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Jan. 21, 2011: Originator compensation FAQ; BofA, SunTrust, PNC, Fifth Third earnings; commercial real estate bonds rallying
Rob Chrisman
It's Friday, so why not throw in something unrelated to
mortgages? Anyone in a really cold climate and even those not,
will find this pretty neat: http://gizmodo.com/5735619/the-most-fun-you-can-have-with-boiling-water
The
Jonas Brothers help lock down the top spot for an affluent
neighborhood? http://finance.yahoo.com/real-estate/article/111860/americas-most-affluent-neighborhoods?modrealestate-buy
“I went
to the butchers the other day and I bet him $50 that he couldn't
reach the meat off the top shelf. He said, 'No, the steaks are
too high.'” The stakes/steaks are pretty high when it comes to compensation
plans. Companies around the country are spending countless
man-hours working with consultants or setting up comp plans on
their own. Caliber Funding sent out a survey: http://www.surveymonkey.com/s/bpcompensationrules
Wells Fargo sent their broker clients a link to a video
focused on compensation and anti-steering. “Join Kathleen
Vaughan, EVP, Wholesale Lending, to learn about Wells Fargo’s
consumer- and lender-paid compensation models, and what the new
anti-steering rules will require.” (And please don’t ask me for
a login & password for accessing it.) And here's Plaza's
update on answers to frequently asked compensation questions:
http://www.plazahomemortgage.com/Documents/Announcements/FAQ%20Reg%20Z%20Final%20Rule%201.20.11-flyer.pdf
Bank
of America, among many other things the #2 residential mortgage
lender and #1 servicer, reported a second straight quarterly
loss, driven by write-downs in the value of its mortgage
business. So far the purchases of Countrywide and Merrill Lynch
are showing mixed results. In the fourth quarter, the bank
recognized a $2 billion write-down in value of its mortgage
business, and a $4.1 billion provision for future mortgage
repurchase claims. Match that against BofA’s global banking and
markets unit, which includes Merrill Lynch's former investment
bank operations, which reported profit of $724 million. The bank
lost $1.57 billion, or 16 cents a share, compared with a loss of
$5.2 billion, or 60 cents a share, a year earlier. Last year's
results included a one-time TARP charge of $4 billion. Without
the mortgage business write-down, the bank earned $756 million,
or 4 cents per share.
Yesterday
Fifth Third sold $1.7 billion in shares to help repay
funds the US Treasury lent it, a small piece of the $118.5
billion that is still outstanding and owed to the US Government
in total by all banks. Four of the 19 banks that were subjected
to government stress tests have not repaid funds to the Troubled
Asset Relief Program: Fifth Third, KeyCorp, Regions Financial
and SunTrust Financial. The money from the 5 3 share sale will
be combined with a 5-year bond issue to repay $3.4 billion in
government loans. This comes after Fifth Third reported that
non-performing assets fell 8% to $4.2bn in the fourth quarter
from a year ago, versus total assets of $111bn. Quarterly net
income was $270m, versus a loss of $160m a year earlier, as the
bank released $190m of reserve funds.
PNC
Financial Services Group reported record income for 2010, even as its
residential mortgage banking unit saw earnings drop more than
35% during the fourth quarter due to high foreclosure costs. PNC
had net income of $3.4 billion, or $5.74 per share, compared
with 2009 net income of $2.4 billion, or $4.36 per share.
Revenue was $15.17 billion, down from $16.23 billion a year ago.
PNC's residential mortgage banking unit earned $275 million for
the full year compared with $435 million for 2009. The decline
was driven by a “decrease in loan sales revenue from lower
origination volumes and lower net hedging gains on mortgage
servicing rights.” Earnings for the residential mortgage unit
were $3 million in the fourth quarter compared with $25 million
in the fourth quarter of 2009. Earnings declined primarily due
to higher foreclosure-related expenses and, when compared to the
previous quarter, by lower net hedging gains on mortgage
servicing rights.
SunTrust
reported earnings this morning, beating expectations. (KeyCorp
and Regions Financial, which has not had a profit since early
2009, are next week.) SunTrust reported better credit and asset
quality, and for the year the allowance for loan losses was $3.0
billion, a decline of $112 million from the prior quarter. Net
charge-offs for the year were $2.9 billion, down $384 million
from 2009.
One
area, in general, that certainly appears to be picking up is the
commercial real estate bond sector. Driving around, I
continue to see a large number of office buildings and retail
spaces for sale or lease, but...http://www.ft.com/cms/s/0/05980728-24c8-11e0-a919-00144feab49a.html?
In the servicing sector, the 50 state Attorney Generals
(Attorneys General?) continue to work on a settlement with
the top 5 mortgage servicers which may include a
third-party "foreclosure monitor" to help ensure that servicers
are abiding by the new guidelines. Recently the FDIC asked
servicing companies to set up a BP-type of damages fund. Don’t
look for anything soon, given the huge scope that is being
covered in these negotiations.
How
about some investor updates? Astoria Federal Savings,
after eliminating its IO product quite some time ago, finally
removed the IO price adjustments from its rate sheets for its
Portfolio Fixed & ARMs product line(s). Earlier this week GMAC’s
correspondent clients learned that GMAC ratcheted down some
LLPA’s on jumbo ARM and fixed rate products. “For Fixed rate, we
are reducing the LLPA’s on Loan amounts >1 Million and
<1.5 Million” by .125 in price, and by a like amount for ARM
loans between $1-1.5 million. GMAC did, however, reduce the
maximum price paid on all loan amounts by .125.
Wells told
its brokers that 75 bps will be waived for conventional
conforming detached condominiums with LTV’s greater than 75%,
starting Monday, once Underwriting confirms the requirements
have been met. Wells also reminded brokers that the Federal
Reserve Board is requiring the Truth‐in‐Lending
(TIL) disclosure be revised to include a payment summary table
to more clearly illustrate the borrower’s mortgage payments,
effective tomorrow for Wells.
PHH
announced that the maximum LTV Increased to 97.00% for
Conventional Fixed Rate Products, commencing today. “The maximum
allowable LTV will be increased to 97.00% for conventional fixed
rate products. Only new registrations receiving an
Approve/Eligible response through DU 8.2 will be eligible for
95.01-97% LTV” with certain requirements like loan amounts less
than $417k, purchase and rate term refinances, 35% MI coverage
required, etc.
It was
not a good day yesterday for anyone waiting to lock.
Fixed-income prices dropped, and rates rose, on mostly favorable
data (Initial Claims, LEI and Existing Home Sales) and a poor
10yr TIPS auction. The 10-year note closed down about 1 point at
3.46%, and MBS prices were worse about .625 for 4.5% securities
(containing 4.75-5.125% mortgages). On the plus side, Existing
Home Sales in December jumped 12.3% to 5.28mln units, much more
than expected, and all regions of the country gained according
to NAR.
There
are no economic reports today, aside from continued earnings
results which I noted above. But next week we have the FOMC’s
two-day meeting beginning Tuesday with the statement released
Wednesday afternoon, the first look at Q4 GDP on Friday, and
$99bln in 2s, 5s and 7s auctioned Tuesday through Thursday. The
week’s calendar also has several housing related reports
including S&P Case-Shiller HPI, FHFA HPI, New Home Sales and
Pending Home Sales Index. We find the 10-yr sitting about
unchanged at 3.46%, and MBS’s are also close to Thursday’s
closing levels.
Russ and Sam, two aging friends, met in the park every day to
feed the pigeons, watch the squirrels and discuss world
problems.
One day Russ didn't show up. Sam didn't think much about it and
figured maybe he had a cold or something. But after Russ hadn't
shown up for a week or so, Sam really got worried. However,
since the only time they ever got together was at the park, Sam
didn't know where Russ lived, so he was unable to find out what
had happened to him.
A month had passed, and Sam figured he had seen the last of
Russ, but one day, Sam approached the park and-- lo and
behold!--there sat Russ! Sam was very excited and happy to see
him and told him so. Then he said, “For crying out loud Russ,
what in the world happened to you?”
Russ replied, “I have been in jail.”
“Jail!” cried Sam. “What in the world for?”
“Well,” Russ said, “You know Sue, that cute little blonde
waitress at the coffee shop where I sometimes go?”
“Yeah,” said Sam, “I remember her. What about her?”
“Well, one day she filed rape charges against me; and, at 89
years old, I was so proud that when I got into court, I pled
'guilty'.”
“The judge gave me 30 days for perjury.”
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