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Mar. 11, 2011: Comp from MetLife & Plaza; news from CSFB, ING, Wells; processing foreclosures tip; FHA commish resigns; earthquake's impact on markets uncertain
Rob Chrisman
Later
today it will be Friday night, and time for mortgage bankers
everywhere to contemplate LO comp changes and think of creative
ways to open a few “tall cool ones”: http://www.youtube.com/watch?v8zbyacK5XZg
"Old soldiers never die...they just...fade away.” So said
General Douglas MacArthur. What would he say about old mortgage
executives that never die... they just form new companies! When
was the last time you saw C-BASS and Thornburg mentioned in the same article? http://www.reuters.com/article/2011/03/09/us-mortgages-funding-executives-idUSTRE72877X20110309.
In a story that first
broke in Mortgage News Daily (http://www.mortgagenewsdaily.com/premium/mbsonmnd.aspx),
Dave Stevens resigned his position as FHA
commissioner. Stevens is expected to end his stint as FHA
commissioner by the end of April and return to “the private
sector.” He was nominated about two years ago and sworn in
during July, 2009.
Monday we learned
that NAIHP filed a suit focused on TILA changes, and yesterday,
moments after the commentary went out, news came out that NAMB
Files Lawsuit Against the Federal Reserve to prevent the April 1st
implementation of the LO compensation rule. The NAMB suit seeks
temporary and preliminary restraints that would enjoin the
implementation of a specific section of the Federal Reserve
Board’s Final Rule on loan originator compensation, Regulation
Z; Docket No. R-1366, Truth-in-Lending. “This section, if
implemented, would prohibit mortgage brokers from paying their
loan officers commissions based on fees paid by the consumer.”
One simple sentence leading to one huge mass of confusion. Is
the borrower really better off?
Credit Suisse
announced a large subprime settlement that may be of interest to
investment bankers or ex-subprime lenders out there: http://www.reuters.com/article/2011/03/10/creditsuisse-subprime-settlement-idUSN1014244120110310.
Apparently ING
Direct, the US internet arm of the Dutch Bank ING, is actively
for sale with CIT being a potential purchaser. As one report
noted, despite having a large number of customers with high
satisfaction rates, raising high cost deposits and investing in
low margin loans is a problematic business model.
John Stumpf, CEO of Wells Fargo, has gone on record as saying he
wants to expand through acquisitions or other means. What about
that “little” issue of one bank, basically, not controlling more
than 10% of the deposits in the US? Stumpf said regulators could
allow exemptions in the case of distressed banks, although Wells
may be focusing on nonbank companies, such as investment firms.
How’s this for a note? “I have a new lending experience. There
was a purchase of a foreclosed property, bank-owned and under
purchase contract with my client. They were great borrowers who
easily qualified with 25% down. There were no appraisal
problems, and the loan was done in less than 30 days, docs
signed and back to the lender, ready to close. But then the
escrow officer tells me the title company does not have the
assignment from the original lender (that went out of business
in 2008) to the lender that foreclosed. The seller (the bank
that foreclosed and sold the property) has not provided the
assignment, and the title company cannot record and insure the
new lender without it. With no word on the assignment my client
is out $1,000 in appraisal, inspection, and credit report fees,
the lock is going to blow, and if the assignment arrives, we
must redraw the loan docs, and there will be a redraw fee. The
moral of this story for your readers is ‘Don't sign a contract
to purchase a foreclosed property until you know all the
paperwork involved with the foreclosure is accounted for. As an originator, doesn’t even start the process for
your clients until you know the foreclosure paperwork is ALL
accounted for."
Regarding the broker community, another vet wrote, “Brokers are
independent originators, like independent insurance agents, who
compete by shopping many banks for consumers - they do not
approve loans, they do not create loan programs, or have any
more influence than originators at a bank. Brokers get paid
because banks and lenders do not have to recruit, train, house,
or pay benefits to additional staff, or spend any money on
direct marketing for new loans. This allows banks and lenders to
increase production with minimal expense, simply by soliciting
brokers. The competition this creates benefits consumers and
keeps retail banks honest. Should independent insurance agents
or (substitute your occupation here) hold a reserve to cover
losses from the policies they write (or the work they do)?
Brokers or originators in general, did not cause the housing
boom or bust…to base legislation in 2011 on conditions that
occurred in 2005 is simply wrong.”
“I have been involved in one aspect or another in mortgages for
the past 20 years. At one point I remember that in New York
State, over 70% of all loans were originated by mortgage
brokers. So of the millions of performing loans in that state
alone most were originated by mortgage brokers. The public chose
brokers because the majority of them consistently delivered
better service, lower rates and costs than the big retail
lenders. The large trade organizations should take this directly
to the public with a television commercial - but the truth needs
to be heard outside of the blogosphere.”
MetLife rolled out more details of its
compensation plan. "You will find details on Lender‐paid and
Consumer‐paid Loan Originator
Compensation as implemented by MetLife Home Loans" in the bulletin. Note that there are some
differences from other plans (possibly that broker employee
originators must be paid a salary or hour, or that the broker’s
company can reduce its compensation in order to offset tolerance
violations). For Consumer Paid Compensation, "Consumer‐paid
broker compensation is determined by agreement between the
Broker and
the Borrower. MLHL will accept loans with Consumer‐paid
broker compensation up to a maximum of 2.5% of the loan amount.
The amount of broker compensation charged to the Borrower may
vary from one loan transaction to another. The Borrower may only
compensate one loan originator, either the Broker or the
Broker’s loan originator employee, but not both. Since the
Broker receives no compensation from MLHL, the Broker has the
option to reduce its compensation to pay some or all of the
third‐party fees or other
Borrower loan expenses, offset consumer disclosure tolerance
violations, or offer other pricing concessions. The Borrower
must pay the broker compensation from Borrower’s own funds or
the loan proceeds. The Borrower may use its own funds or loan
proceeds to fund third‐party fees. The
Borrower may also use interest rate credits to fund third‐party
fees, but not broker compensation. The Borrower may pay bona‐fide
discount points to MLHL to obtain a lower interest rate.”
Under the MetLife
Lender Paid Compensation section from MetLife Home Loans, "The
amount of MLHL Lender‐paid broker
compensation will be based on a percentage of the principal loan
amount, and will not vary from one loan transaction to another
during a 60‐day period. The
Broker will receive its broker compensation from MLHL only and
not from any other party. The Broker may not reduce its Lender‐paid
broker compensation by offering concessions to the Borrower or
to correct consumer disclosure (e.g. RESPA, GFE, or Initial TIL)
tolerance violations. The Broker may not pay third‐party
fees or other costs for the Borrower. Such fees and costs must
be paid from the Borrower’s own funds or the loan proceeds. The
Borrower may also use interest rate credits to fund third‐party
fees, but not broker compensation. The Borrower may pay bona‐fide
discount points to MLHL to obtain a lower interest rate. If the
Broker fails to select a compensation level, the MLHL‐paid
compensation level will default to 1.500%. A Broker may select a
different compensation level every 60 days.”
Plaza Home Mortgage out of San Diego
also released more details on its plan. “The broker will
negotiate compensation directly with the consumer. The consumer
may pay bona fide third party costs and Plaza fees by paying
cash at closing, or by financing them through the loan principal
or interest rate (Lender Credit). Premium pricing (Lender
Credit) cannot be used to compensate the broker partner/loan
originator. The consumer may pay discount points to reduce the
interest rate. The consumer must pay compensation to the broker
partner from their own funds or from the principal proceeds of
the new loan. No other person (other than the borrower) may
provide any compensation to a loan originator, directly or
indirectly, in connection with the loan transaction. The broker
partner must establish compensation agreements with its loan
officers that comply with the Final Rule. Compensation to the
broker partner can vary from one transaction to another.
However, compensation from the broker partner to its loan
officers for any particular transaction may be comprised only of
a salary or hourly wage. Other aggregate bonus related
compensation from the broker partner to its loan officers cannot
be based on prohibited terms and conditions.”
For Plaza's Lender
Paid Compensation: “Compensation is based on established terms
negotiated between the broker partner and Plaza that will remain
in effect for a quarterly period. The compensation will be based
on a set percentage of the loan amount and cannot vary from one
transaction to another. The quarterly compensation amount will
be used for all loans sent to Plaza where lender paid
compensation is selected and will be set up prior to registering
loans. More frequently than quarterly will be considered given
current market conditions. The negotiated percentage is tied to
the Broker ID code issued by Plaza to each approved branch of a
broker partner. You will choose the compensation percentage you
want to earn on each loan, subject to the minimum/maximum in
effect at the time of the agreement.”
For a variety of
reasons fixed-income and MBS prices improved yesterday, not the
least of which is the lack of supply of MBS’s in the market.
Watch for this in the applications figure next week. The 30-yr
bond auction went pretty well, and stock markets were down (not
that bonds always go up when stocks go down!), and the yield on
the 10-yr went below 3.40%. By the end of the day MBS prices had
improved between .5-.625.
Today is a new day,
but the trend is continuing. The massive earthquake
in Japan added to the global uncertainly and turmoil that has
rattled markets recently. The 8.9 magnitude quake, and
aftershocks, was followed by a tsunami. Bonds are obviously
rallying, but insurance company stocks are leading stocks lower.
The Yen is rallying on expectations of repatriation flows. The
film clips of the event in Japan are truly amazing. Here in this
country, Hawaii and the low-lying areas of the West Coast will
be dealing with a tsunami warning. Retail Sales, almost an
after-thought, came in roughly as expected, and we find the 10-yr this morning around 3.37% and MBS prices are
chopping around unchanged.
A drunk staggers into a Catholic Church in Ireland, enters a
confessional booth, sits down, but says nothing.
The Priest coughs a few times to get his attention, but the
drunk continues to sit there.
Finally, the Priest pounds three times on the wall.
The drunk mumbles, 'Ain't no use knockin', there's no paper on
this side either.'
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