Oct. 23, 2012: Mortgage jobs; conference buzz; comments on gfees; how to pick a broker-dealer
Rob Chrisman

Wanna 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 debbied@parksidelending.com.


How about this interesting note from a correspondent AE at a large aggregator, showing some competitive, hard-knocks capitalism? "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.)


Here's a 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 protected….!"

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.


And here’s 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.”


Mike 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 michael.ehrlich@thomsonreuters.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.

As part of Fannie’s Loan Delivery October 2012 Release, which was implemented on the first of the month, several system updates will go into effect on November 26th.  Fannie is holding webinars on October 18th and 30th that will explain the upcoming changes, the registration info for which can be found at: http://cl.exct.net/?qs3fb90744d783d1887e732349937dd50bed427c3b450a9e826e33a32d7fddf761.

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.


The 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.


Flagstar 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."


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 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.




(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 Chrisman LLC.  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.)


Copyright - Rob Chrisman