The politics in the U.S. is already heating up. Donald Trump supposedly said, “Vote for me, or there will be hell toupee.” And in other, uh, interesting news, to many it indicates what kind of society we live in when a man ignites fireworks on his head, thus killing himself, and his mother immediately calls for stricter fireworks laws. Certainly our hearts go out to his family – but perhaps there is some correlation to this and what’s happened in residential lending?
Recruiting is a hot topic, and “We all know that the mortgage business is in need of millennials to balance the rising average age of loan officers, but does anyone really know how to hire them or even keep them. XINNIX, The Mortgage Academy, has an upcoming ‘Leadership Lessons’ webinar on August 6th at 1PM to address this issue. Learn to source, recruit and retain millennials in our webinar, Millennials in the Mortgage Business. As the premier provider of leadership and loan officer training, XINNIX’s insights will be invaluable. This live webinar is complimentary, but registration is required. To register or for more information, please click here.”
In job news, if you’re an underwriter in the San Francisco area, General Mortgage Capital Corporation continues to grow and is looking for underwriters. The ideal candidate is thoroughly versed in automated underwriting systems to include FNMA’s Desktop Underwriter and FHLMC’s Loan Prospector. In addition they should have extensive knowledge of FNMA/FHLMC/VA/FHA programs and jumbo products, and a thorough knowledge of loan processing function. An FHA DE certification is preferable. “We have four offices: Burlingame, Cupertino, Newark, and SF, our LO numbers have increased 100% in the last 12 months, and our 2015 production has already surpassed all of 2014. We pride ourselves on having a well-designed compliance system to meet all regulatory requirements. Please contact President Charles Zhao for confidential interview (510.396.8889).”
If you saw Carl Markman from REMN Wholesale in National Mortgage Professional’s “Legends of Lending” feature, then you already know REMN is continually looking to add more all-stars to their constantly expanding team. REMN’s commitment to an excellent broker experience is due in major part to its same day turn times, which requires REMN to be overstaffed with the ‘best of the best’ in order to meet the growing demand. Know anyone looking for a new position with a thriving wholesale lender? REMN is currently looking for underwriters in its Woodland Hills, CA and Iselin, NJ offices, along with inside producing account executives across the country (especially in NC and NJ) and outside account executives coast-to-coast. Experience and commitment to excellence are a must. Interested applicants should send their resumes to Amanda Miele.
And a privately held Fannie/Freddie seller servicer and Ginnie Mae issuer doing business in 46 states is actively seeking a Branch Manager for its existing Phoenix Branch Office. “With next-to-no overlays and no credit score minimum, other than what is prescribed by the GSEs, this company is a strong government and conforming lender and is sure to make a positive impact in the Phoenix market. Applicants must be well established in the market and have a proven track record of managing multiple originators. This Company is laser focused on growth in the Arizona Market. With our ‘Keep it Simple’ approach to the mortgage process, you will be able to provide more consistent and predictable results to both your borrowers and referral partners! E-mail to see if we are a fit!” Confidential inquiries should be sent to me at firstname.lastname@example.org.
Let’s play some catch up on servicing news, both theory and practice!
First, don’t forget that the FHFA will now require servicers of mortgages to have a minimum net worth of $2.5mm plus 25bp of the unpaid principal balance of loans serviced. In addition, nonbank servicers must have a tangible net worth to total assets of at least 6%, have to hold 3.5bp on total agency servicing unpaid principal balance and hold 2% against nonperforming loans greater than 6% of their portfolio.
MBA Education’s popular instructor-guided online course, School of Mortgage Servicing begins September 14. This introductory course focuses on the servicer’s role in mortgage banking. After attending this course, students will have an understanding of the basic servicing functions as well as the potential compliance risks of not applying appropriate processes.
The MBA and PwC US (PricewaterhouseCoopers) released The Changing Dynamics of the Mortgage Servicing Landscape, a white paper addressing the current state, and history, of mortgage servicing. “The white paper describes the changes that have occurred in the mortgage servicing market to get us to where we are today. It also discusses how increasing servicing costs can impact the price that consumers pay at origination and highlights the trends that have led to non-bank servicers gaining an increasing market share in recent years.
Additionally, this white paper provides a summary of the regulatory framework that applies to both bank and nonbank servicers as well as a perspective on two areas that have recently generated regulatory interest: mortgage servicing transfers and servicer net worth, capital and liquidity requirements.
Key findings of the paper include: Non-bank mortgage servicers in the top rankings are not a new phenomenon. In the late 1980s and early 1990s, non-depository mortgage bankers were major players in the servicing market. Although the five largest non-bank servicers have seen their market share grow significantly, banks still hold the majority of the mortgage servicing assets in the country. Banks and non-banks have differences in how they finance operations and whether they hold deposits, but all mortgage entities are subject to the same consumer-related regulatory requirements. Regulators and guarantors with different oversight responsibilities have enhanced rules around consumer-facing conduct, operational requirements and capital and liquidity in recent years. The impacts of these changes are not limited to servicers. Consumers are also impacted by servicing due to the interplay between servicing costs and upfront loan pricing.
I noticed this note in Joe Garrett’s recent newsletter. “’As you know, we’re having a great year, and our servicing portfolio is growing nicely. Is going public at all possible?’” Mr. Garrett opined: “It’s not going to happen, and here are two reasons: Stonegate and Nationstar. Stonegate is down about 42% and Nationstar is off 71% from their 2013 peaks. Very bluntly, investors are not exactly enamored of the mortgage banking industry after seeing these two companies perform so poorly. Nationstar (NYSE: NSM) was $57.95 less than two years ago, and today it is under $17. Stonegate (NYSE: SGM) is around $9.70, down from $18.95.”
That being said, many companies such as Stonegate aren’t “servicing” centric and a direct tie-in between stock prices and servicing is tenuous. For example, the type of servicing portfolio matters, as does the size and history of performance. And the picture becomes further muddled when on includes other companies with much larger servicing portfolios since they are typically banks such as Wells Fargo, Chase, Bank of America, Citi, and US Bank. Also in the top 10 are Nationstar, Ocwen, Walter, PHH, and Quicken. Some of those are publicly traded (WAC is down 50% in the last couple years), but others have rallied. And residential lending makes up varying portions of the bottom line for some of these companies.
Yes, servicing is a hot topic. Margaret Wright with CliftonLarsonAllen, LLP wrote, “Mortgage servicing is becoming solidified as an area of major regulatory importance. The CFPB’s entry into the mortgage servicing rulemaking arena has resulted in updated and new servicing regulatory requirements. Additionally, the current servicing market has shown that although delinquencies are down overall, servicing income and employment are increasing. Of all the regulatory changes impacting the mortgage servicing industry the areas of servicing transfer, consumer communication and loss mitigation have emerged as the most frequently discussed topics.
“The servicing transfer process is an area of particular regulatory scrutiny. Not only must disclosures be provided to the consumer, there are also stringent requirements concerning the transfer of loan documentation from the transferor to the new servicer. A mortgage lender must maintain policies and procedures to insurance a timely transfer of documents and information to the new servicer. The new servicer also has a responsibility to engage in quality control to validate the data integrity of the documentation provided from the transferor, including procedures to identify and request any missing documents. Identification of missing documentation is particularly important concerning required loss mitigation notices. Noted areas of servicing transfer concern include: servicing transfer notices not correct or not timely provided to the consumer, incorrect loan information provided to the new servicer, especially loan terms such as the APR, Unfair and Deceptive Acts concerning loan modifications not being honored by the new servicer, servicing transfer information omitting detailed descriptions of the data fields utilized, and PMI administration and cancellation notices.
“A mortgage servicer must develop protocol to ensure consumer communication consistency across all channels, including vendors with consumer contact. Effective consumer communication includes consistent procedures in place to receive, resolve and respond to complaints. The ability to track and analyze overall complaint trends is instrumental in developing an effective compliant management system. Detailed documentation of consumer communication is vital when a conversation log indicates a consumer was told a late fee would be waived, but the payment history does not reflect any waiver.
“Noted areas of consumer communication concern include: consistency in debt validation letters, timely provision of payoff information, notices of servicing transfer, single point of contact for loss mitigation requests, force placed insurance notification, immediate and accurate crediting of payments received, rate adjustment notifications, and misrepresentation of electronic payment options.
“Emerging in the area of consumer communication are complaints received through social media, the CFPB consumer complaint database and privacy concerns therewith. The CFPB is considering the addition of an optional narrative section to the complaint database where consumers may explain further their experience. There would also be an option for the lender or servicer to reply to the consumer’s narrative in the same free-form format. The CFPB has recognized that personal information may be included in the narratives provided from the consumers and plan to take reasonable steps to remove it before the information is available to the public in database.
“The most servicing regulatory enforcement actions have resulted from loss mitigation or other default related charges. A servicer must document when an application for loss mitigation was received as well as when the application was completed. When an application for loss mitigation is received a servicer must reply to the consumer in a reasonable amount of time with the decision or a notice that the application is incomplete. Common errors in the loss mitigation application process include improper denials, reasons for denial omitted from the response and the exclusion of the notice of the right to appeal. Noted areas of loss mitigation concern include:
requiring consumers to waive rights in order to obtain a loan modification, delay of permanent modification through unreasonably long trial period payment plans, and improper indication that consumer will receive surplus escrow funds, when will not receive surplus escrow when in default.
Ms. Wright wraps up her fine write-up by saying, “The FHA servicing audit largely focuses on loss mitigation in the areas of outreach and proper evaluation of requests. If the servicing file does not document loss mitigation, FHA will assume that the servicer did not engage in loss mitigation. The most appropriate FHA loss mitigation option as based on the borrower’s circumstances must be supported by file documentation. The FHA has proposed their new Servicing Handbook which is set to be finalized in June of 2015.”
Turning to the markets, we had a small rally/improvement in fixed-income prices Wednesday which we’ve given back this morning. Once again we saw a flight-to-quality due to fear of contagion from Greece’s debt crisis and China’s collapsing stock market. News broke that the Greek government will send concrete proposals to its official creditors on Thursday. The FOMC minutes of the June meeting showed that economic conditions are trending in a direction that would cause the FOMC to hike rates – eventually. The global concerns sent equities lower and treasuries higher Wednesday but what grabbed the press’s attention was the New York Stock Exchange’s technical glitch that halted trading for over three hours. Supposedly it was different than the issue that shut down United Airlines…
Weekly news like Initial Jobless Claims pale in comparison of importance to what is going on overseas, but this morning’s number showed +15k to 297k. We closed the 10-year at 2.21% and this morning we’re sitting around 2.25% with agency MBS prices worse .250-.375.
A woman buys a new phone Sim Card. Puts it in her phone and decides to surprise her husband who is seated on the couch in the living room.
She goes to the kitchen, calls her husband with the new number: “Hello Darling.”
The husband responds in a low tone: “Let me call you back later Honey, my wife is in the kitchen.
(Copyright 2015 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.)