Welcome to 12/12/12, the day (just like 10/10/10 and others) where our dates match the rest of the world's - many countries use day-month-year rather than month-day-year. In fact, the U.S. and Canada are the principal users of our date format – practically everyone else uses day-month-year.

Remember when credit unions were just...credit unions? CU’s have increased their mortgage lending substantially during the first nine months of 2012, originating 60% more first mortgages compared to the first nine months of 2011. Credit unions advertise that they often offer lower interest rates and fees than other financial institutions, and typically work with members on an individualized basis, offering closing cost assistance to their members or a credit at the settlement table. (Isn't that what brokers say?) Credit unions seem to offer every product that other financial institutions offer, and in addition, many credit unions offer their own loan programs to meet member needs. It seems that credit unions keep about 25% of their loans in their portfolio rather than selling them to investors, arguably allowing them to be more flexible with customers than non-depository lenders and reportedly offer individualized mortgage approvals, closing cost assistance, and low lender fees. If non-depository mortgage banks are worried about Costco, Wal-Mart, or PayPal entering the biz because of these great margins, the competition might be right down the street.

On the banking side, they’re continuing to look for personnel. Chicago’s Home State Bank is searching for underwriting and risk management personnel. “Take your career to the next level with Home State Bank, a profitable, 100-yr-old, federally-chartered community bank headquartered in Northwest Suburban Chicago with immediate openings for a Manager of Underwriting & Risk Management and a Senior Underwriter. These are hands-on, highly-visible roles created to accommodate ongoing mortgage growth in a dynamic, direct-to-agency, multi-investor environment backed by a successful, well-established bank.”  Must be a D.E. Home State is offering “highly competitive comp & benefits” and the employees will work from its operations center in Crystal Lake, IL. For more information and/or to apply online, visit www.homestbk.com  or contact Dave Impey directly at dimpey@homestateonline.com.   They’re interviewing now! 

Underwriters are in demand, and out in San Francisco, Bay Equity, a well-established mortgage bank (http://www.bayeq.com/) is growing and looking for experienced and detail oriented underwriters to join their team.  Additionally, Bay recently launched their new fully delegated jumbo loan program. It has taken off quickly and they are looking for Senior Underwriters to help them grow market share in this space. Bay Equity will consider remote underwriters as well as those who would prefer to work from one of their 6 operations centers located in San Francisco, Concord, Portland, Everett, Tacoma and Orange County.   If you are interested, please send your resume to lwoo@bayeq.com.

How much money do you have in the bank? (That was a rhetorical question - don't answer it.) In my travels, when I speak with underwriters, it seems that a large percentage of people out there are not only not putting aside money for retirement, but are more concerned about making their house payments. But there is a different demographic out there -  JPMorgan Private Bank plans next year to pursue clients it previously did not consider wealthy enough to draw its attention. The bank will try to attract individuals and families with $5 million to $30 million in investable assets. "We think it has been underserved for a long period of time, and with around 1.5 million households and $5 trillion in net worth, we think it's a spectacular growth opportunity," said John Duffy, CEO of JPMorgan Private Bank. Here is more if you'd like to read about the needy "underserved": http://www.fwreport.com/article.php?emailpaikert.news@gmail.com&idQ437

Staying on with the personal net worth theme, most retirees did not see this huge drop in yield (in the last few years) coming. First of all, retirement savings in this country are notoriously dismal. But let's say your parents save up $1 million over their retirement lives, and decide to invest their nest egg in the risk-free U.S. 10-yr Treasury note. Most, including me, think that $1 million is a lot of money, but your parents will only earn about $1,000 per month after tax on it!

Some portion of seniors with equity takes out reverse mortgages. With the withdrawals of MetLife, Wells, and BofA, the reverse mortgage industry has taken a hit when it comes to public perception, but loss of liquidity is the bigger issue.  Capacity has been reduced significantly, with a mere 18 Ginnie-approved HMBS issuers (only four of which are actively issuing), Urban Financial, and Reverse Mortgage Services holding down the fort.  Those last two issue more than 50% of HMBS, and after Knight Capital Group, which owns Urban Financial, nearly went under after a $440 million trading loss in August, there has been concern over what would happen if they too were forced to withdraw.  Other issuers could take on additional capacity, of course but absorbing $125 million of liquidity would be immensely difficult.  Losing a major issuer would present serious problems for closed-loan sellers without end investors in the interim, as it would likely result in a colossal amount of capital sitting on warehouse lines until the market’s capacity increased.

And the public sees both sides of the reverse mortgage question: are they good or bad? And they are also confronted with stories from publications like U.S. News about the drawbacks of the program: http://money.usnews.com/money/blogs/On-Retirement/2012/12/11/5-reasons-to-avoid-a-reverse-mortgage.

For the rest of us, income is gradually increasing, but not enough, many claim, on a relative basis.  While prices have risen incomes have stayed relatively flat.  So while companies are facing higher expenses for the cost of putting out their products they cannot charge more because consumers are not spending - and especially will not spend to purchase a higher priced good or because they’re nervous about Congress’ inability to address the looming fiscal cliff.  This has companies worried about their future markets, causing them to hoard cash rather than increase payrolls through raises or new hiring. For lenders, of course, profit margins are at record levels but expenses are high and money is being saved for future liabilities.

The Fed has stated that it will keep interest rates low for at least two more years. They will continue to be aggressive in support of the economic recovery. However, the Fed does not directly control long-term rates which determine the cost of home loans and even loans on automobiles. It can influence long-term rates through the purchases of government securities, and is indeed doing so. When the markets perceive that the recovery is picking up steam, it will react accordingly. The day of the release of positive employment figures, we saw long-term rates go up. That does not mean that the economy is out of the woods and that the increase was permanent. It was a reminder that when and if the economy gains strength all bets are off. The recent strength in the real estate market is one factor which can make that happen.

Meanwhile, investors, banks, agencies, and vendors continue to make changes to their guidelines and business models. Here are some to give you a flavor of recent trends.

Prosperity Bancshares ($13.7B, TX) will buy Coppermark Bancshares ($1.3B, OK) for $194mm in cash and stock or about 1.58x tangible book.

In Georgia, Ameris Bancorp ($2.9 billion in assets) has announced it will consolidate, close or sell at least 13 of its 66 branches as it seeks to reduce annual operating expense by approximately $12 million and improve efficiency.

Fifth Third has instituted temporary guidance for conforming loans on properties affected by Hurricane Sandy and has extended the maximum age of property valuation and underwriting documentation to 180 days.  This affects loans whose applications are dated before November 1st but have Note dates after November 1st and applies to appraisals, HVEs for Freddie, DU Refi Plus Property Fieldwork Waivers, AUS findings, credit reports, income documentation, and asset documentation.  Verbal Verifications of Employment and verifications of self-employed borrowers’ businesses are still subject to their respective existing requirements of 10 business days and 30 calendar days.

For retirement accounts on Fannie products, Fifth Third is requiring that 60% of the vested amount of an account less any outstanding loans must be factored into asset analysis.  If a borrower is at or above retirement age, 70% of the account can be used without incurring the usual 10% penalty.

Fifth Third is now permitting LPMI for Agency Super Conforming loans provided that the insurance is Single Premium LPMI provided by Radian Guaranty.  For the minimum credit score eligibility requirements and pricing adjustments, refer to the ratesheet.

Effective immediately, Fifth Third is considering title commitments to be valid for 90 days from the issue Date as defined by the date the commitment is completed and costs are incurred.  Ideally, this should be as recent as possible. And lastly it reminds clients that it will not purchase any loans with e-Signatures and/or disclosures that have been e-Delivered unless the Correspondent Underwriting Guideline Manual stipulates otherwise.  All 1003 and Residential Loan Applications must be signed by both the loan officer and borrower, and those marked “email/internet” are permitted only if they include both of these wet signatures.

California’s Mountain West Financial reminds brokers that they are required to submit full the full loan package and send out initial disclosures by December 6th in order to have their refinances fund for the month of December.  All refinance PTD conditions need to be submitted by December 12th and be signed off by the underwriting department by December 17th, and all documents must be signed on or before December 20th.  Loans whose documents are drawn in December have to fund by January 7, 2013 in order to avoid a full redraw.

Due to high volume and increased turn times, MWF’s AMC Mortgage Works will be applying a fee increase of $50 to all conventional, conventional non-conforming, and FHA appraisals. Properties with Unusual, Rural, Acreage, Complex, Waterfront, or otherwise abnormal designations will also incur an additional fee, which should be quoted directly from Mortgage Works.

Rate-wise, the markets continue to grind along, although Treasury rates have crept up. (Nothing warranting intra-day price changes, just a slow drift higher.) Agency MBS prices, however, have held in well, and are “tighter” to rate curve hedges. Traders report that the daily supply of securities being sold has been running around recent averages, which is being soaked up by the Federal Reserve purchases (primarily in Fannie 2.5’s and 3.0s in 30yr conventional space, which are the buckets that hold 2.75-3.625% mortgages).  By the way, the technical picture for Fannie 2.5’s has vastly improved over the last couple of weeks as Wall Street MBS dealers see a negative net supply in 2.5s; meanwhile, the Federal Reserve has increased its purchases in the coupon ($500mm last week).  There is even chatter/rumors about an announcement of additional MBS purchases (in additional to UST purchases) at today’s FOMC.

Today there is a “smorgy” of economic updates. We had the MBA’s weekly applications numbers. Refi’s just won’t stop! Applications were up over 6% last week, with refi’s shooting up 8% and even purchase applications up almost 1% - their third straight high point on the year. The refinance share of total mortgage activity rose to 84%. November Import Prices, expected to drop .5%, dropped .9%, and export prices dropped .7%. At 1PM the Treasury will auction off $21 billion of 10-yr notes. Traders, and those that set rate sheets, will be watching the conclusion of the 2-day December FOMC meeting, with the statement due at 12:30PM EST, a 2PM Summary of Economic Projections, and a 2:15PM post-game press conference with the one and only Fed Chairman Bernanke. With all this going on, the 10-yr. is sitting around 1.66%, up from Tuesday’s 1.65%, and MBS prices are worse a shade.

Advertising is a very, very tricky thing: http://gizmodo.com/5954764/samsung-suggests-you-make-and-share-sex-tapes-in-latest-ad.


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 some of the considerations facing the FHFA regarding Fannie and Freddie. 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 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.)