Oct. 22: Appraisal & warehouse options; events of note; flood of Fannie & Freddie changes in the primary & secondary markets

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...

If anyone out there wants to be buy a big office building, Fannie has one: the company is preparing to move to its new HQ downtown and is selling its current quarters.

 

In appraisal news MyAMC, a nationwide provider of appraisal management services, announced recently that Roy McGregor has joined the company as the vice president of national sales. A veteran sales leader with 22 years of mortgage banking experience, McGregor is responsible for overseeing MyAMC’s sales operations and broadening the company’s reach in the mortgage industry. “MyAMC’s spirit is to truly become a valued partner in the mortgage process – not just a stop along the way. It sounds simple but it makes the biggest impact, and the biggest difference in our business,” McGregor states. Reach out to Roy if you’re looking for boutique-style service through a national appraisal management partner.

 

In warehouse news PlainsCapital Bank is a $9+ billion bank looking to aggressively grow its Mortgage Purchase Warehouse Lending platform. “We are seeking sales candidates that have proven sales skills. The most immediate needs are for a sales candidate in the Chicago area and a Credit Officer in the Dallas area. If you are interested in these or any other positions and you possess the right experience, come grow with us. Please submit your resume to Pamela L. Robinson, SVP National Sales Manager. Submit resumes to Pam Robinson (972.998.6954). And please email if you are interest in obtaining a Warehouse line with PlainsCapital Bank.

 

Wells Fargo said Wednesday it is laying off 132 employees in the Charlotte metropolitan area – pretty much attributed to not needing them any more as Wells (and other lenders) continues to see improvements in home-loan delinquency and foreclosure rates, as well as falling consumer demand to refinance mortgages. (Anyone displaced can post a resume – for free – at my www.LenderNews.com site.)

And the name Hudson City Savings Bank is wrapping things up with residential lending due to its merger with M&T. Broker clients received letters like, “Effective 4:30pm Friday, October 30th you will no longer have the ability to register loans with Hudson City Savings Bank due to the merger with M&T Bank. We will continue processing all active loans in your pipeline and will accept all loans registered prior to 4:30pm on Friday, October 30th. You MUST submit your complete loan packages within 30 days from the registration date! M&T does do some broker and correspondence business, but each mortgage company currently approved with Hudson City would have to qualify to do business with M&T if not already approved to do business with M&T…”

 

A couple big events just wrapped up, but there are plenty more on the proverbial slate!

 

The California Mortgage Bankers Association’s Mortgage Quality and Compliance Committee (MQAC) if offering up a free “Fraud in the Age of TRID” webinar today at 11AM PDT. “While lenders are preoccupied with TRID compliance and implementation, fraudsters are honing their skills on how to exploit TRID’s new forms and procedures, putting lenders at increased risk of repurchase liability and financial loss. Stay ahead of the curve by attending this MQAC Webinar on October 22, 2015 led by Vidverify and featuring Ann Fulmer, a nationally recognized authority on Mortgage Fraud. If you have any questions, please feel free to contact Dustin Hobbs. To Join the Teleconference Portion, dial 1-800-351-6802 and when prompted by the operator, provide the top secret passcode 4378.

 

Next week the California MBA is also offering up another free webinar titled, “Topic: Millennials – How to Capture a $1 trillion market?” The speakers are Ori Zohar, Co-Founder, SVP Digital Marketing, Sindeo, Nathan Perez, Operations Manager, Catalyst Mortgage, John Seroka, Principal and Brand Strategist, and Christy Soukhamneut, Area/Branch Manager of Starkey Mortgage. If you have any questions, please feel free to contact Dustin Hobbs or Susan Milazzo.

 

In response to market demand, American Banker has created the Vendor Management Bootcamp, November 4-6. This three-day web seminar series will cover a regulatory overview, key components of a vendor management program and implementation and vendor management IRL. Sign up now to help your entire team become proficient in regulatory and compliance requirements and building, monitoring and implementing a successful vendor management program.

 

“Are you set up to survive or thrive in the mortgage industry in 2016?  Register for Mortgage Maven Method: Re-Creating Your Future In Mortgage Lending Presented by Cindy Tomcak, Advisor to the Mortgage Industry. Jumpstart the new year by attending this interactive 3-hour workshop provided by the Nebraska Mortgage Association on November 4th in Grand Island or November 12th in Ashland.”

 

There is so much going on with the Agencies (Freddie and Fannie) I don’t even know where to start. And of course their actions help determine the secondary markets, which in turn influence the primary markets, which directly impact borrowers and lenders’ profitability. Freddie and Fannie certainly are the subject of conjecturing and political posturing. Most believe nothing will happen – politically – until after the next major election in 2017. But that doesn’t stop the posturing and discussion about ending conservatorship.

 

One of the priorities of the FHFA under Mel Watt has been to increase credit availability to the lower end of the market by providing lenders with more clarity around risk that they bear related to GSE representations and warranties (rep & warranty). We all know that Fannie Mae and Freddie Mac released an update to their rep and warranty framework which continues to increase lender clarity – primarily in terms of the types of defects that would require that a mortgage be repurchased. The January 1st changes, with specifics coming up during the next few months, should continue the trend of increased credit availability through the GSEs, which is a positive for the mortgage market as a whole, and especially for the mortgage insurers.

 

As a reminder, under the updated framework the GSEs (Fannie & Freddie) will categorize defects into one of three categories following a full-file quality control review: findings, price-adjusted loans, or significant defects. Findings are defects that would not have resulted in a change in the price of the loan even if the defect had been known at the time the loan was purchased by the GSEs. Defects categorized as findings will not require action by the lender except potentially for a data update. Price-adjusted loans are loans with defects that would have necessitated the payment of a loan level price adjustment (LLPA) upon purchase. These can be remedied through the payment of the LLPA.

 

Significant defects are defects that would have changed the price of the loan or made the loan unacceptable for purchase by the GSEs. Lenders will have the ability to correct significant defects. However, if they are not able to do so, then they might have to repurchase the loan. The GSEs have also outlined several repurchase alternatives that they may offer to lenders in the case of significant defects. These could include: risk fees, recourse/repurchase agreements, various indemnification agreements, make-whole payments, split losses, or loss reimbursements (depending on if the loan is performing or non-performing).

 

What about underwriting changes? Fannie will permit lenders to use verified employment and income information and trended credit card data supplied by the credit bureau Equifax in its underwriting processes beginning mid-2016. No, not now – in mid-2016! But the public has certainly seen the news. So starting mid-2016 Fannie intends to begin incorporating trended credit data into the automated underwriting system. While the traditional credit score provides information pertaining to a borrower’s credit as of a certain point in time, the trended credit data would add more historical information regarding how the borrower’s credit balance has evolved, payment history, etc. Lenders can use this enhanced time series data during the credit underwriting process to better understand the borrower’s likelihood of default. We believe that the trended credit data better capture a borrower’s credit, and this could help lenders get more confidence in lending to borrowers with low FICO scores or those with a limited history of traditional FICO scores, such as first-time home buyers.

 

Fannie announced that it will incorporate Equifax’s ‘The Work Number’ income and employment verification into the Desktop Underwriter. Lenders can rely on Equifax’s database to provide them a third-party verification of borrower’s income and employment. Equifax will also offer a manual verification solution when the income and employment information is not available in its database. Also, mortgage lenders that use this option would not be required to obtain or verify paystubs from the borrower. We believe that for borrowers where Equifax is able to verify income and employment history, an important source of rep and warranty risk would be removed from the loan origination process. However, it is not clear if this system can benefit self-employed borrowers.

 

Lenders know that one of the primary reasons cited for GSE repurchases requests was related to borrower income and employment verification. Hopefully Integration of “The Work Number” into the desktop underwriter likely relieves lenders of this putback risk. (Another important source of repurchase request was related to home value which has also likely been addressed by the GSEs offering Automated Valuation Models in their automated underwriting systems.)

 

 

Freddie Mac is looking to expand its offering of low down payment loans. Whether or not lenders follow along remains to be seen, but the government is worried about people being shut out of the mortgage market, particularly low income borrowers and those with difficult to document income. Lenders know that not everyone deserves to borrow money to buy a home, and the homeownership rate in the US has fallen to 63.4% – about where it was before the US began the Great Experiment in Expanding Home Ownership which began with Bill Clinton’s HUD around 1994. The last time the homeownership rate was this low? 1967. Many say that this represents a lot of pent-up demand for purchase business and is an opportunity.

 

Freddie Mac and The Mortgage Collaborative inked a new deal. Freddie will provide The Mortgage Collaborative’s members that are Freddie Mac Seller/Servicers with access to critical mortgage products, execution benefits, staff training opportunities, and other services designed to make it easier to originate and deliver high quality mortgages to Freddie Mac.

 

Freddie announced that it is partnering with Quicken to explore and pilot modifications and expansions to the current Home Possible mortgage program (Freddie guarantees loans with up to 97 LTV under this program) to expand homeownership access to millennials, first-time homebuyers, etc. Although the program went into effect earlier this year, issuance has continued to remain at very low levels. Lenders playing in this sector know that the share of loans with LTV above 95 has been much higher at Fannie than at Freddie due to program differences. Based on the success of this partnership, Freddie could then expand the modified home possible mortgage program to all other lenders – but probably only for the Home Possible program.

 

The hot topic is risk sharing: here’s a primer. The Agencies are mandated to do it, the big banks are fine with it since they have the size and money and resources to accomplish the deals. But small and mid-sized lenders feel left out of the game, and watch for this to be a source of disagreement down the road.

 

In the secondary markets they’re talking about Fannie Mae’s 1st Connecticut Avenue Securities transaction structured using an actual loss framework, Fannie said in statement. Fannie has completed 9 CAS deals, issued $12.44b in notes and transferred a portion of the credit risk to private investors on single-family mortgage loans with an outstanding unpaid principal balance of over $437.55 billion. By the end of 2015, Fannie “anticipates it will have transferred a portion of the credit risk on approximately half a trillion dollars in single-family mortgages through all of its risk transfer programs.” (Freddie Mac issued its 1st actual loss deal earlier this year.)

 

Rates? Up a little, down a little. Yesterday the collective intelligence turned back overseas and the small move was blamed on the European Central Bank’s statement and ECB President Draghi’s press conference today which is causing the European markets to move this morning.

 

Today, however, we have more to chew on like Initial Jobless Claims for the week ending 10/17 (+3k from 256k). Coming up are numbers that indicate where the economy has been versus numbers that usually move bond markets: the August FHFA Housing Price Index, September Existing Home Sales, and September Leading Indicators. And let’s not forget a $7 billion 30-year TIPS. We closed the 10-year Wednesday at a yield of 2.03% and this morning we’re pretty much unchanged as are agency MBS prices.

 

 

A UT Austin football coach and two of his assistants were on a recruiting trip when their single-engine airplane sputtered and crashed in the mountains.

The three coaches climbed out of a snowbank and immediately proved their resourcefulness. They drained a bit of gasoline out of the fuselage and started a fire. Later, when they got thirsty, they put a bit of snow in a twisted piece of metal and melted it to make drinking water. A few days later, dying of hunger, they ripped strips from the leather seats, dipped them in motor oil, and fried them up like bacon for a nourishing treat.

The people up the street in the Hilton all admitted it was the most amazing thing they had ever seen.

 

 

Rob

 

(Copyright 2015 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.)