Mar. 9, 2012: Mortgage jobs continue; theory on MIP dates; the MBA & QM; HARP; chatter on compare ratios and BoA/Fannie
Rob Chrisman




"Hey Rob, just a hunch here but figured it probably plays into the equation. FHA is requiring that we pull case numbers on or after June 11 on this new FHA streamline thing, and it just so happens that UFMIP refunds occur during the first 36 months of a loan. Therefore, anyone with a loan that was endorsed prior to June, 2009 would be ineligible for UFMIP refunds when they close a streamline refi June, 2012 or later. I’m guessing they’re trying to avoid refunding even a small portion of the up-front premiums they selected by forcing us to close these streamlines no sooner than the end of June. Why give back money you already spent and most certainly cannot afford to return!" Thanks Aaron C. with RMC Vanguard Mortgage for this note.

Independent retail mortgage banker On Q Financial is looking for an experienced MBS Trader to assist its Secondary Marketing Manager with hedging activities and managing the interest rate risk of our expanding mortgage pipeline. Based in Scottsdale, On Q Financial, with 23 offices across the nation and approved to lend in a couple dozen states, is a Fannie Mae approved seller/servicer.  Previous experience in trading and forming MBS pools plus Agency and Government AOT delivery experience is required. The ideal candidate should be experienced in all aspects of pricing strategies and price modeling in addition to reviewing hedge reports, maintaining an active communication with our Finance/Accounting Department for purposes of communicating pair-offs and monthly mark-to-market reporting, etc. Candidates should send their resume to Nelson De León at nelson.deleon@onqfinancial.com.

Mortgage Solutions of Colorado is looking for wholesale AE's or area managers, and remote DE underwriters, as it expands across the country. MSC is a 15 year old company that epitomizes boutique lender, offers Fannie, Freddie and Ginnie direct, and offer many products for TPO that others do not such as manufactured housing ("following true HUD guidelines"), "follows ethical business practices and is dedicated to providing exceptional customer service through every step of the process." The company is licensed in CA, CO, ID, IL, KS, MD, MO, NE, NM, OH, OK, OR, TN, TX, UT, WA, and WY; for more information, contact greg.grandchamp@msofco.com.

As a quick agency note, Fannie Mae is changing its “Forced-Place” home insurance rules, taking a greater role: http://www.insurancejournal.com/news/national/2012/03/07/238642.htm.

 

I don't pretend to be The Scotsman Guide, listing all lenders doing programs. But HARP is gaining some traction out there, and I thought a quick note might be useful. Mid-March, which seemed so far in the future when HARP 2.0 was announced, is nearly upon us, and with it is Fannie’s software change.

 

As mentioned yesterday, Wells Fargo’s wholesale group is rolling it out soon to brokers. On the correspondent side, Wells Fargo Funding announced “updates to our guidelines supporting the recently announced expanded parameters for Fannie Mae’s Home Affordable Refinance Program (HARP), DU Refi Plus. The updates reflect new LTV/TLTV/CLTV, Loan Score, and number of financed properties guidelines, and are available with Loans submitted or resubmitted to DU on or after DU version 8.3 updates the weekend of March 17.” For best effort registrations/locks and mandatory commitments, “Effective dates and Pricing updates will be announced soon. Pricing is currently not available for DU Refi Plus using DU version 8.3 where the expanded parameters defined above are applied. DU Refi Plus Loans ‘decisioned’ with DU version 8.3 where the expanded parameters defined above are not used can be registered/locked as they are today. Reminder: All Mandatory Commitments that include DU Refi Plus transactions must use the Seller’s Delegated Authority. Prior Approval DU Refi Plus transactions are not eligible to be included in Mandatory Commitments.” See the bulletin for further details, too lengthy in include here.

 

360 Mortgage Group is “ready for the HARP 2.0 with unlimited LTVs.  As for MI we can get that transferred with no issues.” The lender is now accepting loan submissions on the new DU Refi Plus. “Application date must be after: 12/1/2011, originate your loan now, obtain Approve/INELIGIBLE findings, Submit to U/W, 360 will approve & condition for updated findings after 3/17/2012 – 360 will release findings back to broker to rerun updated findings, 15 yr. terms >105% LTV ineligible until 6/1/2012,” and so on. Write to Scott Stavinoha at sstavinoha@360mtg.com if you have questions.

 

And starting on the 19th Mountain West Financial will begin accepting submissions and locks for FNMA DU Refi-Plus loans that utilize the changes included in the release of DU 8.3. “Unlimited LTV/CLTV available, increased issuance of Property Inspection Waivers (PIW), conforming and High Balance loan amounts are eligible, income and asset documentation as required by DU, max DTI determined by DU, available for Primary Residence, Second Home and Investment Properties.”

Engagements letters? Enforcement actions? Any depository who thinks servicing is a "slam dunk" had better be very acquainted with the factors that cause institutions to end up with this kind of publicity: http://www.federalreserve.gov/newsevents/press/enforcement/20120308b.htm.

Institutions do find themselves coming back into the good graces of the FDIC. Yesterday, "The Federal Reserve Board on Thursday announced the termination of the enforcement action" on Sterling Financial Corporation (WA) that has been in place since late 2009.

 

The government will be in our lives…forever it seems. Last week MBA hosted a member fly-in to meet with key regulators and congressional office to discuss the CFPB’s Ability to Repay/Qualified Mortgage (QM) proposed rule required by the Dodd-Frank Act. MBA members met with staff from CFPB, the FDIC, HUD, members of the White House, as well as Congresswomen Capito and Waters, and Senators Isakson and Hagan. “At its meetings, MBA emphasized the need for a safe harbor and the need for amendments to the points and fees restrictions in the proposed rule to ensure credit availability and affordability for consumers. On Friday, March 2, 2012, MBA hosted two well attended Hill briefings, one for the Senate and one for the House, as part of the fly-in, to educate staff on the significance of the proposed rule and advocate for clear and reasonable standards in the QM definition.”

 

Remember Bank of America’s decision to not deliver purchase and non-MHA refinance loans into Fannie MBS primarily “because of the expiration and mutual non-renewal of certain contractual delivery commitments and variances that permit efficient delivery of such loans to FNMA”? Investors are still discussing it, and it seems that although this should directly impact Bank of America’s Fannie issuance volume but the impact on overall monthly Fannie Mae MBS issuance volume is likely to be minimal. This is mainly because the share of Bank of America loans among monthly issuance has been steadily declining since the start of 2011. Purchase loans account for around 20-30% of Bank of America’s monthly issuance, whereas HARP loans account for around 15-25%. Assuming Bank of America’s share to be around 3% of overall issuance, the net impact is expected to be a decline in volumes of around 1.2%-1.5% in Fannie Mae issuance. Of course, it is likely that a large portion of these loans will be originated through Freddie Mac going forward.

Other originators noted, however, that the announcement makes it clear that from BofA’s perspective, GSE putback risk continues to be elevated. Further, the announcement highlights the further deterioration in the relationship between Bank of America and Fannie Mae. And the fact that BofA will only be originating MHA loans suggests that they could have additional capacity to aggressively focus on HARP 2.0. Even though it will not originate purchase and non-MHA refinance loans through Fannie Mae, BofA can still do so through Freddie Mac. In fact, for non-MHA Fannie Mae loans originated by Bank of America, it will most likely resort to using Freddie Mac to refinance these borrowers. Since these loans would have needed full underwriting even in the case of a Fannie to Fannie refinancing (since they are not eligible for HARP), investors do not expect a big impact on prepayments.

 

I think that mortgage banker compliance, ops, and company owners all go to sleep every night worried about compare ratios – it is a metric that HUD is now watching meticulously and determining who are “good risk” lenders and who needs to be cut off.  Most know that this ratio is a comparison percentage for defaults. Remember that HUD identifies a default as a loan that goes 90 days past due. Just because a lender is a “Full Eagle” lender, when a loan is brokered and that loan goes into default, even though the lender did not underwrite it, it still originated it and therefore counts in the compare ratio. Many companies, therefore, have put in overlays even on FHA brokered production. Often these include restrictions such as the lender not offering the product, the loan can’t have been denied for credit, DTI, and so on.

 

We know that mortgage rates and prices are not set by some governmental agency (yet) – they are a result of supply and demand. We were reminded of that yesterday as the volume of MBS sales dropped at the same time as the Fed was doing its usual buying AND new REIT buying figures were contemplated. (Reuters noted that J.P. Morgan analysts noted in recent research that REITs have raised around $15 billion in capital and if the SEC's ruling on REIT leverage is resolved favorably this could result in possibly $100 billion in MBS-related purchases based on past leverage levels of 6-7 times. Until that is resolved, however, they estimate REIT buying for 2012 at $25 billion.) But still, nervousness about today’s employment data pushed rates higher: T-notes were down .375 in price (2.02%) and MBS prices lost .250 in value.

 

Late yesterday news trickled through of a Greek deal, and the press was filled with stories today about how Greek officials announced that 85.8% of private creditors agreed to a bond swap, clearing the way for rescue funds from international lenders. This helps the “risk off” trade, lessening the demand for U.S. securities and nudging rates higher. The big news out this morning is also pushing rates higher: this is another strong payrolls report, continuing the positive momentum established at the end of 2011. The jobs numbers came slightly stronger than expectations, and there was also a solid upward revision to the January and December data. Nonfarm Payrolls came in at 227k (versus 210k) expected, Hourly Earnings were +.1%, and the Household Survey the unemployment rate being steady at 8.3% after declining sharply since the 9.1% reading in August.  However, the “participation rate” rose slightly so more workers are entering the labor force and they are finding jobs. In the early going the 10-yr is at 2.04% and MBS prices are worse a smidge (a technical term).

 


In Ireland, walking into the bar, Mike said to Patrick the bartender, "Pour me a stiff one - just had another fight with the little woman."
"Oh yeah?" said Paddy, "And how did this one end?"
"When it was over," Mike replied, "She came to me on her hands and knees.”
"Really," said Paddy, "Now that's a switch! What did she say?"
She said, "Come out from under the bed, you little chicken."


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Copyright - Rob Chrisman