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Apr. 14, 2011: Citi name change & recent changes; servicing 'settlement' just the start? Rates behaving themselves
Rob Chrisman
Yesterday
Reuters ran a story saying, "A proposed rule requiring a minimum
20% down payment on mortgages that lenders could then sell to
investors without keeping some of the risk on their books might
prevent some potential borrowers from getting a loan, a top U.S.
housing official said. While the rule ‘is designed to create a
class of loans that have a lower likelihood of default, in its
proposed definition it has the potential to exclude a number of
buyers,’ Acting Federal Housing Administration Commissioner Bob
Ryan said in prepared testimony." Is this
late-breaking news to any mortgage bankers, Realtors, title
company, or MI folks? I hope not. But maybe it will
attract the notice of Senators & Congressman, who many in
the industry believe don't know the difference between a
mortgage and a deed of trust.*
(*Ok, just so I don't have to write this tomorrow, the basic
difference between the two is in the number of parties involved,
the state, and the foreclosure process. For more details go to:
http://www.escrowhelp.com/articles/20000121.html.)
Like a kid who is waiting outside the principal's office, where
he knows he's in trouble but doesn't know just how much trouble,
the companies servicing loans had some of that
uncertainty cleared up yesterday: http://www.fdic.gov/news/news/press/2011/pr11069.html.
And of course, this is not the end of it. "The
enforcement orders issued today are important, but they are
only a first step in setting out a framework for these
large institutions to remedy these deficiencies and to identify
homeowners harmed as a result of servicer errors. While today's
orders put these large servicers on a path to improving their
management of the foreclosure process, they do not purport to
fully identify and remedy past errors in mortgage-servicing
operations of large institutions. Much work remains to ensure
that the servicing process functions effectively, efficiently,
and fairly going forward. Importantly, these enforcement orders
do not contain monetary remedial measures."
Over time, it looks
like all servicers will need to conform to these standards.
But in the near term, the risk is that this framework is one
more ingredient that will slow the clear out of the
foreclosure backlog. And
the enforcement actions taken yesterday by the Federal Reserve,
the OCC, and the OTS do not address the issue of fines or
modifications. But the Federal Reserve said in a statement that
it believes that monetary sanctions are appropriate for the
affected banks it oversees, including Ally
Financial, SunTrust, and HSBC. Other banks that have agreed to
the enforcement actions include Bank of America, Citigroup,
JPMorgan Chase, MetLife, PNC, US Bancorp, Wells Fargo, Aurora,
EverBank, and Sovereign Bank. The servicers represent
nearly 70% of the mortgage servicing industry, or nearly $7
trillion in mortgage balances.
Ally Financial, the company formerly known as
GMAC, quickly issued a statement. Ally "and certain of its
subsidiaries have executed the Consent Order issued by the Board
of Governors of the Federal Reserve and the Federal Deposit
Insurance Corporation related to the servicing operation of its
mortgage business. The company deeply regrets the error in
processing certain affidavits and has acted with urgency and
rigor in addressing and remediating the issue. Through our
review to date, Ally has not found any instance where a
homeowner was foreclosed upon without being in significant
default. GMAC Mortgage has substantially upgraded its
operations over the past two years and today has a Tier 1
servicer rating from the Department of Housing and Urban
Development (HUD) and ranks first among large servicers in
borrower workouts by Fannie Mae…”
Of course, there is a
segment of the population that believes that the settlement is
not enough. http://www.usatoday.com/money/economy/housing/2011-04-12-rules-mortgage-brokers-foreclosure.htm
(Yes - USA Today. The article was sandwiched between articles on
"Best Manicures East of the Mississippi" and "Are Retirees
Operating Lemonade Stands Unfair to Youth?".)
If you're saving up all your LP work to do Easter Sunday, don't.
Freddie spread the word that, "The Loan Prospector system
and customer service will be closed on Easter Sunday, April 24."
Citi will be undergoing a name change. “We’re
pleased to announce CitiMortgage, Inc.’s Correspondent Lending
channel will become a part of Citibank, N.A. effective for loans
purchased on or after June 18th… (For) agreements,
CitiMortgage, Inc. will assign its purchase rights, duties and
obligations under the Correspondent Loan Purchase Agreement to
Citibank, N.A. Prior to the effective date, you will receive
notice of this assignment including changes to the Correspondent
Manual. No action is required on your part to complete the
assignment of the Agreement.” For correspondents, “on the
effective date, all of CitiMortgage’s rights in your pipeline
loans will be transferred and assigned to Citibank.” Citi’s
bulleting also addressed MERS changes (with two transfer
transactions - beneficial rights and servicing rights). As
always, it is best for Citi’s clients to read the actual
bulletin.
Citi also recently
announced “a new feature adjuster of (0.50) will apply to all VA
products and programs, regardless of FICO score and to all
executions - best effort and mandatory” that began on the 11th,
and rolled out a program for Texas veterans. And starting
Saturday, for the Freddie Mac Home Possible program, “the
maximum LTV and CLTV are reduced to 95%. A 40-year fixed rate
term is permitted on 1-units only. Buy downs are permitted on
1-unit properties only; buy downs on 2-4 units are not
permitted. In order to meet the pooling deadline set by Freddie
Mac, the last date to register a Home Possible loan with an
LTV/CLTV > 95%, or a 40-year term on a 2-4 unit, or a buy
down on a 2-4 unit is April 15, 2011. Additionally, loans with
the previously listed criteria must be purchased by CitiMortgage
no later than April 30, 2011.”
CitiMortgage, and
every other correspondent investor, performs post-purchase due
diligence on a sample of loans purchased. “Among other
check-points, this process identifies defects or instances of
non-compliance with investor policies, procedures, and quality
expectations and regulatory requirements. Our post-purchase
defect rate goal for each Correspondent is 5%.” (Let’s hope
airplane and surgical implement manufacturers have higher
standards.) “Through in-depth trend analysis, we
identified the top post-purchase defects for conventional and
government loans. For assets, one defect that Citi notes
is that the paper trail for large deposits is missing - source
documentation for large deposits is not included in the file,
and cumulative smaller deposits are not being documented as
large deposit. Another is in the asset area of source of gift
funds from donor: the file is missing a withdrawal document or
bank statement from donor, or missing the documentation that
verifies funds were from an acceptable source.” Citi, and
others, is happy to provide best practice documentation to cure
this.
For certain
scenarios, ClearPoint Funding “encourages and
accepts the use of streamlined appraisal alternatives as
directed by the DU/DO Automated Underwriting System. ClearPoint
points out that property inspection waivers are “Now permitted
when recommend by DU/DO for the following scenarios: 1 Unit,
purchase & R/T refinances, standard loan balances, all
occupancies permitted (excluding investment properties in TX).
If MI is required, refer to MI Guidelines. Property may not be a
REO, recent foreclosure or new construction.” Certain other
forms may be required – check the ClearPoint bulletin for
specifics.
EverBank spread the word to
brokers that, “Since N/O/O loans do not follow the new Dodd
Frank Rule, “We can continue ‘business as usual’ with them when
registering and submitting. Please note you will not have to
price them under Lender Paid, brokers can use the previous
procedures, and when registering the loan (EverBank’s system)
will not give you that option.” EverBank recommends that brokers
“will want to use the Old Broker Cert and MBFA” but that “they
will not need an anti-steering form.”
Late last week Southern Trust Mortgage (Virginia Beach) told its
loan brokers that it would exit the channel, citing what it
calls "increasing compliance implications" tied to the Federal
Reserve’s new loan officer comp rule, and instead focus on
retail production.
Chase Correspondent revised the LTV limits for
its Home Possible product lines.
Rates declined again
Wednesday, helping anyone who waited to lock. Traders and
investors chewed on news from the Beige Book (relatively upbeat
on the economy, but not residential real estate), the 10-yr
auction (poorly received), and President Obama’s plan to cut the
budget deficit (anything is better than nothing?). In the
fixed-income arena, 10-yr notes improved by .25 in price and
headed down to 3.46%. Mortgages, and the securities that back
them, continue to see slow supply – few out there are reporting
that locks “are on fire” – and agency prices were better by
.125-.250, depending on coupon and agency.
The week is rushing
by, and it is Thursday already. Besides a healthy dose of "Fed
speak" later, we've had Initial Jobless Claims and the Producer
Price Index for March. As opposed to expectations, Jobless
Claims jumped from 385k to 412k, +27k, and continuing claims
& the 4-week moving average also rose. The Producer Price
Index was +.7%, ex-food & energy was +.3% - both slightly
better than expected. And later, at 11AM MST, will be the $13
billion 30-yr bond auction. This morning we find the
10-yr yield sitting around 3.43% and MBS prices better by
another .125.
A blonde was driving
her car about two hours from San Diego when she was flagged down
by a man whose truck had broken down. The man asked her, "Are
you going to San Diego?"
"Sure," answered the blonde, "do you need a lift?"
"Not for me. I'll be spending the next three hours fixing my
truck. My problem is I've got two chimpanzees in the back who
have to be taken to the San Diego Zoo. They're a bit stressed
already so I don't want to keep them on the road all day. Could
you possibly take them to the zoo for me? I'll give you $100 for
your trouble."
"I'd be happy to," said the blonde. So the two chimpanzees were
ushered into the back seat of the blonde's car and carefully
strapped into their seat belts, and off they went.
Five hours later, the truck driver was driving through the heart
of San Diego when suddenly he was horrified! There was the
blonde walking down the street and holding hands with the two
chimps, much to the amusement of a big crowd. With a screech of
brakes he pulled off the road and ran over to the blonde. "What
the heck are you doing here?" he demanded, "I gave you $100 to
take these chimpanzees to the zoo!"
"Yes, I know you did," said the blonde, "but we had money left
over, so now we're going to Sea World."
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