Totaling
through May, California (133,000), Florida (92,000), Michigan
(60,000), Texas (58,000), and Georgia (57,000) accounted for nearly
half (400,000) of the completed foreclosures in the
entire country during the last 12 months. The foreclosures in
May brought the 12 month total to 819,000 foreclosures which
is an average of 2,440 each day. Since the financial crisis
began in September 2008 there have been approximately 3.5
million completed foreclosures across the nation and, as of
the end of May, another 1.4 million homes were in the national
foreclosure inventory, down from 1.5 million in May 2011, but
still 3.4 percent of all homes with a mortgage. Though the
national foreclosure inventory levels remain steady, there
have been dramatic shifts at the state level with foreclosure
inventories in most states are declining, but foreclosure
inventory is still rising in many judicial states. The
five states with the most completed foreclosures are also the
top states in terms of their foreclosure inventory. Four of
the five states, Nevada being the exception, use primarily a
judicial foreclosure process which has been blamed for much of
the backlog of loans that are severely delinquent but not yet
foreclosed.
"Rob,
here we are in the mortgage business. Congress is gunning for
us, the CFPB is gunning for us, the public is gunning for us,
and the press is gunning for us. Everyone is upset about all
the compliance, rules, and regulations that have been put in
place. Yet, volumes are through the roof, margins are high,
and many companies are 'going gangbusters.' How am I supposed
to complain about the cost of doing business when this is
happening?" That is a good question. It seems like it is a
dirty little secret that mortgage companies, in general as I
am sure that there are exceptions, are very profitable right
now. Remember, however, that a portion of this money is a) due
to less competition, b) servicing value fluctuations, and c)
companies increasing margins to reserve against future
liabilities, litigation, and buybacks. But yes, from a
money perspective it is a good time to be a mortgage
origination company, and the government & regulators
continue to install hurdles against new companies.
Where are the loans coming from? Many borrowers can’t take
advantage of these incredibly low mortgage rates due to
negative equity, strict underwriting, and originator backlogs.
The only thing that can really extend refi activity in a low
rate environment is a loosening of underwriting or
documentation or appraisal standards to bring more borrowers
into the market, something that isn’t likely to happen anytime
soon. Twice this year the market did see a surge in
refinancing, with the expanded the Home Affordable Refinance
Program for borrowers who owe more on their mortgages than
their homes are worth and the FHA changing the rules on its
streamline refi program for borrowers who already have FHA
loans, dropping underwriting almost entirely. Some LO’s
tell me that most of the activity in recent months are from
the same borrowers who refinanced a year or so ago
refinancing again. While programs like HARP and FHA’s
Streamlined Refi can provide a temporary surge in refi’s,
especially for banks, they still only account for a relatively
small share of borrowers.
Non-bank
lenders
are often confused as to whether or not they will be
subjected to CFPB scrutiny. They will be, just as several
non-banks are being audited.
The Consumer Financial Protection Bureau’s Office of Fair
Lending and Equal Opportunity released expectations for
non-banks concerning compliance with fair lending and unfair,
deceptive, or abusive acts or practices ("UDAAP") laws. The
Bureau intends to create a level playing field between banks
and non-banks, but CFPB representatives have indicated that
they understand that fair lending programs take time to
develop and that they will need to help educate executive and
senior management at non-banks concerning the importance of
fair lending laws and the risks of non-compliance. As a
result, the CFPB does not expect to find fully developed and
implemented fair lending programs in place at non-banks during
the initial examination cycle and recognizes that such
programs will evolve. Nonetheless, non-banks will be expected
to quickly develop and maintain fair lending programs that are
comparable to those at banks. Similarly, it is expected that
UDAAP programs will evolve for both banks and non-banks as the
CFPB continues to define "abusive" practices through
examinations and enforcement actions. Fair lending risk
assessments will continue to be required for banks and are
expected for non-banks. One issue that continues to garner
discussion among both banks and non-banks is the presence of
enforcement attorneys in examination meetings throughout the
examination process. The Bureau understands that both
banks and non-banks will want to have their attorneys
present if CFPB enforcement attorneys attend compliance
examination meetings. The CFPB would not object to the
presence of in-house or outside counsel for financial
institutions at these meetings so long as such attorneys are
not acting in a manner that obstructs the examination process
reports law firm BuckleySandler LLP.
When
in doubt, attend training or a conference! Seriously, the
training and conference calendar is important to know, as
are relatively recent investor/agency updates to give one a
flavor for trends in the industry.
The
Community Mortgage Lenders of America (CMLA) represents nearly
90 mid-sized community bankers and mortgage bankers from
throughout every major metropolitan region throughout the
country. The CMLA is holding its Annual General Session
and Business Meeting this Sunday, August 5. The General
Session will feature a presentation from Christopher Lombardo
– Assistant Regional Director of the CFPB’s Midwest
Region. The CMLA is determined to establish sustainable
business and regulatory strategies to support community based
lending, competition and consumer advocacy while fighting
policies that would increase concentration in the marketplace
among the nation’s largest financial institutions. To learn
more about the CMLA, please visit www.thecmla.com or contact
Kevin Cuff, Executive Director, at kmcuff@thecmla.com.
FinCen’s
August 13th is fast approaching and with it, the new
requirement for Anti-Money Laundering policies for Mortgage
Bankers and Brokers. Barbara Werth is hosting a free
webinar on Anti-Money Laundering policies on August 1st
from 1-2PM CST. There is no cost of the webinar, and
anyone interested should email Barbara at: barb@MTToday.co
so she can send you call-in information.
Fannie
is
offering its servicers free loss mitigation training under
the Know Your Options Customer CARE initiative. The training complies with the
Single Point of Contact Standards set forth by the Office of
the Comptroller of the Currency and the Consumer Finance
Protection Bureau as well as the FHFA’s Alignment Initiative.
See the Know Your Options website (http://cl.exct.net/?qsc8c0b5e6ca36be5179159d3a0e1b470b186d3fa3c091aa28ef2500a11caf0ad6)
for more information.
On
August 14th in Boise, ID, the FHA will host a realtor
training session in the local HUD Field Office. The
event will cover topics such as FHA updates, rehabilitation
loans, Energy Efficient mortgage programs, and selling
HUD-owned properties. Interested parties can register at http://www.hud.gov/emarc/index.cfm?fuseactionemar.registerEvent&eventId17&updateN.
A full-day training on FHA appraisals will be held in
Little Rock, Arkansas on August 22nd. The session will cover
appraisal protocol, updates to FHA appraisal policy, and
property eligibility and is suitable for both new and
experienced FHA appraisers. Register at http://www.hud.gov/emarc/index.cfm?fuseactionemar.registerEvent&eventId06&updateN.
On
August 23rd, the FHA will be hosting “A Day with the FHA,”
an event that will cover a number of fields relevant to those
who work with the organization. Policy updates, refinances,
and REO calculations are all on the agenda. Registration info
is available at http://www.hud.gov/emarc/index.cfm?fuseactionemar.registerEvent&eventId04&updateN.
Who says that there are no new investors? Norcom Mortgage,
one of the fastest growing non-bank lenders on the East Coast,
is launching a correspondent program. It will focus on
high quality credit unions, banks, and select mortgage
companies. Effective immediately, Vice President’s Patti White
and Susan Sheffer will be leading the correspondent team’s
expansion efforts on the East Coast. (Norcom is a FHLMC
seller/servicer and a GNMA issuer.)
Under
its “Just Miss” program, Mid America Mortgage is
offering clients the option of having MAM purchase closed
FHA-, VA-, and USDA-insured loans that aren’t able to be sold
in the traditional manner due to “just missing” investor
guidelines. To qualify for the program, loans must be
RESPA-compliant and insured with MIC, LGC, or LNG.
Turning
to merger and acquisition and closure news, West Virginia’s WesBanco
will
buy Pennsylvania’s Fidelity Bancorp for $70.8mm million
in cash and stock, or about 1.62x tangible book. New York
Private B&T, the parent company for Emigrant Savings
Bank, has reached agreement to sell 30 branches and $3.2B in
deposits to Apple Bank for Savings ($8.4B, NY) for an
undisclosed sum. This is the largest branch transaction of
2012 and the largest in the New York City area in over 10
years. KeyCorp said it will close 5% of its branches
(about 50) in an effort to reduce expenses by $150mm to
$200mm. And Bank of America continues to sell branches
in smaller “noncore” markets with populations of less than
150k people or MSAs with less than 500k people, as it works to
close 750 branches over the next few years.
To
improve performance, Iberiabank ($11.7B, LA) said it
will close 10 underperforming branches. Keefe, Bruyette
& Woods announced that Mission Bancorp, the
Bakersfield-based parent holding company for Mission Bank, has
entered an agreement with Mojave Desert Bank whereby
it will acquire the latter’s branches in Mojave, Ridgecrest,
Lancaster, and Helendale.
Osage
Bancshares announced their agreement for Osage to be acquired
for an aggregate value of $27.4 million by American Heritage
Bank through a merger transaction.
Capital
One
will pay $12 million to military customers to settle charges
from the DOJ and OCC that it improperly foreclosed on them and
overcharged for credit card and auto loans.
A
few weeks ago Stonegate Mortgage released its 2nd
Quarter results that were of note. Its revenues year-to-date
had increased 340% over 2011, servicing portfolio increased by
235%, and its correspondent channel has grown 519% over 2011.
The Indianapolis-based company was recognized last month by
Indianapolis Business Journal as the 9th fastest growing
privately held company in the city. "At Stonegate, we are
always focused on the next few years ahead and that includes
expanding into more states, increasing originations in our
wholesale and correspondent channels, expanding our retail
branch network through acquisitions, building our servicing
portfolio and brand awareness," said Jim Cutillo, CEO of
Stonegate Mortgage. In March Long Ridge Equity Partners,
a New York based private equity firm invested $25 million in
Stonegate Mortgage to support the company's continued growth
and further acquisitions.
Monday
– another summer day in the fixed-income markets. There was
little news over the weekend and nothing here in the United
States. Demand for agency mortgage-backed securities was
steady, and supply from originators dropped off a little. But
where the heck did July go? Anyway, by the end of the day the
U.S. T-note closed at 1.50% and MBS prices were better by
about .125-.375, depending on coupon.
Today,
however, we have a heckuvalot of data, along with the start of
a 2-day Fed meeting. (The Fed announcement is tomorrow, but
don’t look for a lot of change in their statement.) We’ve had
Personal Income and Consumption, unchanged and +.5%
respectively. Although pretty much on target, the numbers are
somewhat disappointing for the economy given that consumer
spending drives growth. No spending no growth. The
Employment Cost Index was on target. 9AM offers May’s
S&P/Case Shiller home price index (+0.4 vs. +0.7 last –
but there is always a two month delay in this number), 9:45AM
EST has July’s Chicago PMI (52.4 vs. 52.9 previously), and
10AM EST we’ll have July’s Consumer Confidence (less so at
61.4. vs. 62.0). Early on the 10-yr is at 1.46% and MBS
prices are again better by .125-.250.
RETIRE
WHERE? Here are some of your choices – I keep receiving them
from readers, part 7 of 7:
You can retire to the Deep South where...
1. You can rent a movie and buy bait in the same store.
2. "Y'all" is singular and "all y'all" is plural.
3. "He needed killin" is a valid defense.
4. Everyone has 2 first names: Billy Bob, Jimmy Bob, Mary
Sue, Betty Jean, Mary Beth, etc.
5. Everything is either "in yonder," "over yonder" or "out
yonder" It's important to know the difference, too.
OR
You can retire to Colorado where...
1. You carry your $3,000 mountain bike atop your $500 car.
2. You tell your husband to pick up Granola on his way home
and so he stops at the day care center.
3. A pass does not involve a football or dating.
4. The top of your head is bald, but you still have a pony
tail.
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.
