Oct. 14: Mortgage jobs & opportunities; comment on flood insurance changes; MBA-CFPB joint webinars

“The latest news is that the Washington Redskins are going to change their name because of all the hatred, violence, and hostility associated with their name. From now on they will be known simply as the Redskins.” Things have not turned violent in lending, as we’re a pretty civilized bunch – but one never knows. And some companies continue to hire and expand.


SWBC Mortgage, a company with a 25 year history in retail mortgage lending is expanding. SWBC Mortgage is an approved Seller/Servicer with both FNMA and FHLMC and is a GNMA issuer who delivers loans directly and retains servicing. It funded in excess of $3 billion over the past year with 66% purchase production and is interested in branch and acquisition opportunities across the country.  SWBC Mortgage offers a traditional retail mortgage banking model with local processing and in-house underwriting and closing.  SWBC Mortgage (www.Swbcmortgage.com) is a wholly owned subsidiary of SWBC (Texas), a diversified financial services company providing a wide range of insurance, mortgage, and investment services to financial institutions, businesses, and families. With offices across the country, and more than 1600 employees, the company has the financial strength to succeed in today’s mortgage environment. Contact Kevin Haycock at khaycock@swbc.com for consideration.  


A full service, independently owned, direct lender is looking to grow its Retail production by consolidating several smaller independent bankers into its organization. The well-known lender, which wishes to remain anonymous, is a GNMA issuer as well as a direct FNMA & Freddie Seller, services for all 3 agencies and is licensed in 47 states. This company is looking to acquire well run Retail branches from companies that cannot achieve economies of scale or from independents looking for an exit strategy. Individual branches are welcome, as well. All inquiries are directly to the company, not via intermediaries, and will be held in strict confidence, beginning with execution of NDA. Send email inquiries to MortgageOpportunities@hotmail.com.


With all the hurdles for residential lenders, such as higher rates, higher loan-level price hits, QM, the list goes on, the last thing it really needs is problems caused by the shutdown. But we have them. The current partial government shutdown is the 12th such slowdown since 1980 (last 33 years).  Of the previous 11, the first 9 (occurring between late 1981 and late 1990) all lasted 3 days or less.  Only the 10th slowdown (starting in November 1995 and lasting 5 days) and the 11th slowdown (starting in December 1995 and lasting 21 days) were longer in duration.


As was mentioned in the commentary last week, “even with many aggregators temporarily waiving tax transcript requirements (the signed 4506-T is pretty much mandatory), lenders should remember that reps and warrants are still in place for the life of the loan.” KK writes, “I agree with this, but after being at the Compliance Conference in D.C. and meeting with the fine folks at the CFPB, here is what they said directly. ‘Spoke with Paul Mondor CFPB at MBA Regulatory Conference in DC.  Per Paul, if all other aspects of Appendix Q are met then third party income verification is not necessary for QM and Safe Harbor status per ATR rule comment.’ Scary!”


Lenders are doing what they can. First Mortgage Corporation’s president Clem Ziroli wrote that FM “Will waive all late fees and will work (i.e., within our prescribed ability) with all federal employees to ensure their home loans remain in good standing during the government shutdown. FMC will do so until the federal government resumes in a ‘normal’ fashion.  Though FMC services primarily in the western states, we’re hoping others will join us.”


“To help U.S. government employees who have been furloughed due to the U.S. government shutdown,” Chase announced efforts to assist them. “The assistance will be in place from October 11th through October 31st or until the shutdown ends – whichever is sooner. Chase encourages its customers who are employees of a U.S. federal agency and whose income has been affected by the shutdown to call the company to discuss certain hardship programs Chase offers and can activate based on individual circumstances.  Chase’s hardship programs are used by customers broadly who have been affected by unemployment, financial strain or natural disasters. In addition, for employees of affected federal agencies whose paycheck was direct-deposited to their Chase accounts in September 2013, Chase will automatically waive fees on their checking and savings accounts that could be incurred as a result of a lower than expected account balance.”


Well, here’s a bit of good news for banks of more than $10 billion in assets, or independent mortgage banks. Effective November 1, the CFPB will end its practice of having enforcement attorneys regularly participate in examinations of supervised entities. The report indicated that a CFPB spokeswoman attributed the change to an internal review that aimed to improve the supervision process and found that having both examiners and enforcement attorneys present at exams was not efficient. Not efficient? One CEO wrote to me and used the term “goon squad.” That aside, the industry viewed having an attorney in the office as inhibiting free and open communications between the CFPB and supervised entities. But before everyone gets excited, it would be a serious mistake for any supervised institution to read the change as signifying that the CFPB will become more lax in exercising its supervisory authority. For more, check out http://www.insidearm.com/daily/debt-collection-news/debt-collection/cfpb-will-no-longer-send-enforcement-attorneys-to-supervisory-examinations/.


Speaking of the CFPB, it, and the Mortgage Bankers Association (MBA) will be hosting two webinars on October 16 and 17 from 2-3:30 PM ET to address outstanding questions under the new mortgage rules. The October 16 session will address the servicing rules and the October 17 session will address the origination rules. Although the webinars were initially limited to MBA members, rumor has it that the sessions will be open to the public and once the link becomes available, the CFPB will post it on their website. In the meantime: http://www.mbaa.org/ConferencesEvents/Education.aspx.


Barry S. wrote to me last week and said, “I have attended several webinars and I still haven’t seen this spelled out so I will assume others would like to know the exact calculation: Mortgage banker (creditor) pays his loan officers a flat fee for each loan closed, say $1000 each. Loan is originated by mortgage banker and then will be sold to secondary market or held.  Is the $1000 part of the 3% test? It would seem by all accounts it isn’t.” James Brody, with American Mortgage Law Group (jbrody@americanmlg.com) writes, “You are correct that the flat fee would not be included in the 3% test as it is a commission paid to a creditor’s own loan officer. The CFPB has stated in guidance docs that compensation paid by a creditor to an MLO that is an employee of the creditor is to be excluded from points and fees for QM purposes.”


Two of the big banks in the U.S. reported earnings on Friday. Chase and Wells are big indeed, and their earnings reflect trends in lending. The two, and other big banks, have only grown larger since the collapse of Lehman, the implosion of AIG and the folding of the major US investment houses into super-sized bank holding companies. According to Bloomberg, the six biggest banks in the US have increased combined assets by 28% since 2007. The biggest banks have been prodded by regulators to cut risk and raise capital in order to survive the next hiccup. As such, the amount of capital at the 6 largest US banks has almost doubled since 2008.


Wells reported $1.6 billion in mortgage banking income for the third quarter, a 43 percent drop from the same period one year earlier, and it received $87 billion worth of mortgage applications last quarter compared with $188 billion a year ago. At JPMorgan, loan originations “only” fell 14 percent year over year to $40.5 billion. Nevertheless, the nation’s largest bank pulled down $705 million in income from mortgage banking during the quarter, a 13 percent increase from the prior year. Commenting on the results, investment banker KBW observed, “Overall, we view JPM’s and WFC’s mortgage banking results as weaker than expected primarily based on the sharp declines in gain-on-sale margins. We believe the read-across for the sector is moderately negative. Gain-on-sale (GOS) margins were down quarter over quarter. JPM’s GOS margin declined 118 bps to 1.44% from 2.62%, and the net mortgage banking margin (which includes expenses) fell 97 bps to 0.22% from 1.19%. We believe the weakness reflects the decline in mortgage application volume, which fell 38% to $40.4 billion from $65 billion. WFC’s GOS margin declined 79 bps to 1.42% from 2.21%. WFC experienced a similar 40% QoQ decline in mortgage applications.”


KBW goes one, “WFC’s unclosed application pipeline at quarter end was $35 billion, down 44% QoQ. The declines in application volume suggest that interest rate lock commitments were also down QoQ. JPM’s mortgage origination volume of $40.5 billion was down 17% QoQ, while WFC’s origination volume was down 28.6% to $80 billion. We view the decline at WFC as relatively in line with industry expectations. The Mortgage Bankers Association (MBA) is currently forecasting that industry volumes will decline by 25% QoQ. The declines in mortgage applications for both companies were close to the 41% decrease in average weekly applications that we saw in the unadjusted MBA index during 3Q. JPM noted that its purchase originations were up 57% from the prior year and 15% QoQ.”


If you’d like some input on the flood insurance rules, now is your chance (through December 10). The proposed rule is being issued by the Board of Governors of the Federal Reserve System, the Farm Credit Administration, the Federal Deposit Insurance Corporation, the National Credit Union Administration and the Office of the Comptroller of the Currency. It would implement certain provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters) with respect to private flood insurance, the escrow of flood insurance payments, and the forced-placement of flood insurance. Separate from the agencies’ joint proposal, Biggert-Waters also mandated other changes to the National Flood Insurance Program.


The proposed rule would require that regulated lending institutions accept private flood insurance as defined in Biggert-Waters to satisfy the mandatory purchase requirements and solicits comment on whether the agencies should adopt additional regulations on the acceptance of flood insurance policies issued by private insurers. In addition, the proposal would require regulated lending institutions to escrow payments and fees for flood insurance for any new or outstanding loans secured by residential improved real estate or a mobile home, not including business, agricultural and commercial loans, unless the institutions qualify for the statutory exception. There are new and revised sample notice forms and clauses concerning the availability of private flood insurance coverage and the escrow requirement, and the possibility it would clarify that regulated lending institutions have the authority to charge a borrower for the cost of force-placed flood insurance coverage beginning on the date on which the borrower’s coverage lapsed or became insufficient and would stipulate the circumstances under which a lender must terminate force-placed flood insurance coverage and refund payments to a borrower.


Here is the formal notice: http://fdic.gov/news/board/2013/2013-10-08_notice_dis_a_fr.pdf?source=govdelivery&utm_medium=email&utm_source=govdelivery. One can also go to one of the agencies – for example: look under recent updates on http://www.fca.gov/index.html. One may submit comments through the Federal eRulemaking Portal “regulations.gov”: Go to http://www.regulations.gov, enter “Docket ID OCC-2013-0015″ in the Search Box and click “Search.” Results can be filtered using the filtering tools on the left side of the screen. Click on “Comment Now” to submit public comments. Click on the “Help” tab on the Regulations.gov home page to get information on using Regulations.gov, including instructions for submitting public comments. Or one can e-mail: regs.comments@occ.treas.gov.


The bond markets are closed today, which obviously includes mortgage-backed securities, which help set rate sheet prices. Interesting, with the debt crisis and partial shutdown, rates were little changed last week. The budget and debt ceiling discussions will still move the markets this week. If the shutdown is not resolved, most of the economic reports scheduled for this week will be postponed, including the Consumer Price Index, Industrial Production, and Housing Starts. Unaffected by the shutdown, the Fed’s Beige Book will be released on Wednesday and the Philly Fed index will come out on Thursday. Mortgage markets will be closed on Monday in observance of Columbus Day.


What economic news will be released this week? I don’t know, just like I don’t know why Federal politicians should continue to be paid, or even have air conditioning, during this shutdown. Actually, unlike last week, many of the scheduled economic reports are not at the mercy of the government which will provide some information to investors about how the economy is looking. Data that will be reported include the Empire State Survey (Tuesday); MBA applications, Beige Book, NAHB house price index (Wednesday); Initial Claims, Industrial Production & Capacity Utilization and Philly Fed (Thursday); and Leading Indicators (Friday); Wednesday’s CPI is the only report that is dependent upon a fully functioning government. As mentioned, the bond market is closed, so setting rates is a little more touchy-feely than normal, and look for conservative rate sheets.



Here is some “late-breaking news”: Christopher Columbus might not have been such a wonderful human being: http://theoatmeal.com/comics/columbus_day. Quite the opposite.




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Rob Chrisman