June 19: Mortgage jobs; Las Vegas & eminent domain; Dodd-Frank update; HARP date petition; CFPB reminders

Rob Chrisman

Rob Chrisman began his career in mortgage banking – primarily capital markets – 31 years ago in 1985 with First California Mortgage, assisting in Secondary Marketing until 1988, when he joined Tuttle & Co., a leading mortgage pipeline risk management firm. He was an account manager and partner at Tuttle & Co. until 1996, when he moved to Scotland with his family for 9 months. Read more...

Here in Colorado, all eyes are on the 500+ houses destroyed by the recent fires. FEMA is also watching, as it is the damage caused by flooding in states like Illinois and Michigan. As a reminder, besides the human suffering that these areas experience, any updates can be found at http://www.fema.gov/news-releases. Obviously a federally declared disaster area has implications for appraisals, insurance, and the general “salability” of recently funded loans in those areas – each investor has their own policies and procedures.

 

Nations Reliable Lending is expanding in selected states and is currently hiring producing Area Sales Managers and MLO’s for its Minnesota division offices in the Minneapolis/St. Paul metropolitan area.  NRL (http://www.nationsreliablelending.com/Default.aspx) is a highly capitalized mortgage banker with private ownership that is “committed to investing in the growth of its production team: company paid advertising at the market, office, and individual MLO level; proprietary technology that is easy to use and fully integrated with LOS and PPE for superior lead management and customer service; compensation plans include not charging corporate expenses against the ASM or MLO.” Nations Reliable is led by industry veteran, Mark Teteris, CMB – he can be contacted at mark.teteris@nrlmtg.com for more information or to submit a resume.

 

St. Louis-based DAS Acquisition Company, LLC, d/b/a/ USA Mortgage, is expanding its operation further in the Midwest and is seeking a COO and/or true Operations Manager for its corporate headquarters.  Tired of the mortgage roller coaster rides on the coasts and other big cities in America?  Want stability and a more conservative/calm way of life? How about relocating to a city with little to no commute time?  DAS is the most dominant Lender in St. Louis, is a three time recipient of the INC. 5000 fastest growing Company (and is expecting 2013 to be their fourth), a two time recipient of Ernst & Young’s Entrepreneur of the Year Midwest Finalist, and one of the largest privately held companies in St. Louis. In addition, DAS is looking for three additional Branch Managers and new locations to enhance their current origination business in the region.  DAS is Missouri’s largest independently owned, mortgage banker, with over $1.75 Billion closed in 2012.  Currently, they have 12 branch offices and are licensed in 10 states.  Please submit resumes to Linda Pring at lpring@dasacquisition.com.

 

If you’re in Las Vegas tonight, take a break from having fun and go to the city council meeting – the members are voting on whether or not to embrace the eminent domain plan put forth by Mortgage Resolution Partners: http://www.lasvegassun.com/news/2013/jun/19/north-las-vegas-set-decide-controversial-mortgage-/#axzz2Weoeq4a8. Per the article, Las Vegas would become the 6th municipality to team up with MRP – I don’t know the other five.

 

This reminded me of a note I received a while back from John Jacobs, SVP of Secondary and Capital Markets. “It is important to know that the issuer of a private label security is no longer the owner of the loans in the security and contract law prevents them from unilaterally deciding to allow a borrower to refi to a lower rate.  Let’s for once take the view of the security holder, who, by the way, in good faith bought a financial instrument with a return associated with it.  No one should have the right to reduce or eliminate their return because the borrower is now in a bad deal.  What if a borrower was in a low-rate loan and rates were to spike, can anyone tell them that they must refi to a higher rate. Sounds crazy, but it is just the corollary to the “let’s let good borrowers reduce their interest rate” argument folks. I have been troubled by all the hoopla surrounding underwater borrowers and foreclosures, and how we must crucify the banks for foreclosing on people that don’t hold up their end of the deal by paying on time.  The ‘below water’ crowd, I have more sympathy for – but who says that things in life are going to be fair? The free-market cuts both ways, and the ‘new’ politically motivated view is that when it ‘cuts’ the wrong way, we must interfere. Is that right?”

 

Dan McPheeters is helping lead the charge for the MBA in the Volker Rule and TMPG Margin Rule, but is also doing a good job keeping the industry up to speed on Dodd-Frank (yes, our little toddler is three years old). Here is an update on Dodd-Frank, prepared by the law firm of Morrison & Foerster. (Yes, an unfortunate abbreviation but let us stick to the task.) Here you go: http://www.mofo.com/files/Uploads/Images/130607-Dodd-Frank-at-3.pdf.

 

Draw a line in the sand, and someone wants to step over it. Write in a date for HARP or FHA streamline refinancing, and people wonder why. David H. reports that a petition was started requesting the qualifying date for HARP and FHA refinancing to be moved from May 31, 2009 to December 31, 2010. He noted, “This certainly would help the industry and millions of homeowners who have been left out of refinancing. I am sure many of your readers would like to sign it and pass along to their clients.” I don’t know if any of these petitions “have legs,” but here you go: https://petitions.whitehouse.gov/petition/extend-date-qualify-harp-and-special-fha-refinancing-may-31-2009-december-31-2010/WZm617Lq.

 

I continue to be asked about the CFPB’s exam procedures. Earlier this month the Consumer Financial Protection Bureau (CFPB) published the first update to its exam procedures for the new mortgage regulations it issued in January 2013. The exam procedures offer financial institutions and mortgage companies valuable guidance on what the CFPB will be looking for as the rules become effective. The new regulations include those on appraisals, escrow accounts, and compensation and qualifications for loan originators. In January, the CFPB issued numerous new regulations reforming the mortgage market. The rules cover many stages of a consumer’s mortgage experience, from shopping for a loan to paying it off. Most of the CFPB’s new rules go into effect in January 2014. Today’s release of exam procedures will help financial institutions and mortgage companies understand how they will be examined for CFPB rules. The official release can be found here, and will give you an idea of what the CFPB is interested in: http://www.consumerfinance.gov/pressreleases/the-cfpb-releases-exam-procedures-for-new-mortgage-rules/.

 

And to follow up, the CFPB’s issuance of the Ability to Repay and Qualified Mortgage Rule (the “Final Rule” or the “Rule) had many thinking the sky was falling. It isn’t. Everyone appears to agree that the Rule has caused fewer borrowers qualifying for mortgages, and will likely result in higher interest rates for many who do qualify. Concurrent with the issuance of the Final Rule, the CFPB issued Proposed Amendments to the Ability to Repay Standards under the Truth in Lending Act (Regulation Z) (the “Concurrent Proposal”). Even if the CFPB follows through on all of the proposed amendments, the mortgage banking industry—and consumers—will face a very changed lending environment. The Rule is likely to negatively impact loans to borrowers who do not have stellar credit, whose debt-to-income (“DTI”) ratios exceed the 43% cap for loans entitled to a safe harbor, or who otherwise do not meet the Qualified Mortgage

(“QM”) safe harbor standards, since risk-based pricing is likely to result in higher interest rates for those loans. It will also negatively impact loans to protected classes under fair lending laws, since many consumers who are members of protected classes are unlikely to satisfy the safe harbor criteria, particularly if risk-based pricing results in higher interest rates (particularly if those rates exceed federal and state high cost loan limits).

 

Brokers will feel the hurt, many of which charge fees of 2% or even 3%, almost guaranteeing that brokered loans will not qualify for QM treatment because they exceed the 3% points and fees maximum – which is why this commentary has written so much about the move by brokers to the “mini correspondent” channel. Others this will affect are lenders and brokers that use affiliates to provide settlement services (due to less pricing flexibility because they must include affiliate fees in the points and fees calculation), Jumbo loans with principal balances above the Fannie Mae and Freddie Mac conforming limits with DTI ratios above the 43% safe harbor QM limit, Interest-only and balloon loans due to decreased availability, and finally smaller balance loans that are above the $100,000 loan amount to which the 3% points and fees test applies, but that are still below a loan amount at which the points and fees test results in an unrealistically low dollar amount.

 

And as one last reminder, the CFPB has decided to delay its effective date of the Regulation Z prohibition on financing single-premium credit insurance to January 10th, 2014 (which is also the effective date for most of the mortgage-related rules issued by the CFPB in January 2013). The effective date was scheduled for June 1st of this year, however, late last month the agency proposed the delay in response to concerns raised by industry about the CFPB’s interpretation that the prohibition would apply to level premiums. The CFPB plans to issue a new proposal clarifying the prohibition’s applicability to transactions in which credit insurance premiums are charged periodically. In the new proposal, the CFPB intends to seek comment on what effective date would be appropriate for the prohibition as clarified. Thanks to Ballard Spahr LLP for including this in its CFPB Monitor (http://www.cfpbmonitor.com/2013/05/30/cfpb-delays-effective-date-of-reg-z-prohibition-on-financing-credit-insurance-premiums/). And yes, I know this is three weeks old, but folks continue to ask about it.

 

If I told you that the Fed was going to stop buying $85 billion a month in securities on November 1, what would you do? Or if I told you that the Fed would announce today that it sees no reason to ever stop buying, what would you do? Of if I told you the Fed, in today’s verbiage and Ben Bernanke press conference, would say something in-between, what would you do? The latter is the most likely, especially if the Fed sees something going on in the economy that the rest of us do not. We have nearly no inflation, homebuilder confidence is at a seven-year high, NY manufacturing is increasing, housing prices are moving higher yet unemployment is stuck. What’s a mother to do?

 

No one says that QE3 has not been helpful to rates, and the housing industry, and I doubt if the Fed wants to disrupt that. But buying $85 billion a month is holding rates artificially low, and keeps the bond market from naturally setting rates and functioning properly. We’ll find out what happens when the statement and summary of economic projections are released at 11AM Pacific Time, and a half hour later Chairman Bernanke will give the post-FOMC press conference – just like pro athletes when the game is over.

 

On the supply side, higher rates and lower refinancing activity has led to reduced supply from originators. For example, this morning we had the MBA’s residential mortgage application data for last week show a 4% drop. The share of applications filed to refinance an existing mortgage was unchanged from the prior week at 69%. Adjustable-rate mortgages, or ARMs, was also unchanged a week earlier at 7% of total applications. The Home Affordable Refinance Program share of refinance applications rose to 31% from 29% in the prior week. It is interesting to look at the relative rates, published by the MBA: 30-year fixed-rate mortgages with conforming loan balances increased to 4.17%, rates on similar mortgages with jumbo-loan balances were 4.23%, FHA loans were 3.85%, 15-year fixed-rate mortgages slid to 3.3%, and the 5/1 ARM average rate rose to its highest level since last June, jumping to 2.81% from 2.78% a week earlier. And through it all, the Fed’s current pace of buying at over $3 billion per day on average is likely for a few more months, and with supply lower, the Fed will be taking out a larger percentage of it – mostly 3.75-4.25% 30-yr mortgages.

 

By the end of the day Tuesday, the 10-yr.’s yield was 2.18% and agency MBS prices were roughly unchanged from Monday’s close. In the early going the 10-yr is at 2.17% and MBS prices are pretty much unchanged – watch for that to change around 2PM New York time.

 

 

The light turned yellow just in front of him. He did the right thing, stopping at the crosswalk, even though he could have beaten the red light by accelerating through the intersection. The tailgating woman was furious and honked her horn, screaming in frustration, as she missed her chance to get through the intersection…..dropping her cell phone and makeup. As she was still in mid-rant, she heard a tap on her window and looked up into the face of a very serious police officer. The officer ordered her to exit her car with her hands up. He took her to the police station where she was searched, fingerprinted, photographed, and placed in a holding cell. After a couple of hours, a policeman approached the cell and opened the door. She was escorted back to the booking desk where the arresting officer was waiting with her personal effects. He said, “I’m very sorry for this mistake. You see, I pulled up behind your car while you were blowing your horn, flipping off the guy in front of you and cussing a blue streak at him. I noticed the ‘What Would Jesus Do’ bumper sticker, the ‘Choose Life’ license plate holder, the ‘Follow Me to Sunday-School’ bumper sticker, and the chrome-plated Christian fish emblem on the trunk, so naturally….I assumed you had stolen the car.”

 

Rob

 

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