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Jan. 25, 2011: Freddie & Fannie's future delayed; more mortgage jobs; NMLS public comment; Part 1 of comp Q&A
Rob Chrisman
Don't let this happen to you at the next mortgage
conference: http://www.cnn.com/video/?/video/bestoftv/2011/01/20/am.fountain.lady.speaks.cnn
Maybe
this person works for the Treasury Department, and the spill
impacted the plans for Freddie and Fannie - which could
be why the plans, which are "required" by the end of January per
Dodd-Frank, have now been pushed back until mid-February.
“Officials say the delay is needed to accommodate other major
policy initiatives, including next month's release of the annual
budget and the president's State of the Union address today.”
(Try that excuse when delaying your 4/1 comp plan!) It doesn’t
help that the Treasury has had some personnel turnover, and
policy disagreements between Treasury and White House officials.
When it does come out, expect two or three proposals for what
should replace Fannie and Freddie, and discussions of the merits
and drawbacks of the different approaches.
The
plan needs to address a way for the government to continue
backing existing mortgage-backed securities (F&F own or
guarantee about half the $10+ trillion of home loans), and how
to structure a market with no government guarantees for some
products. Is there enough capacity in capital markets to finance
mortgages without some type of government guarantee? If you’re a
money manager in Taiwan or Egypt, wouldn’t you demand a higher
rate of return to match the risk without any government
guarantee? And if bank-owned cooperatives issue
government-backed mortgage bonds, wouldn’t that concentrate more
power among the largest U.S. banks?
No
matter what, smarter minds than mine say we need private capital
to return to the market, Fannie & Freddie to raise fees they
charge lenders for riskier loans, and possibly reducing the
maximum loan limits for mortgages the companies can purchase to
push more loans toward other institutions. One industry vet
wrote, "Isn’t it a bit funny that while the GSEs must reduce the
size of their portfolio, the Treasury purchased over $1Trillion
of MBS and continues to buy government securities for their
portfolio through QE2."
While
we’re on the topic, wanna buy a house? Call the agencies - Fannie
& Freddie’s combined inventory of foreclosed residential
property has quadrupled in just three years and now stands at
$24 billion, and the number of properties on their books
(over 241,000) has increased fivefold. That’s roughly a third of
the total U.S. portfolio of repossessed homes. And the numbers
show no signs of declining, since it seems that nationwide
foreclosures are going up faster than buyers can be found. Let
me think about that supply versus demand curve… http://www.businessweek.com/news/2011-01-21/fannie-freddie-s-24-billion-glut-imperils-recovery.html.
And
those buyers will need loans! Colorado State Bank &
Trust Mortgage Group is hiring Mortgage LO’s and Sales
Managers for various offices throughout Colorado. (CSBT is a
subsidiary of BOK Financial Corporation, a Top-50, and $24
billion financial holding company.) Interested
applicants should contact Gary Tackett at gtackett@csbt.com
or visit the website at http://www.csbt.com/employment/.
Maverick Funding Corp., (www.MaverickFunding.com),
a
privately held New Jersey-based mortgage lender licensed in 21
states which needs licensed loan officers in Southern California
and New Jersey. The company is also expanding its retail
footprint in Rhode Island, NJ, and CA. Contact CEO Ralph
Vitiello at rvitiello@maverickfunding.com.
Say what you will about the Nationwide Mortgage Licensing System
and Registry (NMLS), but it is a fact of life in our industry.
The organization is conducting the third annual NMLS User
Conference & Training February 7-10, 2011 in Orlando,
Florida. “The NMLS User Conference & Training brings
together state and federal mortgage regulators, industry
professionals, compliance companies, top law firms, and
education providers to learn about the latest developments in
mortgage supervision and to discuss pressing issues confronting
the industry.” If the site of hundreds of compliance officers
doing the rumba through a hotel lobby appeals to you, go to the
Conference website, http://www.nmlsconference.org/.
On behalf of the state regulatory agencies participating in the
NMLS, the State Regulatory Registry is inviting public
comments on the Mortgage Uniform (MU) Forms developed by
state regulators and used by all states through NMLS; and the
NMLS Policy Guidebook. http://mortgage.nationwidelicensingsystem.org/news/ProposalsForComment/2011-1-MU-Forms-Request-for-Comments.pdf
There
is scuttlebutt out there that the FHA will suspend its
anti-flipping rule for a second year in 2011. Whether
investors go along with it remains to be seen, however. HUD’s
existing rule, that prohibits the FHA from insuring a mortgage
on a home that was owned by the seller for less than 90 days,
was temporarily put on hold last February to help liquidity.
There are certain restrictions, well known in the industry, but
a HUD spokesman reported told HousingWire that the rule is
currently “in the clearance process.”
Turning to LO compensation, one reader opined, “What I am
hearing is that for the most part, the Dodd Frank legislation
will indeed impact certain segments of the LO population. High
volume producing agents may be the least impacted, since they
often use the lowest margins already. Agents who originate few
loans, but with high margins, will see the most change, and some
management teams don’t seem to mind since “we have the most
problems with the agents doing the least loans.” (Licensing
hurdles and requirements have removed many already.) Production
teams are working with producers to maximize their time and
efficiency, although smaller-sized loans apparently still help
originators from the aspect of adding to their reputation and
helping with referrals.”
And as
was mentioned yesterday, here is part 1 of the MBA
questions/Fed answers, published by SunTrust:
Q1: What does the restriction on compensation based on terms
cover and how does it apply to payment of compensation or
other costs through rate?
A. Fed Response - The Commentary accompanying the rule says that
the restriction against compensation based on a transaction’s
terms includes the interest rate, annual percentage rate,
loan-to-value ratio, or the existence of a prepayment penalty.
The rule also prohibits a proxy for a transaction’s terms or
conditions such as credit score.
Q2. If compensation cannot be based on a transaction’s terms,
on what can it be based?
A. Fed Response - Compensation that is not based on a loan’s
terms may include: i. The loan originator’s overall loan volume
(i.e., total dollar amount of credit extended or total number of
loans originated), delivered to the creditor. ii. The long-term
performance of the originator’s loans. iii. An hourly rate of
pay to compensate the originator for the actual number of hours.
iv. Whether the consumer is an existing customer of the creditor
or a new customer. v. A payment that is fixed in advance for
every loan the originator arranges for the creditor (e.g., $600
for every loan arranged for the creditor, or $1,000 for the
first 1000 loans arranged and $500 for each additional loan
arranged). vi. The percentage of applications submitted by the
loan originator to the creditor that results in consummated
transactions. vii. The quality of the loan originator’s loan
files (e.g., accuracy and completeness of the loan
documentation) submitted to
the creditor. viii. A legitimate business expense, such as fixed
overhead costs. ix. Compensation that is based on the amount of
credit extended.
Q3. For purposes of (ii) above what is meant by long
term-performance?
A. Fed Response - The term means any reasonable period of time
over which the overall performance of an originator’s loans can
be measured including the time in which early payment defaults
or payoffs occur. “Long term performance” is intended to cover
overall performance of the originator’s loans not the
performance of individual loans. The language was not intended
to require or permit loan-by-loan claw back based on loan
performance. Lenders can consider early payment default or
payoffs in overall loan originations of the originator with
regard to the originator’s future compensation or bonuses.
More
Q&A tomorrow!
NYCB
Mortgage Company (ex-AmTrust) is now accepting “condominium projects
that have pending litigation against the homeowners' association
or developer that involves minor matters defined as:
Non-Monetary litigation involving neighbor disputes or rights of
quiet environment. Litigation for which the claim amount is
known, the insurance carrier has agreed to provide the defense
and the amount is covered by the association's insurance. The
homeowners' association is named as the plaintiff in a
foreclosure action, or as a plaintiff in an action for past due
homeowners' association dues.”
In more
mortgage-related corporate news, Florida-based Bank United,
a bank seized by the FDIC and now owned by private equity
investors including Wilbur Ross and Carlyle, will be going
public this week. Bank United will aim to raise $630 million in
a test of investors’ appetites for private equity-driven IPOs.
Turning
to the bond markets, no one is looking for a big rate move in
either direction in the near future. There is solid consensus
that the economy will grow in 2011 – but by how much, and what
will happen when all government stimulus is gone and the economy
has to stand on its own? The FOMC starts its meeting today, with
the information being released tomorrow – the last few
announcements have been fairly optimistic about growth without
too much inflation. That would be nice, as too much inflation
will hurt the long end of the yield curve. (Remember that the
Fed continues to buy treasuries almost every day but mostly at
the middle and short end of the curve, which mortgages tend to
mimic.)
Yesterday
MBS prices worsened by .125, which was not enough for many
investors to change their pricing and instead they let it eat
into their profit margins. MBS volume was light, probably
reflecting the state of new rate locks coming in the door.
10-year notes closed around 3.41%. Today for economic news we
have nothing too dramatic: the Case-Shiller 20-city Index, along
with Consumer Confidence, the FHFA Housing Price Index, the 2-yr
auction, and tonight’s State of the Union Address. One issue
contributing to this morning’s markets here in the US was a
much-lower-than-expected GDP (Gross Domestic Product) number out
of the UK. We find the 10-yr yield down to 3.35% and MBS
prices better by roughly .250.
A
senior citizen said to his eighty-year old buddy:
“So I hear you're getting married?!”
“Yep!”
“Do I
know her?”
“Nope!”
“This
woman, is she good looking?”
“Not really.”
“Is she a good cook?”
“Naw, she can't cook too well.”
“Does she have lots of money?”
“Nope - poor as a church mouse.”
“Well,
then, is she good in bed?”
“I don't know.”
“Why in the world do you want to marry her then?”
“Because she can still drive!”
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