July 28: Compliance and AE jobs; $14 billion InterFirst shuts down; servicing deals & law changes; adios LIBOR

We’re a couple months into the North Atlantic hurricane season which lasts to November 30. It has been 12 years since the US was struck by a major hurricane (Category 3 or higher), but that doesn’t stop the U.S. Census Bureau from producing statistics that are critical to emergency planning and preparedness, and these stats reveal the growth in population of coastal areas around the United States. Did you know that there are 185 counties along the Atlantic coastline with nearly 60 million U.S. citizens living in them? The percentage growth of the population of the states reaching along the Atlantic coast has grown over 10% in the past decade, which reveals just how many people can be affected by these storms and re-establishes the importance of emergency preparedness.

Personnel and products

Motive Lending recently welcomed 30-year industry veteran, Keith Stubbs, to help grow its dynamic wholesale sales and operations teams nationwide. Stubbs noted that “Motive Lending’s growth and success are a direct result of putting brokers and Account Executives as their primary customers. Their formula is simple; put brokers and Account Executives first, support them with the best operations teams in the industry, and continually improve process and technology in that pursuit. Motive’s service oriented support structure enables producers to achieve levels of production they only dreamed of elsewhere.” Stubbs is expecting to double Motive’s production going into 2018 by teaming with top AEs in key markets throughout the U.S. Motive Lending offers FHA, Conventional, VA, USDA, Non-QM and Jumbo loan products. Highly motivated Account Executive candidates can reach Keith Stubbs.

JMAC Lending, a Southern California wholesale and correspondent lender, seeks candidates for consideration for the role of Vice President of Compliance. Based at JMAC’s corporate headquarters in Santa Ana, CA, this position will oversee compliance, quality control, counterparty risk management and licensing. Please contact recruiter Vanna Nguyen via email. “To view the job description and other open requisitions, please check out our careers page at www.jmaclending.com/careers.  We provide a competitive compensation package, including health insurance, 401k matching qualified after the first month of hire, and a PTO plan of 14 days and 8 holidays per year.”

Lender closes

At its peak just a few years ago, InterFirst Mortgage funded over $14 billion in home loans. Yesterday the Illinois lender closed down. Ouch.

Servicing news and deals

If your company plans include a transfer of servicing, you don’t want to miss the new issue of STRATMOR’s Insights report. In the lead article, senior partner Michael Grad outlines STRATMOR’s battle-tested methodology to plan, execute and manage bulk Transfers of Servicing (TOS). Grad points out that the primary focus of the TOS leadership team must shift from managing the transfer of the loan data to the successful transfer of the borrower relationship. And, because customer retention is a factor in determining MSR value, bulk TOS need to be planned and managed carefully as the complex nature of such transfers can put borrower retention efforts at risk. A poorly executed TOS can significantly reduce servicing value as dissatisfied borrowers are less likely to do repeat business with you. Follow this link to read “Transfer of Servicing (TOS)—a Battle-Tested Methodology” in the July issue of STRATMOR’s Insights.

Phoenix Capital was the seller of a $558M Fannie Mae bulk servicing rights offering recently. Project Arctic was 100% FNMA A/A, 81% Fixed 30, 19% Fixed 15, 4.021% (F30) Note Rate; 3.354% (F15) Note Rate, Avg Bal $151K, 753 WaFICO, 83% WaLTV, Geography: MI (92%), TN (5%), OH (3%) by loan count, 83% Single Family/PUD Properties, 95% Owner Occupied Properties, 71% Purchase Originations, with 100% Retail Originations.

Incenter Mortgage Advisors has made available a $60 – $90 Million per Month Fannie Mae & Freddie Mac monthly Co-Issue flow servicing offering. The profile summary is 100% FRM, 79% WaLTV, 749 WaFICO, Geography: IL (69%), CA (9%), MN (7%), FL (3%), 74% SFR/PUD, and 90% O/O.

MountainView Financial has two deals recently. The first is a $497 million FHLMC/FNMA/GNMA servicing portfolio. The conventional portion is 99.4 percent fixed rate and 100 percent 1st lien product, 749 WaFICO, 75% WaLTV, 4.00 WAC, average loan size of $205k, top states: California (25.2 percent), Arizona (19.9 percent), Washington (13.6 percent), and Texas (10.8 percent). The Government portion is 100 percent fixed rate 1st lien product, 663 WaFICO, 95% WaLTV, 3.94 percent WAC, average loan size of $227k, with top states: Arizona (18.9 percent), California (15.2 percent), Georgia (14.6 percent), and North Carolina (13.9 percent). The second deal is a $3.1 billion FHLMC/FNMA/GNMA servicing portfolio; Conventional 99 percent fixed rate and 100 percent 1st lien product, 748 WaFICO, 74% WaLTV, 4.02% WAC, average loan size of $225k, top states: California (15.7 percent), Georgia (9.9 percent), South Carolina (7.2 percent), and Florida (7.0 percent). The Government portion is 100 percent fixed rate 1st lien product, 684 WaFICO, 95% WaLTV, 3.75% WAC, $192k average loan size, with top states: California (16.5 percent), Alabama (14.9 percent), South Carolina (12.2 percent), and Tennessee (11.3 percent)

States certainly write state-specific laws governing servicing. The Montana Department of Administration amended its rules relating to surety bond, table funding, application of financial standards, and reporting forms for mortgage servicers. These provisions became effective July 8, 2017.

Mortgage servicers may now choose to submit either the expanded mortgage call report through the NMLS or the Quarterly Statement for Mortgage Servicing Activity dated May 31, 2016 for every quarter during which they held a license. The Quarterly Statement for Mortgage Servicing Activity dated May 31, 2016 is available on the division’s website.

The State of Georgia Department of Banking and Finance has adopted rules regarding mortgage servicing standards and records retention, effective July 19, 2017.

The added rules effect any person who services a mortgage loan. These rules encompass various topics including non-allowable fees, the foreclosure process, handling of payments, force-placed insurance, and requirement of report submission to the NMLS and Registry. Additionally, rules governing multiple requirements for dates, contact information, as well as the effects of loan transfers.

The rule requires each servicer to maintain required books, accounts, and records at the principal place of business, unless the department is first notified in writing if the records are to be maintained elsewhere. There is a 5-business day allotment to provide records to the department upon request. The penalty for refusal to permit an investigation or examination of books, accounts, and records (after a reasonable request by the department) shall be revocation of license or registration. Each servicer must maintain copies of all documents required by Chapter 80-11-3, a list of all servicer’s violations as set forth in Rule 80-11-6-.02, and a servicer file for each mortgage loan that it services.

Capital markets

The mortgage biz will have one less acronym to remember: With four long years to figure out a replacement and work the transition, the London InterBank Offered Rate (LIBOR) is now set to breathe its last breath in 2021 and transition trillions of dollars of floating rate bonds and interest rate swaps to a different reference rate. Challenging yes, impossible no. Many investors finely tune their portfolios with LIBOR-based instruments, and the FCA’s decision (UK Financial Conduct Authority) to drop Libor without designating its replacement may inject some uncertainty into swap rates based on the benchmark. In the next four years the markets will need guidance as to what a replacement could be, and this will lead to increased volatility and, possibly, reduced liquidity in the near term.

Recall that earlier this year the US Supreme Court rejected an industry appeal and ruled that investors’ antitrust lawsuits against a number of banks accused of manipulating the London Interbank Offered Rate, including Deutsche Bank, Bank of America and JPMorgan Chase, can move forward. Remember that Libor is a global index with nearly $40T of derivatives tied to it, along with hundreds of trillions of floating rate securities and loans.

But although adjustable rate mortgages account for less than 10% of originations, LOs always wondered what the heck is LIBOR (which evolved into “Libor” since it was too hard to type all those capital letters)? As with setting the Prime rate in the U.S., Libor similarly comes from a group of large banks. Twenty of the world’s largest banks submit their interest rate data to the British Bankers Association (BBA) each day. The BBA then threw out the top 25% of quotes and the bottom 25% and averaged the remainder.

Critics say that Libor was a hypothetical rate (not an observed rate), in that the banks were asked to submit the rate that they believed represented where they could borrow that day from another bank. That opened things up to interpretation and that is not a good thing and that is why Libor now comes from observable rates. (The Prime Rate is tied more to the federal funds rate, and usually moves when the Fed moves rates.)

Large US banks typically start each day by setting funding rates using the Libor curve. They take each maturity term and then apply some percentage to their own deposit rates for each term. By using Libor on the asset side of a balance sheet as well as the inherent tie to it that is going on with funding (large banks control about 90% of all US funding), community banks stand a better chance of controlling against basis risk. (Basis risk occurs when the relationship among various rates -deposits and loans in this case – is mismatched and move independently from one another. Put another way, basis risk occurs when the spread between Prime and Libor changes.)

Thursday long-term rates slid higher (10-year price down .250 and yield up to 2.31%, but MBS prices did well), and thus with short-term rates staying put the yield curve steepened. What does that mean for the average home buyer? Not much, as it wasn’t that dramatic. Rates improved Wednesday after the FOMC meeting, so we gave some of that back yesterday given better-than-expected economic data which caused many street economists to revise GDP forecasts.

This morning we’ve already had the first estimate of Q2 GDP. Expected to show a 2.5% growth, much higher than +1.5% in the first quarter, it was indeed +2.6%. There are a lot of pieces of this number, so analysts have plenty to examine. And Q2 ECI (Employment Cost Index) was +.5%. At 10AM ET Michigan Sentiment for July is seen holding steady at “93.1.” Soon after the GDP number the 10-year yields 2.30% and agency MBS prices are better by .125 versus Thursday’s close.

(This is something to think about when negative people are doing their best to rain on your parade. Rated R for language.)

A woman was at her hairdresser’s getting her hair styled for a trip to Rome with her husband.

She mentioned the trip to the hairdresser, who responded, “Rome? Why would anyone want to go there? It’s crowded and dirty. You’re crazy to go to Rome. So, how are you getting there?”

“We’re taking United” was the reply, “We got a great rate!”

“United?” exclaimed the hairdresser, “That’s a terrible airline. Their planes are old, their flight attendants are ugly, and they’re always late. So, where are you staying in Rome?”

“We’ll be at this exclusive little place over on Rome’s Tiber River called Teste.”

“Don’t go any further. I know that place. Everybody thinks it’s going to be something special and exclusive, but it’s really a dump.”

“We’re going to go to see the Vatican and maybe get to see the Pope.”

“That’s rich,” laughed the hairdresser. “You and a million other people trying to see him. He’ll look the size of an ant. Boy, good luck on this lousy trip of yours. You’re going to need it.”

A month later, the woman again came in for a hairdo. The hairdresser asked her about her trip to Rome.

“It was wonderful,” explained the woman, “not only were we on time in one of United’s brand-new planes, but it was overbooked, and they bumped us up to first class. The food and wine were delicious, and I had a handsome 28-year-old steward who waited on me hand and foot. And the hotel was great! They’d just finished a $5 million remodeling job, and now it’s a jewel, the finest hotel in the city. They, too, were overbooked, so they apologized and gave us their owner’s suite at no extra charge!”

“Well,” muttered the hairdresser, “that’s all well and good, but I know you didn’t get to see the Pope.”

“We were actually quite lucky, because as we toured the Vatican, a Swiss Guard tapped me on the shoulder, and explained that the Pope likes to meet some of the visitors, and if I’d be so kind as to step into his private room and wait, the Pope would personally greet me. Sure enough, five minutes later, the Pope walked through the door and shook my hand! I knelt down and he spoke a few words to me.”

“Oh, really! What’d he say?”

He asked, “Who fvck&d up your hair?”

Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Does Everyone Want a Job?” 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.


(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are over 300 mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2017 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.)

Rob Chrisman