I am in Atlanta for a couple days, visiting with the Atlanta Mortgage Bankers Association. Some of the conversations involve the $76 million that is going to 50,000 Georgia borrowers who, it was ruled through the National Mortgage Settlement Agreement, who were “improperly foreclosed on” between 2008 and 2011. (I’ll save you finding your calculator: it is about $1,500 per incident.) But the fun never ends in mortgage servicing, and in servicing there is such a thing as too much? Apparently: http://www.reuters.com/article/2013/06/10/us-usa-homeloans-deals-insight-idUSBRE95902T20130610.
Given the continued regulatory changes and potential negative impact on mortgage brokers, Brokers looking to make an easy transition to Banker should contact Florida Capital Bank Mortgage. Its “Early Purchase Program (EPP) has competitive terms with no application fees, easy approval requirements and excellent support staff to ensure timely fundings.” Interested companies should contact Tim Haug at [email protected]. On loans sold to Florida Capital, it will fund Jumbos up to $2mm and HARP 2.0 at its standard terms. Florida Capital is also the source for any company looking for additional warehouse lines as well. Find out more about Florida Capital at www.flcbmtg.com.
I have been asked to assist a large, bank-owned Texas-based lender that is looking for a trader to add to its secondary marketing team. The ideal candidate should have experience allocating, trading, and settling mortgage-backed securities; a familiarity with hedging is a plus, as is investor knowledge and a sense of the markets. Strong analytical skills and the ability to work as part of a team are required. If you, or someone you know, are interested, resumes can be sent to me at [email protected].
Coming out of the MBA’s New York Secondary conference a month ago, a couple trends were easy to see. One was the influx of wholesale companies entering the correspondent channel, usually through a “mini-correspondent” business line. (This was discussed in Saturday’s commentary – it is seen as a way around fee caps.)
The second is the notable defection rate and career path of CFPB employees – perhaps it will rival the number of important folks who have left Freddie and Fannie in recent years. Yes, the regulators now employed there voted to unionize. For those that have left, a couple are following their old boss Raj Date who is launching a startup mortgage lender and business advisory firm named Fenway Summer LLC focusing on loans that don’t count as “qualified mortgages,” as defined by the CFPB. But Mr. Date believes there’s a robust business to be built around loans that don’t meet these standards, with potential lending volume of $250 billion a year. “It is just way too hard for good, responsible people to get good mortgages today,” Mr. Date said. Out of $1.25 trillion in projected mortgage lending this year, only about $20 billion would fall outside the qualified mortgage restrictions, according to Mark Zandi, chief economist at Moody’s Analytics. While that amount should pick up by 2015, it “will remain a small part of the mortgage market for the foreseeable future,” Mr. Zandi said. Many lenders have said they would avoid lending outside the qualified mortgage realm—due to the lack of protections from lawsuits from borrowers who fall into default and contend their loan should never have been made. But Mr. Date said that the litigation risk is manageable—as long as the overall lending standards are sound. And regarding credit scores, “You can’t actually boil people down to a single three digit number: That’s not reality,” Mr. Date said. “We’re going to make loans if it is sensible to do so—irrespective of any particular metric.”
(This caused one reader to e-mail: “I find it ironic that ex-CFPB employees are now going to offer loans which have CFPB-deemed risky features through a TPO channel – which Date himself publicly made disparaging remarks about.”)
The other trend, which ties in to this venture, is for companies entering these non-traditional channels. If a company can building a compliant, sophisticated mortgage-origination system that lends to consumers who are a good risk, and the loans fit into the Qualified Mortgage box, excellent. On the other side of the country, for example, a company named Institutional Mortgage is just starting. The firm has been busy lining up origination partners as well as mortgage credit investors. Recently IM started adding staff and should be operational by year-end. “Institutional Mortgage’s mission is to transform the way investors are presented, and invest in, risk. They will be using proven technology applied in a proprietary fashion which will connect the sources of mortgage assets with the ultimate investors in such assets. Institutional Mortgage is creating a platform and marketplace for whole loan credit risk to be properly placed with specific risk buyers.” The firm has been self-funded to date and is now in the process of raising expansion capital. Doug Dolton, Executive Chairman, recently told me that “We would love to raise capital within the mortgage industry because of the deep understanding and knowledge such investors bring to the enterprise. With that said we are negotiating with multiple sources, including non-industry sources.” (So, if you know anybody interested in participating or investing in this model in mortgage funding, contact CEO Loren Picard at [email protected].)
Of course, life in the border between wholesale and correspondent is not always easy sailing. I received this note from an industry vet out in California: “I’m hearing that some correspondent programs who offer a prior approval option are re-considering their obligations under Regulation B. At a recent conference, many investors stated that their prior approval programs are purely program eligibility confirmations based upon the information provided by the originator. Some compliance folks, on the other hand, view prior approval underwriting as a credit decision or ‘influencing’ a credit decision, thereby binding the takeout investor to disclosure requirements of Regulation B. Could you imagine an applicant receiving multiple notices from investors they had no idea had been part of the lender’s prior approval submission policy/process (particularly on jumbo loans)?”
Regarding the broker channel, Andy Harris, the president of Vantage Mortgage Group in Oregon, writes, “Rob, being an exclusive broker is quite simple and a great means of originating in today’s mortgage environment. Simply set the same competitive flat lender-paid margin with all wholesale lending partners and do not offer consumer-paid. Come January the allowable documented credits for lock extension, etc. will be warranted as the reason some are still offering consumer-paid, but be warned of fair lending issues if % comp varies (on any channel). As noted, the channel does not determine the rules with regard to new Federal regulations we all face. With a competitive fixed margin with all investors and saving lender rate sheets for anti-steering through a combined pricing engine, you have the ability to stay very compliant when it comes to fair lending, disparate impact concerns, and anti-steering. Without the influence of warehouse lines and holding strong wholesale relationships, brokering-only and comparing different investors and overlays is extremely rewarding to the consumer and Mortgage Loan Originator in the channel for what products and pricing they can offer. Keep it simple and keep it compliant. Don’t allow your overhead or recruiting efforts pull you away from compliance as so many have done. No one should carry different margins for any reason, even if others are doing it. There are a few exceptions for originator compensation on source, etc. – but allowing different rate sheets for each originator or using point banks is a clear violation as the CFPB has made clear. Be strong in policy and integrity and it will be rewarding to your business and market share in the future.
Mr. Harris continued, “I’m the guy that asks if it’s a violation of the MAPs rule for a non-bank to say they are a ‘bank’, than how is the ‘er’ okay at the end? Brokers and bankers are the same; we’re all MLOs and third party originators to the agencies. I am enjoying the advantages we have now and branding along with balancing risk and overhead by exclusively brokering and setting up strong lender relationships to stand out from the crowd. Here are some reference points (older articles I wrote for NMPM): PART 1: http://nationalmortgageprofessional.com/news20044/future-mortgage-broker-and-correspondent, PART 2: http://nationalmortgageprofessional.com/news25672/future-mortgage-broker-and-correspondent-markets-sequel, PART 3: http://nationalmortgageprofessional.com/news32643/future-mortgage-broker-and-correspondent-markets-part-iii. Video for consumers (our marketing branding) – http://youtu.be/i_JdfVuEQeg.”
Ginnie Mae keeps rolling along. Ginnie Mae announced last week that it guaranteed more than $41 billion in mortgage-backed securities (MBS) in May 2013. Issuance for Ginnie Mae II single-family pools led the way with more than $31 billion, while Ginnie Mae I single-family pools totaled nearly $8 billion. Issuance for the Ginnie Mae Home Equity Conversion Mortgage-Backed Security (HMBS), included in Ginnie Mae II single-family pools, was $845 million. Total single-family issuance was $39 billion, and multifamily MBS issuance reached nearly $2 billion for the month.
And through it all, lenders are trying to figure out where to go, and local organizations are trying to keep their members educated. For example, XINNIX (“The Mortgage Academy of Excellence”) is holding a free webinar Leadership Lessons: Strategies for Navigating Through Current Market Trends, this Wednesday from 11:30 am – 12:30 pm EST.
Their special guest will be Jim Cameron of The STRATMOR Group. “Jim and his team have compiled in-depth data on market trends in our industry as well as insights on how firms can stay ahead of the game in the months and years to come.” Register here for the webinar: http://events.xinnix.com/Extranet/95899/forms.aspx?msgid=p1d2sehhmiick3gxy1ku12tr
And for those in Northern California the Greater Sacramento Chapter of CAMP (California Association of Mortgage Professionals) will be holding a double header educational event on June 12th at the Sacramento Association of Realtors. First up to bat will be Bill McKnight (Appraisal Ace) and Ryan Lundquist (Lundquist Appraisal Company) “The Art of an Appraisal Rebuttal”. Second up to bat will be yours truly discussing “Current Chatter in the Markets”. To register for this event visit http://bit.ly/15BrehT.
AllRegs is offering a webinar on the CFPB’s 2013 Final Rule on escrow on June 21st that will discuss what the rule requires, who may be exempt, and how to implement the rule for higher-priced mortgage loans. Compliance and QC officers, credit policy professionals, loan origination supervisors, and servicers who manage escrow account functions are all encouraged to attend. Go to http://solutions.allregs.com/cfpbs-2013-escrow-final-rule/?utm_campaign=Email_Advisor_2013-05-29_ln_May&utm_medium=email&utm_source=Eloqua for more information and registration links.
Registration is still open for AllRegs’ School of Mortgage Compliance educational sessions, which will take place in Baltimore, MD from June 18th-21st. The course, which features both lectures and peer group discussions, will cover the federal and state regulations that affect day-to-day processes and will use problem-solving case studies, AllRegs Online products, and the Federal Financial Institutions exam to provide participants with in-depth insights. Registration links are available via http://solutions.allregs.com/school-of-mortgage-compliance-june-2013/?utm_campaign=Email_Advisor_2013-05-29_ln_May&utm_medium=email&utm_source=Eloqua.
The markets are pretty quiet so far this morning. Regarding Friday’s employment numbers, David Zervos with Jefferies wrote, “If someone asked me to put together a fake jobs report that would be the most soothing to a frazzled market, it would have read pretty much as just released. The tick up in the unemployment rate, on a slightly higher participation rate, was a work of art. It moves us further away from the Evans rule trigger of 6.5, and more importantly the theoretical taper trigger of 7.1/7.3. Also, it adds a bit of job-seeking optimism to the mix as more folks are looking for work in better economic conditions. Then we add the 175k on payrolls – not too hot, not too cold. It shows that Fed policies are continuing to work nicely to create a sustainable recovery, but worries about QE “overheating” are way off the mark…Any talk of tapering in June was frighteningly silly, unless one was speaking of June 2014 that is.”
Bill Gross weighed in. “I don’t think the report says anything about tapering at all with unemployment going higher and metrics in terms of the work week and wages being very dire…But I think ultimately in order to get a more normal economy, the Fed has got to move interest rates up to more normal levels.”
And Wells Fargo’s team wrote, “So May’s larger-than-expected rise in nonfarm payrolls does not mark a significant change in the economic outlook. While hiring appears to have ramped up, a very large proportion of the jobs being added are in lower-paying sectors, most notably the leisure and hospitality sector and retail trade.”
Yes, it is Monday all over again, and a whole new slate of economic news. There is zip today, tomorrow, and Wednesday, giving the market a little time to ruminate on the unemployment data and jawbone about the Fed & QE3 (unless something exciting happens in Europe and Asia). Thursday we have a big leap into Jobless Claims, Retail Sales, and Export & Import prices, and then Friday comes in with the Producer Price Index, along with the Industrial Production & Capacity Utilization duo and some University of Michigan number. The 10-yr, which closed at 2.16%, is roughly unchanged as are agency MBS prices.
Sometimes I replace the humor here with something of actual use. And given that swim season is approaching, here is one for kids, parents, and grandparents – do yourself a favor and spend 120 seconds going through it: http://www.slate.com/articles/health_and_science/family/2013/06/rescuing_drowning_children_how_to_know_when_someone_is_in_trouble_in_the.html. (Thank you to Len Tichy.)
If you’re interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog is, “Mortgage Backed Securities: Life after QE3.” 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. Rob (Check out http://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx or www.TheBasisPoint.com/category/daily-basis. For archived commentaries or to subscribe, go to www.robchrisman.com. Copyright 2013 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.)