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Mar. 1, 2011: Important MBA Comp Q&A; comp spillover to Realtors? Banks continue buying mortgage securities; misc. news from Virginia, Redwood, BofA
Rob Chrisman
It
doesn't take long (within 60 seconds of this video of the
Australian flooding) to figure out why insurance is more
expensive in a flood zone. ImportMedia/swf/l.swf?video_idkYUpkPTcqPY
Welcome to Women’s History Month! National Women's History Month
dates back to 1857, when women from New York City factories
staged a protest over working conditions. International Women’s
Day was first observed in 1909, it was made into a week in 1981,
and then in 1987 it was made into an entire month. Given that
trend it will soon be the entire year. (When is National Man's
History Month?) Per the Census Bureau there are 157
million females in the United States, versus 153 million men.
(Please don't ask me where Chas/Chastity Bono fits in.) Over the
age of 85, there are more than twice as many women as there were
men. http://www.census.gov/popest/national/asrh/2009-nat-res.html
These 13 pages should help in answering some of the
compensation questions out there: http://www.robchrisman.com/references/MBAQAreleased021811.pdf
The Q&A document
noted above was published by the MBA recently, and was in turn
sent out by NYCB Mortgage Company. NYCB
cautions “While this MBA document contains informal answers from
Federal Reserve staff, it is not binding upon the Federal
Reserve or the Mortgage Bankers Association. The information
contained in the document is not intended to constitute, and is
not a substitute for, legal or other advice.”
What do Realtors
and title company officers think about the LO compensation
changes coming our way? The
title on a recent piece sent out by NAMB read, “Realtors Upset
After Learning Fed Comp Rule Will Impact Revenue” and focuses on
a “staff interpretation” that suggests that loan officer
compensation rules would restrict payments between mortgage
companies and "affiliated" real estate brokerages and title
agencies. “Trade group officials recently learned that the Fed
staff believes fees paid to affiliated title or real estate
brokerage servicers could run afoul of the rule.” There are
suggested workarounds, but the letter sends out the word that
NAMB has decided that the time has come to seek a temporary
restraining order through legal action, NAMB is
filing a lawsuit against the Federal Reserve on LO comp.
Some out there
believe that as California goes, so goes the nation. CoreLogic released some non-conforming
origination statistics for the West Coast in 2010 that are worth
a peak. For non-conforming product in California,
Wells was #1, followed by Union Bank, Bank of America,
CitiMortgage, and First Republic Bank. But if one looks at
only non-conforming ARM's, however, since it appears that ARM
loans are in everyone's future, Union Bank led the pack. In
Oregon and Washington, for non-conforming ARM's, it was ING,
followed by US Bank, and Wells.
Are mortgages underwritten in the current environment good
investments? You bet they are! Recently the National Information
Center released consolidated financial statements for bank
holding companies for the 4th quarter. Large banks
have been the primary buyers of mortgage-backed securities,
and this study looked at the top 50 bank holding companies. In
the 3rd quarter they added over $48 billion of agency MBS, and
in the 4th quarter added another $38 billion. Most of this was
in Fannie/Freddie product; Ginnie Mae pass-through holdings fell
by about $1 billion. Most analysts believe that
banks should be a leading force in supporting the agency
mortgage basis going into 2011. Compare this to banking
data released from the FDIC for the fourth quarter, which
reported an increase of $42.7 billion in MBS holdings, and $87.4
billion for the year. The demand for agency mortgage-backed
securities continues strong, whereas the supply is expected to
lessen.
More recent news (the
latest H.8 report) shows that large domestic bank holdings of
agency MBS have declined by $15.5bn but agency MBS holdings of
small banks have increased by $11.5bn since the beginning of the
year. This is a continuation of the trend seen from 2010 - in
general, smaller banks are providing a relatively stronger
demand for agency MBS recently. For instance, agency MBS
holdings of large banks rose by 5.3% while those of small banks
rose by 18% since the beginning of 2010.
How about the
non-agency paper biz? Redwood Trust posted a
fourth quarter net income of $15 million compared to $40 million
in the prior year quarter. Redwood also reported an estimated
taxable loss of $6 million during the fourth quarter of 2010,
compared to a taxable loss of $35 million last year.
One down, and I don’t know how many to go. On Friday a federal
judge in Los Angeles approved a deal in which Bank
of America will pay $600 million to the New York State
Common Retirement Fund and several New York City pension funds
that sued Countrywide. The class-action lawsuit accused
Countrywide of failing to disclose to the pension funds and
other investors that its risky mortgage portfolio endangered the
company’s health. The accusations have been denied, and the
issue has been settled rather than spend the money defending it.
If you have a bridge, like the Golden Gate Bridge, there is a
toll. Economists are very good about figuring out what happens
when one raises the toll from $5 to $10. Revenue does not
double, since the increase will cause a drop in commuters, and a
large drop in drivers can cause profitability problems for the
bridge district. This is a simplistic example, but one that may
pertain to a small part of what HUD's FHA is
dealing with, in that its mortgage insurance premiums have
increased while volumes have fallen. The premiums are
expected to help the Mutual Mortgage Insurance Fund to the tune
of $3 billion a year, although (due to many factors) HUD
estimates that FHA originations will total $218 billion during
fiscal 2012. Volume in the current fiscal year is projected to
come in at $289 billion, while fiscal-year 2010 ended at $319
billion.
Friday the commentary
mentioned the FDIC’s meeting this week “to discuss
principles for low- and moderate-income (LMI) mortgage
lending, and supporting financial education,” but also,
“There are many people in the business who argue that the
government's insistence on lowering lending standards in the
past, in order to increase home ownership, especially to those
who weren't credit worthy in the past, accounted for a good
chunk of the credit issues that we're dealing with now.”
I received several comments. “In 1972, I was working as a rookie
loan officer for Mason-McDuffie in Las Vegas. I was the
designated chauffeur for an MBA task force appointed to find out
why North Las Vegas was the foreclosure capitol of the country
for FHA Section 235(i) loans. These were $100 down-payment and
poor credit was OK…the committee's conclusion was that despite
all the good intentions of the government, some people just
ain't fit to own homes.” Another wrote, “The fine line of
encouraging home ownership was crossed when lenders called
subprime lending ‘Affordable Housing.’ There is a distinct
difference between the two, with the point being that low down
payments and higher ratios have nothing to do with willingness
to repay debt - unwillingness to repay debt is the undercurrent
of subprime lending.”
In Virginia
(unofficial slogan “Who Says Government Stiffs And Slackjaw
Yokels Don't Mix?”) a tax issue has arisen for refinances.
Namely "On deeds of trust or mortgages, the purpose of which is
to refinance or modify the terms of an existing debt with the
same lender, which debt is secured by a deed of trust or
mortgage on which the tax imposed hereunder has been paid, the
tax shall be paid only on that portion of the amount of the bond
or other obligation secured thereby which is in addition to the
amount of the original debt secured by a deed of trust or
mortgage on which the tax has been paid. The instrument shall
certify the amount of original debt." Fairfax County, it is
rumored, is now rejecting “same-lender” refinances for many
instances so that if the MERS MIN number on the payoff loan
shows Fannie or Freddie, the county will require the full
recordation fee. If the new GFE shows minimal
recording charges due to the previous policy, it runs the risk
of being rejected at the courthouse. The reader suggested,
“All preliminary HUDs should show full recordation taxes unless
one can show otherwise.”
When the vice
chairman of the FOMC, who is also the Federal Reserve Bank of
New York President, speaks, people listen. William Dudley said
the “considerably brighter” economic outlook isn’t yet reason
for the central bank to withdraw its record monetary stimulus.
“We provided additional monetary policy stimulus via the asset
purchase program in order to help ensure the recovery did regain
momentum.” He doesn’t see any reason to change things.
The markets were
pretty quiet yesterday, with MBS trading volumes running at
about average and prices closing roughly unchanged as did the
10-yr (3.41%). The highlight today will be Chairman Bernanke's
semiannual Monetary Policy Report before the Senate Banking
Committee beginning at 10AM EST. In addition, Treasury Secretary
Geithner testifies before the House Financial Services Committee
on "Mortgage Finance Reform: An Examination of the Obama
Administration's Report to Congress" - also starting at 10:00,
and Construction Spending. Early indications point
to a decent stock market, mortgage prices worse by about .250,
and a 10-yr yield sitting around 3.48%.
A group of Alabama friends went deer hunting and paired off in
twos for the day. That night, one of the hunters returned alone,
staggering under the weight of an eight-point buck.
"Where's Henry?" the
others asked.
"Henry had a stroke
of some kind. He's a couple of miles back up the trail," the
successful hunter replied.
"You left Henry
laying out there and carried the deer back?" they inquired.
"A tough call,"
nodded the hunter. "But I figured no one is going to steal
Henry!"
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