Aug. 13: Mortgage jobs; Amerisave’s $19 million CFPB fine; Ginnie & nonbank servicers; new correspondent and non-QM programs
“The Bureau found that Amerisave lured consumers by advertising misleading interest rates, locked them in with costly up-front fees, failed to honor its advertised rates, and then illegally overcharged them for affiliated “third-party” services.” And thus Amerisave finds itself $19.3 million poorer, and the Civil Penalty Fund increased by that amount.
In better news, Comerica Bank, a leading financial institution and dedicated residential warehouse lender for the last 50 years, is looking to fill a Mortgage Warehouse Relationship Manager opportunity in its Los Angeles office. It is anticipated that the successful candidate will manage an existing portfolio and have the opportunity to generate new business for the Bank. For further info, please confidentially contact Emily Davis or visit Comerica.
Also on the recruiting side, “Employee Retention” has become a major focus! Training internal talent ensures your employee’s career prospers and that you keep the competition out. Register for the 60 Day Recruiting Workshop, hosted by EMAC Recruiting Academy as they train Hiring Managers on how to implement innovative Talent Management strategies to attract and retain talent. “Join us on our next Advanced Talent Management workshop starting TODAY – Wednesday, August 13th at 3PM EST. Learn new approaches to next generation recruiting and retention best practices that are designed to attract, develop and retain talent. Instructor Jim McGrath guides Hiring Managers on how to develop an ongoing system to recruiting and retaining talent. In this workshop you learn how to develop your professional skills and techniques to motivate your team to stay engaged and take their career to the next level.”
Ocwen, or at least its accountants, can still learn a thing or two about doing business. Ocwen (“New Company” spelled backwards) filed a form NT-10Q, delaying the filing of its 10Q. The company noted that this was driven by a decision by the company’s accountants to change the way the company accounts for its HLSS funding liabilities. It is probably not a big deal, but historically HLSS had not marked its MSR (mortgage servicing rights), and Ocwen had not marked the corresponding liability to market if the valuation came in with 5% of carrying value. The new accounting convention would require a mark regardless of the difference. The current 2nd quarter numbers already reflect the new accounting rule, and the changes to prior quarters will move numbers between quarters but the changes will offset each other.
In case you missed it last week, GNMA is the latest mortgage agency to say it is becoming heavily reliant on nonbank mortgage companies to service its loans. The problem is that nonbanks carry lower capital levels than banks and may not be able to survive in stressful times. The change is due to new bank regulations that increase capital requirements, so banks are selling servicing rights and cutting back sharply in this area. At this point, GNMA reports nonbanks service 35% of their loans in June vs. 22% 3 years ago.
In other agency news, Fannie and Freddie, or at least their investors, received some negative comments in the Wall Street Journal. Earnings in Q2 would barely have covered 10% dividends paid on the Treasury’s preferred stock balances, and the Q2 income levels are close to normal levels for both firms (the ’13 profits were inflated by one-time tax benefits and regulatory settlements). Therefore there is likely going to be little left over for common shareholders going forward.
FHFA released a “Request for Input” on a proposed structure for a Single Security. The link to the FHFA website is here.
As if the first time homebuyer didn’t have enough issues with student loan debt and tight credit, they face another challenge: limited inventory at the low end of the price range. The number of US homes for sale in the bottom third of the market – below $198,000 – fell 17% in June compared to a year earlier, according to Redfin. The supply rose 3% in the middle market and 15% in the top third. Blame professional investors who are snapping up low-priced properties to turn into rentals. Prices are rising too, with the low end jumping 15%, the middle increasing 13% and the top end increasing 9%.
Remember in the old days when rating agencies like Moody’s would say that everything is great with securities backed by mortgages? “The proof of the effectiveness of Thornburg’s due diligence process is in the performance of its portfolio. Since the inception of its lending program four years ago, the firm has funded over $4.0 billion in mortgage loans. Over that period, Thornburg has incurred losses on three loans totaling $174,000.” Thornburg offered some great products, which did perform, one of which being a program where it lent money on assets, and the mortgage could be transferred to different properties as the borrower moved. Given the propensity of the Millennials to want to stay mobile, wouldn’t that kind of thing be great? Of course, that is assuming the 20-something has assets…
We hear a lot about student loans these days. How the “bubble” is about to burst in similar ways to the housing collapse in ‘07, how debt is carried into adulthood, how the impending doom and gloom could drag the United States into another economic downturn. Not likely, but we hear it. I’ll go on record as saying I’ve always liked contrarians regardless of the debate or argument…most of the time their reasoning is sound, and it’s just nice to play the “Don’t Pass” side of the craps table every now and then, right? As Ballard Spahr points out, The Vangaurd Group’s paper on student debt disagrees with the general arguments being given regarding the potential severity. “A new report from The Vanguard Group disagrees with those who seek to draw comparisons between the current level of student debt and the level of mortgage debt that led to the housing crisis. Titled “No bubble to burst: U.S. student debt is not housing,” the report found that student debt growth is too small to repeat the housing crisis of 2007-2009.” According to VG’s paper, student debt in 2014 represents 7% of GDP whereas mortgage debt peaked to 62% of GDP in 2007. It also found that student loan asset-backed securities in 2014 represent less than 2.5% of total mortgage-backed securities in 2007.
A story that easily fell through the cracks recently, but an important one regardless, is that the Federal Reserve Board announced a joint enforcement action with the Illinois Department of Financial and Professional Regulation against a state bank that allegedly failed to properly oversee a non-bank third-party provider of financial aid refund disbursement services. Buckley Sandler writes, “The consent order states that from May 2012 to August 2013, the bank opened over 430,000 deposit accounts in connection with the vendor’s debit card product for disbursement of financial aid to students.” Both agencies allege that the vendor misled students about the product, including: (i) omitting material information about how students could get their financial aid refund without having to open an account; (ii) omitting material information about the fees, features, and limitations of the product; (iii) omitting material information about the locations of ATMs where students could access their account without cost and the hours of availability of those ATMs; and (iv) prominently displaying the school logo, which may have erroneously implied that the school endorsed the product. In the end regulators ordered the bank to pay a total of $4.1 million in civil money penalties.
Let’s keep playing catch up on relatively recent investor changes. In the scramble to grab diminishing market share from other lenders, and knowing that the anti-risk pendulum has swung too far, the changes just don’t stop.
In an effort to make up for lost volume, many investors have reduced or eliminated credit overlays to agency guidelines. But are they pricing in the incremental risk or cost of servicing these lower credit score loans? Only time will tell. First Mortgage Corporation (Ontario, California) is one investor with nearly 40 years of experience originating and purchasing the most challenging FHA & VA loans and a proven servicing track record. Consider the top 20 FHA servicers with a weighted avg. seriously delinquent rate of 7.37% vs. FMC’s 3.12%. If you’re going to lower the credit bar, make sure the servicer of the loan is up to the challenge. Need more information about FMC’s Correspondent program, contact firstname.lastname@example.org .
NewLeaf came out with VA guidelines that have been enhanced to allow 100% LTV on Cash-Out Transactions. “The following are the updates to VA Cash-Out enhancement and a clarification for COE policy for surviving spouses: Cash-Out: LTV has increased to 100%, Minimum credit score is 640, Conforming Loan Limits, Maximum Cash-out $100,000 for all LTVs. Certificate of Eligibility: Clarification for Surviving spouse of Veteran has been made to state the COE must be in the surviving spouse’s name and social security number.
For lock desk hours, Affiliated Mortgage Company updated its website, loans can be locked until 7:45pm Central Time. Contact your area representative with any questions. And Cole Taylor is accepting rate locks on Sundays until 11:59 p.m. Eastern time. Just as loans locked on a Saturday, Sunday locks will be treated as if received on Friday.
360 Mortgage is offering an end of summer purchase pricing special. From now until Friday the 22nd of August any locked 30 year fixed FHA, VA or USDA purchase will receive a 100bps price improvement. This special is live and available immediately in our loan locking/pricing engine. Stay tuned for an improved pricing model at the end of August!
JMAC Lending, a wholesale and correspondent lender, announced it launched a non-delegated correspondent program focused on “serving lenders who currently have the resources to fund their own loans but prefer the security of having those loans underwritten by the purchasing investor before the loan closes. The lender originates closes and funds in their own name while JMAC Lending performs the underwriting, purchase review and loan purchasing activities, the statement explained.” JMAC helps create warehouse-lending relationships, and for the JMAC Direct programs, all refinancing will be referred back to the lender and no cross-selling will occur.
Angel Oak Wholesale, for one, offers Jumbo Loans Products with scores down to 500.
Lewis Ranieri’s Shellpoint Partner’s New Penn Financial LLC (did you follow that double possessive?) introduced Home Buyer Power to its wholesale clients. It is a non-QM loan product. “Home Buyer Power creates mortgage lending opportunities for customers with strong credit who fall outside the very specific criteria required for QM loans,” said Brian Simon of New Penn Financial. “These are solid buyers with strong income who may have a high debt-to-income ratio.” Buyers will need to provide full income documentation, demonstrate strong credit scores, and meet additional guidelines that indicate their ability to repay. The product features an interest-only option, and buyers with debt-to-income ratios as high as 55 percent at 80 percent loan-to-value may qualify for loans. Eligible property types include primary residences, second homes, and both warrantable and non-warrantable condos.
Turning to the markets, there still isn’t much going on. The Fed and other investors continue to buy, originators continue to sell, and life goes on as August passes. Investors seem content to have the yield on the 10-yr sitting in the low-to-mid 2.40% area (we’re at 2.46% this morning). Although the news from the Ukraine and Israel has settled down, overnight we had news that Japan and China’s economies are slowing, which in theory would help worldwide interest rates. But they haven’t done much. Today we had the MBA’s application numbers (-2.7%) and July Retail Sales (unchanged). Later we’ll have a $24 billion 10-yr T-note auction by the Treasury Department. The 10-yr is at 2.45% and agency MBS prices a shade better.
In a crowded city at a busy bus stop, a woman who was waiting for a bus was wearing a tight leather skirt. As the bus stopped and it was her turn to get on, she became aware that her skirt was too tight to allow her leg to come up to the height of the first step of the bus.
Slightly embarrassed and with a quick smile to the bus driver, she reached behind her to unzip her skirt a little, thinking that this would give her enough slack to raise her leg.
Again, she tried to make the step only to discover she still couldn’t. So, a little more embarrassed, she once again reached behind her to unzip her skirt a little more.
For the second time she attempted the step, and once again, much to her chagrin, she could not raise her leg. With a little smile to the driver, she again reached behind to unzip a little more and again was unable to make the step.
About this time, a large Texan who was standing behind her picked her up easily by the waist and placed her gently on the step of the bus.
She went ballistic and turned to the would-be Samaritan and screeched, “How dare you touch my body! I don’t even know who you are!”
The Texan smiled and drawled, “Well, ma’am, normally I would agree with you, but after you unzipped my fly three times I kinda figured we was friends.”
(Copyright 2014 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)