I save items all the time, hoping for a place to put them. I’ve had this very short video for a long time, and have never found a place for it, so I’ve given up and decided to plop it right here. So for all you animal lovers out there, this is not to be missed: http://biggeekdad.com/2012/07/polar-bears-playing/.

Uh oh... Even though its stock is up 48% over the last year, First Horizon National Corp. bucked the positive bank earnings trend this quarter and reported third-quarter earnings slid 29% as the bank holding company recorded a double-digit fall in revenue, while its provision for loans gone bad rose. First Horizon is the parent of First Tennessee Bank (remember Sunbelt Savings?), and analysts attributed much of the loss to the bank setting aside money as loan-loss provisions rose sharply. The bank again reported its loan-loss provisions had climbed, posting $40 million in provisions for the third quarter, versus $32 million a year earlier and $15 million in the second quarter. But it still made money: for the quarter, First Horizon reported a profit of $25.8 million, or 10 cents a share, compared with $36.1 million, or 14 cents a share, a year earlier. First Horizon noted that recently issued regulatory guidelines on consumer loans had a negative impact of seven cents on per-share earnings.

Yes, banks and mortgage companies everywhere are “girding their loins” for increased compliance, regulatory, and counterparty measuring costs. And along with those costs go improved processes for managing risk. Andrew Liput from Secure Settlements writes, "Any risk management process for closing professionals that will protect banks and consumers from harm must, in my opinion, have three key elements. The first is a comprehensive risk evaluation process that involves vetting and also ongoing monitoring of risk. The second is that it applies to everyone who can disburse funds as well as those whom may not handle funds but who can appear at a closing to validate documents and monitor the transaction, thereby verify the participants at the closing table and the absence of fraud at closing.  This includes not only title agents, but attorneys, notaries, and anyone else who can and does act as a closer. For example there are more than a dozen attorney only closing states. In southern New Jersey realtors can close loans, and in some states lenders allow mortgage loan originators to attend closings and notarize documents for their own borrower clients.”

Mr. Liput continues, “Lastly the process must involve sharing information so that individual bad actors cannot hide. We have an example of a lender that experienced a defalcation in June 2012 where a seller initially contracted a title report from an ORTIC agent, then cancelled the insurance application. They then conspired with a former agent who had been approved with another insurer, used their logo and paper to create a fake report which falsely omitted liens.  The loan closed with no insurance, no CPL, no valid liens and the entire proceeds stolen. The buyers are not even in title.  I am unaware of any title insurer risk management process that would have stopped this, but SSI's process would have done so.  This is why the process must be independent, cover all possible closing professionals, and involve sharing of risk data."

Yes, handling money (and other things) leads many people into temptation. But money is an unavoidable item in today’s society. Randy Neugebauer, a representative from Texas, recently wrote an article about the payroll costs at the CFPB titled “A $447 Million Consumer Alert.” The number of employees has gone up, but the message is still true. “The Consumer Financial Protection Bureau pays 60% of its 958 employees more than $100,000. But Congress can't really tell how else the agency's money is spent.” Rep. Neugebauer asks the question, “Should an unelected Washington bureaucrat be given tremendous power to lead a new federal agency, set its budget and spend more than $550 million with no oversight or disapproval. Despite the bureau's broad powers, it is not subject to any of the traditional oversight powers of Congress, particularly the ‘power of the purse,’ which is the cornerstone of the appropriations process. The CFPB, which can draw more than $550 million annually from the U.S. Federal Reserve, has vast power in determining its budget. Once the director has decided that a money draw is ‘necessary,’ there is nobody with authority to prevent these funds from being paid out. Not congressional appropriators. Not the Fed. Not even the president's Office of Management and Budget. My House Subcommittee on Oversight and Investigations has tried unsuccessfully to gain greater visibility into the bureau's budgetary planning process. I have repeatedly asked to review the bureau's statutorily required financial operating plans and forecasts. These requests were denied. Where are the transparency and accountability measures that Mr. Cordray promised the American people? Congress is unable to carry out its constitutional oversight responsibilities if we can't analyze budget plans until after the money is spent.”

Rep. Neugebauer goes on. “Another alarming issue is the salary rate of Consumer Financial Protection Bureau employees. Pursuant to the Dodd-Frank Act, the bureau's director may set and adjust employee pay to be comparable to the compensation and benefits provided by the Fed. This means the bureau's employees are paid outside of the traditional government scale.
A review of the bureau's salaries as of Aug. 28, 2012, reveals that approximately 60% of its 958 employees make more than $100,000 a year. Five percent of its employees are out-earning U.S. cabinet secretaries by raking in $200,000 or more annually. The director's secretary alone is paid $165,139 a year.”

But in other areas the CFPB seems to be very transparent. About three weeks ago, as this commentary mentioned then, it established various committees and advisory boards: http://www.cognops.com/cfpb-annunces-appointments-to-consumer-advisory-board-community-bank-advisory-council-credit-union-advisory-council-and-academic-research-council/.

Meanwhile, the bank M&A, agency, and investor news just keeps coming out. Here are some relatively recent updates to give you a sense of the trends.

In Pennsylvania Penns Woods Bancorp announced it was buying Luzerne Bank. But yesterday we had a couple bank closures. First East Side Savings Bank, Tamarac, Florida, didn’t come in first and was closed through the usual mechanisms of the OCC and the FDIC, with Stearns Bank National Association, St. Cloud, Minnesota, assuming all of the deposits. And Excel Bank, Sedalia, Missouri, didn’t excel and was closed. Simmons First National Bank of Pine Bluff, Arkansas, will assume all of the deposits of Excel Bank.

The Fannie Mae trading desk has sent out suggestions on managing the whole loan price change transition in the next few months. “As a reminder, fee increases were announced by Fannie Mae's regulator, the Federal Housing Finance Agency (FHFA), on Aug. 31. Given the potential for increased whole loan commitment activity prior to the Nov. 1, 2012 effective date of the price changes, we want to remind our lenders of whole loan best practices we expect to be followed: Any whole loan commitments taken down through eCommitting, eCommitONE, or with the Capital Markets Sales Desk should be done with the intent to deliver loans into the agreed-upon transactions. Forward whole loan commitments should not be used as a hedge to later pair out of and deliver loans to another investor or into an MBS security. Loans delivered against whole loan commitments should reflect a representative sample of the lender's typical loan profile purchased by Fannie Mae in aggregate. The Sales Desk regularly monitors lenders' commitment, pair-off, over-delivery, and extension activity and expects consistent performance of the same relative to any transactions leading up to and after the implementation of the price changes. Fannie Mae will address activities that may include any commitment, pair-off, over-delivery, and extension transaction inconsistencies directly with the lender, and reserves the right to any remedies as outlined in prior Announcements, the Selling Guide, or other agreements between the lender and Fannie Mae.”

US Bank is requiring that evidence of payment be submitted with all loan files other than just the collection of the premium on the HUD-1.  A copy of the check sent to the mortgage insurance company, a printout from the mortgage insurance company confirming payment, or an actual receipt all suffice.  Correspondents are also reminded that it is their responsibility to transfer the MI to US Bank and to comply with the transfer protocol of their respective providers.

The appraisal ordering fee increases, which US Bank had previously announced would go into effect on October 7th, are now set to take effect on November 4th.  Clients are reminded that appraisal fee increases are not considered to be changed circumstances, and those cheeky enough to try and correct these fees will not succeed.

Following the exhaustion of USDA/Rural Housing funding, US Bank has announced that it will not purchase any USDA/GRH purchase or refinance loans with Conditional Commitments that are “subject to funds availability” until the Loan Note Guarantee can be provided.

Fifth Third has revised guidance on the method used to assess real estate taxes for new construction and newly built properties.  If these types of properties have not been fully assessed, the real estate taxes must be estimated by using the value of the complete purchase price or appraised value rather than the current assessment based on the lot value.  This tax amount should be used to calculate debt ratios and escrows and must be documented in the loan file.

For FHA loans on properties located in Texas or Missouri, Fifth Third is requiring a minimum FICO score of 680.   

(And oldie but a goodie. And given what rates have done lately…)

A mortgage broker dies suddenly.   He immediately goes to visit St Peter who is sitting in front of the pearly gates.
St Peter tells the broker: "Well, you are a unique case.  You haven't been good enough to go to heaven but you haven't been bad enough to go to hell.  So, just for you, we are going to try something different.  We have decided to let you pick.   Where would you like to spend eternity, Heaven or Hell?"
Now the broker, being the typical mortgage broker, knows he should just instantly pick Heaven but the thought of being able to see Hell was too much.  The broker asked St Peter; "Well, I know I should pick Heaven but can I see both Heaven and Hell before I answer that question."
St Peter, slightly annoyed, agreed with the broker's requests.
Immediately, the broker is in Heaven. It is exactly like the stories describe.  There are white clouds, golden streets, angels with harps.....its storybook Heaven.
Next, the broker is in Hell.  It is nothing like the stories.  It is a large "man cave".  In the cave is a large wall of big screen TV's with every sports event ever recorded.  There are recliners all over the cave and Hooters girls bringing everyone beer and wings.  It's amazing!
The broker is then returned to St Peter.  St Peter again asks: "Where would you like to spend eternity, Heaven or Hell?"
Now, the broker being a typical mortgage broker asks St Peter "Can I think about it and tell you tomorrow?"  St Peter, again annoyed, agrees.
The next day, St Peter asks the broker to choose.  The broker explains; "Well, I know I should pick Heaven.  I've lived my entire life thinking about going to Heaven.  But honestly, when I saw Hell, I just believe I will fit into that environment better.  I need to pick Hell."
With that the broker is immediately in Hell.....but this time it looks different.  It's still a cave but now the broker is chained to the wall.  There are cracks in the floor and walls, each with flames heating the cave to a literal inferno.  Across the room is an ice cold glass of water....just barely outside the brokers reach...never to be obtained.
The broker looks up and yells "Hey St Peter, what happened to the TV's and the Hooter girls?"
And St Peter yells down "You should have locked yesterday!"


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 looming fiscal cliff brought on by Washington DC. 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.

Rob

(Check out http://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx or www.TheBasisPoint.com/category/daily-basis. For archived commentaries, go to www.robchrisman.com. Copyright 2012 Chrisman LLC.  All rights reserved. Occasional paid notices do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)