Mar. 13: Mortgage jobs & an expanding warehouse lender; nationwide housing continues to improve; appraisal compliance input
“Due to a water shortage in California, Sacramento swimming pools have announced they are closing lanes 7 and 8.” Speaking of swimming pools, the most any of us see of swimming events is at the Olympics every four years, and the winter Olympics just finished up. What happens to previous Olympic venues? Needless to say, the pomp, circumstance, glory, and fresh paint fades, and we are left with some pretty surprising sites, and sights: http://www.huffingtonpost.com/2013/07/15/abandoned-olympic-venues_n_3580868.html#slide=2685853. (Page down once or twice to quickly go through the slides.)
SharePlus Bank is looking for new warehouse clients. SharePlus is a Dallas-based warehouse lender, has been in business since 1958, and provides warehouse lending services nationwide to both the emerging (mini-correspondent) and experienced mortgage banker. The warehouse lending program started in 2009 and the management team has over 70+ years’ experience in the mortgage industry. Interested lenders should submit their inquiries to Jim Harrison at email@example.com. For information about SharePlus visit its website at www.shareplus.com.
Fannie & Freddie seller/servicer American Capital Corp (ACC) is gearing up to increase business in its wholesale channel. The name has changed from ACBN to ACC Wholesale, but the “feel like a big fish” offering to brokers is still in place. The new wholesale website is www.ACCwholesale.com. Julie Engel has recently joined the team as Bay Area Regional Sales Manager and brings years 20+ of experience to the company, which has been in business for over 20 years. Julie is actively looking for Account Executives who are interested in offering wholesale and banking options for brokers, and ACC is looking for a Regional Sales Manager for the new Seattle office. Please email Allen Cravello at firstname.lastname@example.org if you would like to be considered.
Advantage Credit was honored recently by being named as one of the top fifty mortgage service providers in the country by Mortgage Executive Magazine. Advantage Credit Inc., a national leading provider of mortgage and banking solutions and business credit solutions, continues to grow and it has two Corporate Account Manager openings in the San Francisco/Sacramento area. Both positions would be responsible for maintaining and retaining an established base of customers in the financial industry market. “If you are looking for freedom, independence in your job and be surrounded with a great team that will help you, then apply here.”
New Penn Financial has sucked up the 30 employees who were recently let go by Green Tree (when it closed its wholesale division a month or two ago). So New Penn has three new regional sales executives and 28 account executives, roughly doubling New Penn’s wholesale sales force to 70. Congrats to Wells Constantine (Nor Cal & the Northwest), Zeenat Zonte (So Cal and the Southwest), and Tony Petronio (Northeast and Midwest).
I can’t figure out if this is a story about the rebounding real estate market, or about the gap between the “haves and the have-nots” widening – or both. Bloomberg’s Oshrat Carmiel writes how “Miami Luxury Condos Revived With Buyer Cash Deposits.” Regarding one 132 unit luxury project where prices range from $4.5 million to $32.5 million, “While the oceanfront tower’s foundation is still being poured, 113 of its 132 units have sold. All buyers placed deposits of 30 percent in cash…We wanted to reconfigure and go after a buyer that is not as financially sensitive.” Builders are funding projects with cash commitments from buyers of as much as 60 percent of the purchase price: http://www.bloomberg.com/news/2014-03-12/miami-luxury-condos-revived-with-buyer-cash-deposits.html.
One reason existing home sales are so anemic is because few homeowners can afford to sell. There are roughly 75 million owner-occupied households, of which 10 million are underwater and 10 million have insufficient equity in their homes to afford a down payment on a new home. So 27% of all owner-occupied homes are effectively off limits under standard loan programs. As such, the 5 million expected home sales this year, 10% of the available stock, is good, per economist Dr. Elliot Eisenberg. That being said, a Zillow survey finds nearly 4 million homeowners saw their home prices rise enough to push them back above water (owe less than their house is worth). So-called negative equity is now below 20% nationwide according to Zillow.
Digging into that a little, if inflation is the cruelest tax of all, negative home equity has to be the most repressive. According to the fourth quarter Zillow Negative Equity Report, the national negative equity rate dipped below 20 percent to 19.4 percent for the first time in years; negative equity reached its national apex in the first quarter of 2012 with 31.4% of all home owners underwater. As home values have risen, negative equity has diminished, which is certainly good for the homeowner, as well as the nation. However, not is all perfect as more than 9.8 million homeowners with a mortgage still remain underwater. Zillow is a driver of interesting housing numbers; none more interesting than their effective negative equity rate (homeowners not technically underwater, but having an LTV > 80%)….this number, unfortunately, is a persistent 37.6%.
There is a lot of press about Freddie and Fannie – what about jumbo originations? Non-agency residential mortgage lending rose 21% y/y in 2013 to $272 billion and home-equity lending increased 33% to $59 billion, while GSE originations fell 18% as refinancing slowed, according to Inside Mortgage Finance. Total non-agency lending accounted for 18% of total mortgage originations in 2013. As a reminder, the MBA expects about $1.1 trillion in mortgage loan originations in 2014, down 37% year over year. Given that so much of this non-agency production (read: jumbo, and now non-QM) stays on the books of portfolio lenders, there sure are a lot of venture capital and money managers chasing a small percentage of the origination market.
I received this note regarding appraisal issues: “I work for a large lender, and wanted to see if you could shed some light on the New Appraisal Compliance and Waiver Guidelines. We are being told by legal that when a buyer cannot use 100% of the contracted Seller Help stated in the sales contract, we will have to go back to the appraiser and have the appraiser update the appraisal and if we do not have either a verbal or written Appraisal Waive in the file we will have to wait three days before we can close. Have you heard of something such as this? This seems to be either my employer interpreting the new guideline incorrectly or another ridiculous new guideline from Dodd–Frank. On the other side of this guideline, according to my employer, is if the seller help has to go higher we will have to get the realtors to complete an addendum to make that happen. This is something that has always been there AND we require the appraiser to again change the appraisal AND wait the three days after the customer has received a copy of the new appraisal showing the changes. I have heard rumors that this guideline is not to go into place until 2015, or that my employer has interpreted the new guideline incorrectly.”
I am no expert in appraisal issues, so I sent this along to Brian Coester (http://www.coestervms.com/blog/) who returned with, “The reason for this is the tendency to use the concessions to inflate the price of homes and the recent changes from a ‘market’ based adjustment to concessions to a dollar for dollar amount which is a little more accurate. They are trying to prevent realtors and appraisers from ‘inching up’ the value of homes in the market are by including concessions in the appraised value or using some type of other then the dollar vs dollar for this. The reason for the appraisal update is because they are required to have that exactly right before the appraiser can be signed off on. The appraiser wouldn’t know of the changes in the amounts that the seller is paying. This is annoying but it’s technically the right thing to do.”
In a non-descript strip mall somewhere in America, there are three store fronts: an AutoZone parts place, a Subway sandwich shop, and a Check ‘n Go payday lender. Since it was after lunch, and my Prius never breaks down, I opened door #3. While it is hard for me to imagine a mortgage originator currently being OUT of compliance with Dodd-Frank (and the CFPB) it’s even harder for me to imagine places like these, in their current business model, ever being IN compliance. In a speech given recently by CFPB Director Cordray, addressing state’s Attorney Generals, Mr. Cordray said that issues relating to payday and title loans and other small-dollar lending products will be “very much on the [CFPB’s] plate” in 2014. Director Cordray is also reported to have said that scrutiny of such products “could easily be expanded to things like pawn brokering and overdrafts.” For all your payday lending informational needs, visit Ballard Spahr’s CFPB Monitor.
Government definitely influences housing & lending, and vice versa. On the Eastern Seaboard Marc Savitt is running for office, and now out in California Dr. Lesli Gooch is running for Congress to succeed Congressman Gary Miller. “Lesli has been an intricate part of Congressman Miller’s success in promoting housing and the mortgage industry. When elected, Lesli will be the voice for the homeowner; fighting to preserve and expand homeownership, while working with the housing industry to increase opportunity.” “Lesli has spent the past 15 years on Capitol Hill fighting for San Bernardino County families,” said Congressman Miller. If you’re in Northern California, come by Il’ Fornaio in Burlingame Saturday March 15th between 3-5PM PST to meet Dr. Lesli Gooch.
Freddie Mac has updated its reserve requirements to base calculations on the subject property’s full monthly payment amount rather than only principal, interest, taxes, and insurance. Borrowers no longer need to have an additional six months of reserves when converting a -4 unit primary residence to an investment property and using the resultant rental income, e.g. income from units they have not previously occupied, to qualify. Additionally, FHLMC mas removed the requirement that the appraisal be dated 60 days or fewer prior to the note date when used to document the value of a primary residence pending sale or being converted to a second home/investment property with the intention of establishing the minimum required reserves. This goes into effect for all loans with settlement dates on or after June 1st.
M&T has clarified its appraisal policy for its 203(k) Refinance program to state that, in cases where an As-Is appraisal is obtained in addition to the as-completed appraisal, the LTV calculation should be based on the lesser of the after-improved value or the as-is value of the property plus the total rehabilitation. If a separate appraisal is not obtained, this calculation should be determined using the lesser of the UPB plus total rehabilitation cost or the after-improved appraisal value. When the subject property is owned free and clear, M&T requires the use of an As-Is appraisal if the loan amount is greater than the renovation costs, while an As-Is appraisal is “highly recommended” if the borrower has enough equity accrued that the existing UPB is considerably lower than the anticipated as-is value, as this allows the lower LTV to be used when calculating monthly MIP. M&T has also clarified that, for all 203(k) transactions, inspection and title fees necessary for draw administration, HUD consultant fees, permit fees, and structural engineer or architect fees are all excluded from the 3% Points and Fees test.
Cornerstone Home Lending has launched a 15-day mandatory lock option for all of its Conforming Fixed products. At present, no changes may be made to the lock, and overnight locking is not available. Cornerstone has also rolled out its new R Jumbo and F Jumbo products, which offer Premium Pricing and a full array of Fixed and ARM options.
We actually saw a bit of a rally/improvement Wednesday in the bond market. Attribute it to whatever you’d like (flight to quality due to the Ukraine/Russia issue is as good a reason as any), the 10-yr price rose by almost .375 and closed at 2.73%, and agency MBS prices improved about .250. The Fed continues to be the big buyer, and the New York Federal Reserve Board announced that over the mid-March to mid-April period it expected to purchase $16 billion in MBS from paydowns received in its Agency MBS and debenture portfolios in February. Thomson Reuters points out, “Combined with outright purchases, buying is projected to average $2.3 billion per day over the last half of March compared to $2.1 billion in the first half of this month. Assuming the Fed announces another $5 billion taper in MBS at its upcoming meeting, buying is anticipated to decline to just over $2 billion per day over the first two weeks of April.”
But a new day has begun. We’ve had Retail Sales for February. (Expected at +.2%, it was +.3%, same ex-auto). We’ve also had Initial Jobless Claims (expected +7k to 330k, it was 315k down 9k from a revised 324k), and Import Prices were +.9% – double expectations. At 11AM MST we’ll have a $13 billion 30-year bond auction. For numbers, the 10-yr. closed Wednesday at 2.73% and this morning we were at 2.73% before the numbers; soon after we’re at 2.74% and agency MBS prices are worse a tad.
TEACHER: “Seamus, what do you call a person who keeps on talking when people are no longer interested?”
SEAMUS: “A teacher.”
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