Here's one case that the mortgage industry, is watching: UBS
is striving to block a lawsuit by the Federal Housing
Finance Agency (conservator of Freddie & Fannie)
over claims of losses on $6.4 billion in mortgage bonds sold
to Fannie Mae and Freddie Mac. The case hinges on whether the
2008 law establishing the FHFA also gave the government more
time to file claims against lenders. Here are more details: http://www.bloomberg.com/news/2012-11-26/ubs-leads-wall-street-bid-to-halt-fhfa-mortgage-bond-suit.html.
Yesterday’s
CFPB comments inspired some interesting notes. "I'd
like to know when the CFPB is going to turns its gaze to the insurance
business. The catch word lately is "disparate"
and I believe the insurance industry, particularly medical
insurance is totally disparate. If you work for the
government, or a large corporation, you have employer provided
insurance coverage, either paid by the employer totally or
partially. If you work for a small company, or are
self-employed, you must find individual insurance coverage.
The difference in identical coverage is HUGE! Employer-based
coverage is 1/3 the cost of individual provided coverage.
That is disparate. If you leave your employer, then your
insurance is canceled. If you transfer to COBRA and keep the
coverage, your premium will increase 3 times, minimum, for the
exact same coverage you had. That is disparate. Someone
should point this out to the CFPB. There are areas in
Consumerville that are far worse than mortgage lending when
it comes to disparate transactions."
Mike
L. from California writes, "Maybe the question we SHOULD be
asking all these lawyers writing the new regs is if they would
be happy if they were all required to charge the same hourly
rate, regardless of the type of law they practice or how long
they’ve been a lawyer? It seems fair to me to apply the same
rules to the Regulators as to the Regulated."
Speaking
of things to think about, the Fed has identified four key
things every bank should have in order to have an effective
risk management program. (And mortgage companies may-as-well
have them also.) The first component identified is to have
active board and senior management oversight. They should
question where revenues are coming from, expenses are going,
and why things change from period to period. Determine the
biggest risks in the bank; generate reports to measure,
monitor and manage them; and raise awareness and education to
help get more smart people around the organization to help.
Another
area regulators focus on is whether or not the bank has
adequate policies, procedures and limits. Our parents told us
that too much of any one thing can be a bad thing, and
banks and mortgage companies are no different. All your loans
coming from FHA streamlines? All your overhead in payroll? The
need for diversification is one key lesson from the credit
crisis, and policies, procedures and limits exist for a reason
and trouble can appear quickly and unexpectedly when they are
not followed. When exceptions appear, ask why, focus on the
primary reasons driving the exceptions and determine an
appropriate course of action.
A
third area of focus is on whether the bank has an adequate
risk-measurement, monitoring and management information
systems. You can’t improve what you can’t measure!
Technology continues to change and more than ever, regulators
now expect to see board and management reports with a decent
amount of useful detail. You must be able to monitor
concentrations, understand funding sources and have some way
to perform forward-looking analyses.
Finally,
Pacific Coast Bankers Bank notes to make sure the bank (or
mortgage company) has comprehensive internal controls. Here,
regulators will test to see how well the internal controls are
keeping pace with changes in its risk profile and growth in
relation to the external risk landscape. Challenging budgetary
assumptions as industry conditions change, closely reviewing
examination and audit reports and understanding how and where
issues may arise in general as a result of industry changes
are good places to start. All internal control functions
including internal audit, risk management and compliance
should be reviewed on a regular and ongoing basis to stay on
top of areas that may need improvement.
Things
are actually relatively quiet out there. Sure, the commentary
could talk about FHA problems, lawsuits, interest rates, and
so on, but we’re a behind on investor, agency, investor,
and MI news. So here’s a chunk to give you an idea for
trends out there.
Freddie
updated
its FEMA assistance eligibility requirements
for borrowers whose personal property or workplace is in an
area affected by a natural disaster. The revisions expand
seasoning requirements for documentation and property
valuation, require servicers and law firms to temporarily
suspend foreclosure sales and evictions, expedite the release
of insurance funds to affected borrowers, allow short-term
forbearance for a period of up to three months without a
written agreement, and permit servicers to extend short-term
forbearance based on verbal agreements. The forbearance
requirements for HAMP and Standard Modification Trial Period
Plans have also been updated.
Hurricane Sandy has influenced gfee activity as well: to make
things a bit easier for borrowers, Freddie is delaying the
gfee increase originally scheduled for December 1st for
mortgages sold through the Guarantor and MultiLender Swap
programs. In order to be eligible, properties must be located
in designated disaster areas and have settlement dates no
later than March 31, 2013.
As another part of the FHFA’s Servicing Alignment Initiative,
Freddie’s Deed-in-Lieu initiative has been updated to improve
the options available to borrowers facing foreclosure. For
servicers, that means increased incentive ($1000, up from the
previous $275) and expanded authority to approve
Deeds-in-Lieu. The guideline changes also require servicers
to conduct an interior inspection no more than two days before
the Deed-in-Lieu is executed and have their performance
measured against their state’s Freddie foreclosure timeline.
The Borrower Response Package, eligible hardship verification,
and borrower contribution requirements for borrowers with
FICOs of less than 620 who are delinquent 90 days or more have
been removed. In certain cases where the subject property is
the borrower’s primary residence and they aren’t required to
make a financial contribution towards the debt, relocation
assistance of up to $3,000 has been made available.
In compliance with Washington state law, Wells Fargo
correspondent is permitting sellers to submit a title company
Trust Certification in place of an Attorney’s Opinion letter
and copies of trust documents for transactions that involve
living inter vivos trusts.
Wells has updated its non-conforming fixed-rate and ARM price
adjusters, which will apply to all Best Effort registration
and Best Effort locks on and after November 19th. The changes
don’t affect other non-conforming adjusters.
The document formerly known as the Tax Information Sheet (Form
16) has been incorporated into the Wells Loan Submission
Summary; as such, sellers will no longer need to fill out a
separate Form 16.
Citi has identified Verbal Verifications of Employment
to be one of the most common sources of pre-purchase suspense
items and post-purchase defects. As such, clients are
reminded that the VVOE must be carried out no more than 10
days before closing for wage earners and that verification
sources, if necessary, should be updated as soon as possible
to make sure that they’re accurate.
For properties located in counties designated as having been
impacted by Hurricane Sandy, Flagstar is requiring
that same servicer HARP loans insured by MGIC, Radian, or RMIC
be re-inspected. This includes properties in Orange, Putnam,
Sullivan, and Ulster Counties in New York, the four of which
were recently added to Flagstar’s list of disaster-affected
areas.
Flagstar Jumbo loans that are currently being processed are
also subject to new hurricane-related guidance. All
properties with an appraisal effective date of October 26,
2012 or before will require an internal and external
inspection that includes photographs, a map, and a narrative
description of any damage inflicted, as well as commentary on
the condition of neighboring properties as it pertains to the
subject property’s marketability. Those properties with an
appraisal effective date after October 26th won’t require a
full re-inspection, but an appraiser must note any damage,
necessary repairs, and the general condition of the
neighborhood.
Several changes to the Flagstar Jumbo program went into effect
with loans submitted this last week, including a requirement
that program refinances must have the appraisal included at
the time of submission. For properties valued at $1 million
and higher, appraisers are required to have a Certified
General License, while properties valued at less can be
appraised by either a Certified Residential or Certified
General appraiser. Brokers should consult the list of
approved AMCs in the Flagstar Sellers Guide, while
correspondents should choose between PCV, Murcor, StreetLinks,
and iMortgage for their Jumbo appraisals.
Everbank has revised its policy for pricing re-locks
that are less than 60 days expired. In cases where the
current market is worse than on the original lock effective
date, worst case pricing applies for a one-time re-lock, while
loans are eligible to re-lock for 25bps for a maximum of 30
days if the current market conditions have improved. Clients
are reminded that loans must be “Approved with Conditions”
status or beyond in order to re-lock and that they are allowed
one re-lock at a maximum of 30 days. Extension requirements
remain unchanged.
Yesterday was another quiet day in the markets, and so far
today is shaping up to be the same. Much of it comes
down to, as it always does, supply and demand: on the supply
side, mortgage banker selling was below $2.0 billion, and on
the demand side, the Fed's daily average appetite is over $3
billion. Those folks on Wall Street who think about these
things expect the Fed to buy through QE3, $500 billion in MBS
outright with another $250 to $300 billion through paydowns
received from its Agency MBS and debenture holdings while
organic net issuance is predicted to be negative to modestly
positive. Sounds like paradise for LO’s and mortgage
companies for most of 2013!
Oh,
but wait, we still have the fiscal cliff, once again
demonstrating why the public’s opinion of Congress is so low,
and headlines from Europe. But overnight we saw that Euro-zone
finance ministers and the International Monetary Fund have
broken deadlock over how to reduce Greece's long-term debt to
a level that the country can pay it back. Major creditors
agreed to a long list of measures that could reduce Greek debt
to 124% of gross domestic product by 2020.
Turning
to rates, yesterday the U.S. 10-yr improved by .250 in price
and closed at 1.67%, and MBS prices were also better by .250.
How much of that made it onto rate sheets remains to be seen,
given higher overhead costs and setting aside reserves for
future liabilities.
Today
we’ve had the volatile Durable Goods number (October). It was
expected at -.1% from +9.8% last month but came in at
unchanged with a revision to last month to +9.2%. Later we
have the S&P/Case-Shiller Home Price Index (expected
higher, with its two month lag), Consumer Confidence (also
expected higher), and the FHFA's House Price Index (also
expected higher). We also have a $35 billion 2-yr note auction
today. In the early going the 10-yr is unchanged at 1.67%
and MBS prices are as well.
Let’s go to the way back machine for this TV clip. “Well you
see, Norm, it's like this…A herd of buffalo can only move as
fast as the slowest buffalo. And when the herd is hunted, it
is the slowest and weakest ones at the back that are killed
first. This natural selection is good for the herd as a whole,
because the general speed and health of the whole group keeps
improving by the regular killing of the weakest members. In
much the same way, the human brain can only operate as fast as
the slowest brain cells. Now, as we know, excessive intake of
alcohol kills brain cells. But naturally, it attacks the
slowest and weakest brain cells first. In this way, regular
consumption of beer eliminates the weaker brain cells, making
the brain a faster and more efficient machine. And that, Norm,
is why you always feel smarter after a few beers.”
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 some of the considerations facing
the FHFA regarding Fannie and Freddie. 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.
