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Jul. 14, 2011: Chase mortgage banking results; BofA settlement questions; Wells & UCDP for appraisals; Prospect settlement
Rob Chrisman
“Help a
man when he is in trouble and he will remember you when he is in
trouble again.” The Consumer Finance Protection
Bureau is not in trouble, but we do have one week until it
springs into action – but still without a nominated
leader. What the heck? Phil Hall wrote, “Next week is the
premiere of two highly anticipated endeavors: the Hollywood
blockbuster ‘Captain America: The First Avenger’ and the
Consumer Financial Protection Bureau (CFPB). One of these is a
ridiculously expensive production that traffics in a juvenile
fantasy about an over-the-top crime fighter going to wild
extremes in the pursuit of justice. The other is a movie.”
JPMorgan Chase
weighed in with 2nd quarter results, the first of
the “big boys” that smaller mortgage banks tend to have
interest in, given its position in mortgage banking. The company had net
income of $5.4 billion on revenue of $27.4 billion, up 7% from
the prior year. "With respect to our mortgage portfolio,
delinquency and net charge-off trends improved modestly compared
with the prior quarter; however, net charge-offs remained high,
and we expect credit losses to remain elevated…While delinquency
trends and net charge-offs have modestly improved compared with
both prior periods, the current-quarter provision continued to
reflect elevated losses in the mortgage and home equity
portfolios. Mortgage Banking net revenue was $1.3 billion,
compared with net revenue of $1.2 billion in the prior year.”
Chase continues:
“Mortgage Banking net revenue included $1.1 billion for mortgage
fees and related income, $124 million of net interest income and
$106 million of other noninterest revenue. Mortgage fees and
related income comprised $544 million of net production revenue,
$533 million of servicing operating revenue and $23 million of
MSR risk management revenue. Production revenue, excluding
repurchase losses, was $767 million, an increase of $91 million,
reflecting wider margins. Total production revenue was reduced
by $223 million of repurchase losses, compared with repurchase
losses of $667 million in the prior year. Servicing operating
revenue declined 6% from the prior year, due to run-off of the
servicing portfolio, and increased 9% from the prior quarter,
reflecting lower amortization of the MSR asset. MSR risk
management revenue declined by $288 million from the prior
year.”
For Chase “Mortgage loan originations were $34.0 billion, up 6%
from the prior year and down 6% from the prior quarter.
Total third-party mortgage loans serviced were $940.8 billion,
down 11% from the prior year and 1% from the prior quarter.”
Over at Bank
of America, maybe this conversation took place. Boss:
"Whew! I am glad we got that $8.5 billion settlement thing out
of the way. Now, let's move on to new business." Minion: "Uh,
sir, not so fast. I'm afraid the issue is not over..." (Nervous
glances around room – like that YouTube Hitler video.) Six
federal home loan banks sought to join a case in which a New
York judge will decide whether to approve an $8.5 billion
settlement by Bank of America Corp. with Bank of New York Mellon
Corp. over mortgage-securitization trusts. “The FHLBs have not
made decisions whether to oppose the settlement,” the Federal
Home Loan Banks of Boston, Chicago, Indianapolis, Pittsburgh,
San Francisco and Seattle said in a filing. They are seeking to
intervene because “the procedures that BNYM has established for
approval of the proposed settlement will not provide them enough
information on which to make careful and informed decisions.” http://www.bloomberg.com/news/2011-07-13/six-federal-home-loan-banks-seek-to-intervene-in-bofa-mortgage-accord.html
Wells Fargo's (aka “The Coach”)
clients learned that “The Uniform Collateral Data Portal is Now
Available!” Ops folks know that the UCDP provides a common
pathway for electronic submission of appraisal data files to the
GSE’s. Wells reminds them that, “Lenders and/or their agents can
submit appraisals through UCDP. A lender agent is an entity that
a lender authorizes to perform functions within the UCDP, such
as uploading appraisals and evaluating results.” After December
1, for conventional conforming loan applications, “Wells Fargo
will require successful submission of appraisal report forms to
the UCDP, prior to Wells Fargo Funding Loan purchase. This
requirement only applies to conventional Conforming Loans which
require an appraisal report. There are two ways in which lenders
and their delegated agents may access the UCDP: An easy-to-use
Web-based interface that allows users to browse and upload XML
or first generation PDF files to the portal, or Vendor-provided
solutions that offer an integrated system interface to the UCDP.
Both GSEs have published a list of technology vendors who plan
to provide a vendor solution that offers an integrated system
interface to the UCDP. Wells Fargo will require our Sellers to
submit appraisal data files to both GSEs. If you have not done
so already, we encourage Sellers to complete the UCDP
registration process within your organization's set-up - for
each GSE. Fannie Mae and Freddie Mac have separate multi-step
registration processes for users of the UCDP. The primary lender
administrator must be the same individual for both GSEs. Refer
to Fannie Mae's UCDP Page and Freddie Mac's UCDP Page for
complete registration instruction and support.”
Any FHA & VA
originators, along with Ginnie issuers, should know that Ginnie Mae is revising the language originally
introduced for “Determining Loan Eligibility for Issuance of
Ginnie Mae Securities.” All loans pooled in Ginnie Mae
single family securities, except for loans backing bond
consolidation pools, must meet the following criteria: As of the
pooling date, no more than one monthly payment on the pooled
mortgages can be due and unpaid – usually the one for the
current month.
News came out that Prospect Mortgage will pay HUD $3.1 million to
settle claims of kickbacks to mortgage professionals from the
company's alleged "sham joint ventures” on FHA loans, which is
similar to Fidelity National Financial agreeing
to pay HUD $4.5 million to settle kickback claims. Reports
indicate that Prospect created hundreds of these joint ventures
to share profits with lenders, servicers, real estate agents and
brokers for the referral of these services. Don’t mess with
RESPA! Prospect denied the allegations and claimed it disclosed
the business structure to HUD in a previous audit. Prospect said
it assumed the business structure did not violate RESPA because
of this disclosure. HUD countered and said these companies had
little to no employees, capital or offices. Prospect agreed to
dissolve these ventures immediately along with paying the
settlement.
Some lock desks are
seeing a slight pickup in flow, which may appear in next week’s
MBA application numbers. Rates have come down, but originators
are reporting from Q4 of '10 to Q1 '11 lender expenses per-loan
have risen by nearly $1,000/loan. Investors were somewhat less
risk averse yesterday with equities rallying on remarks from
Chairman Bernanke saying that additional stimulus was possible
if conditions warranted. The Fed "remains prepared to respond
should economic developments indicate that an adjustment in the
stance of monetary policy would be appropriate." I am safe in
saying that everybody and their brother knows that the economy
is not improving dramatically – and rate-wise we may not want it
to. But a little more improvement would be helpful.
The new 10-year notes
closed around 2.89%, and we saw numerous intra-day price
improvements from lenders. Traders saw, “buying from hedge funds
and real money investors, such as pension funds, along with
servicers with spreads at mid-day at 5-6 ticks tighter versus
10-year notes across the stack…” MBS prices were up/better
nearly 3/8 of a point on 30-year 3.5s and by over 1/4 point on
4’s (with 4.25-4.625% mortgages). Chrysler announced a recall of
244,000 pickups, which one trader noted, “The only
group having trouble trying to recall that many pickups are
the doormen in Derek Jeter's building.” (Get it?)
This morning we’ve
already seen the Producer Price Index numbers: PPI was -.4% for
June.
Initial Jobless
Claims dropped 22k to 405k, above 400k for the 14th
week in row although the 4-week moving average is dropping. And
Retail Sales were +.1%, better than expected. We have a $13
billion 30-yr auction later on, along with a 10AM EST Business
Inventories number. Other thrilling events include a repeat of
Chairman Bernanke's Monetary Policy Report to the Senate Banking
Committee at 7AM PST. The yield on the 10-yr is
around 2.92% and MBS prices are worse by a shade.
(This sums up my
life.)
A wife asks her husband, "Could you please go shopping for me
and buy one carton of milk, and if they have eggs, get 6."
A short time later the husband comes back with 6 cartons of
milk.
The wife asks him, "Why the heck did you buy 6 cartons of milk?"
He replied, "They had eggs."
If you're interested,
visit my twice-a-month blog at the STRATMOR Group web site
located at
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