Aug. 6: Mortgage secondary job; more LO comp implications & the C&C complaint; CFPB updates; Obama housing speech today

Here we are on the 68th anniversary of the bombing of Hiroshima, and I received this note. “Rob, what is the difference between ‘Secondary Marketing’ and ‘Capital Markets’? I keep hearing the two terms used interchangeably. Is the Secondary guy is looking for a raise by becoming the Capital Markets guy?” I don’t know about the raise part, but the position does encompass more responsibility. As opposed to the “primary markets” which refer to working directly with borrowers, “secondary markets” refer to the selling of loans to investors or securitizing them. “Capital Markets” usually includes that function, but also includes the lock process (and lock desk), pricing, possibly underwriting and doc drawing & funding, and servicing. So in a nutshell Secondary is selling the loans, or determining whether they should be sold servicing released or retained, whereas Capital Markets includes several other areas and often finds itself working closely with several other areas of the company.


Speaking of which, First Community Mortgage, Inc. headquartered in Murfreesboro, TN is searching for a Secondary Marketing Manager. 2013 production will be roughly $1 billion in volume and the current mix of production is 60% TPO and 40% retail. The ideal candidate will be responsible for managing the lock desk department, managing pricing/lock policies and procedures, pipeline management, hedging, trading and all loan sales. Experience in trading and selling loans in the following methods is desired: direct trades to aggregators and agencies either retained or released, AOT’s, co-issue transactions, specified pools, and issuing securities with Fannie, Freddie, and Ginnie. For further information on this position and to learn more about FCM and our future growth plans, please visit and/or send a résumé to Keith Canter at


Talk of LO comp just won’t stop. While the 2011 rules on compensation limited how lenders could pay loan officers, based on the STRATMOR Compensation Survey, 73% of lenders pay LOs on a tiered basis point schedule. Bank-owned lenders are more likely to have a single compensation schedule (2/3 of banks reported a single plan) but “Independents” report a mix of plans, including 15% who report that LOs can choose among a variety of plans. (For more information about the STRATMOR Compensation Survey contact Nicole Yung at And if you aren’t tired of loan officer compensation procedures and confusion, here’s a video, with a hand-out, brought to us from Black, Mann & Graham LLP, on the whole issue:


LO comp is an issue with the recent CFPB complaint. Tim D. writes, “Here is a link to the CFPB Compensation Complaint. The potential claims and damages that can arise from violations – especially ‘knowing’ violations – of the comp rule means that people are essentially betting the company that they won’t get caught if they try to dance around the substance of what the law requires.  My guess is that the CFPB won’t have to be very proactive in finding companies that are potentially violating the law.  All it takes is one disgruntled LO or broker to make a phone call to the CFPB and it is likely that there will be plenty of them as the market tightens up.”


(When I was growing up, the term “whistle blower” wasn’t in anyone’s vocabulary. But like so many other words and terms, things become politically correct, and terms like “squealer”, “rat”, “stoolie”, and “snitch” go away, and we lose something. Anyway, here’s the CFPB’s site for tattletales:


Yes, some say that “The Machine” over at the CFPB is starting to tire of idle mode, and recently stretched its legs by filing suit against C&C and two of its executive officers for giving bonuses to loan officers who allegedly steered consumers into mortgages with higher interest rates. Buckley Sandler LLP writes, “The complaint alleges that the company and its two officers violated the Federal Reserve Board’s Loan Originator Compensation Rule by instituting a quarterly bonus program that paid more than 150 loan officers greater bonus compensation based on the terms and conditions of the loans they closed. The CFPB claims the program incentivized loan officers to steer consumers into loans with higher rates. According to the complaint, when the Loan Originator Compensation Rule took effect in April 2011, the company amended its program to eliminate any written reference to compensation based upon the terms or conditions of loans, making the program appear on its face to be a compliant compensation program.”


Continuing on with the CFPB, in July the Consumer Financial Protection Bureau (CFPB) put debt collection companies on notice through bulletins advising that all companies under Bureau jurisdiction will be held accountable for unlawful conduct in collecting a consumer’s debts. The CFPB also announced that it is now accepting debt collection complaints and is publishing action letters for consumers to consider using in corresponding with debt collectors. The official press release can be found here:


And here is a reminder of something that I am asked about often – the CFPB’s mortgage guide. On July 8, the CFPB published their Mortgage Rules Readiness Guide, which is intended to help financial institutions prepare to comply with the various mortgage-related rules the CFPB set in January 2013, some of which it continues to revise. The guide briefly describes each of the rules and provides: a readiness questionnaire, a FAQ, and a list of other resources available to companies seeking to come into compliance with the new rules. The guide can be found here:


And last week, in the Ballard Spahr CFPB Monitor, the author writes, “The American Bankers Association and the Mortgage Bankers Association have sent a letter ( to the CFPB asking it to reconsider the applicability of the final Equal Credit Opportunity Act appraisal rule to business credit. The rule applies to loan applications received on or after January 18, 2014. It implements a Dodd-Frank amendment to the ECOA that requires creditors to provide to an applicant for a loan secured by a first lien on a residential structure containing one to four units a copy of all written appraisals and valuations developed in connection with the application.” The ABA and MBA argue in the letter that the rule will significantly impact lenders that provide financing to developers and home builders, the rule’s timing requirements are unsuited to business credit, thee applicant in a business loan is typically a business entity but the dwelling that serves as collateral is typically owned by an individual who is guaranteeing the loan, and finally, that the CFPB’s burden estimation methodology used in the final rule may be based on invalid assumptions for business credit. The full blog can be found here:


Turning to some recent investor, agency, and bank news…


Yesterday Freedom Mortgage rolled out additional credit enhancements for loans in “application received status” on or after the effective date. (Loans already in pipeline that meet the new guidelines may be elevated for exception consideration.) “FHA Streamlines: We will follow FHA guidelines regarding Mortgage Lates prior to loan application. Increasing maximum CLTV from 100% to 125%. FHA – Full Documentation: For FHA transactions Standard loan limits now follow FHA Total Scorecard requirements for payment history on the subject property and additional properties owned, on FHA Jumbo transactions follow FHA Total Scorecard for mortgage lates on other properties, subject property still 0x30, foreclosure/bankruptcy discharge reduced from 7 years to 5 years for FHA Jumbo transactions. (Not applicable for Manufactured Housing, must follow Manufactured Housing Product Guide.) VA- Full Documentation: maximum LTV’s increased to Follow VA guidelines for all purchase transactions, maximum LTV on base loan amount increased to 90% for VA Refinances, PLUS the VA funding Fee, foreclosure/bankruptcy discharge reduced from 7 years to 5 years for VA Jumbo transactions. USDA – Purchase Transactions: will permit up to 102% LTV of the appraised value (including the funding fee).


Freedom Mortgage reminded its broker clients that it offers financing for Manufactured Housing properties (Freedom requires an equal or greater number of units from brokers in core products). Manufactured Housing Requirements: FHA 203(b)’s FRM Only, Purchase, Rate & Term, Cash-Out or Streamline, Minimum 680 representative Credit Score, Primary Residence (may not own any other property), 0x30 days delinquent in housing payment during the most recent 24 months, Double Wide Only (400 minimum square feet), must be permanently affixed to foundation.


On Friday regulators closed First Community Bank of Southwest Florida ($266mm, FL) and sold it to C1 Bank ($970mm, FL). C1 obtains 7 branches, assumes all deposits and entered into a loss-share transaction on the assets. On the M&A side, Landmark National Bank ($649mm, KS) will acquire Citizens Bank ($265mm, KS). Citizens cited an increased regulatory burden as a key driver for the decision to sell. Centerstate Bank ($2.4B, FL) will buy the parent company of Gulfstream Business Bank ($545mm, FL) for about $82.1mm in cash and stock or 1.6x tangible book. This is the highest premium paid for a community bank in FL in 6 years, per Pacific Coast Banker’s Bank. (And let’s not forget the opposite of M&A that was announced recently: American International Group’s AIG Federal Savings Bank will close its bank and return deposits to customers, as it adjusts to limits placed on it, as an insurer, by the Dodd-Frank Act.) Lastly, Wintrust Financial ($17.1B, IL) will acquire Diamond Bank, FSB ($174mm, IL) for an undisclosed sum – it adds 4 branches.


Radian Guaranty has published its June numbers on primary mortgage insurance delinquencies and cures.  The data is sourced from loan servicers, who reported $4.76 billion in new insurance written and 79,344 loans in the way of beginning primary delinquent inventory.  June saw 5088 new delinquencies; 4361 cures; 1903 paids, which includes those charged to a deductible or captive, and 89 rescissions and denials, which are the net of actual reinstatements for the data period.  By the end of June, Radian’s primary delinquent inventory had shrunk by 1,087 loans, leaving 78,257 delinquent units.  Those interested can join a conference call at 10am EDT on July 24th that will discuss the Q2 results in greater depth.  To connect to the broadcast, go to


Last week Fannie Mae & Freddie Mac altered their servicing incentives. In separate bulletins ( and announced that they are altering certain servicing incentives. Effective for all collection periods with a start date on or after August 1, 2013, the two entities are eliminating the complete Borrower Response Package and Delinquency improvement performance standard and the related incentive and compensatory fee structure. Servicers still must collect the package when required to do so by the enterprises’ respective guides. In addition, for mortgages with HAMP modification effective dates on or after April 1, 2014, the entities are increasing the servicer incentive by $500 if the modification is completed in accordance with the Guide.


Market aside, at noon Arizona time President Obama will give a speech on housing. Is it posturing, or substantive? Probably some of each – although not everyone can qualify for a loan, but there are some improvements that can be made. Remember, though, that a portion of those require Congressional approval, or the sign-off from a risk perspective by investors. Most believe that the speech today will focus on expanding HARP yet is unlikely to lead to any movement on the issue. The President will call on HARP to be expanded to include non-agency borrowers, which is unlikely to occur unless housing prices take a sudden, steep decline. And Congressional authorization is needed for expansion. Transferring private risk to GSEs goes against recent the focus on shrinking the government’s footprint in the mortgage market. It is expected that the President will also comment on past performance of HARP/HAMP (with over 3 million borrowers helped to date, which is poor compared to the initial government estimates for about 9 million to be helped). And he will also comment on GSE reform efforts (without much specificity) and reiterate support for Mel Watt to become the FHFA’s director (the odds seem to be against the confirmation).


Mortgage prices are doing pretty well, especially with below-average mortgage banker supply being easily absorbed by the Fed. (Supply is around $1 billion; the Fed is buying over $3 billion.) The Treasury’s refunding begins today with $32 billion in 3-year notes to be auctioned at 1PM EST. We’ll have International Trade numbers for June – hardly a market mover. In the early going the 10-yr is at 2.64%, unchanged from Monday’s close, and agency MBS prices are also roughly unchanged.



How about part 1 of a run on some non-mortgage trivia?

It takes glass one million years to decompose, which means it never wears out and can be recycled an infinite amount of times. Gold is the only metal that doesn’t rust, even if it’s buried in the ground for thousands of years.

Your tongue is the only muscle in your body that is attached at only one end. (No jokes please.)

If you stop getting thirsty, you need to drink more water. When a human body is dehydrated, its thirst mechanism shuts off. Each year 2,000,000 smokers either quit smoking or die of tobacco-related diseases. Zero is the only number that cannot be represented by Roman numerals. Kites were used in the American Civil War to deliver letters and newspapers.



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Rob Chrisman