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Jul. 22, 2011: MetLife Bank in play; SunTrust earnings; Lots of HUD & FHA news & warnings; Closing cost study
Rob Chrisman
Here’s
a Planning & Scheduling Algorithm for any company: “Choose
two: Good, Fast, Cheap.”
An
apparent consequence of Dodd Frank, MetLife Bank is for sale
- but not the mortgage company. In a quote that tells it all,
"MetLife Bank represented just two percent of MetLife Inc.’s
first quarter 2011 operating earnings, and we do not believe it
is appropriate for the overwhelming majority of our business to
be governed by regulations written for banking institutions,”
said Steven Kandarian, president and chief executive officer of
MetLife Inc. MetLife Inc. said that it is considering the sale
of its MetLife Bank N.A.'s depositary business and eliminating
the company's status as a bank holding company. The firm said it
will still offer residential mortgages through its MetLife Home
Loans business. http://www.bloomberg.com/news/2011-07-21/metlife-seeks-to-avoid-banking-rules-by-selling-deposit-gathering-business.html
Yesterday the OCC
officially took over the OTS, assuming responsibility for
examining, supervising and regulating federal savings
associations.
Here's
something
that one doesn't see very often: a bulk servicing sale.
Whole Loan Capital, LLC
is bringing to market a $553 million Fannie/Freddie/bank
conventional servicing portfolio. 2,400 loans, $230k average
balance, Investors: Fannie/Freddie - 71%; Wells & BofA -
26%, others – 2.5%, etc. For more information & metrics
please email mailto:info@wholeloans.com or shoot David Akre an e-mail at dakre@wholeloans.com.
Up in Atlanta, SunTrust
Bank announced its second-quarter earnings. SunTrust
reported a profit of $178 million, helped by slightly higher
revenue but also reducing the amount it had set aside for bad
debt (which reduced earnings then, but is now helping earnings).
During the 2nd quarter SunTrust received permission
to repay $4.85 billion it received under the U.S. Treasury's
Troubled Asset Relief Program during the financial crisis.
Loan-loss provisions fell to $392 million from $662 million a
year earlier and $447 million in the previous quarter. Net
charge-offs, of loans lenders don't think are collectible, were
down at 1.76% from 2.57% and 2.01%, respectively. Nonperforming
loans, or those near default, declined to 3.14% from 4.16% and
3.46%.
The
commentary
has been listing “new” correspondents, but readers should note
that some companies, like Flagstar and Franklin
American, also have long standing hybrid correspondent
programs. Franklin American’s, for example, is called the
“Emerging Mortgage Banker” program and allows brokers to become
the lender with FAMC prior loan approval. This program is
available through the wholesale channel in 48 states. For
information contact Holly Chase at hchase@franklinamerican.com.
Last
week the commentary carried the news that, “Prospect Mortgage
will pay HUD $3.1 million to settle claims of kickbacks to
mortgage professionals from the company's alleged ‘sham joint
ventures’ on FHA loans, which is similar to Fidelity National
Financial agreeing to pay HUD $4.5 million to settle kickback
claims” and received this note from an originator: “It’s great that HUD is
pursuing justice for the referral ‘donors.’ But how about
pursuit of the ‘recipients’ of these referral fees? They
are just as guilty and need to be made an example of. I
generate working referral partnerships through great service
levels, and to this day, have never paid a referral fee in
exchange for business. But the fact that this practice still
goes on is making it difficult to generate new relationships is
a big problem for the ethical guys like me. We need to level
that playing field when it comes to these unethical practices.”
A
lender wrote, "What the NAR executives are saying proves what
those of us on the lending side have always knows; that Realtors
need more educating as to what lending is all about, or how to
go about qualifying a borrower! To say that lending
standards are to blame for the housing slow down reveals their
lack of understanding of how lending has returned to actually
qualifying borrowers. Many think that if they were
allowed, Realtors would gladly create another real estate
bubble, because it would profit them individually, and plunge is
all even further into an economic disaster. It is truly a sad
thing that even as we are, obviously, still reeling from the
abuses of the recent past, we have learned absolutely nothing
and would repeat the same ‘mistakes’ all over again. And, to be
honest, it’s not just the Realtors; too many brokers and loan
officers would do it all over again too. Prov. 26:11 'As a dog
returneth to his vomit, so a fool returneth to his folly.'"
Mortgage rates are low and holding steady, but Bankrate recently
announced that mortgage
closing costs rose for a second straight year. The company
said the average loan origination and title insurance fees on a
$200,000 mortgage total $4,070, up 8.8% from a year ago. And the
average bank/mortgage lender charges roughly $1,614 in loan
origination fees, up 10.3% from last year. (Loan origination
fees include services such as underwriting and loan processing
fees, along with loan officer or mortgage broker compensation
for closing the loan.) New Yorkers can legitimately chant,
“We’re #1, we’re #1!”since it topped the survey again for the
second straight year, with average closing costs of $6,183,
followed by Texas at $4,944 and Utah at $4,906. The folks down
in Arkansas are #50 with an average of just $3,378 on the
survey’s typical loan: a $200,000 purchase-money mortgage on a
single-family home with a 80% LTV, excluding taxes, homeowners
insurance, homeowners association fees, prepaid interest and
other prepaid items.
In
2010, the Federal Housing Administration (FHA) changed the
recertification requirements for FHA approved “supervised
mortgagees,” a category which includes institutions, such as
banks, that are overseen by another federal regulatory agency.
Now supervised mortgagees have a wide range of recertification
requirements, which must be complied within 90 days of the end
of the mortgagee’s fiscal year. Thus, the first of the new
recertification submissions (for those mortgagees whose fiscal
year ended December 31, 2010) were due no later than March 31,
2011. Experts believe that given the problems that a tremendous
number of approved mortgagees have had with satisfying what
FHA’s recertification office believes is required by the
regulations and other guidance, it is extremely likely that a
substantial number of the 1,400 supervised mortgagees will
have their recertification submissions deemed inadequate.
They predict that perhaps as many as 75% of those mortgagees are
not in compliance, and warn of an increase in the number of
Notices of Deficiency (NOD), which will lead to referrals to the
Mortgage Review Board for mortgagees who do not come into
compliance.
Speaking
of which, what have HUD and the FHA been up to lately? A notice
was sent out about FHA Credit Watch Termination (for origination
approval agreements). To read this notice in its entirety please
visit: http://www.gpo.gov/fdsys/pkg/FR-2011-06-30/pdf/2011-16518.pdf and or http://www.gpo.gov/fdsys/pkg/FR-2011-06-30/pdf/2011-16489.pdf.
HUD also issued a final rule that made “technical corrections
and certain clarifying amendments to HUD's RESPA regulations”
now that it has some experience under its belt. To read this new
final rule in its entirety please visit: http://www.gpo.gov/fdsys/pkg/FR-2011-07-11/pdf/2011-17230.pdf. Another final rule
came out about minimum standards for licensing, NMLSR, and the
SAFE Act: http://www.gpo.gov/fdsys/pkg/FR-2011-06-30/pdf/2011-15672.pdf.
Just
in time for summer reading on the beach, FHA published the
Summer edition of the FHA Appraiser Newsletter. See it at http://portal.hud.gov/huddoc/2011summernewslettr.pdf or to find out more
about FHA appraisals please visit: http://portal.hud.gov/hudportal/HUD?src/groups/appraisers.
Originators
of
Home Equity Conversion Mortgages (HECM’s) should know that the
list of Frequently Asked Questions (FAQs) has been updated.
Please visit FHA’s HECM Lenders webpage to view the FAQs: http://portal.hud.gov/hudportal/HUD?src/program_offices/housing/sfh/hecm/hecmhomelenders or please view the
updated FAQs directly at: http://portal.hud.gov/hudportal/documents/huddoc?idDOC_12607.pdf.
And
Mortgagee Letters have been issued the Condominium Approval
Process, the Type I special forbearance program as it pertains
to unemployed borrowers, and a few others. To read them go to http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/.
This
week was filled with housing-related news.
The modest pop in housing starts (led by multifamily), was
positive though most analysts believe that there is little
reason to believe that the U.S. will see a real pickup in home
construction any time soon. Housing Starts have been running
well below long-term trend for over three years, and with good
reason: the most recent data from the Census Bureau shows 13.4
million vacant homes, roughly 3 million above a normal market.
Much of this is from the big increase in vacancies that we saw
in 2005-2006 when overbuilding hit its peak. The fastest-growing
category of vacancies is in homes that the owner would like to
sell or rent but are currently “held off” the market, and it is
yet another form of shadow inventory that will eventually have
to be absorbed.
We
also had the FHFA Home Price Index increase by .4% in May, the
second consecutive monthly increase and better than the expected
0.1% increase. April's results were revised downward to a 0.2%
increase from an initial estimate of a 0.8% increase. Year
over year, home prices were still down 6.3%, and the index
remains 19.6% below its peak in April 2007 and roughly equal to
the level of January 2004.
Rates
crept up during the latter half of the week, mostly due to
speculation that Greek bonds will receive some type of European
guarantee. Just as investors move money during a “flight to
safety,” they move it out again when risk is reduced – and that
is what we saw yesterday. So the EU side of the debt drama
appeared to be making some progress as opposed to the US debt
ceiling impasse. The 10-yr closed at 3.01%, and traders reported
higher selling of mortgage-backed securities on the sell-off.
There are no economic releases scheduled for today so the
markets will stay focused on the deals being reached in Europe
and in the US with an eye on what our stock market is doing. This morning the 10-yr is
back down to 2.98% and MBS prices are about .125 better.
All
you Need to Know about Government Bureaucracy & Complexity:
Pythagorean Theorem: 24 words.
Lord's Prayer: 66 words.
Archimedes' Principle: 67 words.
10 Commandments: 179 words.
Gettysburg address: 286 words.
Declaration of Independence: 1,300 words.
US Constitution with all 27 Amendments: 7,818 words.
US Government regulations on sale of cabbage: 26,911 words.
If
you're
interested, visit my twice-a-month blog at the STRATMOR Group
web site located at
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