|
Apr. 21, 2011: Do Wells' mortgage numbers apply to industry? Sobering MI losses; NMLS Call Report; Startling gov't vs. manufacturing job stats
Rob Chrisman
The
percentage of jumbo business that any
originator does is, of course, very dependent on location. But
what are borrowers thinking when it comes to obtaining a jumbo
loan? Here's one take from Linda Stern with Reuters: http://www.reuters.com/article/2011/04/20/us-usa-housing-jumbo-idUSTRE73J7B420110420
Wells Fargo does a decent
business in jumbo loans (at least in its retail and
wholesale channels), but as analysts continue to look at
its earnings numbers, other items stand out that
are indicative of the overall industry. Namely, loan
growth was flat to down in most loan categories, including a 32% drop in mortgage production. During the first
quarter, “Home mortgage applications of $102 billion, compared
with $158 billion in prior quarter, home mortgage application
pipeline of $45 billion at quarter end, compared with $73
billion at December 31, 2010, home mortgage originations of $84
billion, down from $128 billion in prior quarter, and a
residential mortgage servicing portfolio of $1.8 trillion.” You
can scroll down to page 10 in this supplement for more,
including layoffs: https://www.wellsfargo.com/downloads/pdf/press/1Q11_Quarterly_Supplement.pdf
Generally speaking,
in the first quarter the four largest banks here in the US saw
average loans outstanding drop 7% from a year earlier, but
deposits increase by 5%. From a bank’s point of view, the demand for credit has dropped and may not
pick up again until the economy shows more improvement. And, as
we found out a few years ago, making loans for the heck of it
doesn't pay off. For some banks, SBA, auto, and commercial
lending sectors are showing some growth, but Chase is dealing
with WAMU’s legacy, Bank of America with Countrywide’s, and
Wells Fargo with Wachovia/World Savings’. And so, very
basically, they sit on the cash, and earn the spread between
what they pay on deposits and earn on loans.
Private mortgage
insurance companies, on the other hand, wish they had more cash.
MGIC has lost money in 14 of the last 15 quarters.
It is the largest MI company in the US, so therefore used as an
indicator of the health of the industry. Yesterday’s release
surprised the market, causing stocks of Radian,
PMI, MGIC, etc., to tumble. (For the year, MGIC is down
27%, Radian down 33%, and PMI down 44% - don’t look for a lot of
free spending at the upcoming conference in NY!) In theory MI
companies pay lenders when homeowners default and foreclosures
fail to recoup costs – but rescissions are a big issue. MGIC
stated that, “The benefit from rejected claims, or rescissions,
was about $200 million in the first quarter, compared with
annual totals of about $1.2 billion in 2009 and 2010…Rescissions
will not continue at the same rates, as a percentage of claims
received, we have previously experienced.”
I received some
notes regarding the LO’s comments about Realtors not being
impacted by Dodd Frank (yet). "He wondered why
Realtors were not targeted under Dodd Frank. The primary reason
is Dodd Frank and the Federal Reserve Board have thrown up a
smoke screen to make the general public believe that they have
the consumers best interest in hand when in fact this has all
been done for the big banks - to put them back in the driver's
seat. After all, they are the ones who created the FRB in the
first place. And we all know how big the Realtors' lobbying
group is."
"On the 5-6% commissions thing, I'll leave it to others to know
if its apples-to-apples, but the 5-6% is split 4 ways, the two
realty firms split the commission and then they split it with
their agents. Agents see 1.25-1.5%, not 5-6% (unless they sell
one of their own listings then their share doubles). I don't
know how that compares to the mortgage broker's complaint.
Regardless, again, from close personal observation, if you
divide the hours put in by a real estate agent across all the
successful, commissioned closes in a year they don't often get
to minimum wage. The amount of
low-bid-we-didn't-get-the-house-buyers and
dead-wood-I-want-2x-value-sellers and failed deals, etc., etc.
is quite high, especially in this uncertain market of strained
bank accounts."
The hits just keep on coming, as companies’ compliance officers
are setting up for the quarterly NMLS Mortgage Call
Report in May. (Watch for a cottage industry to spring up
as companies may want to outsource this.) As most know, is a
quarterly report of mortgage activity and company information
created by state regulators and administered electronically
through NMLS. “The NMLS Mortgage Call Report is intended to be
completed by all state-licensed companies and all
state-registered companies that employ licensed mortgage loan
originators. The Mortgage Call Report comes in two varieties:
“Standard” and “Expanded.” “The Expanded version of the MCR is
for companies that are a Fannie Mae or Freddie Mac
Seller/Servicer or Ginnie Mae Issuer. All other companies will
submit a Standard MCR. The vast majority (90%) of
state-licensed companies in NMLS will complete the Standard
MCR.” NMLS is offering training sessions on the NMLS Mortgage
Call Report, and have produced a practice sheet: http://mortgage.nationwidelicensingsystem.org/slr/common/mcr/NMLS%20Document%20Library/Standard-MCR-Practice-Worksheet-May-2011.pdf.
For a little
wholesaler news, Stearns reminded its brokers to
"Let Your Realtor Know About the 3.5% Buyer Incentive on
HomePath. Fannie Mae has recently announced a special
incentive effective with offers submitted on or after April 11th…Fannie
Mae is currently offering buyers up to 3.5% in closing cost
assistance through June 30, 2011. The HomePath property buyer
must meet the following qualifications to be eligible: Buyers
and/or selling agents (the agent representing the buyer) must
request the incentive upon submission of initial offer in order
to be eligible. The initial offer must be submitted on or after
April 11, 2011 and close by June 30, 2011. If an initial offer
was made prior to the effective date, the offer is not eligible
for the incentive. The sale must close on or before June 30,
2011. No exceptions will be made to this deadline. Only buyers
purchasing a HomePath property as their primary residence may
receive up to 3.5% in closing cost assistance. Second homes and
investment properties are excluded from the incentive. Buyer
must sign the Owner Occupant Certification Rider to the Real
Estate Purchase Addendum. If a buyer's total closing costs are
under 3.5%, the difference will not be available as a credit to
the buyer.”
GMAC Bank’s wholesale group
announced Expanded Approval Levels for the DU Refi Plus Fixed
Rate product. “All levels of Expanded Approval decisions (EAI,
EAII and EAIII) can go to 105% LTV,” several without MI. The
lender also announced its “Super Jumbo Products will now permit
Second Homes: minimum FICO score of 740, maximum loan amount of
$1,000,000, maximum LTV/CLTV of 65%, maximum DTI of 35%,
purchase and R&T only – no cash out, and for one unit
properties.” Check the bulletin for appraisal specifics.
Today we had Jobless
Claims, and two weeks ago we had the release of the employment
numbers. A story from the Wall Street Journal recently noted,
“If you want to understand better why so many states—from New
York to Wisconsin to California—are teetering on the brink of
bankruptcy, consider this depressing statistic: Today
in America there are nearly twice as many people working for
the government (22.5 million) than in all of manufacturing
(11.5 million). This is an almost exact reversal of the
situation in 1960, when there were 15 million workers in
manufacturing and 8.7 million collecting a paycheck from the
government. More Americans work for the government than work in
construction, farming, fishing, forestry, manufacturing, mining
and utilities combined. We have moved decisively from a nation
of makers to a nation of takers. Nearly half of the $2.2
trillion cost of state and local governments are the $1
trillion-a-year tab for pay and benefits of state and local
employees. Is it any wonder that so many states and cities
cannot pay their bills?”
Besides Wisconsin and Indiana, every state in
America (including Pennsylvania and Michigan!) has more
government workers on the payroll than people manufacturing
industrial goods. Wyoming and New Mexico “lead” the nation
with more than six government workers for every manufacturing
worker.
By the time the dust
settled yesterday, not much had happened – again. Volatility is
dying down, usually a good thing. The 10-yr ended around 3.40%,
and current coupon MBS prices were worse by .125. Per the NAR
numbers, sales of previously owned U.S. homes rose more than
expected in March, +3.7%. All-cash sales set a
record market share at 35% in March; investors accounted
for 22% of sales activity, while distressed homes accounted for
40%. Sales rose in the Northeast, South and Midwest, and were
down slightly in the West.
Later today we have
the Leading Economic Indicators, a measure that tracks changes
in the business cycle. In February it rose 0.8%, the seventh
consecutive month of improvement in the index. Nine of the 10
components of the indicator were in positive territory for the
month. Most economists feel that the LEI is supporting the
notion of slow, albeit uneven, growth in the US economy. For
today, expectations are for a slight improvement again. With the
early bond market close and ahead of tomorrow’s market holiday,
we had the usual Initial Jobless Claims (which moved from 416k
down to 403k), Leading Economic Indicators, the Philly Fed, and
another housing price index – the FHFA HPI. We also will have
the Treasury’s announcement for next week’s auction of 2, 5, and
7-yr notes. So far the 10-yr yield is slightly
better at 3.38% and agency MBS prices are also a shade better.
After the North American Beer Festival, all the brewery
presidents decided to go out for a beer. The guy from Corona
sits down and says, “Hey Senor, I would like the world's best
beer, a Corona.” The bartender dusts off a bottle from the shelf
and gives it to him.
The guy from Budweiser says, “I'd like the best beer in the
world, give me 'The King Of Beers', a Budweiser.” The bartender
gives him one.
The guy from Coors
says, “I'd like the only beer made with Rocky Mountain spring
water, give me a Coors.” He gets it.
The guy from Molson Canadian sits down and says, “Give me a
Coke.” The bartender is a little taken aback, but gives him what
he ordered.
The other brewery presidents look over at him and ask, “Why
aren't you drinking a Molson's?”
The Molson Canadian president replies, “Well, I figured if you
guys aren't drinking beer, neither would I.”
|
