Sep. 12: Umpqua & Sterling merger; Citi layoffs; even the big boys are supposedly easing lending standards

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...

Today I head to Austin, TX, which is pretty cosmopolitan. (Some would say “weird.”) If you don’t think the world (or at least the U.S.) is becoming a more global place, think again or ask an LO. The U.S. Census Bureau reported that in this country 11.4 million married-couple households, or 21% of all married-couple households in America in 2011, had at least one spouse born in another country. About 13% (7.3 million) of households had two foreign-born spouses, and 7% had one native-born and one foreign-born spouse.

 

Citi is a global bank, and unfortunately for some of its workforce, there will be fewer of them in the mortgage group. Per FOX Business, Citigroup plans to lay off an estimated 2,200 workers within its mortgage business by early next year. The layoffs could come at mortgage units across the country, including its closing of the Danville, IL facility. And when one adds this to BofA, Wells, and Chase, the total is over 22,000 mortgage-related folks being displaced in one way or another. And that doesn’t count the scores of smaller lenders who have done the same thing, or will if production continues to slide. Don’t forget that back in April Citigroup’s CFO John Gerspach, told Wall Street analysts that Citigroup is “not looking to significantly grow share in mortgages,” other than through making loans to its existing retail bank customers.

 

Over at Chase, they are supposedly “removing lending barriers.” Per an article in Bloomberg by Dakin Campbell, Heather Perlberg, and Prashant Gopal, “JPMorgan Chase is easing mortgage lending standards in housing markets hard hit by the crash where prices are surging. The bank lowered some down payment requirements in Florida, Nevada, Arizona and Michigan because they will ‘no longer be considered distressed states,’ it informed smaller lenders it buys loans from in July. The second-largest U.S. mortgage lender also loosened underwriting requirements for a refinancing program for Federal Housing Administration borrowers.” Here’s the scoop: http://www.bloomberg.com/news/2013-09-11/jpmorgan-removes-lending-barriers-in-booming-u-s-markets.html. “JPMorgan removed a minimum 640 credit score requirement for the FHA’s streamlined refinancing program in May, enabling more borrowers to get new home loans at lower interest rates, according to spokeswoman Amy Bonitatibus.”

 

But Chase isn’t alone. Per the article, “Wells Fargo has relaxed certain credit standards and is requiring borrowers to put up less equity to buy high-priced homes. The San Francisco-based bank began, on July 13, to offer nonconforming loans with a loan-to-value ratio of 85 percent, up from 80 percent, according to Tom Goyda, a bank spokesman.”

 

But while we’re yapping about banks, the big news is a proposed Northwest merger reported by the WSJ that Sterling Financial Corp. will merge into Umpqua Holdings Corp. The combined company is nothing to sneeze at: it will have $22 billion in assets and about 400 branches when the deal closes in the first half of 2014. Sterling, based in Spokane, Wash. (even though I was there earlier this week, I had nothing to do with it!), will merge into Umpqua Bank, based in Portland. Ray Davis, currently president and chief executive officer of Umpqua Holdings, will continue leading the combined company, while Greg Seibly, president and CEO of Sterling, will become a co-president at Umpqua Bank.

 

The story noted that, in a note that can easily apply to non-depository mortgage banks, “Analysts have predicted a wave of consolidation would hit the banking industry as new capital requirements, lending regulations and weak loan demand make it harder for banks to grow profits and pressure them to cut costs. But there have been few large bank transactions, in part due to concerns over additional regulatory scrutiny such deals could attract to banks, analysts have said. A deal Buffalo, N.Y.-based lender M&T Bank Corp. (MTB) announced last year to acquire Hudson City Bancorp Inc. (HCBK) for $3.8 billion was delayed after the Federal Reserve in April raised concerns about M&T’s antimoney-laundering compliance programs.

 

And as companies merge, morph, or cut back, compensation levels are adjusted. What comp makes sense? This is fundamental to ensuring that your organization hires and retains the best talent while simultaneously controlling costs and justifying compensation to your stakeholders. Did you miss participating in STRATMOR’s Compensation Survey earlier this year? By popular request, STRATMOR has added a TPO Sales module and is reopening all of the original modules (Retail Sales, Retail Fulfillment, and Executive Management) for a second round of evaluation. Be armed with compensation data from 40+ participant companies as you head into budget season.  The results will be cumulative from both rounds.  For full details, visit http://www.cvent.com/events/fall-2013-stratmor-compensation-survey/event-summary-a29398447a6a4a25922a1d3e95b5ecd5.aspx or email nicole.yung@stratmorgroup.com for more details.

 

It is time to keep catching up with some of the agency, investor and lender updates to give us a sense of where guidelines are going, and where the focus is in the industry.

 

The Stearns Senior Leadership team and industry expert Laurence E. Platt of K&L Gates will offer an educational webinar where they will discuss the Rules implemented by the Consumer Financial Protection Bureau that will go in to effect in January of 2014 and the relationship between those rules and existing consumer regulations such as RESPA. “During the course of the webinar, we will review the changes and their impact on our industry.” There are two scheduled webinar dates for you to select from: Monday, September 16th @ 2:00 PM Pacific (5:00 PM Eastern): https://www1.gotomeeting.com/register/809117529, Teleconference Dial-In Number: (800) 553-0273, Conference ID: 303030. Or Tuesday, September 17th @ 7:00 AM Pacific (10:00 AM Eastern): https://www1.gotomeeting.com/register/451410208, Teleconference Dial-In Number: (800) 553-0273, Conference ID: 303031.

FNMA released new BU/BD grids with some large adjustments reported. As one would expect, buydowns rose more than buyups, thus pushing lenders into putting a given mortgage rate into a lower coupon.

 

Adam Q. from Thomson Reuters wrote, regarding his comment about slow purchase times at Nationstar, “Nationstar feedback received. Delayed PA wires stem from technology upgrade at Nationstar. New system delivery in 30-60 days. Nationstar also has a new custodian (Deutsche Bank). That could certainly create extra stips for sellers. Growing pains!”

 

Per one industry observer, the VA Central Office is working on a regulation change that hasn’t hit the public records yet. The expected focus of that change is allowing veterans to pay some or all 3rd party fees. The NAMB VA government affairs team is working directly with the VA to submit industry recommendations on how to structure that change along with submitting other recommended changes. “VA regulation changes are rare, and the focus of this effort will have a great positive impact on veterans and their ability to get their offers accepted.  Since this regulation change will need to run through the full approval process, it’s a great time to get other minor changes included and improve the VA loan program for veterans. If you believe there is a place for improvement and have a recommended change, please send your inputs to Ken Bates at Ken@VAproNetwork.com or Jim Brown at Jim.H.Brown@wellsfargo.com.”

 

The note went on to say, “Lender overlays are not in the control of the VA, so please leave suggestion/complaints about those out.  However, recommendation on how to clarifying the grayer area VA guidelines (for example putting in black and white writing that the veteran can pay for any repairs including termite) would help minimize lender overlays in the first place.  All other suggestions to improve the VA loan program are welcome and will be consolidated for input to the VA before this change comes out for public comment.”

 

The FHA is now “allowing for the consideration” of the eligibility of borrowers who have experienced an “economic event,” i.e. unemployment or other circumstances resulting in a significant reduction of income, provided that they can provide adequate proof.  This includes documentation of credit impairments caused by loss of employment or loss of household income beyond the borrower’s control, evidence of full recovery from the event, and evidence of completion of housing counseling.  This effectively provides a workaround for the waiting period for bankruptcies, foreclosures, deeds-in-lieu, short sales, delinquencies, and indications of derogatory credit, including collections and judgments and applies to all FHA purchase programs apart from Home Equity Conversion mortgages through September 30th, provided that the borrower in question meets all other applicable eligibility and policy criteria.  The definition of an “Economic Event” is key here: “any occurrence beyond the borrower’s control that results in loss of employment, loss of income, or a combination of both that causes a reduction in the borrower’s household income of 20% or more for a period of at least six months.”  For the full details on satisfactory credit requirements, verification of income reduction, verification of loss of employment, verification of previous and post-Economic Event income, credit deficiencies, and housing counseling, refer to Mortgagee letter 2013-26 (http://clients.cisend.com/go.cfm?a=1&b=276362&f=4d39911c06f54ab86248f46a81fead65bc9536925170e1c7).  

 

Ginnie Mae has added a web functionality that lets users search for Pool-Level and Loan-Level details for Single-class MBS and Loan-Level details for HMBS in its Disclosure pages.

 

Fannie Mae and Freddie Mac have announced the second phase of the conversion of the current UAD compliance warning edits to fatal UAD edits in the UCDP, which are scheduled to occur in Q1 of 2013.  This will affect the Quality of Construction, Location Rating, View Rating, and Condition Rating fields.  Refer to the official update for additional information on changes to XML file formats accepted in the UCDP and enhancements to Hard Stop 303, along with further details on the changes to the edits (https://www.fanniemae.com/content/news/ucdp-uad-newsletter-august-2013.pdf). 

 

Following the CFPB’s adoption of the High-Cost Mortgage Homeownership Counseling Rule and the subsequent amendments of Regulations X and Z, Wells Fargo has informed sellers that purchase transactions and HELOCs will be subject to HOEPA.  Points and fees equal to more than 5% of the total loan amount will render loans of $20,000 high-cost; for loans under $20,000 this is the greater of 8% of the total or $1000. The definition of points and fees has also changed and now covers all fees included in the finance charge apart from interest or the time price differential; government program mortgage guarantee insurance; certain types and amounts of private mortgage insurance; charges retained by a party other than the originator, creditor, or an affiliate of either; and up to two discount points in particular circumstances.  The rule also changes the index used in the APR threshold from the Treasury rate to the APOR as well as the APOR thresholds that make a loan high-cost.  For first liens, this has been revised from the Treasury rate plus 8% to APOR plus 6.5%, and for junior liens, from the Treasury rate plus 10% to APOR plus 8.5%.  For ARMs, the rule requires that the higher of the initial rate or fully indexed rate be used in the APR calculation.  With all of that in mind, Wells reminds lenders that it does not purchase high-cost loans and that the revision of the High-Cost rule goes into effect with applications dated January 10, 2014 and after.

 

I could practically re-type yesterday’s blather about the bond market: Syria, overseas, tapering, MBS supply versus MBS demand, etc., although we did have a $49 billion record size Verizon corporate bond pricing and a $21 billion 10-year note auction. Interestingly, traders reported that supply from mortgage bankers increased a little over its recent dismal pace (about $1.5 billion). But through all this rates improved somewhat, with agency MBS ending the day better by about .250 in price and the 10-yr at 2.92%.

 

Today we’ve had Initial Claims (expected higher to 330k from 323k, the number came in at 292k from a non-revised 323k, a drop of 31k – but apparently the data is faulty!) and August Import Prices (+0.4 expected versus +0.2 previously, they were unchanged). Other events of interest are Treasury’s $13 billion re-opened 30-year bond auction at 1PM EDT. Prior to the number Fannie 4’s +3 at 102.50. After the jobless claims data, which are suspect, the 10-year is sitting around 2.89% and MBS prices are slightly improved.

 

 

Very punny (part 3 of 3)

When cannibals ate a missionary, they got a taste of religion. If you jumped off the bridge in Paris, you’d be in Seine. A vulture boards an airplane, carrying two dead raccoons. The stewardess looks at him and says, ‘I’m sorry, sir, only one carrion allowed per passenger.’ Two fish swim into a concrete wall. One turns to the other and says ‘Dam!’ Two Eskimos sitting in a kayak were chilly, so they lit a fire in the craft. Unsurprisingly it sank, proving once again that you can’t have your kayak and heat it too. Two hydrogen atoms meet. One says, ‘I’ve lost my electron.’ The other says ‘Are you sure?’ The first replies, ‘Yes, I’m positive.’ Did you hear about the Buddhist who refused Novocain during a root canal? His goal: transcend dental medication.

 

Rob 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.