Jan. 14, 2013: Mortgage jobs; HARP petition; HARP & HAMP's impact on the market; has Fannie been pushing lender approvals, and if so, why
Rob Chrisman


Here’s a story from Ohio that LO’s in other states will find of interest: Ohio Creates Temporary Loan Originator License.” Last month, Ohio enacted a bill, S.B. 333, to allow the Division of Financial Institutions to offer a transitional loan originator license to assist an originator licensed by another state to transition to employment with an Ohio-regulated firm. The new license allows a transitioning out-of-state originator to originate loans on a temporary basis-120 days-while the originator completes the requirements of obtaining a state-issued annual license. A transitioning originator must have a sponsor that meets certain criteria and must pay a fee as set by the state regulator. In addition, the law directs the state regulator to adopt regulations allowing an originator from a federally regulated institution to obtain a temporary state license after federal law is changed to allow such transitional licenses. Not so fast, however, as the CFPB has interpreted current federal law to prohibit such transitional licenses. Here is more: http://www.legislature.state.oh.us/bills.cfm?ID=129_SB_333.


Lenders continue to expand! Residential Home Funding is hiring NMLS licensed Originators, Sales Managers, Team Leaders and Branch Managers. RHF (http://www.rhfbranch.com/), with headquarters in Parsippany, NJ, has been steadily expanding, and also has a need for staff underwriters, processors, and closing department personnel. If you are new to this industry or know someone who wants to make a transition, RHF has an in-house training facility. Check its website above for all of the licensed states or email Anthony Pepe at APEPE@RHFUNDING.COM for more information. All inquiries are held in strict confidence


And Colorado State Bank & Trust Mortgage Group is hiring several Mortgage Loan Originators and Sales Managers for various offices throughout Colorado.   CSBT is a subsidiary of BOK Financial Corporation (NASDAQ symbol: BOKF) a $27 billion financial holding company and has a history of providing banking and financial services to Coloradoans dating back to 1908. CSBT’s continued growth can be attributed to focusing on core objectives which includes investing in top talent, and LO’s can expect competitive pricing, local processing & underwriting, and niche products including 100% LTV’s with no MI, 80/10/10s & 97% LPMI.  Interested applicants should SVP, Gary Tackett at gtackett@csbt.com or visit its website at https://www.csbt.com/en/Other/jobs_frame.html.


I don’t know if this petition stuff works, but here is one: “Make a formal request to the FHFA to eliminate the securitization cut-off date for HARP eligibility and allow re-HARPing.” (We can imagine what investors, who purchased pools made up of HARP loans thinking they’d be on their books for a long time, have to say about this.) Here you go: https://petitions.whitehouse.gov/petition/make-formal-request-fhfa-eliminate-securitization-cut-date-harp-eligibility-and-allow-re-harping/BlPYbvZw.


“Rob, there is chatter out there that Fannie has been clearing its backlog of approvals in recent months. All kinds of companies are being approved. What do you hear about this?” I am hearing the same thing. Now for the rumors why this could be – for more questions you should ask your Fannie rep. Both Fannie and Freddie are very motivated by profits, just like any other company in a capitalist world. The question is, “If you are Freddie or Fannie, would you rather deal with 100 smaller firms, or 5 large ones and let those 5 deal with the 100 smaller lenders?” This is a very simplistic view, but stick with it for a bit. Personally I’d rather deal with fewer, larger counterparties, but diversification can be good. Fannie and Freddie both want market share, and if future market share is determined by having more clients, then it behooves them to approve as many as prudently possible. The two already have market share among the largest lenders and investors, so why not put smaller companies through their rigorous approval process now?


Things become more complicated. Keep in mind that when a lender is approved by Fannie or Freddie, that doesn’t automatically mean “full approval.” In Fannie’s case, not only are there potential sales caps in place, limiting annual volumes, but newly approved lenders will often only be able to deliver to Fannie’s cash window – they usually cannot securitize loans themselves. “So what?” you ask. Well, by forcing loans to be delivered to its cash window (to be immediately purchased through whole loan sales), Fannie can take those loans and securitize them. The advantage of that, of course, is that Fannie picks up the “specified” pooling advantages often mentioned by this commentary. There are price advantages for being able to slice and dice pools, filling some pools with loans with small balances/amounts, other pools with low FICO loans, still other pools with HARP refi’s that are going to be on the books for a long time and guaranteeing more predictable and often longer servicing income to whoever owns the pool.  Specified pooling is about getting paid higher by the Street for longer servicing cash flows, pure and simple.


In fact, a Credit Suisse research piece just mentioned, “Specified issuance exploded in 2012 with a more than 200% and nearly 500% increase in gross and net issuance over the past two-year average, respectively. This was driven by a massive pickup in HARP activity during the year. We note a significant issuance increase in the loan balance sector as well over this period. However, a closer look reveals that even this increase was driven by HARP activity. Based on Freddie Mac’s loan-level data, we find that all of the increase in net issuance for sub-150K loan balance paper in 2012 came from 80+ OLTV loans. Originators have been pooling eligible HARP-ed loans into loan balance pools, whenever possible, instead of MHA pools due to higher pay-ups on the former. We estimate that specified issuance should decline by roughly $100B in 2013. This is driven by an expected decline in HARP volumes as a result of the ongoing shrinking of the HARP-eligible universe. For instance, we estimate that the outstanding universe of FN/FH 105+ LTV loans was roughly $250B at the beginning of 2012. At a roughly 39 CPR 12- month voluntary speed (45 CPR overall speed), this contributed an estimated $96B issuance of CQ/CR/U6/U9 pools in 2012. However, as a result, the outstanding balance of this universe at the beginning of 2013 is reduced to $140B. This implies that even under a relatively flat prepayment rate assumption, the issuance of 105+ LTV pools should drop by roughly 50% in 2013. This analysis assumes a flat HPA. A rising HPA would only reduce this supply further.”


HARP, and other government-sponsored refi programs, is indeed impacting the market. In fact, more than six million mortgage modification and other forms of assistance arrangements were started between April 2009 and the end of November 2012. More than 81,000 loans were refinanced under the Home Affordable Refinance Program (HARP) in October, bringing the total to 790,600 since the beginning of 2012, per the government’s latest scorecard. More than 1.4 million homeowner assistance actions have taken place through the Making Home Affordable Program, while the FHA has offered more than 1.5 million loss mitigation and early delinquency interventions. As of November, more than 1.1 million homeowners have received a permanent modification through HAMP, saving approximately $544 on their mortgage payments each month, and an estimated $16.7 billion to date. In November, 77% of homeowners with eligible non-GSE mortgages benefited from principal reduction with their HAMP modification, and 87% of homeowners entering the program in the last two and a half years have received a permanent modification of their mortgage through HAMP. Over 70 percent of mortgages had interest rates above 4 percent in the fall, according to CoreLogic. Some of those borrowers would benefit financially from refinancing, given that the interest rate on fixed, 30-year loans is 3.4 percent.



Wells Fargo does its share of these programs, especially when the loans are already in their own portfolio, and the market has had some time to cogitate on Wells’ earnings. Wells Fargo reported $5.1 billion in profit for the fourth quarter, a 24% increase, and for the last 12 quarters profits at the bank have increased. Wells, like many other lenders have seen its revenue increase (“a rising tide raises all boats”), but it is instructive to dig into Wells’ numbers as they are indicative of the overall residential lending market: Wells Fargo, which dominates the market as the nation’s largest mortgage lender, notched $125 billion in mortgage originations, up from $120 billion in the fourth quarter of 2011, and fees from mortgages climbed nearly 30% from a year ago to $3.1 billion. Refinancing applications accounted for nearly 75 percent of that total. The big profit in the group came from the extra money Wells Fargo makes bundling the mortgages into bonds and selling them to the government. In the fourth quarter, the bank reported $2.8 billion of net gains on its mortgages activities, up 51 percent. And the spread between primary and secondary pricing is certainly helping Wells (and others): Wells Fargo’s gains from this industry-wide phenomenon totaled $10.3 billion in 2012, more than double the previous year. In the fourth quarter, Wells Fargo handled $125 billion of mortgage originations, up 4 percent from the previous year. But loan production was higher earlier in the year, peaking at $139 billion in the third quarter. At the same time, the Fed’s low rates are actually hurting other parts of the business: the net interest margin has eroded, and in the fourth quarter “The Coach’s” net interest margin dropped slightly to 3.56 percent, from 3.89 percent a year earlier.


But nothing lasts forever, trees don’t grow to the moon, and anyone who refi’s at 3.25% will probably not be doing it again in the near future. The Mortgage Bankers Association has forecast that banks will make fewer loans in 2013 than 2012, and then fewer again in 2014, with a drop in refinancings more than offsetting an increase in loans to purchase homes. Well's pipeline of applications for home loans that have not yet closed was $81 billion at the end of the fourth quarter, down from $97 billion at the end of the third quarter. Wells issued $125 billion in mortgages during the fourth quarter, compared with $139 billion in the third quarter. Wells CFO Tim Sloan said the bank made fewer mortgage loans in the fourth quarter mostly due to a decision to stop making loans through brokers (wholesale).


This week we can make up for the lack of scheduled economic news from last week. Maybe we’ll be some intra-day volatility? There is zip today, but tomorrow we have Retail Sales which will measure December’s total receipts of retail stores. (Consumer spending accounts for more than two-thirds of the economy so investors watch this indicator closely to get a handle on where the economy is headed.) Tomorrow we also have the Producer Price Index (PPI) which measures the prices of goods at the wholesale level. Remember when we cared about inflation? (Tomorrow’s December number is expected to show a drop of almost 1%.) On Wednesday, January 16th, we look forward to the MBA’s application numbers, the Consumer Price Index (CPI), the Industrial Production and Capacity Utilization duo, yet another house price index (NAHB this time), and the Fed’s Beige Book. Thursday we’ll have the usual Initial Jobless Claims, the Housing Starts and Building Permits duo, and some forgettable Philly Fed number.


On Friday the risk-free U.S. 10-yr T-noted closed at a yield of 1.87%; this morning, on no substantive news, we’re down to 1.84% and MBS prices have improved roughly .125 from Friday’s close.



I used to work in a fire hydrant factory. You couldn't park anywhere near the place.

Last week, I went to a furniture store to look for a decaffeinated coffee table. They couldn't help me.

What's another word for "thesaurus"?

When I get real bored, I like to drive downtown and get a great parking spot, then sit in my car and count how many people ask if I'm leaving.

When I was a kid, we had a quicksand box in the backyard. I was an only child . . . eventually.

I bought some batteries, but they weren't included. So I had to buy them again.

For my birthday I got a humidifier and a dehumidifier. I put them in the same room and let them fight it out.




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