Oct. 23, 2012: Mortgage jobs; conference buzz; comments on gfees; how to pick a broker-dealer
little scoop from this conference in Chicago? Try this one: Wells
Fargo has added operational capacity to its current
operations centers to handle its correspondent business and
cut turn times. More than three hundred peopled are in the
process of being added to 2 of its 4 existing operations
centers. So much for those nearly daily rumors I am asked to
address about Wells shutting down correspondent. Wells even
adjusted some of its prices to some clients to help "pump up
the volume." Chatter is focused on quality control and its
costs, building capacity with all the cash that is out
there, quality control, compliance, QM, Basel III, and
investor gossip. Oh, and quality control and compliance.
Speaking of adding capacity, Parkside Lending,
LLC, announced the opening of a new Southern California
Operations Center, and is currently seeking to hire
Conventional Sr. Underwriters, Jr. Underwriters, QC
Staff, and Broker Service Representatives for its Laguna
Hills Operations Center. Parkside Lending, a wholesale lender
founded in 2004, is a FNMA direct lender/servicer based in San
Francisco. Parkside focuses primarily on A-paper, conforming
and non- conforming conventional loans, “offers exceptional
customer service and leading edge technology.” Interested
individuals can contact Parkside Lending at www.parksidelending.com
or contact Debbie DeFlores directly at firstname.lastname@example.org.
this interesting note from a correspondent AE at a large
aggregator, showing some competitive, hard-knocks
"Rob, that was great news for us when Fannie sent the cap
letters to many of its clients. When the lenders run up
against their counterparty limits, they'll come right back to
us, adding to our servicing, boosting our profits, and having
to take whatever margins we offer. And by the way, we’re all
waiting for Freddie’s letter – what do you hear on that?"
(Answer – not much, although my opinion is that either it will
come soon or that the FHFA is using this to establish more
parity between the two.)
note I received recently from a mortgage originator in San
Francisco on the gfee increases. "My opinion is that we should end
FNMA and FHLMC and the government guarantee of mortgage debt.
As you know, I have been pointing out for years that too
little attention is paid to the fact that the mortgage mess
was created in part and the demise of the GSE was almost
entirely due to the National Homeownership strategy demanding
that the GSE’s buy bad loans. Taxpayers are paying the bill
for the expensive meal which politicians thought served their
purpose. The increase in gfee is moving conforming loans
toward where they would be if there was no government
guarantee. I believe that is the idea behind this – slowly
move up conforming rate/price to eliminate the decrease in
rate that goes with taxpayer guarantee. We should preserve
several things which FNMA has: their underwriting guidelines
as a basis for defining a “qualified residential mortgage” and
their DU/DO technology. Wall Street can do the rest. When
there was a healthy jumbo market jumbo mortgages were within
0.5% of conforming."
And this observation: "The CFPB wants originators to charge a
flat fee for all mortgage originations, but it allows
Fannie/Freddie to charge variable fees to lenders who then
pass along that fee to borrowers via originators. Meanwhile
the lenders charge varying rates to borrowers via originators
on MBS that they hedge with slower price declines when MBS
prices jump and faster price increases with MBS prices fall.
So in the end the borrower and the originator pay the price
for the regulators' decisions. But as long as the consumer is
Occasionally folks want to see a list of acronyms used by
broker dealers, Realtors, and mortgage bankers. There are too
many! And similar to how no one fully understands the tax
system, no one is sure exactly how many financial regulatory
entities are out there. The Securities and Exchange
Commission (SEC), Commodity Futures Trading Commission (CFTC),
the Office of the Comptroller of the Currency, the Federal
Deposit Insurance Corporation (FDIC), and the Department of
Justice (DoJ) are probably the best known, but there is a
plethora more. The Fed, for one, has been granted additional
powers and responsibilities under Dodd-Frank, including an
obligation to pour money into the CFPB. Consider as well that
most entities have sub-departments that act independently of
each other - a bank recently found itself being
investigated by three of the SEC’s twelve separate offices.
Throw in the parallel departments in state governments, and it
becomes clear that financial institutions face something of a
legal minefield. For lawyers, it’s something of a golden
age. Here is more, courtesy of The Economist: http://www.economist.com/node/21564565?fsrcscn/tw/te/pe/lawanddisorder.
some commentary on recent broker-dealer activity from Mike
Ehrlich with Thomson Reuters. “Many of my clients/prospects
routinely ask me to recommend broker-dealers for their TBA
(“To Be Announced”) hedges. I usually don't like to make any
connections unless I know a good deal about the bank (what
their capital situation looks like, how much they are doing in
origination, percentage of refi business versus purchase, and
so on). I also seek to build out relationships with the broker
dealers and learn about what types of mortgage banks they are
willing to accept as counterparties, i.e., capital
requirements, whether they are approved to do AOTs,
origination volume of bank they seek to trade with, margin
requirements and thresholds....and then the subjective things
such as customer loyalty/relationships.”
continued, “Many of my clients use a third party for their
hedging and may take their guidance as to whom they should
trade with, but lots of politics come into play here. Some of
the broker dealers also prefer not to do business with some of
the hedging firms that will call 5, 6, or even 7 broker
dealers in search of the best price. My clients like to have
the ability to see where Tradeweb was quoting a security price
at any point during the day so they can match their trade
ticket time against the time-stamp for all historical TBA
quotes on my platform. This allows them to see how much of a
spread their regional broker dealers are pricing them versus
the Tradeweb price around the time of their trade.”
Lastly, “One common theme is the desire of my clients to trade
with a large regional bank/broker-dealer or a primary dealer.
Many will not have that opportunity, as they will never
make it past the credit departments “litmus test.”
Broker dealers such as Bank of NY and Daiwa seem more willing
to take on clients with capital as low as $5-10 million than
someone like RBC which requires $100m in capital. What
questions should I be asking to the BDs I meet with? What
should I ask my clients about their existing relationships?
What role does the TradeWeb electronic execution system play
in all of this as only mortgage banks with multiple primary
dealer relationships can benefit from this trading platform
(in terms of electronic execution)?” (If you’d like to ask
Mike more about TBA limits, broker dealer information, or the
markets, contact him at email@example.com.)
Time for a little investor, lender, and training news,
although not necessarily from here in Chicago! As always, for
full details read the bulletin, but these will give you a
taste of things.
Pinnacle Mortgage has updated clarified its trust fund
disbursement policy for conforming loans as well as manual
underwriting and appraisal order date policies for FHA loans.
Guidelines on thermal certification and continuity of
obligation for USDA loans, disaster area inspections and
income and asset documentation for Enhanced DU Refi Plus
loans, and fund sources for Homepath loans have also been
updated. Pinnacle has updated the Underwriting Guideline
Matrix for second home and investment properties and no longer
allows property sale commission as a source of funds for
Pinnacle Plus loans.
For Tier 3, 6, and 7 Conventional loans, PHH Mortgage
updated its underwriting policies on cash-out refinancing,
various sources of income, and HUD area median family income
limitations. Changes have also been made to Conventional
Conforming P&I LIBOR ARM, Conventional Conforming Plus
ARM, MyCommunityMortgage, HomePossible, and Conventional
Conforming Plus fixed-rate products in anticipation of the
integration of DU Version 9.0 on October 20th.
San Francisco-based Parkside Funding has just rolled
out Park Xpress, which allows clients to submit certain
refinance loans to an “Xpress Lane” for accelerated
underwriting. In order to qualify, refinances must be
Conforming single property owned Wage-Earner transactions that
have received an Approve/Eligible from DU (LP or manually
underwritten loans will not be accepted).
Following Freddie’s announcement that it will now allow debt
ratios over 50 on HARP loans, United Mortgage
introduced a new HARP 2.0 product that permits LTVs over 105%,
unlimited CLTVs, and EA-1, -2, and -3 DU/LP findings.
The FHA is hosting a webinar on HUD’s REO disposition
program with a special focus on underwriting and appraisal
requirements. Suitable for a wide variety of real estate
professionals, the training will discuss borrower incentives,
repair escrows, and the Good Neighbor Next Door program.
Register at http://www.visualwebcaster.com/FHA/89713/reg.html.
USDA has announced that FY2013 funds are now available for
both purchase and refinance transactions.
As a reminder, while the VA maximum entitlement is $104,250 in
the majority of counties, properties in high-cost areas may be
eligible for bonus entitlement. Veterans with full
entitlement living in high-cost areas are eligible for
entitlement equal to 25% of the county maximum; however, the
VA entitlement for any given loan must be manually confirmed,
as previous use, multiple veterans, and the property’s
location can all affect the amount. Note as well that VA
loans may exceed the published county maximum provided that
the sum of the down payment/equity entitlement is at least 25%
of the sales price or appraised value.
has updated its Loan Originator Compensation policy to state
that borrower-paid compensation is not allowed to exceed the
Flagstar-paid total compensation amount. Flagstar-paid
compensation schedules have been limited to a maximum of 325
bps plus an optional flat fee, and clients are permitted to
determine their percentage of the loan amount in bps within
this framework. Clients who currently have a compensation
schedule that exceeds the 325 bps maximum must enter a new one
into the system and should be aware that they may be required
to provide a written explanation and/or documentation that
supports their stated flat fee amount. All compensation
schedules should account for Flagstar’s high-cost, federal,
state, local, and fair lending tolerances.
Things seem to be pretty quiet in the market place. The
10-yr closed at 1.80%, and in residential MBS-land capital
markets & secondary folks could well be accused of being
on holiday with the MBA conference their focal point out of
Chicago this week and originator selling well under its normal
pace at roughly $1 billion all day. With no real news, I won’t
waste your time talking about the markets – but today could be
another quiet day.
A nice, calm and respectable lady went into the pharmacy,
walked up to the pharmacist, looked straight into his eyes,
and said, "I would like to buy some cyanide."
The pharmacist asked, "Why in the world do you need cyanide?"
The lady replied, "I need it to poison my husband."
The pharmacist's eyes got big and he explained, "Lord have
mercy! I can't give you cyanide to kill your husband, that’s
against the law? I'll lose my license! They'll throw both of
us in jail! All kinds of bad things will happen. Absolutely
not! You CANNOT have any cyanide!"
The lady reached into her purse and pulled out a picture of
her husband in bed with the pharmacist's wife.
The pharmacist looked at the picture and replied, "You didn't
tell me you had a prescription."
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 looming fiscal cliff brought on
by Washington DC. 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.