Jan. 5, 2013: QM right 'round the corner; HR survey from the CFPB; Fannie MBS developments; a few upcoming events & training sessions
Rob Chrisman

Yes, the Girl Scouts of America has gone hi-tech in its sales effort. (Every year I buy several boxes of thin mints, put them in the freezer, believing that I am going to enjoy them throughout the year while others have blown through theirs. But just knowing they’re in the freezer, I always fail to ration them out for myself.) Forgetting the fact that girl scouts have reduced the number of cookies in each box to keep the price the same to the consumer (CFPB spoiler: the GSA is transparent about it), I anxiously await the sales season. And to find out when they are rolled out in your zip code, here you go: http://www.girlscouts.org/program/gs_cookies/faq.asp

On to something perceived as less fun. News about QM, expected to be announced by the CFPB in the second week in January, is "hotting up." Here's one opinion piece from the NYT: http://www.nytimes.com/2013/01/05/opinion/new-mortgage-rules.html?_r0. Insiders say that the rules for originating mortgages suitable for sale in the secondary market won’t be as onerous as they could have been, although there will be some changes.

And from here on out we may hear about the CFPB final rules in a different way. An insider reports, "Final rules have always been officially "issued" when they are published in the Federal Register. The CFPB is now saying that their final rules will now be "issued" upon the earlier of its posting to their website or when published in the Federal Register. This is a significant departure from customary practice and will accelerate effective dates as rules are typically published in the Federal Register weeks after agency issuance. Perhaps we are seeing the CFPB trying to meet their January 21st deadline which is quickly approaching, hence this new change..."

And for those HR managers out there looking for survey questions for their employees, you can obtain some tips from the CFPB's employee satisfaction survey: http://files.consumerfinance.gov/f/201212_cfpb_annual-employee-survey.pdf.


The volatility in rates this week has impacted the market in several ways. Lock desks were slow anyway, without an inordinate number of locks coming in. And those originators that didn’t react to the volatility with a “knee jerk lock” after the Fed’s announcement were rewarded with an improving market late Friday. And we were reminded that with the Fed soaking up all the MBS out there, mortgage rates are artificially being held low – what the Fed giveth the Fed can taketh away, and just the reminder of that was enough to spook the markets.


There have been some developments in the agency security market, especially on the Fannie security side of things. These are important to know, since without securitization and investors for agency or non-agency product, if all that could be originated was portfolio product we would definitely see much higher rates. And as we know, currently about 90% of the loans being produced are agency loans, and good originators like to know what becomes of the loans they originate. Certainly, on the non-depository side, with their NMLS numbers attached to every loan, LO’s production can be tracked by investors.


Fannie announced a tool for investors to “further inform market participants about the following aspects of our Single-Family MBS: How data flows from lenders to our disclosures used to value MBS; strategic improvements that we have made in an attempt to ensure data used by market participants is reliable; and what investors should do if they have questions about disclosure regarding a specific pool.” Here are the full details: http://www.fanniemae.com/resources/file/mbs/pdf/mbsenger_1112.pdf.


Fannie also issued information on its “Majors” program. “Fannie Majors are multiple-lender Fannie Mae mortgage-backed securities (‘MBS’) comprised of current production mortgage loans, including 40-, 30-, 20-, 15-, or 10-year fixed-rate loans; 10/20 or 15/15 interest-only loans; high balance loans, and/or loans with a loan-to-value ratio greater than 105%. When lenders deliver mortgage loans into a Majors pool, they receive a proportionate amount of the issued MBS based on the unpaid principal balance of the mortgage loans that they contributed to the Majors pool.  Lenders can deliver mortgage loans into a Majors pool when they otherwise may not have the number of mortgage loans necessary to satisfy the minimum requirements for the creation of a single-issuer MBS pool.

“Recently, we have observed a lender preference for the delivery of mortgage loans into Majors pools, even when the loans being delivered could be used to create a single-issuer pool.  It has come to our attention, through anecdotal evidence, that lenders believe that the delivery of mortgage loans with less desirable characteristics into Majors pools is an acceptable execution strategy.  Fannie Mae wants to reiterate that the Fannie Majors program is intended to create pools with diverse characteristics and to help provide MBS execution to smaller pools of loans, and is not intended to be a means for lenders to avoid creating single-issuer pools.  

“Any lenders intending to deliver a significant volume of mortgage loans into a Majors pool should contact the Fannie Mae Capital Markets Sales Desk (800-752-0257), in advance of delivery, to discuss this execution strategy.  Please note that the Sales Desk may request that a lender deliver a representative sample of mortgage loans before accepting a large delivery of mortgage loans into a Majors pool.  In addition, please be aware that Fannie Mae may be contacting select lenders to educate them on the goals and purpose of the Fannie Majors program.”


On the other hand, the jumbo market is alive and well. As a recent example, Titan Capital Solutions (Denver) introduced its jumbo program and became a jumbo conduit. Titan Capital Solutions is a correspondent jumbo investor serving select bank and non-bank partners. Titan entered the market as a mid-sized shop, with scope and aspirations far larger. “Having already achieved a national presence, Titan’s objective is to support the vitality and expansion of a reformed, perhaps totally reframed, secondary market.” (To lead its sales efforts, Titan Capital Solutions recently selected sales veteran Joel Veenstra as its national sales manager).  For more information on the program, visit Titan's website at www.titancapitalsolutions.com or contact Joel Veenstra at joel.veenstra@titancapitalsolutions.com.


Following the GSEs’ recent announcement about potentially recapturing premium pricing for loans that pay off within 120 days of settlement, Wells Fargo has amended its Early Payoff Event of Default and Remedies policy to recapture above par premium pricing.  If a loan is paid off within 180 days of purchase, the seller will be required to reimburse Wells for above par premium pricing if Wells is billed by the Agencies or private investors.  This affects all loans purchased after December 31, 2012.


Wells is now allowing sellers to submit extension requests for Conforming conventional loans affected by the pricing changes implemented back in September.  Requests may be submitted via www.wellsfargofunding.com.

Fifth Third reminds all correspondent lenders that they must be signed up for the Secure Documents Exchange program by January 11th, as it will no longer be possible to email documents directly after that date.  The web-based portal, implemented in conjunction with Wolters Kluwer, will be used for all new submissions, underwriting conditions, appraisals, closed packages, and funding documents, while the delivery method for post-closing trailing documents will remain unchanged.  Fifth Third also reminds lenders that it won’t permit E-Signatures or E-Delivery for documents in loan packages and that all initial 1003 applications require wet signatures from both the loan officer and the borrower.

Kinecta Federal Credit Union has lowered rates across the board for its Jumbo offerings, improving rates by -0.25% for 3/1 and 5/1 products and -0.125% for 7/1 ARMs, 10/1 ARMs, and 15 and 30-year fixed products.  DTI limits have also been updated for Jumbo ARMs with LTVs up to 90%; see the Wholesale Product and Eligibility Matrix at https://www.kinectaxchange.org/wholesale/wholesale_mortgage_matrix.pdf for details.


MGIC has updated underwriting guidelines for purchase, rate/term refinance, and construction permanent transactions to require fixed rates/payments if the LTV is over 95%.  Two-unit properties are subject to a no financed mortgage insurance requirement and  2/1 maximum buydown, and Home Improvement seconds must satisfy the requirements for the payoff of a non-purchase money subordinate lien.  For primary residence loans with payoff of non-purchase money subordinate liens, MGIC does not allow financed MI or temporary buydowns and only permits fixed rates/payments.  All ARM purchases, rate/term refinances, and construction permanent transactions on second homes are subject to a maximum LTV of 85%.

Further MGIC underwriting updates prohibit balloon mortgages, require a minimum of four credit references for non-traditional credit borrowers, and limit the age of documentation for new and existing construction to 120 days.  ARMs are subject to a 400bps margin maximum, and for financed MI, the LTVs cannot exceed the maximum LTV for the loan product.


In training and events news, the Mortgage Bankers Association of New Jersey will be presenting a webinar on the new requirements for third party service providers on January 9th.  The program will provide an overview of the CFPB’s compliance requirements for lenders, strategies for implementing policies and procedures, striking the right balance in terms of due diligence, contractual agreements, and ongoing monitoring.  MBA-NJ, New Jersey Association of Mortgage Bankers, Mortgage Bankers Association of Pennsylvania, and Pennsylvania Association of Mortgage Bankers members are eligible for a discounted rate.  To register go to http://events.r20.constantcontact.com/register/eventReg?llrngb5z8dab&oeidka07e6p8hlco2c7a74dc&oseqa02abvgz75rk1h

As Richard Cordray embarks upon his second year as director of the CFPB, Ballard Spahr presents a January 9th webinar that looks back over the Bureau’s activities in 2012 and discusses what financial service professionals might expect in 2013. The webinar will focus on origination and servicing regulation, examinations of financial institutions, enforcement, fair lending, disparate impact, third-party servicing, the current arbitration study, and which industries may be subject to supervision under “large participant” rules in the near future.  Register at http://www.ballardspahr.com/eventsnews/events/2013-01-09-happy-anniversary-director-cordray.aspx.


The New Mexico Mortgage Lenders Association will be hosting its monthly luncheon at the Albuquerque Country Club on January 10th.  The focus will be on homebuilding and construction, and members may attend at a discounted rate.  To register, go to http://nmmla.com/ai1ec_event/nmmla-january-luncheon/?instance_id„.


(Parental discretion advised.)
I was a very happy man. My wonderful girlfriend and I had been dating for over a year, and so we decided to get married. There was only one little thing bothering me...It was her beautiful younger sister.
My prospective sister-in-law was twenty-two, wore very tight miniskirts, and generally was bra-less. She would regularly bend down when she was near me, and I always got more than a nice view. It had to be deliberate because she never did it when she was near anyone else.
One day her "little" sister called and asked me to come over to check the wedding invitations. She was alone when I arrived, and she whispered to me that she had feelings and desires for me that she couldn't overcome. She told me that she wanted me just once before I got married and committed my life to her sister.
Well, I was in total shock, and couldn't say a word.
She said, "I'm going upstairs to my bedroom, and if you want one last wild fling, just come up and get me."
I was stunned and frozen in shock as I watched her go up the stairs. I stood there for a moment, then turned and made a beeline straight to the front door. I opened the door, and headed straight towards my car.
Lo and behold, my entire future family was standing outside, all clapping!
With tears in his eyes, my father-in-law hugged me and said, "We are very happy that you have passed our little test. We couldn't ask for a better man for our daughter. Welcome to the family."
And the moral of this story is:

Always keep your condoms in your car.


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 role of the IRS and REMIC’s in the current credit crisis. 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 2013 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.)

MBSenger Nov 2012


Copyright - Rob Chrisman