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Mar. 16, 2011: Broker vs. banker lawsuit; multi-family & commercial news; news from BofA, GMAC, Wells, Flagstar; Goldman selling servicing
Rob Chrisman
“HVCC”
is gone, but still with us in other forms. Unofficially, which
services seem to be popular among retail loan agents in determining property values prior to the actual
appraisal? Any agent would want speed, accuracy, reliability,
lack of cost (e.g., free), etc. The popular choices, not in any
particular order, include Zillow, title company public records,
Yahoo Real Estate, Trulia, local Realtor's MLS listings &
opinions, Redfin, BlockShopper http://www.blockshopper.com/,
and BAREIS http://norcalmls.rapmls.com/
in Northern California. Please feel free to send me any that you
think others might find useful and don’t mind sharing.
The commentary might be a little late tomorrow. I'm going to
head to Nevada and fetch me an empty house! According
to the US Census Bureau there were 167,564 empty houses in
Nevada, which is about one out of every seven houses
across that state. Although I imagine that many actually have
some kind of occupant, something tells me that home building
will not be flourishing there for a while. For perspective,
putting three people in each one would cover the population of
Kansas City, and four people would cover the population of
Seattle. http://www.msnbc.msn.com/id/42084625/ns/us_news/.
Many areas of the
nation have stabilized, but falling home prices in other areas
pushed more borrowers into a negative equity position.
CoreLogic’s recent study showed that in the 4th
quarter of 2010 23% of borrowers nationwide, or 11.1 million,
were holding "underwater" mortgages which is a collective $750
billion of negative equity. Negative equity is concentrated in
the hardest hit states: Nevada (65%), Arizona (51%), Florida
(47%), Michigan (36%), and California (32%). And although banks
and servicers didn’t plan for this, if negative equity continues
to rise the principal write down argument gains strength.
Are we really
better off winding down Freddie and Fannie entirely? I imagine that most,
if not all, of the mortgage and real estate professionals in the
US would suggest that we're better off with those agencies
staying around in one form or another. Here's one: http://www.businessweek.com/news/2011-03-15/shiller-says-fannie-freddie-phase-out-threatens-housing-market.html.
Dodd-Frank is not set in stone. There is some small bit of hope
that the comp issue will be delayed, although it is not likely.
But House Republicans are drafting five bills to
repeal or change parts of the Dodd-Frank financial-overhaul
law that have been opposed by business groups. A story in
the WSJ noted that the bills are to be discussed at House
subcommittee hearing today. The group is not trying to reverse
the entire bill, but is targeting specific provisions.
FHA Commissioner Dave
Stevens, who announced his resignation last week, will be merely
having a different morning commute: he will become the MBA’s
president and CEO in early May. The MBA “represents more than
2,400 firms in the nation's real estate finance industry,”
although critics claim that the membership has such divergent
goals and objectives that it is nearly impossible for the MBA to
adequately address them. One story noted that, “An
administration official said Stevens signed a pledge when he
took office not to lobby any official for the remainder of the
Obama administration and not to speak on official matters for
two years with anyone from HUD, if he left government.”
Freddie Mac announced a new offering of multifamily mortgage-backed securities - $1
billion of Structured Pass-Through Certificates ("K
Certificates"). They are expected to price next week and settle
the week after, and are backed by 76 recently originated
multifamily mortgages and are guaranteed by Freddie Mac. Check
out http://www.freddiemac.com/mbs/data/k011oc.pdf.
Goldman Sachs and Citigroup are
marketing $1.4 billion of bonds tied to commercial
property loans: 57 mortgages on 111 properties across the
U.S. with the highest concentration in Texas. According to
Reuters & Bloomberg, "the transaction will bring 2011 sales
of commercial- mortgage backed securities to about $8 billion,
compared with $11.5 billion in all of 2010...Top-rated
securities backed by skyscraper, hotel and shopping mall loans
are yielding 2.02 percentage points more than Treasuries,
compared with 1.91 percentage points a month ago, according to a
Barclays index."
Lenders that act as both mortgage brokers and
mortgage bankers need to pay attention to this recent court
ruling, noted by law firm BuckleySandler. “Court Rules
Lender, Acting as Mortgage Broker, Breached Fiduciary Duty to
Borrower. A California court of appeals affirmed a trial court's
decision to award damages against a mortgage lender for breach
of fiduciary duty and misrepresentation, where the loan officer
for the lender acted as a mortgage broker.” The case involves
shopping a loan for a borrower that didn’t qualify, prepayment
penalties, and then doing the loan through the agent’s mortgage
bank thus bringing up the question of their fiduciary duty to
the borrower. See www.buckleysandler.com/Smith_v_Home_Loan_Funding.pdf.
In Florida Freddie Mac pulled its cases from the Law
Offices of Marshall C. Watson, a Florida law firm that is
under investigation by the Florida attorney general. The firm
represents lenders in foreclosure cases, but is one of four
foreclosure firms targeted by the AG (Attorney General)
investigation.
Wanna buy some Litton
servicing? Goldman Sachs may be looking to exit the servicing
business entirely: http://online.wsj.com/article/SB10001424052748704662604576202980158164482.html.
Bank of America's correspondent clients
were reminded of the UAD requirements being rolled out, and that
the Uniform Collateral Data Portal (UCDP) will serve as the
portal through which lenders submit electronic appraisal reports
to Fannie Mae and Freddie Mac. “Clients should determine how and
when in the loan process appraisals should be submitted to UCDP.
Both the GSEs and Bank of America recommend submitting early in
the loan process to allow sufficient time to resolve any UCDP
edit failures. If Clients choose to submit directly to UCDP,
they should ensure that their appraisal management company
provides them the appraisal in either an acceptable XML (MISMO
or ACI) or first-generation PDF format*. There is no lack of
training for it: https://www.efanniemae.com/lc/webseminars.jsp?
This week GMAC’s correspondent clients saw the removal of
the non-delegated adjustment of -.250 on Government products.
And GMAC, who is expanding its wholesale operation, reminded its
correspondent clients that starting April 18, “when requesting
FHA case number assignments through FHA Connection, all lenders
will have to certify that the case number corresponds to an
active loan application for the subject borrower and property in
accordance HUD/FHA policy and procedures. The borrower’s name,
Social Security Number and property address will be required for
all transactions including proposed and new construction loans.
The Case Assignment screen in FHA Connection will be modified to
contain these certification statements that lenders will need to
acknowledge and check.”
Flagstar has “added a flood insurance escrow
requirement to our system for all loans falling within a flood
zone. However, escrows will not be required for flood insurance
if the property is a condominium, PUD, or co-op.”
Wells Fargo's wholesale also continues to
release comp plan information for its brokers. Under the
Consumer Paid Plan, for example, the broker or loan officer will
directly negotiate with the consumer regarding compensation.
“Compensation typically will be paid through the loan principal
or cash from the borrower at closing. Compensation must not be
paid through the interest rate. A party other than the consumer
– such as the seller – may pay the compensation. At no time can
the other party who pays the compensation be the lender. There
is no fixed minimum dollar amount of compensation. There is a
fixed maximum dollar amount and percentage that corresponds to
the level the broker owner has selected on the lender-paid
model. For example, if the selected lender-paid level is 1.5%,
then the consumer can’t pay more than 1.5% of the loan amount in
compensation. The lender-paid fixed maximum for that state will
also apply to the consumer-paid level. Premium pricing can be
used to pay third-party costs, but must not be used to pay
broker owner compensation. Total premium pricing must not exceed
the total of the third-party costs by more than $250. If the
rate selected includes discount points, then the borrower will
pay those to Wells Fargo at closing. On a purchase transaction,
seller concessions may cover the discount points.”
Yesterday rates
improved again, although they started off the day much better
but then tailed off. The Treasury’s 10-year notes closed up
6+/32s (3.32%) after being better by almost 1 point earlier in
the day. After starting off strong (better by about .5), agency
MBS's finished the day only better by about .125 on “below
normal” volume. Traders are reporting that the
Treasury market volatility is not being mirrored in the agency
MBS market – a good thing for hedgers! As expected, the
FOMC statement was close to January’s (which was identical to
December’s), but with a little more underscoring of inflation
concerns. In short, the statement was slightly more bullish.
With all that has happened in Japan and the Middle East, the Fed
wanted to emphasis stability so did not deviate too much from
last statement.
This morning we
learned from the MBA that last week’s mortgage applications fell
slightly after a 15% jump the week before. The four-week moving
average is up 4.9%, while the four-week moving averages for the
purchase index and refinance index are up 1.6% and 6.6%,
respectively. Refinancing accounts for 66.4% of total
applications.
This morning we also
had Housing Starts & Building Permits. Recall that initial
Housing Starts numbers jumped 14.6% in January to a 596,000
annual rate, but the entire increase came from a 78% surge in
multifamily starts following the rush of multifamily permits in
December ahead of building code changes. Single family starts,
which comprise 70% of the market, fell 1%. Last month Permits
were down about 10%. Housing Starts dropped 22.5%
and Building Permits dropped 8.2% – painful numbers.
We also had the
Producer Price Index, which for last month was +1.6%, with the
core rate (ex-food & energy) was+.2%. After this news, and
given the continued impact of Japan, Europe, the Middle East,
etc., the 10-yr’s yield is down to 3.28% and MBS
prices are better by roughly .125.
New High School Exit Exam - you only need 4 correct out of 10
questions to pass.
1) How long did the Hundred Years' War last?
2) Which country makes Panama hats?
3) From which animal do we get cat gut?
4) In which month do Russians celebrate the October Revolution?
5) What is a camel's hair brush made of?
6) The Canary Islands in the Pacific are named after what
animal?
7) What was King George VI's first name?
8) What color is a purple finch?
9) Where are Chinese gooseberries from?
10) What is the color of the black box in a commercial airplane?
Remember, you need only 4 correct answers to pass. Check your
answers below:
1) 116 years
2) Ecuador
3) Sheep and Horses
4) November
5) Squirrel fur
6) Dogs
7) Albert
8) Crimson
9) New Zealand
10) Orange (of course)
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