Oct. 15: New products & jumbo buyer wanted; lender purchased; more on RESPA-TILA; big bank’s mortgage earnings

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...

I know an older couple who have been married for almost fifty years. Their “first home story” they like to tell is relatively straight forward. After graduating from college, and getting married, the couple moved into an apartment. Down the street from the husbands new employer was a vacant 3-by-1 ranch home; six weeks later they secured a loan from the local bank, purchased and moved into that home…and to this day they still complain about the security deposit they had to forfeit for breaking their lease. Zillow writes, Americans are always in search of affordable housing. But whether you’re looking to buy or rent, finding housing that is as affordable today as it has been in the past can be relatively easy in some areas and impossible in others, according to the Zillow Affordability Index.” To rent or to buy, the age old question. According to the article there are many areas, as long as you have saved for a 20 percent down payment, monthly payments on a mortgage for a typical home consume a smaller portion of a median household’s income than they did in the years leading up to the housing bubble. The share of income devoted to rent, on the other hand, is well above historic norms in most places. Did low interest rates helped keep mortgages affordable?

 

Hey! A large, well-capitalized retail lender is interested in selling jumbo fixed rate loans in bulk on a monthly basis, servicing released or retained. Credit standards would meet most securitization standards, with FICOs averaging greater than 760, LTVs averaging 72%, with a 32% concentration of MA loans, 14% TX, 11% WA, 6% NC; origination is approximately $20-30 million per month of jumbo fixed. Interested investor parties may pass contact information along to me at rchrisman@robchrisman.com.

 

In the reps and warrants arena, zIngenuity, Inc. announces “Cost-Free Buyback Defense and 5x Money-Back Guaranty” on all loans it underwrites or reviews in the pre- and post-closing QA/QC process. zIngenuity, an established provider of contract underwriting, quality control, and buyback defense services, will backstop the quality of its work by providing cost-free buyback defense and money-back guaranty of 5x the fee paid for any loan it has underwritten or reviewed that becomes the subject of a buyback.  zIngenuity’s CU/QA/QC programs incorporate the “lessons learned” from analyzing and defending its lender clients against tens of thousands of buybacks and MI rescissions in BTB and litigation matters.  To learn more click on the link above or contact Steve Mageras.

 

On the mortgage product front, BOK Financial Correspondent Mortgage Services offers the Construction to Perm solution as a one-time close or two-time close. The Construction to Perm one-time close must adhere to Fannie Mae’s Guidelines.  In addition, please refer to our overlays for additional requirements.  Furthermore, BOK Financial Correspondent Mortgage Services will only purchase the closed loan when it is modified to permanent financing. To compliment this product is our extended lock program up to 360 days. If you are a bank or credit union, please contact client relations for more information. If you are attending the National Mortgage Bankers Association Annual Convention & Expo this month in Las Vegas, let us know so we can hold an appointment for you. Contact us as at clientrelations@bokf.com or contact Leah Harper, AVP of Corporate Communications.

 

Frankly, I am very skeptical of the recent Deutsche Bank estimate that non-QM lending could be a $600 billion a year industry (thus about 60% of 2014’s volume). But one thing is for sure: QM or non-QM, prime or subprime, investors want yield, and are willing to chase it. So it was no surprise that Deephaven Mortgage LLC and Värde Partners, Inc. announced that they have entered into a purchase agreement. Värde will acquire Deephaven Mortgage and provide over $300 million of capital to grow the company and finance the acquisition of residential mortgage loans. “This transaction will allow us to further our mission of providing private-capital liquidity for non-prime residential mortgage loans responsibly made to borrowers who are unable to obtain a traditional government-financed mortgage,” said Matt Nichols, CEO of Deephaven Mortgage.

 

Speaking of industry volumes, BAML opines, “It will be close, but 2014 is on track to see gross annual mortgage origination volume drop below $1 trillion for the first time since 1997. Our forecast is for $936 billion, down 47% from 2013. Assuming mortgage rates and mortgage application volumes remain near recent levels, we would expect roughly another 10% decline in mortgage production in 2015, down to $850 billion. The mix would be $500 billion in purchase mortgages and $350 billion in refinancings. While some may remember the lean days of sub-$1 trillion mortgage originations in 1994-1997, relative to the size of the US economy, nobody has seen such anemic production levels as today’s in the modern era. Because the US economy has roughly doubled since 1997, from $8.6 trillion nominal GDP to $17.4 trillion in 2014, 2014-2015 are likely to be the lowest production years as a percent of GDP in the past 25 years…Mortgage rates could drop another 50-100 basis points (through market forces), and push 2015 purchase mortgage share of GDP up from 2014 levels, leading it to move in the same direction as GDP growth. In other words, the ‘fix’ to the ‘broken’ mortgage market is not loosening credit, but something far simpler, lower mortgage rates. We think 50-100 basis points lower is needed to turn things around in housing, suggesting a return to the 3%-3.5% range on 30-year fixed rate mortgages. To us, the odds seem to favor this as an outcome.”

 

Big banks are obviously a part of that picture, and yesterday we learned of their 3rd quarter results. If stock price is any indication of bank performance versus expectations, Citi rallied, Chase drifted off, and Wells took it on the chin falling almost 3% in one day. As an indicator for the mortgage biz, Wells reported $48 billion in originations, an increase of a billion from the previous quarter. Gain on sale margins increased from 1.41% to 1.82%. JP Morgan announced the bank had gained market share in mortgages, however they cut 6,000 jobs in the space and will probably cut another 1,000. For JP Morgan, originations were $21.2 billion, down 48% from a year ago, but up 26% quarter-over-quarter. It saw lower GOS margin (to 1.85% from 2.02%) likely driven by higher percentage of correspondent volume.

 

CFPB supporters and detractors saw this announcement yesterday focused on next August’s changes. “Last week, we proposed two substantive amendments to the TILA-RESPA integrated disclosure rule issued November 2013. One proposes to relax the timing requirement that creditors provide revised disclosures on the same day that a consumer’s rate is locked, in order to give creditors until the next business day to provide a revised disclosure. The other proposes placement of language relating to certain new construction loans on the Loan Estimate form. In addition, we’re proposing some technical corrections. Check out the proposed amendment to learn more.

 

Let’s catch up with some relatively recent lender updates. There is more anecdotal evidence that mortgage credit is easing, and the article includes information on TD and Shellpoint’s non QM loans.

 

Fifth Third has posted clarification regarding attached PUD and CONDO requirements pertaining to special endorsements. Also, real estate transactions involving 1031 Exchanges are not permitted under Fifth Third product guideline with no exceptions available to the rule. Additionally, October 1st is the retirement date for Wholesale Connect; it will no longer be able for access after the 1st of October.

 

“Starting Monday, October 13th, Carrington will offer the 25 Day Closing Pledge where we will close your client’s loan within 25 days (calendar), or your borrower will receive a $500 closing cost credit to their loan at closing.”

 

And the Wholesale Lending Division of Carrington Mortgage Services, LLC (Carrington) announced that it has eliminated its underwriting fee in its wholesale division in support of Carrington’s commitment to serving the underserved borrower for the broker community.

Effective immediately, without an underwriting fee, brokers will experience an easier, more direct path to disclose and fund loans in a compliant fashion, offering consumers a more efficient process. The elimination of the underwriting fee aligns with the company’s focus to accelerate and further enhance its ability to give the underserved market the attention it deserves.

 

Last month Franklin American updated its LPMI adjustments.

 

In mid-September Flagstar Bank began making the Lender Paid Mortgage Insurance (LPMI) price adjustment updates. Additionally, it announced the addition of Lender Paid Mortgage Insurance (LPMI) to the Single Financed Mortgage Insurance (SFMI) and Lender Paid (LPMI) Matrix. There is a new functionality within Loantrac to better streamline the process of canceling or withdrawing a loan. A new link has been added to the Loantrac main page to facilitate this process.

 

LDWholesale updated its fast facts to include its new VA ID, The ID number should be used on all VA appraisal orders effective immediately. Credit inquiry explanation document has also been added to be completed by borrowers regarding any new accounts and an updated submission form adding the selection for monthly or single premium borrowers paid MI has been posted.

 

U.S. Bank has requested lenders do not include copies of borrower’s photo I.D., the exception is documentation request requirements for non-U.S. citizens.

 

Commerce Mortgage Wholesale reminded clients that it offers loans up to $1.5 million, 740 FICO required; IO ok up to 80% and $2 million. NOO ok up to 70%…

 

Citibank has identified some areas deserving attention when submitting QM Loans to Citi for purchase consideration. QM best practices identify some problem areas and clarification on requirements.

 

U.S. Bank Wholesale division has provided an updated list of approved mortgage insurance providers including all Easy D eligible loans: Arch, MGIC, Radian, UG, Essent Guaranty, and GE.

 

Beginning with loans locked on Monday, September 22, 2014, Flagstar Bank Wholesale will be making the FICO price adjustment changes as outlined in its memo #14109 on FHA and VA products.

 

Franklin American Mortgage Correspondent published bulletin 2014-28 covering Desktop Originator Sponsorship, RESPA – GFE Requirement, TILA – Seller/Lender Credits, Florida State Disclosure Requirements, MERS Rider, FHA Monthly MIP Calculation, and RESPA Trends.
Business assets are not an acceptable form of reserves for all Kinecta Federal Credit Union Wholesale Jumbo ARM products. Refer to the updated manual regarding Product & Eligibility Matrix for details of the update. Also available are tips for filling out lines 3 and 4 of the 4506-T, https://www.kinecta.org/Broker/wholesale_lending_manual.aspx.

 

Effective with loan deliveries on or after October 20, 2014, PennyMac will now require two years tax transcripts for all borrowers, regardless if income is used to qualify. Any losses reported on the tax transcripts must be considered in the income calculation. Full tax returns must be provided and analyzed according to current requirements. As a reminder, a Profit & Loss and Balance Sheet are required for all self-employed borrowers, even if the income is not used to qualify.

 

Are countries around the world all heading for recession? It is doubtful, but if foreign growth is weaker than anticipated the consequences for the U.S. economy could lead the Fed to “remove accommodation more slowly than otherwise” – meaning that short term rates could be this low well into 2015. At the longer end of the curve 10-year T-note yields dropped below 2.20% for the first time since June of last year as volatility picked up.

 

For mortgages, however, lower rates increase the possibility of refinancing – although it is more expensive than in the past – and thus mortgage prices lag Treasury prices in rallies. Lock desks were busier reminding LOs about renegotiation policies rather than locking in new loans, and looked to senior management to support existing policies. (Hey, if rates went the other way, would lenders be hitting up borrowers for renegotiations?)

 

I head off to The Great State of Texas today, thus the early commentary, but there is a lot of economic news. The MBA weekly survey on applications will come out, September Retail Sales are expected to drop, and the Producer Price Index for September is expected to creep higher. Also ahead is the October NY Fed Empire manufacturing survey for October (27.5 prior) and the release of the Fed Beige book. In the very early going the 10-yr. and agency MBS prices are unchanged from Tuesday’s closing levels.

 

 

Bill Gates arrives at the entrance to the afterlife. On his left is the gate to heaven and on his right (you guessed it) is the gate to hell.

St. Peter says to him, “We have a problem, Bill. We don’t know what to do with you. Thus, you may choose for yourself between heaven and hell.”

Bill peeks into heaven and sees a couple of old men seated around a table talking about “the old days” listening to Lawrence Welk. Bill peeks into hell and hears loud rock and roll music and sees a bar, several beautiful women, and people playing blackjack, slot machines, and roulette.

“I want to go to hell!” shouts Bill, whereupon he is immediately thrown into the fire.

“Hey!” he screams. “This is messed up! You promised me gambling and fun!”

The devil says: “That was just a demo version.”

 

 

Rob

 

(Copyright 2014 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.)