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Apr. 4, 2011: Non-bank, commercial, and multi-family lending picking up; lots of investor changes unrelated to comp uncertainty; AE jobs
Rob Chrisman
Buffalo
Springfield wrote, “There's something happening here, what it is
ain't exactly clear…” But there is one movement that appears to
be clearer, and that is the increase in mortgage
lending by non-bank institutions: http://www.nytimes.com/2011/04/03/realestate/03mortages.html?_r1&srctwrhp.
"Congressional Republicans are moving aggressively to wind down
mortgage giants Fannie Mae and Freddie Mac, but they face
resistance not only from Democrats, but members of their own
party who fear rapid elimination of the two
entities would destabilize the fragile housing market."
And many in the business would agree. Read more at the
Washington Examiner: http://washingtonexaminer.com/politics/congress/2011/04/gop-moves-eliminate-fannie-freddie#ixzz1IWI6jMLX.
And when you had a
25% market share last year of the mortgage market, the opinions
that your CEO has on mortgages matters somewhat: http://money.cnn.com/2011/04/04/real_estate/john_stumpf_mortgage.fortune/?sectionmoney_latest.
Yes, the US Court of
Appeals has granted a stay on Fed's LO Compensation
rule. This order does not permanently stay or otherwise
modify the enforceability of the rule. Instead, it is a temporary measure to give the Court an
opportunity to review the case and make a final determination.
The Federal Reserve has until 12PM EST today to file a response
to NAMB and NAIHP's (the plaintiffs) motions, and then the
plaintiffs will be given the opportunity to file a response to
the government's response no later than 10AM EST tomorrow. After that filing takes place the Appeals
court can order a hearing or make a decision on the basis of the
filed briefs. If the court decides in favor of the NAMB and
NAIHP then the most likely course of action would be that the
case would move back to the District Court. The stay would
probably be extended to cover the period of time the case is in
the District Court and could be extended further if there is
another appeal. If the Appeals Court decides in favor of the
Federal Reserve the stay will be dissolved upon the issuance of
the decision.
Well, did you or
didn't you? Implement your compensation plan, that is. (If you
thought I was asking about whether or not you swore and felt
frustrated with the comp news Friday morning that would include
practically everyone in the biz. The overwhelming
sentiment seems to point to everyone preferring to change
their focus to more positive issues that actually help
borrowers and company's bottom lines.) One survey that I
saw indicated that a majority of larger companies
moved ahead with implementation by a factor of 3:2, whether or
not they were independent or bank owned. For example,
Wells Fargo wholesale told brokers, "Until a decision is made on
April 5th, Wells Fargo will continue under the financial reform
model that we began on 3/28. We will not be flipping back to the
old way at this time." And, “At this time, CitiMortgage will
continue business, including accepting new registrations, with
the Regulation Z policy and system changes that were implemented
on March 26, 2011. Sterling Savings Bank moved ahead with the
new comp plan, as did many others.
But a good-sized
group went the other way.
Fifth Third, for example, at first put their entire wholesale
registration on a temporary hold, and then announced it "will be
operating business as usual; on a pre Reg. Z compensation rule
model where you control compensation." Premier Nationwide
Lending noted "business as usual until this is finalized."
Flagstar "will continue to operate under the pre-April 1 rules
until further notice. All requirements that were announced in
prior memos for April 1, 2011, in connection with Loan
Originator compensation have been extended,” and Provident
Funding, "has rolled back our operational implementation of the
rule until further notice." This camp included Plaza Home
Mortgage, Terrace, ICON Residential, Liberty Savings Bank, U.S.
Bank Consumer Finance Division, Sierra Pacific, EverBank
Wholesale, Pinnacle Capital, Home Savings of America, Mountain
West Financial, Kinecta Federal Credit Union, MSI (Mortgage
Services III), Bay Equity, and GMAC's wholesale &
correspondent channels both are "standing by while standing by".
In the meantime, the
wholesale investor channel appears to be doing well. Real Estate Mortgage Network, for example, is hiring
regional managers AND AE's in Arizona, California,
Colorado, New Mexico, Nevada, and Oregon. REMN has been in
mortgage banking since the 1980's and is servicing about $1.4
billion as a Ginnie Mae seller/servicer, but just opened up the
West Coast wholesale operation. The company, interestingly, has
offered same-day approvals since 2002! And under the new comp
scheme, is offering Broker Compensation from 100 - 350 basis
points which can be updated monthly. For more information go to
http://www.remnwholesale.com,
call (858) 273-3007, or contact Tom Conklin at tconklin@remn.com.
The latest survey
shows that three out of four people make up 75% of the
population. Statistics and numbers are interesting like that.
But here is more good news: commercial and
multifamily mortgage originations grew 88% in the fourth
quarter of 2010 when compared to 4Q 2009 and hit $6
billion, the Mortgage Bankers Association said in its Fourth
Quarter Commercial Real Estate-Multifamily Finance Quarterly
Report. Much of this gain was due to a pick up by insurance
companies in the CMBS segment – up 170%. Loans for conduits for
CMBS saw a 60-fold increase compared to last year’s fourth
quarter, and GSE’s saw a 65% increase. http://www.mbaa.org/NewsandMedia/PressCenter/76171.htm.
In spite of the
compensation confusion, investors continue to make changes to
their policies and guidelines. Bank of America,
starting today, “Correspondent Lending will no longer accept
AVMs to document 30% equity on a converting primary residence.
Clients must document 30% equity in the existing property using
at minimum a 2055 Exterior-Only Inspection Residential Appraisal
Report in compliance with the Bank of America standard appraisal
policy. The appraisal may be performed by a Bank of America
Approved Review Appraisal Company.”
Flagstar Bank rolled out its
“Advantage Select” programs, which allow non-warrantable condos.
It also cash out up to 75% max LTV for a primary residence with
a 700 FICO requirement to $500k and up to 70% max LTV for 2nd
Homes with a 720 FICO requirement up to $500k. Flag also came
out with several updates on the Fannie Mae DU Refi Plus, Freddie
Mac Relief Refinance, and the Freddie Mac Relief Open Access
programs, and announced it will no longer be charging an
additional LPMI premium for Genworth-specific loans on refi’s.
Last week I mentioned
that GMAC is using the VEROS Valuation team for correspondent
lending – GMAC is using VEROS for wholesale as well.
MSI/Mortgage
Services III
announced, for conventional loans, the removal of the
acceptability of the Fannie Mae Condo Approval, and a change in
the Government ARM margin.
Wells Fargo sent its brokers news
on compensation and anti-steering changes for high cost, TBD,
etc. loans, notice of a process change for loans possibly
impacted by “undue influence,” clarified that appraisals for the
USDA Rural Development program must be ordered via Wells’
system, and updated its maximum CLTV levels and desk review
policies for its Home Equity programs.
Plaza Home Mortgage, out of
Jacksonville, in adherence to the Dodd - Frank Act Appraisal
Independence changes, stated “All USDA appraisals ordered on or
after April 1 must be ordered through a Plaza approved AMC,” for
VA loans “value discussions or communication regarding material
aspects of the appraisal must be between the VA Underwriter and
the Appraiser - the appraiser may not be paid directly by the
borrower or the broker,” and a few other appraisal issues. Plaza
also dropped its maximum qualifying ratio on all FHA products to
50% for DU, LP or FHA Scorecard AUS approvals.
SunTrust rolled out a nice
summary of government credit overlays as a resource tool
provided to Correspondent Lenders. “The Correspondent Government
Credit Overlay Matrix aids in identifying areas where SunTrust
Mortgage, Inc. has additional credit requirements supplementing
investor guidelines.”
Jobs and housing,
housing and jobs. After a decent Pending Home Sales number
earlier in the week, on Friday the focus was on jobs after we
learned that March non-farm payrolls rose 216k, with private
payrolls up 230k. The overall payroll data was stronger than the
market expected, and in the Household Survey (those pesky phone
calls), the unemployment rate ticked down to 8.8% from 8.9%. A
trader at Jefferies wrote, “Both the household
survey and the establishment surveys are very encouraging and
very clearly reflect improved labor market conditions. The
only significant flies in the ointment are the lack of growth in
earnings, which will translate into a continuation of very
moderate income growth, and the continued substantial job losses
at the local government level.” (Even McDonalds is
having a national hiring day on April 19th:
50,000 employees! Apply either on-line, or in any outlet.)
The strong employment
numbers, combined with some “bullish Fed-speak” recently would
normally push bond prices lower and yields higher, but perhaps
the market focused on the big drop in Consumer Confidence. On
Friday somehow the 10-yr clawed its way back from being down
.625 and closed basically flat at 3.45%. MBS prices were also
roughly unchanged Friday, and in some cases better by .125.
This is a decidedly
light week for scheduled economic news, which gives originators
one less thing to worry about. Zip today, tomorrow is a 9AM CST
ISM services number, zip on Wednesday, Thursday holds the usual
Jobless Claims number, and zip on Friday. Ahead of a lot of
zips, the 10-yr is sitting around 3.43% and MBS
prices are a shade better.
In keeping with the jobs theme, Arcelor-Mittal Steel, feeling it
was time for a shakeup, hired a new CEO. The new boss was
determined to rid the company of all slackers.
On a tour of the facilities, the CEO noticed a guy leaning
against a wall. The room was full of workers and he wanted to
let them know that he meant business.
He asked the guy,
"How much money do you make a week?"
A little surprised, the young man looked at him and said, "I
make $400 a week. Why?"
The CEO said, "Wait right here." He walked back to his office,
came back in two minutes, and handed the guy $1,600 in cash and
said, "Here's four weeks' pay. Now GET OUT and don't come back."
Feeling pretty good about himself the CEO looked around the room
and asked, "Does anyone want to tell me what that goof-ball did
here?"
From across the room a voice said, "Pizza delivery guy from
Domino's."
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