apply to the jobs listed in this commentary every week. "Mortgage Investors Corp. laid off nearly 500 workers, including 256 in its St. Petersburg headquarters, and stopped making new home loans in a stunning pullback Monday. Bill Edwards, a well-known local businessman and chairman of MIC, blamed the near-shutdown on federal regulations under the Dodd-Frank Act that are going into effect Wednesday. His company, one of the biggest refinancers of home loans for veterans, doesn't have the technological capacity to comply, he said." Here is the full story.

"Rob, my originators are getting beat up on their jumbo loans by the big banks, especially Wells' retail. What's up with that?" Part of the answer to that can be found in the recent earnings numbers from Wells, and Chase. Remember that banks are having a problem finding commercial loans to make, and some have turned to holding jumbos on their balance sheets. JPM, for example, reported a 7.4% quarter over quarter increase in 1-4 family residential loans on their balance sheet to $85B from $79B. By far, this was the largest driver of loan growth for JPM in the 3^rd quarter.  Wells also had an increase. Jumbo securitizations, loosely correlated with "non-agency", are receiving competition from the banks holding rather than selling into the market. The big banks are buying whole loans directly from originators through their correspondent channels, and on the retail side, when they want to compete, there is little stopping them. And the big banks, at this point, would rather hold the product and earn the spread & rate of return, than securitize the loans. That, of course, is not great news for the entities that have put together jumbo securities lately (Redwood Trust, CSFB, Nomura, EverBank, PennyMac Mortgage Trust, to name a couple) and anyone hoping for a loan amount reduction (it has been a thinly veiled secret that the FHFA is preparing to lower conforming loan limits, which could increase jumbo securitization volume in 2014) may be disappointed - with the QM changes barreling at the industry, the FHFA may be open to postponing it.

Regarding LO comp for FHA loans, Jude T. observed, "Readers should know that some rules out there are about the folks that are not LOs, and that the LO comp rule has no applicability to them.  I believe you should note the following in regards to an Underwriter and HUD's prohibition. 'An underwriter cannot receive overrides or commissions.  This is prohibited by HUD under 4060.1 Rev-2, Chp 2-9: Employees and Officers.  An approved mortgagee must employ trained personnel that are competent to perform their assigned responsibilities. Employees: Employees are those individuals who are under the direct supervision and control of an FHA approved mortgagee and where the individuals are exclusively employed by the FHA approved mortgagee in the mortgage lending and real estate fields. The mortgagee must demonstrate the essential characteristics of the employer-employee relationship upon inquiry by the Department.  [See also paragraphs 2-9(D) and 2-9(G)]. Compensation of employees may be on a salary, salary plus commission, or commission only basis and includes bonuses.  All compensation must be reported on Form W-2.  Employees who perform underwriting and loan servicing activities may not receive commissions.' Just thought you'd want to distinguish this as a majority of us lenders are HUD approved/endorsed lenders and can lose approval for items like this."

"Rob, is it true that I can put 10% of my LOs compensation into their retirement plans?" Well, kind of. Compensation under a non-deferred profits-based compensation plan is permitted and not a term of a transaction, as long as the compensation is not directly or indirectly based on the terms of that individual loan originator's transactions and either: the compensation, in the aggregate, does not exceed 10% of the individual loan originator's total compensation; or the individual was a loan originator for ten or fewer transactions consummated during the 12-month period preceding the date of the compensation determination. But you, or your attorney, should carefully read page 45.

Let's play some long overdue catch up on MI, vendor, agency, and investor news to give you a taste for the trends out there!

The National Association of Hispanic Real Estate Professionals (NAHREP), the nation's largest housing industry trade group for Latinos, has entered into a two-year partnership with Radian Guaranty, the mortgage insurance subsidiary of Radian Group. The partnership, which could be extended beyond 2015 by mutual agreement, will provide training on private mortgage insurance solutions to the association's 20,000 members, according to NAHREP officials who announced the transaction at the group's national convention. "Radian is an excellent partner and the timing for this strategic partnership couldn't be better," said Gary Acosta, NAHREP CEO and co-founder. "As more Latinos buy homes, those families who do not have the requisite 20 percent down payment will need private mortgage insurance. Our members must be able to educate buyers on this product." Under the agreement, Radian will develop a nationwide training program that educates NAHREP member agents and lenders about private mortgage insurance through on-demand training, face-to-face sessions, video and interactive webinars so they can, in turn, better inform Hispanic consumers.

Len Patton, who runs correspondent lending for PHH, broadcast, "As you may know, one of our shareholders included in a filing with the Securities and Exchange Commission recommendations they believe would increase shareholder value at PHH. Since that time, there have been a number of news stories related to these recommendations, including an article published earlier this week by Reuters. Shareholders often present ideas to us when we meet with them. However, when a shareholder goes public with recommendations, it sometimes generates media attention that can fuel market rumors and speculation. I want to reassure you that our primary focus remains on continuing to successfully execute our strategic plan and delivering value for our clients. Nothing has changed about our daily focus. We remain committed to our Correspondent Lending partners and buying quality loans from current and prospective clients. Thank you for your partnership and your business."

The FHA, due to the shutdown, sent out a list of Q&As. "Q:  Can I get an FHA case number? A:  Yes. Lenders will be able to obtain an FHA case number from the FHA Connection. Q:  Will FHA endorse single family loans during a shutdown? A:  FHA will be able to endorse single family loans, with the exception of Home Equity Conversion Mortgages (HECM) and Title I loans, during the shutdown. A limited number of FHA staff will be available to endorse new loans. Due to limited staff, the time to endorse the cases may be extended. Q:  Will FHA still be able to endorse my loan if I am not able to obtain tax returns verified by the IRS during the shutdown? A:  FHA is aware that some lenders obtain tax transcripts directly from the IRS for use in underwriting their FHA-insured loans. These lenders may be unable to actually obtain any returns directly from the IRS for the duration of the Government shutdown."

The bulletin went on. "Lenders may continue originating loans using FHA's existing underwriting requirements, which have not changed as a result of the shutdown. Lenders are required to obtain tax returns from certain borrowers in order to originate FHA-insured loans and lenders must also continue to obtain the borrower's signed authorization (i.e., Forms IRS 4506, IRS 8821, or whatever form or electronic retrieval service is appropriate) for any loan for which the borrower's tax returns are required." The bulletin and questions can be found on the FHA's FAQ site, goes on to address "Why didn't the borrower's name and Social Security Number pass validation with the Social Security Administration?", "Can the Social Security Number validation be run again?", "Can I continue to process the loan without the Social Security Number validation?", and "What happens if I cannot validate the borrower's SSN?".

(Speaking of FHA loans, a while back Ginnie Mae released its numbers for August, during which it guaranteed $35.3 billion in MBS.  GNMA II single-family pools clocked in at $29.2 billion for the month, while GNMA I single-family pools totaled $4.16 billion.  Ginnie also guaranteed $744 million in Home Equity Conversion MBS as part of its GNMA II single-family issuance, along with $1.91 in multifamily MBS.)

Are rates going up? Not if the government keeps dragging them down, intentionally or otherwise. On October 8, the FDIC issued Financial Institution Letter, which re-emphasizes the importance of prudent interest rate risk oversight and risk management processes to prepare for a period of rising interest rates. The FDIC states that interest rate risk management should be viewed as an ongoing process that requires effective measurement and monitoring, clear communication of modeling results, conformance with policy limits, and appropriate steps to mitigate risk. It believes that for a number of FDIC-supervised institutions, the potential exists for material securities depreciation relative to capital in a rising interest rate environment. FDIC examiners will continue to consider the amount of unrealized losses in the investment portfolio and the degree to which institutions are exposed to the risk of realizing losses from depreciated securities when qualitatively assessing capital adequacy and liquidity and assigning examination ratings.

Looking at the markets, rates are slightly higher this morning. The 10-yr closed Friday at a yield of 2.68%, and this morning it is sitting around 2.71%. Agency MBS prices are worse by about .125.

Four men were bragging about how smart their dogs are. The first man was an engineer, the second man was an Accountant, the third man was a Chemist and the fourth was a Government Worker.

To show off, the Engineer called to his dog, "T-square, do your stuff!"

T-square trotted over to a desk, took out some paper and a pen, and promptly drew a circle, a square, and a triangle.

Everyone agreed that was pretty smart. But the Accountant said his dog could do better. He called his dog and said, "Slide Rule, do your stuff!"

Slide Rule went out into the kitchen and returned with a dozen cookies. He divided them into 4 equal piles of 3 cookies each.

Everyone agreed that was good. But the Chemist said his dog could do better. He called his dog and said, "Measure, do your stuff!"

Measure got up, walked over to the fridge, took out a quart of milk, got a 10 ounce glass from the cupboard and poured exactly 8 ounces without spilling a drop.

Everyone agreed that was good. The three men turned to the Government Worker and said, "What can your dog do?"

The Government Worker called to his dog and said, "Coffee Break, do your stuff!"

Coffee Break jumped to his feet, ate the cookies, drank the milk, dumped on the paper, assaulted the other three dogs, claimed he injured his back while doing so, filed a grievance report for unsafe working conditions, put in for Worker's Compensation and went home on sick leave.

Oct. 14: Mortgage jobs & opportunities; comment on flood insurance changes; MBA-CFPB joint webinars

"The latest news is that the Washington Redskins are going to change their name because of all the hatred, violence, and hostility associated with their name. From now on they will be known simply as the Redskins." Things have not turned violent in lending, as we're a pretty civilized bunch - but one never knows. And some companies continue to hire and expand.

SWBC Mortgage, a company with a 25 year history in retail mortgage lending is expanding. SWBC Mortgage is an approved Seller/Servicer with both FNMA and FHLMC and is a GNMA issuer who delivers loans directly and retains servicing. It funded in excess of $3 billion over the past year with 66% purchase production and is interested in branch and acquisition opportunities across the country.  SWBC Mortgage offers a traditional retail mortgage banking model with local processing and in-house underwriting and closing.  SWBC Mortgage  is a wholly owned subsidiary of SWBC (Texas), a diversified financial services company providing a wide range of insurance, mortgage, and investment services to financial institutions, businesses, and families. With offices across the country, and more than 1600 employees, the company has the financial strength to succeed in today's mortgage environment. Contact Kevin Haycock at khaycock@swbc.com for consideration.  

A full service, independently owned, direct lender is looking to grow its Retail production by consolidating several smaller independent bankers into its organization. The well-known lender, which wishes to remain anonymous, is a GNMA issuer as well as a direct FNMA & Freddie Seller, services for all 3 agencies and is licensed in 47 states. This company is looking to acquire well run Retail branches from companies that cannot achieve economies of scale or from independents looking for an exit strategy. Individual branches are welcome, as well. All inquiries are directly to the company, not via intermediaries, and will be held in strict confidence, beginning with execution of NDA. Send email inquiries to MortgageOpportunities@hotmail.com.

With all the hurdles for residential lenders, such as higher rates, higher loan-level price hits, QM, the list goes on, the last thing it really needs is problems caused by the shutdown. But we have them. The current partial government shutdown is the 12th such slowdown since 1980 (last 33 years).  Of the previous 11, the first 9 (occurring between late 1981 and late 1990) all lasted 3 days or less.  Only the 10th slowdown (starting in November 1995 and lasting 5 days) and the 11th slowdown (starting in December 1995 and lasting 21 days) were longer in duration.

As was mentioned in the commentary last week, "even with many aggregators temporarily waiving tax transcript requirements (the signed 4506-T is pretty much mandatory), lenders should remember that reps and warrants are still in place for the life of the loan." KK writes, "I agree with this, but after being at the Compliance Conference in D.C. and meeting with the fine folks at the CFPB, here is what they said directly. 'Spoke with Paul Mondor CFPB at MBA Regulatory Conference in DC.  Per Paul, if all other aspects of Appendix Q are met then third party income verification is not necessary for QM and Safe Harbor status per ATR rule comment.' Scary!"

Lenders are doing what they can. First Mortgage Corporation's president Clem Ziroli wrote that FM "Will waive all late fees and will work (i.e., within our prescribed ability) with all federal employees to ensure their home loans remain in good standing during the government shutdown. FMC will do so until the federal government resumes in a 'normal' fashion.  Though FMC services primarily in the western states, we're hoping others will join us."

"To help U.S. government employees who have been furloughed due to the U.S. government shutdown," Chase announced efforts to assist them. "The assistance will be in place from October 11^th through October 31^st or until the shutdown ends - whichever is sooner. Chase encourages its customers who are employees of a U.S. federal agency and whose income has been affected by the shutdown to call the company to discuss certain hardship programs Chase offers and can activate based on individual circumstances.  Chase's hardship programs are used by customers broadly who have been affected by unemployment, financial strain or natural disasters. In addition, for employees of affected federal agencies whose paycheck was direct-deposited to their Chase accounts in September 2013, Chase will automatically waive fees on their checking and savings accounts that could be incurred as a result of a lower than expected account balance."

Well, here's a bit of good news for banks of more than $10 billion in assets, or independent mortgage banks. Effective November 1, the CFPB will end its practice of having enforcement attorneys regularly participate in examinations of supervised entities. The report indicated that a CFPB spokeswoman attributed the change to an internal review that aimed to improve the supervision process and found that having both examiners and enforcement attorneys present at exams was not efficient. Not efficient? One CEO wrote to me and used the term "goon squad." That aside, the industry viewed having an attorney in the office as inhibiting free and open communications between the CFPB and supervised entities. But before everyone gets excited, it would be a serious mistake for any supervised institution to read the change as signifying that the CFPB will become more lax in exercising its supervisory authority. For more, check out AlwaysOnTheRecord.

Speaking of the CFPB, it, and the Mortgage Bankers Association (MBA) will be hosting two webinars on October 16 and 17 from 2-3:30 PM ET to address outstanding questions under the new mortgage rules. The October 16 session will address the servicing rules and the October 17 session will address the origination rules. Although the webinars were initially limited to MBA members, rumor has it that the sessions will be open to the public and once the link becomes available, the CFPB will post it on their website. In the meantime: MBAEducation.

Barry S. wrote to me last week and said, "I have attended several webinars and I still haven't seen this spelled out so I will assume others would like to know the exact calculation: Mortgage banker (creditor) pays his loan officers a flat fee for each loan closed, say $1000 each. Loan is originated by mortgage banker and then will be sold to secondary market or held.  Is the $1000 part of the 3% test? It would seem by all accounts it isn't." James Brody, with American Mortgage Law Group (jbrody@americanmlg.com) writes, "You are correct that the flat fee would not be included in the 3% test as it is a commission paid to a creditor's own loan officer. The CFPB has stated in guidance docs that compensation paid by a creditor to an MLO that is an employee of the creditor is to be excluded from points and fees for QM purposes."

Two of the big banks in the U.S. reported earnings on Friday. Chase and Wells are big indeed, and their earnings reflect trends in lending. The two, and other big banks, have only grown larger since the collapse of Lehman, the implosion of AIG and the folding of the major US investment houses into super-sized bank holding companies. According to Bloomberg, the six biggest banks in the US have increased combined assets by 28% since 2007. The biggest banks have been prodded by regulators to cut risk and raise capital in order to survive the next hiccup. As such, the amount of capital at the 6 largest US banks has almost doubled since 2008.

Wells reported $1.6 billion in mortgage banking income for the third quarter, a 43 percent drop from the same period one year earlier, and it received $87 billion worth of mortgage applications last quarter compared with $188 billion a year ago. At JPMorgan, loan originations "only" fell 14 percent year over year to $40.5 billion. Nevertheless, the nation's largest bank pulled down $705 million in income from mortgage banking during the quarter, a 13 percent increase from the prior year. Commenting on the results, investment banker KBW observed, "Overall, we view JPM's and WFC's mortgage banking results as weaker than expected primarily based on the sharp declines in gain-on-sale margins. We believe the read-across for the sector is moderately negative. Gain-on-sale (GOS) margins were down quarter over quarter. JPM's GOS margin declined 118 bps to 1.44% from 2.62%, and the net mortgage banking margin (which includes expenses) fell 97 bps to 0.22% from 1.19%. We believe the weakness reflects the decline in mortgage application volume, which fell 38% to $40.4 billion from $65 billion. WFC's GOS margin declined 79 bps to 1.42% from 2.21%. WFC experienced a similar 40% QoQ decline in mortgage applications."

KBW goes one, "WFC's unclosed application pipeline at quarter end was $35 billion, down 44% QoQ. The declines in application volume suggest that interest rate lock commitments were also down QoQ. JPM's mortgage origination volume of $40.5 billion was down 17% QoQ, while WFC's origination volume was down 28.6% to $80 billion. We view the decline at WFC as relatively in line with industry expectations. The Mortgage Bankers Association (MBA) is currently forecasting that industry volumes will decline by 25% QoQ. The declines in mortgage applications for both companies were close to the 41% decrease in average weekly applications that we saw in the unadjusted MBA index during 3Q. JPM noted that its purchase originations were up 57% from the prior year and 15% QoQ."

If you'd like some input on the flood insurance rules, now is your chance (through December 10).The proposed rule is being issued by the Board of Governors of the Federal Reserve System, the Farm Credit Administration, the Federal Deposit Insurance Corporation, the National Credit Union Administration and the Office of the Comptroller of the Currency. It would implement certain provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters) with respect to private flood insurance, the escrow of flood insurance payments, and the forced-placement of flood insurance. Separate from the agencies' joint proposal, Biggert-Waters also mandated other changes to the National Flood Insurance Program.

The proposed rule would require that regulated lending institutions accept private flood insurance as defined in Biggert-Waters to satisfy the mandatory purchase requirements and solicits comment on whether the agencies should adopt additional regulations on the acceptance of flood insurance policies issued by private insurers. In addition, the proposal would require regulated lending institutions to escrow payments and fees for flood insurance for any new or outstanding loans secured by residential improved real estate or a mobile home, not including business, agricultural and commercial loans, unless the institutions qualify for the statutory exception. There are new and revised sample notice forms and clauses concerning the availability of private flood insurance coverage and the escrow requirement, and the possibility it would clarify that regulated lending institutions have the authority to charge a borrower for the cost of force-placed flood insurance coverage beginning on the date on which the borrower's coverage lapsed or became insufficient and would stipulate the circumstances under which a lender must terminate force-placed flood insurance coverage and refund payments to a borrower.

Here is the formal notice. One can also go to one of the agencies - for example: look under recent updates here. One may submit comments through the Federal eRulemaking Portal "regulations.gov": Go to Regulations, enter "Docket ID OCC-2013-0015" in the Search Box and click "Search." Results can be filtered using the filtering tools on the left side of the screen. Click on "Comment Now" to submit public comments. Click on the "Help" tab on the Regulations.gov home page to get information on using Regulations.gov, including instructions for submitting public comments. Or one can e-mail: regs.comments@occ.treas.gov.

The bond markets are closed today, which obviously includes mortgage-backed securities, which help set rate sheet prices. Interesting, with the debt crisis and partial shutdown, rates were little changed last week. The budget and debt ceiling discussions will still move the markets this week. If the shutdown is not resolved, most of the economic reports scheduled for this week will be postponed, including the Consumer Price Index, Industrial Production, and Housing Starts. Unaffected by the shutdown, the Fed's Beige Book will be released on Wednesday and the Philly Fed index will come out on Thursday. Mortgage markets will be closed on Monday in observance of Columbus Day.

What economic news will be released this week? I don't know, just like I don't know why Federal politicians should continue to be paid, or even have air conditioning, during this shutdown. Actually, unlike last week, many of the scheduled economic reports are not at the mercy of the government which will provide some information to investors about how the economy is looking. Data that will be reported include the Empire State Survey (Tuesday); MBA applications, Beige Book, NAHB house price index (Wednesday); Initial Claims, Industrial Production & Capacity Utilization and Philly Fed (Thursday); and Leading Indicators (Friday); Wednesday's CPI is the only report that is dependent upon a fully functioning government. As mentioned, the bond market is closed, so setting rates is a little more touchy-feely than normal, and look for conservative rate sheets.

Here is some "late-breaking news": Christopher Columbus might not have been such a wonderful human being: AProductOfHisTime? Quite the opposite.

 

Oct. 8: Mortgage jobs; CFPB tools for research; 4506-T indem thoughts; parts of PHH up for sale?

Debi B. writes, "Thought for the day... We are always hearing about how Social Security is going to run out of money.  How come we never hear about Welfare running out of money?" And there is plenty of money in the agency MBS markets, and F&F, and the FHFA, are indeed working on a platform for common securitization.

Due to its continued expansion, Affiliated is looking for successful operational staff and account executives to join its team. Please contact www.affiliatedtpo.com if you wish to learn more. Affiliated recently added Mylena Evans-Alred as Executive Vice President of its Wholesale/Mini-correspondent division. Mylena joins Jerry Alred in expanding the TPO division in over 25 states and growing their current group of Third Party Originators. (Affiliated is a wholly owned subsidiary of Benchmark Bank, which has been a banking leader since 1964. Affiliated is a direct Seller/Servicer for FNMA and Issuer/Servicer for GNMA and offer a wide spectrum of programs, including Conventional, Texas Cash- Out,  FHA, VA, USDA and  Texas Veterans Land Board, and also offers warehouse lines.)

"All of the talk about lenders 'loosening' their requirements for IRS transcripts. Lenders should remember that just because an investor or aggregator does not require a customer to provide an IRS transcript for a borrower doesn't mean they are 'in the clear.' As you are aware, the agencies and many aggregators or national lenders include in their sale agreements with customers a clause saying the originating institution would have to repurchase any loan that contains fraud. For lenders that underwrite, certainly they could be in a repurchase situation for not correctly calculating a borrower's income. Let's say a lender, aggregator, or GSE executes the 4506-T as part of its post-funding Quality Control and sees unreimbursed business expenses, side jobs, or other discrepancies in the approved borrower's income. This would mean that it was not run through DU or LP correctly and potentially that there is borrower fraud since they signed a 1003 at closing not disclosing certain income or losses thereto. The question is not 'Will my lender let me close a loan without tax transcripts?' The correct question is, 'Without the transcripts from the IRS, what is the repurchase or indemnification exposure I have on this loan, if eventually the 4506-T is executed and my income figures are not correct.'" So wrote Fowler Williams, president of Crescent Mortgage Company - thank you!

(Speaking of the 4506-T question, here is what the public sees regarding Fannie & Freddie's stance on the requirement.)

Not only is the lending industry grappling with potential future liabilities regarding 4506-T issues, but lenders will still somewhat confused about the QM/non-QM question, and even what kind of loans they can originate. As a reminder, the CFPB came out with a quick reference chart. "Our newest chart maps out the types of qualified mortgages that small creditors can originate. View the quick reference charts here. These charts offer an easy way to visualize how the new mortgage rules are likely to apply to certain products or transactions in a variety of circumstances. These charts are not substitutes for the regulation text and official interpretations, but they can give you an idea of where to start."

And for fans of maps, as a reminder the CFPB also provides heat maps and illustrative graphs that detail local mortgage market trends. The tool relies on data gathered through the Home Mortgage Disclosure Act (HDMA) to offer consumers information on mortgage loan applications and originations, mortgage loan volume, and the volume of loans insured by the Federal Housing Administration (FHA) and the Veterans Administration (VA). Here you go: HMDA. OK, so maybe the guys and gals at the CFPB have a ways to go before they rise to the level of analytics of say, a Wells Fargo, or even a well-staffed originator, but at least they've made something relatively mundane (spending any amount of time on a .gov website) somewhat interesting. The CFPB is planning additional features for the site, including "easy-to-use tools" that allow users to filter HMDA records and create summary tables and an application programming interface that will allow researchers and software developers to incorporate the CFPB-provided HMDA data into other applications and visualizations.

When I learned that CFPB examiners have found mortgage servicing problems at banks and non-banks, I immediately thought about sitting in my dentist's waiting room thinking, "What are the odds he doesn't find anything and there will be no drilling?" Not good on both accounts as the older I, and Dodd-Frank, become. The agency released its recent report detailing mortgage servicing problems, which also found that many non-banks lack robust systems for ensuring they are following federal laws. Some of the mortgage servicing problems contained in the report are disorganized account transfers, poor payment processing, and loss mitigation mistakes. Some issued noted in compliance include: missing consumer compliance programs, the lack of formal policies and procedures, and the lack of independent consumer compliance audits. This is yet again, another indication of the role compliance, and compliance accountability, will play in mortgage banking moving forward. The official report can be found here, and is a useful guide for companies thinking about starting to build their own servicing portfolio.

Soon we will all be partnering with the CFPB! In late September the CFPB announced a partnership with the City of Jackson, Mississippi, to accept and respond to questions and complaints about financial products and services posed directly to the Bureau by local residents. The agreement will allow Jackson consumers to dial a local hotline and be connected with the CFPB's Consumer Response team, which will screen complaints for completeness, jurisdiction, and non-duplication. This agreement is one of several the CFPB has entered with localities around the country and is at least the second time that the CFPB has partnered with a locality on a consumer complaint hotline. We all know that the CFPB is currently accepting complaints regarding credit cards, mortgages, deposit products and services, consumer loans, private student loans, credit reporting, debt collection, and money transfers.

Yes, companies are going to merge, and the landscape is going to change - plenty or originators would rather focus on originating and not compliance. There is no doubt about it. Servicing is being transferred, personnel shifted or eliminated, originators are being courted, and companies are looking at getting bigger, smaller, or merging. For example, last week we learned that PHH was laying off hundreds of workers, and now the industry is digesting news/rumors that PHH is for sale, or at least parts of it are (http://www.chicagotribune.com/business/sns-rt-us-phh-sale-20131007,0,33289.story). So PHH is thinking about selling the company for up to $1.5 billion, which is roughly in line with the current capitalization of the company. KBW reports that the current tangible book equity of the company is $1.6 billion. The article also stated that PHH had approached both Ocwen and Nationstar about buying the mortgage company in recent months.

KBW goes on to say that, "...we believe that there are operational challenges for any buyer of the mortgage business. PHH is not a traditional mortgage company. The bulk of its mortgage volume comes through mortgage originations it makes on behalf of its partners. As part of the company's contract with its partners, PHH has to provide certain levels of service. We believe that this gives PHH somewhat less flexibility in cutting its costs, and management noted on the 2Q earnings call that it would seek to amend certain private label contracts to reflect fundamental changes in the industry. We agree that the company's $229 billion servicing portfolio ($133 billion of owned servicing) would be very attractive to both Ocwen and Nationstar. But neither company has paid meaningful premiums to book value to purchase MSRs. If we assume that the mortgage company is worth book value, the market is now valuing the fleet management business at around $140 million over book value. We believe that further upside to the current share price in a sale would largely depend on any potential buyer valuing the fleet management business at a level higher than this."

Keeping on with lender and vendor news, let's take a look at some recent announcements to see the trends out there in residential lending along with some upcoming events.

Radian's management reiterated that they expect the GSEs to introduce new risk-to-capital standards as early as year-end, likely in the range of 16-18 to 1 with potential haircuts for subsidiary capital. There is expected to be a phase-in period for the new rules. Given its holding company liquidity, the company expects to be able to comply with any new requirements. "While conditions in the mortgage insurance sector remain competitive, management believes that the overall growth in private mortgage insurance relative to the FHA should help limit competitive pressure. Further, the company noted that there are meaningful barriers to entry given the long timeline to profitability so it is unlikely there will be new entrants into the industry in the near term."

Effective October 1, the new name for Secondary Interactive is now Optimal Blue Secondary Services. "We are changing our name to better integrate our secondary marketing products and services with the Optimal Blue family and brand, a recognized leader and innovator in mortgage technology." To learn more about Optimal Blue Secondary Services, visit www.optimalblue.com.

Paramount Residential Mortgage Group announced the recent expansion of its Retail Division in the South Eastern U.S. "The Southeast territory will be headed up by the recent hiring of PRMG's new Retail Regional Manager, Steve Levine. Levine brings over 13 years of independent retail mortgage banking experience to an already robust PRMG retail platform."

MBA is holding a one-day Retained Servicing Workshop on Wednesday, November 13 at the Westin - DFW Airport, Dallas, TX. "We have a strong line-up of expert speakers, including executives from mortgage companies that have ramped up their servicing in the past few years. They will discuss their major operational decisions, such as servicing loans in-house versus using an outside subservicer.  All companies that are starting to retain servicing must understand the CFPB servicing requirements that go into effect in January and what exemptions may apply to them as smaller servicers. Financially, they need to understand how to properly value servicing rights and explain their valuations process to regulators and auditors. Strategically, they need to decide if it makes sense to grow their servicing portfolios going forward. Click here to find out more: http://www.mortgagebankers.org/RSW13.htm.

In Georgia, its MBA October events will be held at the City Club of Buckhead (Financial Center) in Atlanta on October 23. FNMA will speak to the new changes (effective Nov.16^th) as it relates to QM, DU 9.1 guidelines, Rep & Warrant framework, QC Overview and ULDD Phase 2 updates: http://events.r20.constantcontact.com/register/event?oeidk=a07e8963x903d420d7b&llr=wc756jcab. There is a Free Networking event hosted by the MBAG and anyone can attend: http://events.r20.constantcontact.com/register/event?oeidk=a07e8a4orh0c8e51f7f&llr=wc756jcab. And lastly on the 23^rd is a session on understanding the impact of the CFPB's Final Rule on ATR/QM on the Broker Model. "This is a Broker-Only Luncheon sponsored by the Mortgage Bankers Association of Georgia's Membership Committee and presented by Loretta Salzano" - here you go: http://events.r20.constantcontact.com/register/event?oeidk=a07e898cnh197d75196&llr=wc756jcab

The Texas Mortgage Bankers Association is now accepting registrations for its annual Educational Seminar and Marketplace, which is scheduled for November 12^th and 13^th in Dallas, TX.  The event will focus on best practices, with breakouts in operations and sales and general sessions on technology and compliance, and culminate with a CEO roundtable.  To register, go here.

The Mortgage Bankers Association of Florida has announced the dates for the Eastern Secondary Market Conference, scheduled for February 5-7^th in Orlando, and its 61^st Annual Convention, scheduled for June 18^th and 19^th in Delray Beach.  Watch http://www.mbaf.org/ for upcoming details.

As I head to San Francisco today to give a speech, there just is not much going on out there for the markets to latch onto. Partial government shutdown...blah blah blah...light MBS flows...market nervousness...delayed government economic announcements.... There just is not much going on with interest rates, and certainly lenders have much more on their minds. The economic calendar today contained more postponed data than released ones as the government shut down continues and August Trade Balances are the latest casualty - it is not coming out. The Treasury, however, will auction off $30 billion of 3-yr notes today. The "benchmark" 10-yr yield saw a 2.63% close on Monday, and this morning it is at 2.64%, with very little change in agency MBS prices.

Here are some facts for football fans, part 2 of 2:

It takes 600 cows to make enough footballs for one NFL season. Moo!

The Dallas Cowboys haven't played in Dallas since 1971. Cowboys Stadium is located in Arlington, TX.

The St. Louis Rams were the first NFL team to use their logo on their helmets.

The Green Bay Packers are a publicly owned corporation, the only team in the NFL to have this status.

President Theodore Roosevelt radically changed American Football rules when he introduced the forward pass in 1906.

Dr. James Naismith introduced helmets to football, but he is better known as the inventor of basketball.

Former Minnesota Vikings kicker Fred Cox invented the Nerf football in 1972...he still receives royalties for every unit sold.

The NFL is considered a non-profit and is thus tax-exempt.

The NFL requires that all stadiums be built facing north/south so the sun never interferes with a play.

The average life expectancy of an NFL player is 55 years.

The league minimum for an NFL rookie in 2013 is $405,000. In 2014 it will be $420,000. Somewhere, Ricky Williams smiles.

The NFL averages 290 million television viewers a week. That is four times the population of the United Kingdom.