Apr. 30: Mortgage jobs & job site; IOs from years ago being recast; referral fee discussion; MBA app numbers

What has Wells Fargo’s Economics Group been writing about recently? The economic recovery, of course; more specifically, how does one compare economic recoveries across economic recoveries with any sort of meaning? The group writes in Different Times for the U.S. Consumer, “the recovery from the Great Recession has lasted, so far, 56 months, from July 2009 until February 2014. In order to compare the current recovery to past recoveries, we calculated the change in disposable personal income (DPI) and the change in personal consumption expenditures (PCE) from the end of the recession up until the next 56 months.” Going back to 1960 the group picked all of those recessions whose recovery lasted at least as long as our current recovery (from July ‘09 to Feb ‘14). By doing that they evaluated the 6 recessions whose recovery phase lasted, at least, 56 months, including the recovery from the Great Recession. The conclusion? The biggest problem today is a lack of income growth.


But speaking of income, Costa Mesa, California’s iApprove Lending is searching for an experienced Operations Manager along with frontline DE underwriters & compliance professionals. The California company recently expanded into TX, CO, GA, VA, and OR, with plans for additional states in the near future, through both business on the wholesale and retail channels. iApprove (http://iapprovelending.com) is an eight year old company with proven records with major counter-parties, ample warehouse and investors capacities, and ideal geographical locations. Resumes and inquiries should be sent to careers@iapprovelending.com.


And PHH Mortgage is recruiting Mortgage Loan Officers to support its inbound call platform in Honolulu, HI. PHH offers a competitive compensation package which includes a base salary and full benefits.  Interested candidates can view more details and submit a job application at www.phhjobs.com or send a resume directly to Gail Simons at Gail.Simons@mortgagefamily.com. Qualified applicants will receive consideration for employment without regard to race, color, religion, sex, national origin or any other characteristic protected by law.


On the flip side of companies expanding, I am hearing about selective cutbacks by some companies. For example, NASB, North American Savings Bank is rumored to have shut down an entire division in Springfield, Missouri – solid producers, underwriters, processors, etc. JPMorgan Chase reported it has laid off 3,000 people in its mortgage banking and trading desk units since the end of last year as mortgage activity has declined. In an unabashed plug, for companies looking to hire employees, or job seekers who would like to post resumes, the site traffic to www.LenderNews.com has been steadily increasing. Site stats include 249 Active Resumes, 32 Open Positions, 76 Company listings. Resumes can be posted for free.


How can a week go by without a little settlement news? Yesterday it was First Horizon’s turn: $110 million to settle misleading Freddie & Fannie $883 million of loans funded between 2005 and 2007: http://www.reuters.com/article/2014/04/29/firsthorizon-lawsuit-idUSL2N0NL28620140429.


Yes, I remember it well; it was 2005 and saying “Jumbo” or “Alt-A” without adding an IO at the end was unthinkable. Borrowers would ask, “What happens at the end of the IO period?” “You refinance of course! Here‘s my card, call me.” As a matter of fact, between 2005 and 2007 30-40% of fixed rate loans were IOs and more than 80% of hybrids were IO. Well, as most know, at the end of the IO period, the loan is recast, and its amortization recalculated. I bring this up after reading an interesting paper from a broker/dealer with a few interesting facts facing the markets in the next year or three. After years of relatively low levels of payment shocks in the Jumbo/Alt-A space, we are now on the verge of what is likely to be a period of higher payment shocks on Jumbo/Alt-A borrowers, especially on 10-year IO loans. Over the past three years, a total of $40bn of loans in the Jumbo/Alt-A space have gone through IO recasts, however, unlike in the past three years, a significant portion of the upcoming recasts will be on FRM loans and will undergo payment shocks of approximately 35-40% above their initial IO payments. Hybrid IOs will also recast with large payment shocks, especially on loans where the rate reset and IO recast was staggered. For these loans, payments will jump 80-100% from current levels but will still be only 10-15% higher than their initial ‘underwritten’ payments. IO loans that are yet to recast constitute about 35% of the outstanding Jumbo and alt-A universe. Overall, about $150B is set to recast in the coming four years. Of these, about $50B will be from FRM deals while the rest will be on Hybrids. In other words, expect recasts and payment shocks to rise in 2014-17.


On to more mainstream securities, Ginnie Mae guaranteed $17.79B in March. The number of Ginnie Mae I single-family securities issued in March grew to $670M, while the number of Ginnie Mae I Multifamily pools totaled over $1.16B. During this time, Ginnie Mae issued more than $15.95B Ginnie Mae II securities. In addition, Issuance for the Ginnie Mae Home Equity Conversion Mortgage-Backed Securities (HMBS), included in Ginnie Mae II single-family pools, was $510M. I believe these numbers could grow as we creep deeper into 2014.


I am in Chicago much of this week, and the MBA’s celebrity economist Mike Fratantoni is here as well. In the past I always thought that the MBA application numbers came out at 6AM CST, but it appears they’re out early this morning. I noticed a story saying that mortgage applications fell 5.9% from one week earlier, with refis dropping 7% from the previous week and purchases dropping 4% from one week earlier. “Both purchase and refinance application activity fell last week, and the market composite index is at its lowest level since December 2000,” said Mike. It appears that purchase apps are down 21% from a year ago and refis are down to 2008 levels and account for 50% of all apps.


Zillow’s first quarter Real Estate Market Reports show home values increased 0.5 percent from the fourth quarter of 2013 to $169,800. The Zillow Home Value Index (ZHVF) climbed 5.7% from March 2013 levels. On a monthly basis, home values are up 0.2% nationally. Zillow writes, “According to the Zillow Home Value Forecast (ZHVF), we expect national home values to increase 3.3 percent over the next year (March 2014 to March 2015). Of the 301 markets covered by the Zillow Home Value Forecast, 282 markets are expected to see increases in home values over the next year, with the largest increases expected in the Riverside metro (12.0 percent) and the Orlando metro (8.2 percent).” Nationally, the number of homes listed for sale on Zillow was down 0.5% annually in March (seasonally adjusted), after having increased on a monthly basis late last year for several months in a row. Inventory rose on an annual basis in 337 out of 648 metros Zillow covers with inventory data.


I was recently involved in a conference call in which the topic of “referral fees” was discussed, and what exactly constitutes as an agreement for a referral of business. There are a few things to discuss; first is how RESPA defines “referral” to a settlement service provider, which it does in two ways: “A referral includes any oral or written action directed to a person which has the effect of affirmatively influencing the selection by any person of a provider of a settlement service or business incident to or part of a settlement service when such person will pay for such settlement service or business incident thereto or pay a charge attributable in whole or in part to such settlement service or business, AND, a referral also occurs whenever a person paying for a settlement service or business incident thereto is required to use a particular provider of a settlement service or business incident thereto.” The required to use is key, in that it defines the event where a person “must use a particular provider of a settlement service in order to have access to some distinct service or property, and the person will pay for the settlement service of the particular provider or will pay a charge attributable, in whole or in part, to the settlement service.”


Let us continue playing catch up on some recent Freddie news to obtain a sense of the trends out there!


Freddie Mac is revising the requirements for mortgages with pre-modification mark-to-market LTVs of less than 80%, for which eligible borrowers must be offered the option of a 480-month, 360-month, or 240-month payment term, depending on how the estimated modified P&I compares to the current contractual P&I payment.  Borrowers will no longer be able to request a different payment term or change the payment term after making the first trial period payment, which will determine the modification term.  The payment term will be equal to the shortest term covered by the first payment.  The updated requirements will go into effect on July 1st, but lenders are encouraged to implement them before this.


As of July 8th, Freddie will be evaluating rates monthly to assess whether or not the Standard Modification interest rate must be adjusted.  If the interest rate changes, the new rate will be published on the fifth business day of the month and must be implemented for Trial Period Plan evaluations that are conducted on or after the tenth business days of the same month.


Freddie Mac has updated the Electronic Default Reporting (EDR) Quick Reference Guide to reflect changes announced in Single-Family Seller/Servicer Guide (Guide) Bulletin 2014-1. You must begin using these new codes starting May 1. As a result of the new codes, five new error messages have been added. Please see the EDR Quick Reference Guide for details. Additionally there are updates to existing selling and servicing requirements, effective immediately, unless otherwise indicated. Changes include requirements surrounding reporting guilty pleas or governmental authority investigations to Freddie Mac, incorporating FEMA’s revised Standard Flood Hazard Determination Form and updating flood insurance requirements and revisions to the process for requesting and obtaining physical or constructive possession of a note as well as related document custodial functions and duties.


Other changes announced in this Guide Bulletin include: removal of requirement that a borrower must maintain six month’s rent loss insurance for 2- to 4-unit primary residences when rental income is used in qualifying, updated Guide Exhibit 4 and Exhibit 5 to reflect the creation and use of the joint GSE MERS Rider Form in three states (required use effective October 15, 2014), posting a document listing the full table of contents for the Guide on AllRegs, and publishing the most recent Historical Guide Snapshot. For Sellers only, the guide has clarified that unemployment compensation is an eligible source of income for Relief Refinance Mortgages and the applicability of resale restrictions by updating Guide Section 22.23, Purchase Requirements for Mortgages Secured by Properties with Resale Restrictions. Please refer to Guide Bulletin 2014-6 for additional details on these requirements.


And on April 24, Freddie Mac issued Single-Family Seller/Servicer Guide Bulletin 2014-06, which notifies sellers and servicers of numerous miscellaneous policy updates. The Bulletin, among other things, (i) requires sellers and servicers to immediately notify Freddie Mac of a guilty plea indicating lack of integrity or upon being notified that law enforcement or another governmental authority is investigating or prosecuting a Seller/Servicer’s board member, officer, employee or contractor for fraud; (ii) updates flood insurance requirements and updates related forms; and (iii) revises the process for requesting and obtaining physical or constructive possession of a note as well as related document custodial functions and duties. The Bulletin also (i) removes the requirement that a borrower maintain six month’s rent loss insurance for a 2- to 4-unit primary residence when using rental income as qualifying income; and (ii) clarifies selling requirements related to unemployment compensation as an eligible source of income for Relief Refinance Mortgages, and the applicability of certain resale restrictions.


So far this week there just isn’t much going on in the fixed-income markets, although Tuesday’s prices faded about .125. (Thomson Reuters observed, “There was also a better appetite for risk assets with equities gaining on favorable earnings news, which provided a temporary distraction from the crisis in Ukraine.”)


The news picks up a little today, however, so we may see some movement. At 7:15AM CST we have the March ADP Employment number, of questionable predictive ability for the jobs number Friday, the first read on Q1 GDP (expected +1.2%) at 7:30 AM CST, and April’s Chicago PMI (+56.5 versus +55.9 last). We’ll also have the FOMC statement at 1PM CST (expected to be a nonevent with another $10 billion in tapering, split equally between Treasuries and MBS, and no changes to forward guidance expected).  The Treasury will announce its quarterly refunding; $70 billion in 3- and 10-year notes and 30-year bonds is expected for auction next week. The 10-yr closed Tuesday at 2.70% and it is nearly unchanged so far this morning as are agency MBS prices.



We’re all witnesses to trends in residential real estate & correspondent lending. Here’s a link to one that I continue to hear about: http://covers.dummies.com/share.php?id=60963.




(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.)


Rob Chrisman