Nov. 18: Mortgage jobs; Supreme Court & 2nd mortgages; ARM index news; what new FHA numbers mean for lenders

Recently the commentary noted, “Maybe we should start at the grade school level and teach kids about money. How to make a budget, manage debt, save for retirement. Most kids only know how to use their ATM card and check their balance online. I challenge you to ask a millennial if they balance their checkbook (or know how).” Tracy Sanderson with the Pacific Northwest’s Banner Bank penned, “Mortgage folks should check out the ABA’s volunteer program to help students. If every person in this industry volunteered for just 1 class a year, I think we’d make a difference.” Meanwhile the College Board reports that a child born this year and attending college between the years of 2032 and 2036 can be expected to pay all-in about $55k per year for an average public in-state 4-year college if current price increases hold.


Speaking of making a difference, while November marks the beginning of the season of giving, Academy Mortgage has a unique platform focused on giving back to individuals, families, and communities throughout the year. Academy’s vision of inspiring hope, delivering dreams, and building prosperity shines through in all aspects of the independent mortgage lender’s business. For example, unlike other typical sales incentives, Academy rewards its highest-performing Loan Officers and Branch Managers with opportunities to participate in Service Expeditions around the world to help those whose needs are great and whose resources are limited. Qualifiers travel to selected locations (such as Secanquin, Guatemala; Budapest, Hungary; and Amaru, Peru) to work side by-side with the local people on projects related to education and homeownership. It is a life-changing experience for all who participate. Loan Officers, Branch Managers, branches, and firms interested in helping Academy make a difference in the world should contact National Recruiting Manager Ben Green.


On the correspondent side, Jim Loving (Director of National Sales for Planet Home Lending’s Correspondent Division) is looking for 5 Regional Sales Managers. These positions will be responsible for establishing and maintaining relationships with Correspondent customers within their respective regions. Planet Home Lending is a fast-growing national residential mortgage lender and servicer with over $16 billion in servicing.  It supports multiple business channels uniquely positioned to provide competitive products and services. The company is an approved originator and servicer for FHA, VA, and USDA as well as a Fannie Mae Servicer, Freddie Mac Seller/Servicer and full Ginnie Mae Issuer.  If interested please forward your resume in confidence to the Recruiting Team at Planet Home Lending.


The U.S. top court will hear a Bank of America cases on second mortgages. Yesterday the Supreme Court agreed to hear arguments on whether homeowners can cancel their second mortgages in bankruptcy when their properties aren’t even worth the value of the first mortgage.


Suits are indeed being settled. For example, as a reminder late last month there was the case of Prospect against American Financial Network.


For those of you involved in compliance & training and don’t mind taking a short survey…”We all know the cost of compliance has increased over the past several years and one of those costs, specifically, compliance training can be viewed as a negative or a positive depending upon how a company utilizes it.  While it is an upfront cost it will, if done correctly, over time help to reduce a company’s overall compliance cost by having more educated employees. The CFPB reviews a company’s compliance training program as a part of their examination. We are starting to see a trend in many state exams as well, especially with Anti-money Laundering training. Companies need to be developing comprehensive training programs based on the size of their company.  I have had conversations with many companies to determine how they are going about developing their compliance training programs and have created an informal survey to determine allocation of time, costs and resources companies are making to compliance training and what kind of a positive/negative impact they are seeing. The survey’s results will be shared in the next few weeks.


While we’re waiting on pins and needles for the results of that survey, another survey conducted by the Collingwood Group reveals that lenders are still wary about loosening lending standards, even if the federal government mandates it. The results of the Collingwood Group Mortgage Outlook Report, found that mortgage and real estate industry professionals are still uncertain about a housing recovery. The survey was conducted during October 16th through October 31st and found that 71% of respondents believed it would be “somewhat” to “extremely” unlikely that they would lower credit scores for borrowers in the near future. The respondent’s reaction to loosening credit stemmed from their unwillingness to inherit the risk to allow more borrowers to obtain a mortgage due to federal regulatory fears. Mel Watt encouraged lenders to relax their credit standards, but survey respondents are uncertain the government would support their decision. Almost two-thirds of respondents said the CFPB regulations are causing the most concern, whereas others believe that the volume of complex and at times, contradictory regulations are what is most taxing.


And CoreLogic reported that home prices increased 5.6% nationwide in September 2014, compared to a year earlier. The non-distressed index rose 5.2% YOY, which fell from 9.8% in February of this year. The annualized, seasonally adjusted month over month home price appreciation increased 6.9%. The year to date home price appreciation was 3.7%, which increased from 2.9% in June. BofA Merrill Lynch predicts that the home price appreciation will end the year up 3.6%, a decline from 10.8% YOY in 2013.The only monthly seasonally adjusted rate that fell was Phoenix, where prices decreased to 0.3% from 1.1% in August, and Miami had the strongest change in month over month growth greatly increasing from -5.3% in August to 13.3% in September.


Here’s something to note…The Actuarial Review of the FHA came out and shows that the FHA is back on more solid financial footing. But some think that the recovery is occurring at a slower than expected pace which lessens the likelihood of a significant FHA premium reduction in 2015. If that is what plays out (e.g., no change in FHA premiums in the near future) it is a positive for private mortgage insurers and a small negative for mortgage originators and builders that cater to FHA borrowers. The FHA’s well-known fund (the Mutual Mortgage Insurance Fund) is expected to remain below the Congressionally-mandated 2.0% threshold until October 2016, so don’t look for any Republicans to support a decision to lower FHA premiums in 2015. Unless, of course, building and lending really start to falter…


NAR is pleased that the 2014 Actuarial Review of the Federal Housing Administration confirms that the Mutual Mortgage Insurance Fund is healthy and continues its positive trajectory. The ongoing decline in delinquencies and stabilizing home values indicate that FHA will stay on track to rebuild its capital reserve fund and ultimately meet the 2 percent excess reserve amount required by Congress. Now that the MMI Fund is on a path to recovery, NAR urges FHA to lower its annual mortgage insurance premiums and eliminate the requirement that mortgage insurance be held for the life of the loan. Achieving homeownership has become more difficult with current FHA mortgage insurance premiums. NAR estimates that in 2013, nearly 400,000 creditworthy borrowers were priced out of the housing market because of high FHA insurance premiums. By lowering its fees, FHA could provide greater access to homeownership for historically underserved groups. To put it in perspective, over the past four years, the percent share of first-time buyers using FHA-backed loans shrank from 56 percent to 39 percent…NAR is a strong supporter of the FHA and its vital role in the mortgage marketplace. In light of this report, NAR believes that Congress should not dramatically change the FHA or redefine its purpose. We will continue our work with FHA to help make the dream of homeownership a reality for millions more Americans.”


The MBA summed things up. “FHA released its Summary of the FY 2014 Actuarial Report. Here are a few important highlights: the Fund gained nearly $6 billion in value over the last year and now stands at $4.8 billion, the current capital ratio is .41 percent, and improvement in the Fund is a result of better portfolio performance including delinquency rates dropping 14 percent and recovery rates improving by 16 percent since last year. The entire report along with a summary can be found here, and MBA’s statement can be found here.


Compass Point LLC opines, “We estimate that 10-12% of FHA production could shift to the PMIs (private mortgage insurers) if the PMIs offer better financing than the FHA for >729 FICO loans. This shift would help to offset the loss in PMI market share that could occur if the FHA significantly lowers its MIPs.


As noted above, the FHA news might just be good for MI companies. Recently Radian published its monthly statistics for October with default notices increasing to 2.1% from September and the ending delinquent inventory declining to 1.3% from the previous month. The delinquent inventory was down 27.6% YoY, a slight decline from a year earlier when it was at 32.0% in October 2013. Paid claims decreased 0.2% MoM and net recessions and denials (R&Ds) were reported at 175 versus 125 in September.


While we’re talking about MI companies, here’s a smattering of recent mortgage insurance news.


Arch MI announced the introduction of two new technology solutions. These new customer solutions include the launch of Arch MI’s new mobile application as well as system integrations with the Optimal Blue pricing and automation platform.


Arch Mortgage Insurance and Ellie Mae have announced their partnership through the integration of Ellie Mae’s Encompass® Mortgage Management Solution.


MGIC announced the State of Florida is terminating the emergency assessment on most property and casualty insurance premiums, including mortgage insurance premiums on MGIC-insured loans secured by Florida properties.


Eventually we’ll see more ARM production, but not right now. The Federal Home Loan Bank of San Francisco announced that the Cost of Funds Index (COFI) for September 2014 is 0.663%, slightly down from last month’s index. Twelve institutions reported COFI data for September, where the index is calculated based upon the average of interest expenses incurred by Federal Home Loan Bank District savings institutions covering Arizona, California and Nevada. Since the index is calculated each month for the previous month, the index’s lagging pace tends to benefits borrowers when rates rise, but not when they fall.


And the Libor drama continues as firms and government agencies met to discuss alternatives to using it – not because ICE is now charging large banks to use it, or because we don’t know whether or not to capitalize all the letters in the acronym, but because of its recent sketchy history.


Eventually everyone that is predicting higher rates will be right, but probably not in the near future: QE news is fully in the market, and the world’s economies aren’t doing well enough to push rates much higher. Yesterday we learned that Industrial Production was -0.1% in October, following a downwardly revised gain of 0.8% in September, which had initially been reported as a 1% increase, and Capacity Utilization, a measure of slack in the industrial sector, decreased to 78.9% in October from September’s revised reading of 79.2%.


Yes, QE has ended, but that has not stopped the Fed from buying about $1 billion a day of MBS using money from early payoffs in its portfolio. And thus the Fed is continuing to provide a “cushion” on the demand side of the MBS price equation. And on the supply side, well, if MBS sales are any indication of locks and thus lender volumes, things are pretty steady.


For news today we had the Producer Price Index for October, seen even to last month’s -0.1% decline but it was +.2%. Later we’ll have the November home builder sentiment (NAHB HMI) which printed 54 last. We had a 2.33% close on the 10-yr Monday and this morning we’re barely changed at 2.32%; agency MBS prices are a shade better.



(Parental discretion advised.)

Some old cowboys were seated around the campfire out on the lonesome prairie, and with the pride for which these men were famous it was a night of bravado, rotgut whiskey, and many tall tales…

Frank, the hand from Texas says, “I must be the strongest, meanest, toughest cowboy there is. Why, just the other day, a bull got loose in the corral. It had gored six men before I wrestled it to the ground by the horns with my bare hands and castrated that sucker with my teeth.”

Snake River Ben, from Idaho, couldn’t stand to be bested. “That’s nothing, I was walking down the trail yesterday and a 15 foot diamondback rattler slid out from under a rock and made a move for me. I grabbed that devil with my bare hands, bit off its head, and sucked the poison down in one gulp – didn’t even get a belly ache.”

Old Powder River Tom, the cowboy from Wyoming, remained silent, slowly stirring the campfire coals with his pecker…





(Copyright 2014 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