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Mar. 7, 2011: Warehouse update; Multicultural conference; FHA refinances; HUD's auction & many training sessions; AE jobs in California
Rob Chrisman
I think
that rumors of Charlie Sheen going to work for the mortgage
industry as a lobbyist are untrue. (In fact, I just made it up.)
But maybe someone can use his tact, especially with pithy quotes
like, "My success rate is 100% - do the math." www.livethesheendream.com.
On to something more serious, like the need for due diligence.
Here's an interesting, although long, story about Sue Allon's
efforts in that field: http://www.denverpost.com/business/ci_17544882.
Last week I mentioned
some good news for brokers. Changes are continuing in the
wholesale channel, and some are indeed good. For example, JMAC
Lending continues to expand its AE base to service brokers. JMAC is looking for California wholesale reps out in
the field. JMAC itself has been focusing strictly on the
wholesale business for about 13 years, and offers jumbo,
conventional, and FHA product lines where the broker can speak
directly to an underwriter if need be. The company's website is
www.jmaclending.com and if you are
interested, or know a wholesale rep looking for a good
opportunity, contact careers@jmaclending.com.
Late in 2010,
mortgage bankers seemed to be scrambling for warehouse lines.
Now things have quieted down need-wise, and how is the warehouse
biz doing? Jim Reynolds, of Reynolds Financial Services in New
Jersey, wrote to me: "I believe it's safe to say that the
warehouse lending business is back. After dropping below 15
warehouse lenders about 3 years ago, we estimate there are now
over 65 active warehouse lenders serving 3 market segments:
small, medium and/or large cap mortgage banking platforms. We
are observing a tightening of margins, including a decrease in
"floor" pricing arrangements, especially with the large and
mid-cap mortgage bankers. A return to mezzanine financing is
being reviewed by several large lenders; overall, it is still a
very profitable asset based business, with very high quality
collateral. (For those interested, The Reynolds Group will be
presenting its 2011 Annual Warehouse Lending Survey in NYC
during the National MBA Secondary Marketing Convention at the
RMA Warehouse Lender Roundtable, and you can go to www.reynoldsg.com.)
I don't want this to turn into a site for 65 warehouse banks,
but here is one with a bit of a niche. Bank of the
Sierra is offering mortgage warehouse lines of credit from
$1-10 million for mortgage bankers originating California
product. The bank itself has been around for over 30
years and has grown to $1 billion in assets. "The warehouse
lines are simple with no non-usage fees and no capture
requirements and no line origination fee; however, there is an
operational audit required to be performed by a third party
which usually costs $2,500 to $3,000. Collateral package fees
are just $125 per package. Rates are as low as WSJ Prime plus
1.625% or 4.875%; pricing is adjusted based on the specific risk
profile of a client." Contact Brent Amos: bsamos@bankofthesierra.com.
Hispanic, Asian and
African-American real estate leaders are in Washington DC this
week for the 2011 Multicultural Real Estate &
Policy Conference, and will distribute a joint plan for
preserving minority homeownership to elected officials during
member visits to Capitol Hill. The plan calls for more diverse
and innovative solutions needed to meet the housing challenges
facing multicultural communities now and in the future. Check it
out! http://www.nahrep.org/
The National Association of Independent Housing
Professionals (NAIHP), represented by the Washington, D.C.
law firm of Howrey, filed suit with the United States District
Court for the District of Columbia against the Federal Reserve
Board (Board), to prevent implementation of the controversial
Regulation Z rule that restricts mortgage loan originator
compensation. It appears that things are in motion. http://www.naihp.org/home.
Sunday (to make up
for not sending out the commentary Thursday) I discussed risk
retention and Qualified Residential Mortgages. "Readers need to
be sure that they do not confuse risk retention and QRM. Risk
retention is the requirement for securitizers, and perhaps
originators, to retain a portion of every loan that backs a
security that is sold into the capital markets. QRM is an
exemption from risk retention. So to say that mortgage brokers
will not be subject to QRM is simply incorrect. If mortgage
brokers want to originate loans that are exempt from the risk
retention requirement, the loans they originate will have to
conform to the QRM regulations that will be issued by a joint
group of six regulators -- the OCC, FDIC, Federal Reserve, HUD,
FHFA and the SEC." So wrote Glen Corso with the Community Mortgage Banking Project.
A mortgage lender associated with a builder wrote, "What will
requiring 20% down do to the home building industry? Will it
really help the consumer? The majority of our new starter homes,
what few there are now, are sold to new families with higher
LTV's than 80%. Could hitting this segment hard just be another
'unintended consequence' of regulators running wild? Check out http://www.theatlantic.com/business/archive/2011/03/is-requiring-20-down-on-mortgages-too-much/71934/."
Is refinancing into
an FHA loan an option for many who default, or anyone else for
that matter? The
required documentation for income or employment verification
changes in mid-April, a switch from policies instituted in late
2009. The FHA (ML 09-32) also prevented borrowers from rolling
in the closing costs on the refi into the balance of the loan
(they previously allowed this) and introduced some other changes
as well which resulted in a slowdown in FHA refi activity in the
beginning of 2010. It would appear that when a FHA borrower is
coming to refinance, the lack of the ability to roll-in closing
costs into the balance of the loan has caused a drop in refi's.
Also, that should mean that the slight relief in terms of
employment income verification will not make a big difference to
overall refi application approvals.
It is generally
believed that the reason that FHA changed the
streamline refinance requirements initially was due to the
increase in defaults on streamline refinance transactions –
delinquencies and compare ratios shot up. A certain percentage
of borrowers lost their jobs soon after closing, or said they
were convinced by an originator that lowering their payment
would stall or allow them to 'skip' a payment, hence the need to
verify the borrower is current for the month due. According to
one long-time underwriter and trainer, FHA also realized that
borrower's that had no investment in the refinance went
delinquent or into default at a rate of 3 times as often as
borrower's that paid their closing costs, hence the need to only
allow the borrower to roll in the costs if there is value to
substantiate it. Many do not realize this, but FHA is known to
call the borrower when their loan goes into default for
research.”
What has HUD been
up to lately? On
March 26th it will be auctioning off 150 homes in Phoenix. (If a
servicer forecloses, it experiences a loss. At some during the
process the house is conveyed to HUD and the servicer is
reimbursed by the FHA mortgage insurance fund.) HUD is
conducting a live auction ”to owner occupant homebuyers who have
not purchased a HudHome in the past two years and agree to
occupy the property as their primary residence for a minimum of
12 months. Buyers may be able to utilize FHA insured financing
for as little as $100 down, and HUD will pay up to 3% of the
buyers closing costs." http://www.hudhomestore.com/HudHome/Index.aspx. HUD offers free
training to brokers wanting to be involved in selling HUD homes.
Registration required but with no fee. Today: http://www.hud.gov/emarc/index.cfm?fuseactionemar.registerEvent&eventIdv4&updateN Tomorrow: http://www.hud.gov/emarc/index.cfm?fuseactionemar.registerEvent&eventIdv5&updateN March 14: http://www.hud.gov/emarc/index.cfm?fuseactionemar.registerEvent&eventIdv6&updateN
On April 7 HUD is offering a free FHA Refinance Webinar geared
toward LO's, Underwriters & others: "Learn general
principles of Streamline, Cash-out, & Rate & Term
refinances. This training should help you calculate any
refinance confidently." (If it lasts more than 4 hours, consult
a physician...) Once again, registration is required, no fee. http://www.hud.gov/emarc/index.cfm?fuseactionemar.registerEvent&eventIdv8&updateN
Tomorrow (and every 2nd Tuesday of the month) there
is a Live Meeting webinar demonstration of the HOPE LoanPort
from 2-4EST. This will be followed by an interactive question
and answer session for all participants. To register: https://www3.gotomeeting.com/register/953720406.
In fact, HUD is offering training and information sessions all
across the nation, and too lengthy to reproduce here. But go to
http://www.hud.gov/offices/hsg/sfh/hsgsingle.cfm and on the left side
click on "Events & Training".
HUD also announced the reactivation of the Emergency Homeowners’
Loan Program. http://www.gpo.gov/fdsys/pkg/FR-2011-03-04/pdf/2011-4817.pdf. It "provides
emergency mortgage relief to homeowners who are unemployed or
underemployed and at risk of foreclosure and who meet certain
requirements of the program."
Last but not least, in the last month HUD has released a slew of
Mortgagee Letters, ranging from HECM counseling fees to tier
ranking scores to "multifamily hubs." http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/
Rates have certainly
been contained within a certain range, as have MBS trading
volumes, although we have seen some volatile days. Friday, for
example, 10-year notes recovered 75% of Thursday’s loss, gaining
about .625 and moving back down to a yield of 3.49%. MBS prices
were better by about the same – but for the entire week mortgage
rates were pretty close to unchanged.
Few will argue that
there is some type of recovery occurring. Jobs will certainly
help many qualify for home loans, but the higher rates have all
but shut off refinancing. The early part of this recovery was
fueled a reduction in inventories, and then by government
stimulus (cash for clunkers, QE-whatever), and now it seems that
the job market is improving. Granted, as more unemployed begin
looking for work again the improvement in the numbers will be
limited, but things are better than 6 months or a year ago.
Unfortunately for our business, home sales and new
home construction continue to face a long and difficult road
to recovery. While sales of existing homes have risen for
three consecutive months, most of the increase appears to be due
to a rise in foreclosure sales and distressed transactions.
If you're looking for lots of economic news, this is not your
week. In fact, aside from the auction there is nothing until
Thursday's Jobless Claims and the Trade Balance. On Friday we
have Retail Sales, a Michigan Consumer Sentiment number, and the
always thrilling Business Inventories number. With no news the 10-yr is sitting around 3.52% and MBS prices are
worse by about .125-.250.
The man said to the dentist, "Doc, I'm in one heck of a hurry. I
have two buddies sitting out in my truck waiting for us to go
deer hunting, so forget about the anesthetic, I don't have time
for the gums to get numb. I just want you to pull the tooth, and
be done with it! We have our feeders set to go off in thirty
minutes... I don't have time to wait for the anesthetic to
work!”
The dentist thought
to himself, "My goodness, this is surely a very brave man asking
to have his tooth pulled without using anything to kill the
pain."
So the dentist asks him, "Which tooth is it, sir?"
The man turned to his wife and said, "Open your mouth Honey, and
show him.”
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