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Apr. 25, 2011: FICO & strategic defaults; older jumbo pools downgraded; Call Report Q&A; production & Ops jobs are out there
Rob Chrisman
In terms
of powerful world figures, how does the FDIC's Sheila Bair stack
up against Lady Gaga or Katie Couric? http://www.forbes.com/wealth/power-women/list
For the 1st
quarter, the big four banks originated a combined $186 billion
in residential mortgages, down 33% from the
$281 billion home loans written in the previous quarter,
according to their financial statements. Servicing costs were
up, each bank still has hundreds of millions of dollars in
reserves for buybacks on defaulted loans, and thousands of
full-time and part-time jobs were eliminated. Wells
Fargo did $84 billion (down from $128 billion in the 4th
quarter), BofA did $52 billion (down from $81
billion), JPMorgan Chase totaled $36 billion
(down from $51 billion), and Citi did $14
billion (down from $22 billion in the fourth quarter). However,
compared to the 1st quarter of 2010, Wells, Chase,
and Citi were all up, with only BofA dropping (from $67 billion
last year).
But good loan
officers continue to be in high demand. For example, Advantage Mortgage, a Mortgage Banker/Broker
licensed in 16 states, is looking for retail LO's
in CA, CO, CT, FL, GA, HI, ID, MA, MD, NM, NV, OR, PA, TX, UT,
and WA. Advantage is headquartered in Irvine, CA, but also has
branches in Hawaii, Nevada, and Texas, and is looking for a Qualified Employee (Manager) in each of its
Nevada and Texas branches, along with an Operations
Manager and processors in Irvine. The company has been
around since 2003, is a Direct lender for Conventional and VA
loans, approved with all lenders for FHA, Jumbo, Homepath, USDA,
Commercial and portfolio products. If anyone out there is
looking, or if you know someone who is, check out Advantage at www.advmortgage.net and click on Careers
or email a resume to resume@advmortgage.net.
In Illinois, Home State Mortgage Group is searching for retail LO's in the NW Suburban Chicago area,
along with a recruiter/HR person in its headquarters. The lender
is part of Home State Bank (Illinois), and together they've been
around over 90 years. For more information visit their website
at http://www.homestateonline.com and click on
"Mortgage Center", and if you're looking for a new opportunity,
or know someone that is, contact Jim Sorenson at jsorenson@homestateonline.com.
And in Colorado, Peoples
Mortgage, owned by Peoples National Bank, is looking
for loan officers in Colorado, although the company, being
a bank with a Federal Charter, has no licensing required at the
bank’s LO level, and can lend in all 50 states. (A Federal chart
exempts LO’s from state licensing, but not, in the soon future,
NMLS.) If you’re interested in People’s e-mail Jeff Garman at Jgarman@epeoples.com
or call 1-866-573-9662 for inquires.
The flow of regional bank earnings continued through the end of
last week, with PNC’s net income coming in more
than expected at $3.63mm, up 15% from the same period last year.
NIM (net interest margin) was stable on flat loan growth and
most of the improvement came from lower non-performing assets.
No loan growth was reported. BB&T reported
a 21% increase in earnings to $234mm, or slightly higher than
expected. NIM and loan growth were largely unchanged from the
quarter before and most of the earnings came from a 40% drop in
provisions. Cap One posted profit that was 60%
higher at $1B on better credit card recoveries and lower charge
offs. 5th 3rd said net income rose to $265mm from a $10mm loss
from a year earlier and SunTrust posted a $38mm
gain compared to a loss of $229mm a year earlier. Both 5th 3rd
and SunTrust had improvement due to better credit quality.
In the past, the setting of jumbo loan rates was much more
dependent on where the jumbo residential mortgage-backed
securities traded. Now, prices are primarily set based on a
spread to the investor’s cost of funds. Still, it is important
to see what is happening with the price of existing jumbo
securities, and it is not good news: http://online.wsj.com/article/BT-CO-20110421-718587.html
and http://www.housingwire.com/2011/04/22/moodys-downgrades-more-than-17-billion-of-jumbo-rmbs.
The California
Mortgage Bankers Association continues to host its Mortgage
Quality and Compliance Committee presentations. Inside or
outside of California the presentation is free, with the next
webinar being this Thursday the 28th at 11AM PST. It
will cover an “Overview of the NMLS Call Report”
which includes what is expected/who needs to submit these
reports, implementation of receiving reports and uploading
capability by company, requirements of various reports (i.e.
broker vs. banker), and what are some of the false rumors about
the Call Report? For more details or how to get set up to
“attend,” contact Susan DeMars at susan@cmba.com.
The folks at FICO Labs are coming out with a new way to
predict the likelihood a borrower will default, even if they can
afford their mortgage. Predicting strategic defaults is the
goal, with a strategic default being where borrowers, who can
afford their monthly mortgage payment, opt not to pay it – often
because they owe more on the home than it is worth. FICO
Labs believes that the strategic default borrower is one with
a reputable credit score, low levels of revolving credit,
little retail balance and a short occupancy in their current
residence. By these characteristics, the strategic
borrower is money conscious, has a low probability of past
defaults and has little attachment to their property. FICO
reports that borrowers whose homes lost the most value are only
twice as likely to default as those who lost the least value. And just how much impact does a short sale or
foreclosure have on FICO scores? Apparently the magnitude
of the impact is highly dependent on the starting score, but
there's no significant difference in score impact between short
sale/deed-in-lieu/settlement and foreclosure. http://bankinganalyticsblog.fico.com/2011/03/research-looks-at-how-mortgage-delinquencies-affect-scores.html.
LO compensation issues continue to be questioned. "I continue to
believe that Congress and the President do not understand the
industry, so their efforts to place preventive measures end up
being overkill. This has turned very abusive to borrowers and in
my opinion will be very detrimental to the housing recovery. I
was here when TIL and RESPA came into existence. But removing
the right to determine one's compensation for labor creates
several problems. First, this is a socialistic idea, not an
idea this country's ideals are based upon. Second, there is no
data showing compensation caused harm to consumers any more than
not getting the best price for new car or consistently paying
more for a gallon of milk at a convenience store. Third,
compensation has nothing to do with value provided – in the
mortgage industry different investors and wholesalers will price
the same product differently. Shouldn’t the borrower benefit
from this? Fourth, loan scenarios are all as different as
fingerprints, and some take much more time and expertise to
close. Pricing flexibility allows the originator to be
compensated for their time and expertise in helping these
borrowers and provides value to a buyer who otherwise would
continue to rent. Should a roofing company be paid the same for
every roof it replaces? Fifth, it prevents lenders and
originators from reducing their fees preventing their ability to
deliver the best customer experience by preventing them from
paying rate lock extension fees, appraisal inspection fees, or
any number of concessions that need to be made for the consumer
in their loan process.”
The bond market
closed early on Thursday, and was closed on Friday – often not a
great environment for anyone needing to lock in a loan. And
indeed today we find rates slightly better than
Thursday’s closing prices. We have an average amount of
scheduled economic news this week, starting with New Home Sales
today and Consumer Confidence tomorrow. Wednesday may be a
little more interesting with Durable Goods and the FOMC
statement (released at 12:30PM) and the first post-FOMC press
conference from Chairman Bernanke (2:15PM EST) along with $99
billion of Treasury supply hitting the market (Tues through
Thursday). Thursday we’ll see the advanced Q1 GDP report &
Pending Home Sales, and on Friday Personal Income &
Consumption for March, along with the Employment Cost Index,
Chicago Purchasing Manager’s Survey, and the Michigan Sentiment
numbers.
With these issues in
mind, in addition to the continued debt issues abroad and the
march of oil and gold prices and weakness in the dollar, the 10-yr is down to 3.38%, and agency MBS prices are
better by about .125.
A man is driving
along a highway and sees a rabbit jump out across the middle of
the road. He swerves to avoid hitting it, but unfortunately the
rabbit jumps right in front of the car. The driver, a sensitive
man as well as an animal lover, pulls over and gets out to see
what has become of the rabbit. Much to his dismay, the rabbit is
dead. The driver feels so awful that he begins to cry.
A beautiful blonde woman driving down the highway sees a man
crying on the side of the road and pulls over. She steps out of
the car and asks the man what's wrong.
"I feel terrible, "he explains, "I accidentally hit this rabbit
and killed it."
The blonde says, “Don’t worry."
She runs to her car and pulls out a spray can. She walks over to
the limp, dead rabbit, bends down, and sprays the contents onto
the rabbit.
The rabbit jumps up, waves its paw at the two of them and hops
off down the road.
Ten feet away the rabbit stops, turns around and waves again, he
hops down the road another 10 feet, turns and waves, hops
another ten feet, turns and waves, and repeats this again and
again and again, until he hops out of sight.
The man is astonished.
He runs over to the woman and demands, "What is in that can?
What did you spray on that rabbit?"
The woman turns the can around so that the man can read the
label. It says..
"Hair Spray - Restores life to dead hair, and adds permanent
wave."
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