LO compensation remains an issue. “I still remain scared of how many lenders have loan officers out there who still have an interest in upselling rate and maximizing premium pricing.  They’re still asking their Secondary Departments, “Should I lock today or wait until tomorrow?”  Talk about a red flag! Others have taken a micro approach with dozens of comp structures based on LO and/or origination source (referral versus marketing lead). The rules and security measures must be fully thought and implement in a consistent manner. I am finding that overages (above par pricing) certainly remain an area of exposure. To whom does premium pricing belong?  If it’s not passed along as a lender credit, it belongs to the bank – and what LO is looking to sell pricing to fatten managements P&L and not their own? This all spells trouble if, or when, the regulators come knocking on the door with both independent mortgage bankers and community banks.  The problem here is that most, if not all, of these lenders are under the impression they’re in compliance.  Matchbox has been working with bankers to analyze how bankers have implemented their compensation plans and eliminate the areas of exposure.” Contact Frank Fiore at ffiore@matchboxllc.com if you'd like to have your compensation plans reviewed.

FHFA Director DeMarco's latest testimony on the GSE's can be found at http://www.fhfa.gov/webfiles/22744/DeMarcoTestimony1132011.pdf. This is timely, since Freddie Mac reported a $4.4 billion loss for the third quarter and said it will seek $6 billion from the U.S. Treasury Department. For those playing along at home, the request brings Freddie Mac's total Treasury draw to $72.2 billion although it has returned $14.9 billion of that money to taxpayers in the form of dividend payments to the government (including $1.6 billion in the 3^rd quarter). And lower rates don’t help everyone: Freddie Mac reported $4.8 billion in derivative losses due to declining interest rates.

Things are a little rosier in the commercial and multi-family sector. The MBA reports that in the 3^rd quarter loan originations came in 98% higher than during the same period last year and 10% higher than the second quarter. “Mortgage originations by life company portfolios hit another new record in the third quarter,” said MBA Vice President of Commercial Real Estate Research Jamie Woodwell. “Lending by bank portfolios and Fannie Mae and Freddie Mac also picked-up. Hotels, retail properties, office space, multifamily, industrial, etc. are all included in the numbers. To view the report, visit the following Web link: http://www.mortgagebankers.org/files/Research/CommercialOriginations/3Q11CMFOriginationsSurvey.pdf.

Barclays Capital noted that, “The survey numbers support our view that originations will continue to increase in the near term, though growth will be sluggish and concentrated outside the CMBS conduit space. Since the quality of collateral financed by the agencies, banks and insurance companies is higher, we expect the tier 1 properties to be well bid, while properties in secondary and tertiary markets could face difficulties finding avenues to refinance, given the slowdown in conduit issuance.”

But another item, generated from the Real Estate Roundtable, indicated that commercial real estate executives appear to have cut back their expectations on economic conditions, citing worries about the pace of recovery and other concerns. “The Roundtable’s latest Sentiment Index fell for the second consecutive quarter to its lowest point since fall 2009. After rising slightly at the beginning of the year (77 out of 100), the index fell to 69 in the third quarter and to 59 in the latest survey. Respondents cited concerns about the pace of economic recovery; Washington's ability to address fiscal and tax policy challenges; new regulatory requirements; and the long-term European debt situation as negative factors.

When in doubt, file a lawsuit. Allied Home Mortgage sued HUD for suspending the firm’s ability to write FHA insured home loans. Allied and James C. Hodge, founder and chief executive officer of the Houston-based firm claimed last year that it was the biggest closely held mortgage broker in the U.S., and HUD’s move earlier this week wipes out 70% of its business.

I received several e-mails on Allied's HUD/FHA suspension - none of them pro-Allied, and in fact a few pointed out HUD’s neglect. Here is a sample: "The principals at Allied will get theirs - and deservedly so. But I hope a bright, searing light shines on the folks at HUD/FHA as well.  Allied's horrific misuse of the FHA program hasn't been a secret.  This has gone on for years and anyone with a computer could watch the train wreck via their compare ratio. Where were the folks at HUD/FHA?  Why did they let this go on and on?  Maybe a prosecutor or two should sue a few of those folks for gross dereliction of duty and failure to mitigate taxpayer damages. And what makes this worse?  There are other Allied's out there - just check the compare ratios."

The Bella Homes saga continues. Wednesday the commentary noted its site (http://www.gethelp.whybellahomes.com/index.html) and received this site from a reader: http://www.scam.com/showthread.php?t2156.

David Oldenburg, author and the CEO of California Seller Realty, writes, "In my new book I talk extensively about real estate "options", "mortgage assignments", "rent-to-owns" etc... Here is what I think Bella is doing because I work with some bankruptcy attorneys.  Notice that Bella says, "If you qualify". I am guessing they are looking for situations where they can wipe out the second mortgage or offer them far less than what they are owed.  They may even be doing this with the first as well, kinda like a short sale but a direct payout by them. There are lots of investors seeking these high-rent situations right now because of the yield on their money. This is easily accomplished because with a lease-option or rent to own, the payments can be much higher for the same priced property.”
 
Mr. Oldenburg continues, "Many of these so-called people who are "helping" home buyers and sellers are simply using it as a tool to get more calls, more leads that lead to other business. Think about it... If you are an upside-down owner and you watch that Bella video you are going to be all over it. They can easily come back later and say you do not qualify but they can handle your short sale. My guess is the ONLY people who qualify are the ones that have an ideal situation where they can negotiate or get rid of some of the mortgage debt and then offer a lower payment to the original seller. I can guarantee there is never a situation where Bella is buying a home and making payments that are higher than what they are receiving!"

And lastly, "Please look more into the Bella Homes business plan. I have been approached by several people about this program – we refuse to get involved. Search for ‘Mortgage Assignment Program’ and you will find hundreds of sites talking about how to sell homes underwater homes to buyers who may never qualify. For example, this one: http://mortgageassignmentprofiting.com/.  A representative shows an underwater house to a buyer with bad credit. The seller can't sell and the buyer can't obtain financing. The buyer signs a contract with the seller with a clause that it is subject to the lender assigning the mortgage to the buyer.  I have also heard of where they quit claim the deed to the buyer and then the buyer just starts making payments.  Then they call the bank and tell them that they are the new owners.  The bank is upside down, so they assign the loan? Smells like a scam to me.”

If you’d like to learn more about FHA loan origination and processing, you may want to check out a webinar on Tuesday, November 8^th. It is hosted by Fairway Wholesale Lending, and doesn’t cost anything: https://www2.gotomeeting.com/register/866264266. “This is an excellent training course for originators and processors with little to no FHA lending experience or with previous FHA experience but needing a refresher, or owner/mangers considering FHA lending as an additional product offering.” (This is Part 1; Part 2 is on Thursday.) Write to Bob Sweeney with any questions: bob.sweeney46@yahoo.com.

Yesterday was not a great day for the U.S. fixed-income markets due to an announced 25 basis point cut in the ECB's benchmark rate to 1.25%. Reuters noted that the 10-year Treasury notes ended lower by 17/32nds (2.07%)…In MBS, lower coupons struggled from the start due to a bout of late day selling and supply yesterday, with expectations of more supply as Treasuries opened lower. Mortgage banker selling appears to have remained in the $1.5 to $2.0 billion area today with supply consisting primarily in 3.5% coupons.” Most rate-sheet mortgage prices worsened slightly.

You’ll see the same thing today, as rates are slightly higher after a decent Nonfarm Payrolls report for October showed a pickup of 80k jobs, back-month revisions higher, and the unemployment rate dropping to 9.0%. The 10-yr slid up to 2.10% and MBS prices are worse by about .125.

Confucius didn’t say:

Man who wants pretty nurse must be patient.
Passionate kiss, like spider web, leads to undoing of fly.
Better to be pissed off than pissed on.
Lady who goes camping must beware of evil intent.
Squirrel who runs up woman’s leg will not find nuts.
Man who leaps off cliff jumps to conclusion.
Man who runs in front of car gets tired; man who runs behind car gets exhausted.