Jul. 25, 2012: Mortgage jobs continue; CFPB publishes year's agenda; new FICO score; watching Kroll Bond Ratings; poverty in the U.S. increasing
Rob Chrisman
"Rob,
I've read that wholesale lending accounted for only 5% of
Wells Fargo's volumes. Only 5%? What are you hearing about its
remaining business and what will happen to that 5%? I am sure
lots of wholesalers would be happy with it." During the first
quarter of 2012, Wells did about $7.4 billion, and, according
to National Mortgage News, only had about a 14% market share.
(This is out of the firms that report volumes to NMN, which is
not everyone.) The "Top 10" wholesalers had about a 61% market
share, versus the Top 10 correspondents having 73%. So the
wholesale business is much more diversified.
Sure, that $7 billion will be absorbed by others
(Provident, Flagstar, etc.) who are happy to have the $2-3
billion a month spread between them, forgetting about
capacity issues for a moment. But the industry really is
caught between a rock and a hard place. You have politicians
who want to do away with Fannie Mae and Freddie Mac and at the
same time encouraging lenders to step up, the FHA concerned
about its own solvency, but foreign governments who will only
buy MBS's backed by those groups (especially Ginnie's). The
same lenders that Congress thinks are going to take up the
slack are now scaling back (BofA, Wells, GMAC) for various
reasons, you have Basel III coming down the pipe which could
have a huge negative impact on residential lending and
mortgage holdings (more on this soon), every lender is worried
about buybacks and lawsuits, and yet the barriers of entry for
anyone considering entering this business are practically
insurmountable. One area of the government is concerned about
“too big to fail” yet other areas are slowly creating an
environment where only large institutions, with established
compliance and legal departments, can become any larger. Just
my opinion…
Yet
companies continue to expand. Capital Markets Cooperative
(CMC) is seeking experienced Secondary Marketing candidates
to join its trading desk team. The account manager will
be responsible for daily pipeline management, trading MBS and
loan collateral, best execution analysis and customer
support. Requirements include 2-3 years secondary marketing
experience, strong SQL and Excel skills and attention to
detail. CMC, founded in 2003 and located in Ponte Vedra Beach,
FL, provides mortgage bankers the expertise to reduce risk and
maximize profit in the secondary market through hedging and
it’s cooperative. Interest parties should send their resume info@capmkts.org.
And
Mid America Mortgage, Inc., a National lender, is seeking
to expand its retail operations with qualified branch
managers and loan originators. Privately held Mid
America Mortgage is a Ginnie Mae Issuer, Fannie Mae
Seller/Servicer, USDA National Lender and offers many other
competitive products. The organizational belief in hard work,
high ethical standards and the use of superior technology are
the foundation on which the company will continue to grow.
Anyone interested in learning more please contact National
Sales Manager, Donna Wright, at Donna.Wright@MidAmericaMortgage.com.
Congratulations
to Kroll Bond Ratings, having rated its first
commercial MBS one year ago, now occupies the #3
market-share spot in CMBS ratings. Kroll has rated about
$10.6 billion worth of CMBS over the past year via its 11
offerings, which include both private-label deals issued by
bank lenders and transactions backed by Freddie-underwritten
loans on multifamily properties. Moody’s and Fitch, occupying
the Number 1 and 2 positions, rated just under $18 billion.
You’ll notice that Kroll was recorded as having a higher
market share than Standard & Poor’s, whose credibility
took a hit after a blunder on a $1.5 billion deal in July 2011
led to bonds being pulled from the market post-sale. As a
result, S&P’s market share has declined significantly,
allowing smaller and new agencies to fill the vacuum. It is
obvious that rating agencies like Kroll have definite
advantages in the current climate – they certainly don’t have
the legal legacy issues (sounds like mortgage
banking). Although Kroll employs the oft criticized “issuer
pays” model, it uses transparent criteria and analysis,
whereas pre-crisis the large agencies were notorious for the
unclear and subjective criteria they employed when issuing
ratings. In the past year, Kroll has expanded into
municipal-bond ratings and asset-backed securities and is
scheduled to issue its first corporate rating this autumn. I
had the privilege of being in a meeting in Manhattan with
Jules Kroll a few years ago – a good guy!
Turning
the political arena, Julian Hebron (The Basis Point) observed
that in order for Mitt Romney to qualify for a mortgage
here in the U.S., he’d need two years of tax returns –
and he’s only provided one. Two years of filed tax returns is
a loan approval requirement of Fannie Mae and Freddie Mac,
which own or back more than half of the $13 trillion in U.S.
mortgage debt. Julian points out that, “Full disclosure is
very slowly rebuilding the system. With that backdrop, let’s
try to answer this question: is it ok that you have to provide
more information to get a mortgage than a politician does to
be president? First, let’s understand the basic rules that
voting masses must follow. To get a home loan in this country,
all lenders—even the ones making “Jumbo” loans that aren’t
eligible for purchase by Fannie/Freddie—start from the
Fannie/Freddie template requiring borrowers to provide two
years of filed federal tax returns. If a borrower provides
2010 tax returns plus a 2011 filing extension along with draft
2011 returns as Romney has, this isn’t sufficient to approve
and fund a mortgage. In this scenario, the borrower must also
provide the filed 2009 returns to complete the approval and
funding process. The exception to this under Fannie/Freddie
rules is if a borrower only has W2 income (Form 1040, line 7).
Then they can get a loan with one year of filed returns. But
if a W2 borrower has unreimbursed expenses (Schedule A, line
21) on filed 2011 returns, their filed 2010 return will also
be required. Or if a borrower has any sort of income beyond
straight W2—such as dividend, interest, 1099/Self-Employed
earnings, income from owning part/all of entities/properties,
capital gains, or anything else on lines 8-21 of Form 1040—two
years of filed returns must be provided so the lender can root
out income AND losses. Lenders subtract losses from income to
qualify borrowers. Romney has income/losses on lines 8, 9, 10,
12, 13, 14, 17, and 21 of his 2010 filed return. So he’d have
to provide another year if he was applying for a loan. His
2011 draft would be ignored because it isn’t filed, and 2009
would be required.”
In
the interest of equal time (something I rarely do, but here it
is), the Obama Administration must not only contend with a
stagnant job market, but now something else has popped up: the
number of Americans in poverty is increasing. “The ranks
of America's poor are on track to climb to levels unseen in
nearly half a century, erasing gains from the war on poverty
in the 1960s amid a weak economy and fraying government safety
net. Census figures for 2011 will be released this fall in the
critical weeks ahead of the November elections.” It is
expected that the official poverty rate will rise from 15.1
percent in 2010, climbing as high as 15.7 percent. Several
predicted a more modest gain, but even a 0.1 percentage point
increase would put poverty at the highest level since 1965.
"The issues aren't just with public benefits. We have some
deep problems in the economy," said Peter Edelman, director of
the Georgetown Center on Poverty, Inequality and Public
Policy. He pointed to the recent recession but also
longer-term changes in the economy such as globalization,
automation, outsourcing, immigration, and less unionization
that have pushed median household income lower. Even after
strong economic growth in the 1990s, poverty never fell below
a 1973 low of 11.1 percent. That low point came after
President Lyndon Johnson's war on poverty, launched in 1964,
that created Medicaid, Medicare and other social welfare
programs. "I'm reluctant to say that we've gone back to where
we were in the 1960s. The programs we enacted make a big
difference. The problem is that the tidal wave of low-wage
jobs is dragging us down and the wage problem is not going to
go away anytime soon," Edelman said.
The
2010
poverty level was $22,314 for a family of four,
and $11,139 for an individual, based on an official government
calculation that includes only cash income, before tax
deductions. It excludes capital gains or accumulated wealth,
such as home ownership, as well as noncash aid such as food
stamps and tax credits, which were expanded substantially
under President Barack Obama's stimulus package. (An
additional 9 million people in 2010 would have been counted
above the poverty line if food stamps and tax credits were
taken into account.) The analysts' estimates suggest that some
47 million people in the U.S., or 1 in 6, were poor last year.
An increase of one-tenth of a percentage point to 15.2 percent
would tie the 1983 rate, the highest since 1965. The highest
level on record was 22.4 percent in 1959, when the government
began calculating poverty figures. It is indeed a serious
problem.
Thanks
to a slow U.S. economy, and problems in Europe that will
continue for years, our rates are great. The yield on the
“benchmark” 10-year bond briefly hit 1.398%, its first time
below 1.4%. Moody’s downgraded the outlook for Germany, The
Netherlands and Luxembourg from stable to negative. Inspectors
are in Greece this week to determine if they have made enough
progress to receive bailout funds as Greece has fallen behind
targets agreed upon. Spain issued 3mo and 6mo bills above
their target, but the Spanish 10-yr yielding about 7.57% is
still cause for concern. In this country, the 2-yr auction
results were somewhat benign, and the FHFA House Price Index
rose .8%. By the end of the day MBS prices were marked higher
by .125 and the 10-yr closed at 1.40%.
This
morning we learned (from the MBA) that last week’s apps didn’t
do much, volume-wise. The overall number was +.9%, with refi’s
+2% and purchases dropping 3%. Refi’s are 81% of all
applications – much of it at large aggregator banks. Ahead
we’ll have New Home Sales and a $35 billion 5-yr T-note
auction; ahead of that our 10-yr is at 1.43% and MBS
prices a shade worse than Tuesday’s close.
RETIRE WHERE? Here are some of your choices, part 3 of 5:
You can retire to New York City where...
1. You say "the city" and expect everyone to know you mean
Manhattan.
2. You can get into a four-hour argument about how to get
from Columbus Circle to Battery Park, but can't find Wisconsin
on a map.
3. You think Central Park is "nature."
4. You believe that being able to swear at people in their
own language makes you multi-lingual.
5. You've worn out a car horn. (If you have a car.)
6. You think eye contact is an act of aggression.
If
you're interested, visit my twice-a-month blog at the STRATMOR
Group web site located at www.stratmorgroup.com.
The current blog discusses the FinCen, SAR’s, and the impact
on mortgage lenders. If you have both the time and
inclination, make a comment on what I have written, or on
other comments so that folks can learn what's going on out
there from the other readers.
