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May 16, 2011: AE jobs; NAR opines on QRM; banks continue to buy agency mortgages; reader input on REO sales/lending
Rob Chrisman
Seen on
a doc drawer’s bulletin board: “I don't mind coming to work. But
it is the 8 hour wait until going home that is killing me.”
Here is some news of
interest to start the week: there is a push to simplify
the disclosure paperwork given to borrowers when obtaining
a mortgage. Huh? What? The CFPB might actually
combine mortgage forms, or make them simpler? http://www.consumerfinance.gov/knowbeforeyouowe/
But things have
become more complicated in Montana, where the state adopted
revisions to the “Montana Broker, Mortgage Lender, and Mortgage
Loan Originator Licensing Act” which is now known as the Montana Mortgage Act. Will it be indicative of
what is in store for other states? The revisions include
provisions for the licensing and regulation of mortgage
servicers, updated application and licensing requirements for
brokers, lenders and originators, a reduction in the number of
hours required for continuing education, changes to
recordkeeping, reporting, bonding and disclosure requirements,
and prohibitions against certain acts by mortgage lenders and
mortgage servicers. Here is a copy of the adopted 2011 Montana
House Bill Number 90: http://data.opi.mt.gov/bills/2011/billpdf/HB0090.pdf.
Kinecta Federal
Credit Union, with
$3.5 billion in assets, continues to make the news. It recently
has expanded into the Northwest, Midwest and Southwest
territories, and is still looking for wholesale AE’s in
Sacramento, Southern California, Washington, Idaho, Utah,
Arizona, Colorado, Wisconsin, Illinois and the Northeastern US.
The credit union has over 220,000 member-owners across the
country, and obviously likes the wholesale channel. “Account
Executives will develop and maintain relationships with
wholesale and correspondent mortgage loan brokers to gain loan
business.” If you, or someone you know, are interested please
send a resume to Erika Schlarmann at eschlarmann@kinecta.org.
Any time you see SunTrust, AIG United Guaranty, and “lawsuit” in
the same story, it is probably worth checking out. The lawsuit
was brought by SunTrust Mortgage, which alleged that UG refused
improperly to provide coverage for insured mortgage loans that
had gone into default. The Virginia court awarded attorney's
fees and expenses in connection with the defendant's motion for
sanctions, but denied motions to dismiss the action, to sanction
outside counsel, and to provide an adverse inference instruction
to the jury. The firm of BuckleySandler printed the opinion: http://www.buckleysandler.com/SunTrust_Mortgage_Inc_v_AIG_United_Guaranty_Corp_(1).pdf
Also in the legal
arena, and involving non-agency loans, lawyer Talcott Franklin
representing mortgage- securities investors said they will send
letters to American Home Mortgage Servicing and
four bond trustees asking them to seek repurchases of loans made
by H&R Block’s Option One Mortgage. Should
Option One be forced to buy back mortgages that failed to meet
its contractual quality promises? It is not a minor question:
H&R Block may face a maximum liability of $12.8 billion from
mortgage repurchases.
NAR has issued its
opinion of the potential implications of QRM. The public opinion
period ends on June 10, and NAR's opinion, which includes,
"...strong evidence shows that responsible lending standards and
ensuring a borrower’s ability to repay have the greatest impact
on reducing lender risk, and not high down payments..." carries
some weight. http://www.realtor.org/press_room/news_releases/2011/05/mortgage_requirements
Who's buying dem
mortgages? The National Information Center released consolidated
financial statements for bank holding companies for the 1st
quarter, providing additional information to the FDIC data to be
released soon. Banks continued to add agency
mortgage-backed securities from January through March to the
tune of about $30 billion. This is a strong number,
although not as notable as $38 billion and $48 billion in the 4th
and 3rd quarters, respectively. For those interested
in the non-agency MBS market, non-agency holdings declined $8.6
billion over the same period. Once again, looking at the move in
non-agency amounts one wonders what would happen if Freddie
& Fannie ceased to exist. The latest H.8 report from the Fed
shows that domestic bank holdings of agency MBS
have increased by $15 billion over the week ending on May
4. This latest spike brings the year-to-date spike in agency MBS
holdings of domestic banks to $58 billion, mostly attributed to
the purchases of large banks instead of small banks.
Last week the
commentary had this quote from a reader: “"With regard to the
comment of bank sellers of REO requiring cross
qualification with a preferred lender, there are reasons
beyond building origination business that it may be required.
Whether dealing with a foreclosure or a short sale, the bank
needs to be assured the buyer is legitimate and will be able to
complete the purchase in a timely manner. Some lenders
pre-approving a borrower on an REO may not be able to meet a
tight closing deadline. A ruse some of the foreclosure rescue
companies use is to provide purchase and sale agreement signed
by a fake buyer with a fake approval letter as a strategy to get
a foreclosure delayed."
I received an earful. “What I’m constantly
running in to as a LO is my buyers not even having any chance at
their offers being considered by a seller due to the speed,
ability, and “policies we have that require I talk to the buyer”
that these required cross-qualification loan officers possess.
If the performance of my buyer was really the only concern,
these cross-qualifying LO’s wouldn’t be trying to snake my
buyers by putting loan quotes together. Also, one “unintended
consequence” of this process is potentially resulting in lower
sales prices of these homes and the deterioration of our
national equity due to the fact that the true highest & best
offer was not even considered due to the delays surrounding
cross-qualification. Sellers should review all offers, send out
multiple counters, accept an offer, then and only then complete
their cross-qualification before opening escrow. This will
ensure that these REO banks and short sale banks are truly
netting the highest and best sale, which will in turn result in
the proper direction of home values in a truly free market.
When a home sells under market, it de-values every Note on homes
that is affected by this latest sale that becomes the latest
sales comparable, and it’s a real problem.”
Also, from another
lender, “I have not seen an article about LO’s saying they need
a subprime product again or Alt-A product in order to continue
doing business. Everyone in the business is hurting, but we’re
playing by the new rules. It is the Realtors who are asking for
the riskiest products to make their money. These are the same
people who demand 6% commission yet throw the loan officer in
front of a bus if they charge 1.25 points (or 1.25%
commission). In short, their true colors are shining once
again. They seem unable to adapt to a lower commission when
everyone else (appraisers, mortgage companies, etc.) are
changing to the time. I cannot believe their 6% commission has
not come under attack yet.”
“I have to call BS on
the comment of one of your readers. Myself, having been an
originator for 16 years and having spent a lot of time dropping
off doughnuts, attending Realtor luncheons, home shows,
presenting homebuyer seminars, and just plain scrounging for
business, I’ve noticed Realtors are quick to point out the
legality of referring/sending a borrower to a specific loan
officer when they don’t want to send anything your way. I’ve
also noticed they have no hesitation in pushing borrowers toward
their spouse, nephew, aunt, etc. Additionally, it’s not uncommon
for builders to own their own brokerage, mortgage, or title
companies. They write their contracts to incentivize and steer
borrowers into using all of their services. The entire point of
becoming a preferred lender is to build origination and try to
capture a captive market. Why would lenders knock themselves
out trying to become someone’s preferred lender if it wasn’t?”
And lastly, “It's really funny you mentioned this. Take a look
at this and let me know: www.Mylastoption.com
and www.thelastoption.com
and www.prolongmysale.com.
I've had to start doing RE again and started to see that my
full-price offers from fully qualified buyers weren't even being
presented, or I don't even get a call or email back from the
listing agent. I've started turning in these brokers with the
Board of Realtors. Conversely, REO's have the opposite problem:
turn in an offer, wait for the listing agent to get a highest
and best offer, and then I see it’s ‘double ended’ or at least
from a very close realtor. It must be nice to have the listing
and always be able to come in at highest and best offer. These
REO listing agents should have to publish all offers publically
so everyone can see what is happening. But the banks won't care
as long as the property is sold, which means no one will care
and this will continue.”
Focusing on more
temporal things, we had a nice little rally on Friday. Traders
attributed this to the opinion that the inflation numbers were
not worse than they actually were, another Treasury auction was
out of the way, weak commodity prices help the Fed keep short
term rates stable, and so forth. By the end of the day 10-yr
notes closed at 3.19%, practically unchanged for the week. MBS
prices were roughly unchanged for the week.
Many agree that the
“wildcard” remains the situation in Europe, which includes Greek
debt and the arrest of IMF’s Strauss-Kahn, and this might be the
focus this week. But the U.S. is set to hit its
$14.3 trillion debt limit today. Over the weekend,
Republicans spelled out in greater detail what they want in
return for supporting an increase to the debt ceiling. Democrats
warned of the likely consequences of allowing the nation to
default. Economic news this week is on the light side. Today we
have the Empire Manufacturing number, about half of last
month’s. Tomorrow is Housing Starts and Building Permits for
April, along with Industrial Production and Capacity
Utilization. Wednesday is the MBA’s app data, and the 4/27 FOMC
minutes. Thursday is Jobless Claims, and Existing Home Sales.
Then on Friday are Leading Economic Indicators and the Philly
Fed. The current 10-yr is sitting around 3.18% and
MBS prices are better by a shade.
High school kids sure have it all figured out!
At a high school in
Montana, a group of students played a prank. They let three
goats loose in the school. But, before turning them loose, they
painted numbers on the sides of the goats: 1, 2, and 4.
School
administrators spent most of the day looking for No. 3.
If you’re interested,
visit my twice-a-month blog at the STRATMOR Group web site
located at www.stratmorgroup.com
. The current blog considers the near and longer-term outlook
for jumbo lending. If you have both the time and
inclination make a comment on what I have written, or on other
comments so that folks can learn what’s going on out there from
the other readers.
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