I
have been contacted by a metropolitan bank, wishing to
remain confidential, looking for a mortgage originator with
the ability to do private label loan originations, and
preferably servicing too, on its behalf. The anticipated
volume is $150-200 million per year, and very high standards
of policies and procedures are expected. Leads are 100% retail
and generated through bank branches and banking
relationships. If you are the CEO of a company who is
interested in offering these services, please email me at rchrisman@robchrisman.com.
(If you know of a company, please have the CEO e-mail me.)
On
the job front, American Capital Corporation is searching
for Sales Managers and LO's in California, Oregon, Colorado,
Washington and Hawaii. They are also looking for
Underwriters in Northern and Southern California. ACC has
been around since 1994 and is a well-capitalized privately
held mortgage banker doing over $1 billion annually, offering
a "full product mix." The company already does both retail and
TPO originations (wholesale is the ACBN channel) in
California, New Mexico, Colorado, Hawaii and Oregon, and will
be soon expanding into Idaho, Tennessee, Utah, and Montana.
The company has some other good bells & whistles: e-mail
Allen Cravello at acravello@amcapmortgage.com
for more information or to send a resume.
Why
are investors snapping up bonds backed by subprime
mortgages?
After all, not that credit rating agency’ moves carry the same
weight they used to, but S&P downgraded 187 AAA jumbo RMBS
classes, noting higher re-defaults on previously cured loans
and longer timelines required to liquidate nonperforming
mortgages. These are pre-crisis jumbo residential
mortgage-backed securities previously rated AAA. "The
downgrades were primarily driven by increased losses due to an
increase in our default and loss multiples at higher rating
levels," S&P said, and found higher re-defaults on
previously cured loans and longer timelines required to
liquidate nonperforming mortgages. Some of those subprime
securities are well priced!
But
property values are not falling precipitously, so the
collateral is safer.
In fact, CoreLogic reported another strong month-over-month
U.S. home price appreciation of over 16% (non-seasonally
adjusted annualized rate) for July 2012. And of course the
Case-Shiller Index, with its two-month lag, is showing
improvement. CoreLogic points out that “Non-distressed home
prices grew at a pace of 22.9% annualized. The YOY price
growth through July was 3.8%, the biggest increase since
August 2006. Year to date, CoreLogic shows home prices are up
8.1% through July, or 14.3% on an annualized basis.”
Realtors
and analysts know that, especially in the Western U.S., two
major factors driving the strength in home price indices
have been the drop in inventories and the decline in the share
of distressed sales share relative to expectations. Moreover,
the increased use of short sales over REO sales as the form
distressed sale is providing further support to home prices.
Have prices bottomed? Perhaps, but enough smart folks think
they have, and this has helped alleviate fears of further
“collateral damage” in subprime securities, and is thus
helping demand.
How
about
home ownership in general – is it now in “stronger hands”?
The real homeownership rate, defined as the percentage of
households who own a home and are not 90 days or more
delinquent on their mortgage, has fallen to 62.1%, the lowest
level in nearly 50 years. (The Census Bureau’s 65.5%
homeownership rate overstates the real level of homeownership
in the country since it counts all 3.8 million homeowners who
are 90-plus days delinquent on their mortgage as homeowners.)
Historically, the spread between the published and real
homeownership rates has been slightly below 1%, even in a
strong economic environment there is always some level of
delinquency. But as we all know, the spread has widened from
1% to 3% due to the economic downturn, and understaffing at
the banks who cannot deal with the huge inventory of
delinquent mortgages and the complications of loan
modification or foreclosure with so many parties involved. We
also have lenders treading very cautiously, fearing fees,
sanctions and even jail time (in Nevada) for not properly
documenting the foreclosure process, and still some confusion
from dealing with many Federal government attempts to
intervene in the process like HARP and HAMP.
But
a recent survey of 20,000 consumers conducted by John Burns
Real Estate Consulting, and many surveys by others, confirms
that the American dream of homeownership is still strong. And,
believe it or not, time goes fast, so in states where the
foreclosure process has moved more smoothly than others (such
as Arizona and Texas), foreclosed homeowners are returning as
homebuyers after the three-year waiting period required by
most mortgage programs.
Remember
that the application of Basel to banks will significantly
increase the risk weighting for mortgages designed for first
time homebuyers – that won’t help. Declining home
ownership can constrain economic growth and mortgage lending,
including declines in some home equity portfolios. On the
positive side, it should create long-term growth opportunities
in apartment, credit card, and auto lending – but not many of
those folks read this commentary.
What
about young folks - where are graduates taking their
underwater basket-weaving degrees? Though they’re in
deeper debt than ever before, new college graduates still need
to live somewhere. Conventional wisdom holds that these
bright young minds flock to centers of influence like New
York, Boston, and San Francisco, all known for being “cool”
cities with high concentrations of “smart” people. Census data
from 2000-2010 suggests otherwise, however: Las Vegas, of all
places, recorded growth of 122,304 recent graduates, which
represents a staggering 78.4% increase. Rounding out the top
five metropolitan areas playing host to new graduates were
Riverside-San Bernardino, CA; Raleigh-Durham, NC; Austin, TX;
and Charlotte, NC—hardly perceived to be hotbeds of commerce
and culture. In contrast, New York ranked 38th in terms of
new graduate growth, while San Francisco ranked 48th, just
above Detroit.
It’s no secret that it can be cripplingly expensive to live in
one of US’s major urban centers, especially for recent
graduates in a weakened economy. This demographic is more
likely to settle down in places they can actually afford to
live, and companies looking for skilled labor are realizing
that their recruiting options are no longer limited to the
primary coastal cities and Chicago. As an added bonus, it’s
cheaper for companies to operate in second- or third-tier
cities with less expensive commercial real estate. As recent
graduates’ and companies’ presence in these cities grows, they
tend to develop culturally, making them more enticing places
to live and further fuelling growth.
From
a regional perspective, the Sun Belt cities have experienced
the greatest development, with metropolitan areas like San
Antonio, Orlando, Nashville, and Phoenix all recording recent
grad-growth of over 40%. Rust Belt cities like Cleveland,
Buffalo, and Detroit, despite the attraction of low living
costs, all recorded growth of 20% and under, nearly 10% below
the national average. New graduates, it would appear, are as
averse to northern winters as the rest of the aging
population.
How
about
some recent Fannie Mae and Fannie-related updates?
Fannie
Mae announced a week or so ago that 22 of its servicers had
produced results in its Servicer Total Achievement and Rewards
(STAR) Program for the first half of 2012 that put them at or
above the median levels for others in their peer group. STAR
was created in 2011 to establish servicing standards and
recognize Fannie Mae servicers in their overall performance,
customer service, and foreclosure prevention efforts. The
program measures servicers across key operational and
performance areas relative to their peers and acknowledges
their achievement through star designations. Servicers are
divided into three peer group based on the size of their
servicing portfolio and their performance is measured against
other servicers in their peer group. Nineteen servicers
achieved Three Star status for their performance in 2011. In
announcing the results Fannie Mae made special mention of Fifth
Third Bank's performance which came closest of the
servicers enrolled in the program to reaching the fourth star
for its 2011 performance.
Wendy Barnett with DataQuick reports that, “Fannie Mae
has no bulletin to be found, but has been notifying clients in
person and by phone that Custom DU (CDU) will no longer accept
new submissions after September 30, 2012 and resubmissions
after December 31, 2012. This was a tool that used the DU
engine to also provide decisioning on non-Fannie Mae loans.
DataQuick has been providing a solution for several lenders,
with our Mindbox - Art Enterprise component framework for
Pre-Qualification, Product, Pricing and Automated
Underwriting. Your readers can contact me at wbarnett@dataquick.com.
Fannie Mae plans to provide propriety feedback on appraisals
submitted to the Uniform Collateral Data Portal that
will address the quality of the data within the appraisal as
per Fannie policy and delivery requirements. The feedback
will be available in the form of opt-in monthly reports
beginning in October 2012 and via the UCDP as of January 2013.
Fannie has revised its policies on regarding the transfer of document
custody such that both the current and new document
custodians must provide at least 30 days’ written notice in
cases where the servicer remains the same. Fitch, Inc. has
been removed from the list of financial rating firms that may
be used to satisfy the document custodian’s eligibility
requirements; clients should use either IDC Financial
Publishing or Kroll, the latter of which was previously known
as LACE.
Fannie Mae has relaxed its guidelines on custodial accounts
such that servicers are no longer required to provide the GSE
with notification of a depository’s ineligible status, ask for
approval to hold custodial funds in a depository that was
previously ineligible, or request the implementation of a
different remedy for a depository that is currently
ineligible. Under the previous policy, servicers were
permitted to commingle T&I escrow funds with all
remittance types in the same custodial accounts, but the
updated policy allows servicers to maintain multiple T&I
custodial accounts for the purposes of depositing hazard
insurance loss drafts, partial payments, and/or unapplied
funds. Servicers should identify whether the custodial
account is a replacement for an existing account using the
P&I and T&I Letter of Authorization forms (Fannie Form
1013 and 1014), which have been updated accordingly and can be
found on www.efanniemae.com.
Fannie
is
set to release DU Version 9.0 over the weekend of October
20th.
As there is a mix of changes that can be viewed as a negative
or positive, but overall they say approvals will be consistent
with Version 8.3. Some of the highlights are reportedly
“Limited Review for Condominiums is going to be maxed at 80%
(currently at 90%), Retirement of Expanded Approvals (with the
exception of DU Refi Plus), Maximum LTV/CLTV for ARM Purchases
and Rate/Term will be reduced for 97% to 90%, All other ARM
programs will receive a 10% reduction in the maximum LTV/CLTV,
Two-Unit Purchases INCREASED from 80 to 85%LTV, and Self
Employed Borrowers will be required to produce TWO years of
1040’s (currently allows for 1 year). Put another way, Fannie
Mae tightened some underwriting standards based on performance
data. In addition, the agency will end its flexible
FannieNeighbors program supporting underserved areas.
Wednesday
was a ho-hum day, which is fine. Investors are keenly
interested in the fact that residential MBS trading volumes
are sliding lower, as echoed by the MBA application figures.
Perhaps refi's are indeed slowing down, and not being replaced
with purchases? U.S. markets seemed to fret more about today's
ECB monetary policy decision. The U.S. 10-yr closed at 1.60%.
It's a whole new ballgame today, however. We've had the ECB
announcement, and the ADP numbers (+201k – stronger than
expected) which are usually of questionable validity for
tomorrow's official payroll numbers. (NFP is projected at
+125k with the unemployment rate unchanged at 8.3%.) We've
also had Initial Claims (377k down to 365k, lower than
expected), while 10AM EST offers up Non-Manufacturing ISM for
August, projected little changed at 52.5 versus 52.6, and the
Treasury's announcement at 11AM EST of next week's auctions of
3’s, 10’s, and 30’s. In the early going rates are higher
with the 10-yr at 1.65% and MBS prices worse .125-.250.
The following list of phrases and their definitions might help
you understand the mysterious languages of science and
medicine. These special phrases are also applicable to anyone
working on a Ph.D. dissertation or academic paper anywhere.
(Part 1 of 3)
"It has long been known" I didn't look up the original
reference.
"A definite trend is evident" These data are practically
meaningless.
"While it has not been possible to provide definite answers to
the questions" An unsuccessful experiment, but I still hope
to get it published.
"Three of the samples were chosen for detailed study" The
other results didn't make any sense.
"Typical results are shown" This is the prettiest graph.
"These results will be in a subsequent report" I might get
around to this sometime, if pushed/funded.
"In my experience" once.
"In case after case" twice.
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 new CFPB Rule combining TILA
& RESPA disclosures. 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.
