To no surprise to the industry, Wells Fargo remained the largest U.S. mortgage originator in the second quarter although its market share dropped slightly. Wells is the #4 bank in the U.S. but is #1 in residential mortgages with 32.4% of them flowing through its Ops Centers. This is down from a record 33.9% in the first quarter. The next three largest lenders (Chase, U.S. Bancorp, and Bank of America) all gained share, according to the industry publication. Bank of America has fallen to fourth from second in the rankings but in the second quarter it showed the biggest increase in new loans, more than 18 percent, according to Inside Mortgage Finance. Wells Fargo still has nearly three times the market share of its closest competitor, JPMorgan.

Mason-McDuffie Mortgage is currently seeking top notch Producing Managers and Loan Officers in California, Arizona, Nevada, Oregon, Washington, Virginia, Indiana and Texas.  Mason-McDuffie is a privately held mortgage company licensed in 34 states, is funding and servicing jumbo, conventional, and government loans, and sells is FNMA, FHLMC, and GNMA approved. "We have built our company around the highest quality people," said Herb Tasker, Chairman. "We remain one of the few Loan Officer centric Lenders in today’s competitive market." Interested parties should send their resume to Daniel Dawson at ddawson@mmcdcorp.com.

Out in Washington, Peoples Bank is growing its retail network and is actively seeking experienced processors and underwriters for offices in Bellevue, Seattle, and Bellingham. This 91-year old, $1.2 billion community-bank has a history of strong financial performance and long-term commitment to the mortgage business.  "At Peoples Bank they believe that offering customers the highest level of service starts with creating a terrific work environment that's why they're looking for only the best and the brightest. If you think you've got what it takes to work at the Northwest's premier community bank, e-mail Erin Krawczak at Erin.Krawczak@peoplesbank-wa.com.

Lastly, in Scottsdale, Arizona, CNN Mortgage is growing and looking to add a lock desk coordinator to its secondary Marketing Department at the corporate office. Interested candidates with Lock Desk experience can contact Julie Messina at juliem@cnnmortgage.com.

With all these jobs flying around, it is pretty tough to keep track of who is making what. As the mortgage origination business is on the verge of four consecutive years of relative prosperity (probably a first in our industry’s history), does your incentive compensation motivate and reward the right behaviors and also mitigate against the inevitable cyclical downturn? To help lender answer that question STRATMOR is conducting a comprehensive Compensation Survey with the results coming right back to the participants. The survey is split into three modules allowing you to choose your level of participation (Executive Management - 11 positions including CEO, CFO, Head of Loan Servicing, Retail Sales - 7 positions from Head of Production through Loan Officer Assistant, and Retail Fulfillment - 7 positions from Head of Fulfillment through Closer). And lender participant responses will be segmented for better analysis based on "Independents vs. bank-owned lenders," "Production scale brackets," and relevant position-related metrics (tenure, management scope). Special attention is being directed to obtaining incentive compensation structures and amounts so that participants can calibrate their own programs accordingly. For more information including timing of data submission and fees to participate see http://www.cvent.com/events/2012-stratmor-compensation-survey/event-summary-ace07f6ab0af44bd962b9361461a0aef.aspx  or email nicole.shown@stratmorgroup.com for an invitation to participate.

On to something simple like somewhat recent investor updates, providing a flavor for the environment. They just don’t stop. As always, it is best to read the actual bulletin.

Let's commence with the news that caught brokers’, and the industry's, attention yesterday. “Franklin American Mortgage Company remains strongly committed to wholesale lending and maintaining a compliant lending environment. Based on recent industry events, FAMC is making the following changes to our Loan Originator Compensation Policy. Allowable compensation methods and amounts are being revised effective August 1, 2012 for all submissions for which either the earlier of the application date (1003) or Good Faith Estimate (GFE) date is ON OR AFTER August 1, 2012. Emerging Mortgage Banker (EMB) loans will NOT be affected by this change. All submissions for which either the earliest of the 1003 or GFE date is ON OR AFTER August 1: All Wholesale brokered loans submitted to FAMC must use the Lender Paid compensation method. The Borrower Paid compensation method will no longer be offered. Broker compensation for all loans submitted to FAMC will be two and a quarter percent (2.25%) of the loan amount. This compensation percent applies to all loans, cannot be varied or changed at any time, and replaces any past or future compensation requests (including all maximum compensation dollar limits previously established).” The memo goes on to some specifics from there.

So in other words, FAMC is discontinuing borrower-paid compensation completely and fixing lender-paid compensation at 2.25% for all brokers for all loans. Word quickly spread that the decision was the result of the Wells Fargo-Justice Department settlement. One AE, who will remain nameless, told clients, “After Careful consideration and lengthy discussions with our own Corporate Legal Counsel we have decided to make this change as quickly as possible. We do not want to fall into a situation where we could potentially be effected by business decisions we have no control over (LO Comp selection by mortgage brokers).” His/her e-mail goes on to describe the good definitions of “Disparate Impact” (Adverse effect of a practice or standard that is neutral and non-discriminatory in its intention but, nonetheless, disproportionately affects individuals having a disability or belonging to a particular group based on their age, ethnicity, race, or sex) and “Disparate treatment” (Intentional discriminatory dealing with individuals who have a disability or belonging to a particular group based on their age, ethnicity, race, or sex) and reminds brokers that “It’s everyone’s responsibility to insure that no one or no class of person(s) are ever treated unfairly. It is also your responsibility to identify it and report it if it happens. It is all of our responsibility to ensure that our policies and procedures do not have an unintended, adverse effect on any one group of people.” Lastly, a reminder that recently the Consumer Financial Protection Bureau (CFPB) announced that it will use all available legal avenues, including disparate impact, to pursue lenders whose practices discriminate against consumers.

But any chatter that FAMC’s decision was related to investor issues or selling loans to Wells Fargo is not the case. (Remember that Wells has not made any comment about what lenders are required to do.  They have only stated publicly that they will continue to buy wholesale business via their correspondent channel.) FAMC appears to be doing this for safety. "In faithfulness to its mission, vision and value system, Franklin American Mortgage Company is constantly evaluating its operations, the mortgage industry as a whole, and the global business environment. As a result of these processes, FAMC has reached the conclusion that at this time, in order to maintain a viable presence in the wholesale mortgage channel it is necessary and prudent to make substantive changes to our Wholesale Lender Compensation Plan. Two key components of the new plan involve a shift to a nationally fixed broker compensation rate and the elimination of borrower-paid compensation. Franklin American Mortgage Company remains committed to the wholesale channel of the mortgage industry and will continue to work tirelessly to provide the high level of service to which our wholesale customers have grown accustomed; so that they may in turn, continue to provide significantly essential services to borrowers across the nation."

Once again, we are dealing with unintended consequences. Are borrowers better off with these changes in wholesale? A key issue is the DOJ’s role in this and other recent events. Does one hand of the government know what the other is doing? Did the DOJ’s statements on wholesale lending create a “disparate impact”? Disparate impact is now imbedded in Fair Housing. If there is to be no allowance for variable compensation on mortgages, i.e., the DOJ impact results in a fixed level of compensation, those harmed the most could be the low to moderate priced borrowers. And will this lead to setting fixed compensation levels for many other occupations? It is indeed a slippery slope.

On to some more generic news over recent times – they keep piling up.

At Flagstar, in response to a growing number of customer inquiries concerning the submission of loans that may have been initially targeted to Wells Fargo, Flagstar would like to clarify their position and remind customers that they can accept the submission of these loans to Flagstar provided they fit within the current guidelines. Effective immediately, for pipeline loans as well as new registrations, in accordance with a regulation issued by the Federal Housing Finance Agency on March 16, 2012 and codified at 12 C.F.R. Part 1228 (the “Regulation”), Flagstar Bank will not purchase any transactions where the property is encumbered by private transfer fee covenants.

GMAC spread the word that several conforming ARM products now permit assumptions. The loans may be assumed by a creditworthy borrower after the initial fixed-rate period. The product summaries have been updated to reflect this change: LPMI Conforming 5/1 LIBOR ARM (Y61), LPMI Conforming 7/1 LIBOR ARM (Y62) LPMI Conforming 10/1 LIBOR ARM (Y63).

At Chase, a new Assistance Request feature is available in ChaseLoanManager providing the ability to submit requests to Chase online eliminating the need to fax most requests. The Declined Condominium Project List and the Co-op Project List are now available online in the ChaseLoanManager Resource Center.

SunTrust removed the requirement for a renegotiated sales contract from the Interested Party Contributions Limits as previously announced. Fannie is updating DU for FHA and VA loans with multiple messaging changes. The Fraud and Collateral Risk Management Department at SunTrust Mortgage maintains a list of settlement agents who are ineligible to close loans, updated weekly. Correspondent lenders are to check the list when selecting a settlement agent. SunTrust Mortgage also maintains a list of ineligible appraisers and appraisal companies, updated as needed. Correspondent lenders must continue to check the list when selecting an appraiser. Because the lists of approved projects can change daily, SunTrust Mortgage, Inc. and Fannie Mae conduct regular reviews and can update frequently. This means it is important to check the most recent information before requesting approval.
 
Yesterday we learned that the housing sector hit a speed bump in June when the Census Bureau and HUD announced that sales of new single-family houses in June 2012 were at a seasonally adjusted annual rate of 350,000, unexpectedly down 8.4% from the revised May numbers. (It is still about 15% above last year’s level, and previous months’ numbers were revised higher.) “The median sales price of new houses sold in June 2012 was $232,600; the average sales price was $273,900.  The seasonally adjusted estimate of new houses for sale at the end of June was 144,000.  This represents a supply of 4.9 months at the current sales rate.”

But it was a yawner of a day in the fixed income markets, which closed nearly unchanged from Tuesday’s closing levels. And frankly, folks are happy to concentrate more on closing loans than on interest rate volatility. And we still have, of course, problems in Europe. Agency MBS sales were slightly above normal, per Thomson Reuters and TradeWeb, with originator selling totaling nearly $3.0 billion split 60/40 between 3.0s and 3.5s. (Note that with the Fed buying $1.2 billion that leaves $1.8 for others to soak up.) The 10-yr closed around 1.40%.

This morning we’ve had the always volatile Durable Goods for June. Expected slightly higher at 0.4% but down from +1.3% in May, it was much higher at +1.6% (mostly due to transportation). We also had Initial Jobless Claims (7/21), called lower and came in much lower dropping from a revised 388k down to 353k. We still have Pending Home Sales, and a $29 billion 7-yr note auction, ahead of us, but in the early going the 10-yr is up to 1.43% and MBS prices are worse about .125.

RETIRE WHERE?   Here are some of your choices, part 4 of 5:
You can retire to Minnesota where...  
1.  You only have four spices: salt, pepper, ketchup, and Tabasco.   
2.  Halloween costumes fit over parkas.  
3.  You have more than one recipe for casserole.  
4.  Sexy lingerie is anything flannel with less than eight buttons.  
5.  The four seasons are: winter, still winter, almost winter, and construction.

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog discusses the FinCen, SAR’s, and the impact on mortgage lenders. 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.

Rob

(Check out http://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx or www.TheBasisPoint.com/category/daily-basis. For archived commentaries, go to www.robchrisman.com. Copyright 2012 Rob Chrisman.  All rights reserved. Occasional paid notices do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)