Feb. 14, 2013: Mortgage jobs; finance industry & cybersecurity; QM's impact on volumes 7 years from now; who owns 10,000 houses?
Rob Chrisman

While I sit here kicking myself for not owning the stock in catsup maker Heinz (up 20% this morning because of being purchased by Berkshire Hathaway), I managed to remember that it is Valentine’s Day. What is more romantic, really, than a happy household? Well, when you work for the Census Bureau, romantic households are not enough – it is more interesting to segregate the income of all those households. The New York City suburb of The Bridgeport-Stamford-Norwalk, Conn. (metropolitan area) has the highest concentration of high-income households. The prize for the lowest percentage of households having high income goes to two metro areas named Danville (VA and IL) with only 1% of households having high income. By the way, the report defines high income as being in the top 5% of national income distribution, which is an annual household income of at least $191,469. Here you go: http://www.census.gov/prod/2013pubs/acsbr11-23.pdf.


Lots of folks think Tucson is pretty romantic – it is the “sunniest” city in the U.S. Tucson’s First Credit Union (AZ’s first credit union, founded in 1929) is seeking a Mortgage Loan Officer at its Tucson, Arizona branch. “Proactively sell mortgage loans and cross sell other products and services. Attract new loans through personal sales efforts, community involvement and referrals from inside and outside of the credit union.  First Credit Union offers a professional, friendly, and cohesive working environment while offering competitive pay and superior benefits!”  If interested, send a confidential resume to Debra Janusee at debra.janusee@firstcu.net, and visit its website at www.firstcu.coop.


In neighboring California, Orange County’s Metropolitan Home Mortgage is searching for a Mortgage Lock Desk/Secondary Market Specialist. Responsibilities include daily loan pricing which “consistently positions Metropolitan Home Loans to offer competitive rates while managing associated risks,” review and confirm loan locks with appropriate end investor and loan originator within stated timeframes, manage delivery dates, and reconcile investor fundings. Experience with loan pricing engines such as OB, Mortech, Loan Sifter, etc., a plus. Metropolitan Home Mortgage has been in business nearly 20 years, and is a HUD approved FHA direct endorsement lender as well as an approved Fannie Mae seller servicer. Inquiries and confidential resumes can be sent to Chris Weir at CWeir@mthm.com.


Do you rent? Own your own place? Maybe have a 2nd home, or a rental? Well, the founder of Public Storage has 10,000 houses! And when you throw a fund that invests state oil royalties that have financed annual dividends for Alaska residents since 1982, well, you have quite a story from Bloomberg: http://www.bloomberg.com/news/2013-02-13/billionaire-hughes-chasing-blackstone-as-u-s-rental-king.html.By the way, this story by Heather Perlberg and John Gittelsohn points out that B. Wayne Hughes is a sharecropper’s son. “Hughes, 79, has purchased about 10,000 properties through his American Homes 4 Rent, making the Malibu, California-based firm the second-biggest owner of single-family rentals after Stephen Schwarzman’s Blackstone Group LP. Hughes is using $600 million from the Alaska Permanent Fund Corp. and other fundraising to buy real estate, mostly at foreclosure auctions, according to Paul Saylor, chairman of CS Capital Management Inc., who advises the Alaska fund…The Alaska Permanent Fund’s joint venture with American Homes 4 Rent has spent $750 million to purchase about 4,500 of Hughes’ 10,000 single-family houses, according to Michael Burns, chief executive officer of the $44.8 billion Alaska fund. The American Homes 4 Rent venture should yield unleveraged returns of 6-7% from rents, before home prices and rents rise, according to Burns. By comparison, high-yield, high-risk company debt, or junk bonds, are yielding about 6.6 percent.”


President Obama signed a long-anticipated Executive Order, “Improving Critical Intrastructure Cybersecurity” which directs the federal government to share cyberthreat information with the owners of systems that are critical to the country's infrastructure. The order also requires government to work with businesses to develop baseline cybersecurity best practices that private industry may voluntarily adopt. Law firm Ballard Spahr observes, “While the Executive Order is not geared toward general commercial enterprises, private industry will be affected. Within 150 days of the release of the Executive Order, the Homeland Security Secretary shall use a risk-based approach to identify critical infrastructure—even infrastructure owned by private industry—where a cybersecurity disruption could reasonably result in "catastrophic regional or national effects on public health or safety, economic security or national security." The financial services sector is specifically mentioned in this Executive Order in several sections. The Executive Order designates the Treasury Department as the industry's sector-specific agency "responsible for providing institutional knowledge and specialized expertise as well as leading, facilitating, or supporting the security and resilience programs and associated activities" of this sector. The industry lobbied for the Treasury Department, instead of the Department of Homeland Security, to fulfill this function, given Treasury's existing financial services knowledge base…Private lawsuit and government regulatory action liability will be a heavy concern and a disincentive for industry to share voluntarily any threat information with the government and other businesses.” Here is the link to the actual order: http://www.ballardspahr.com/~/media/Files/Alerts/2013-02-13-cybersecurity.pdf.


Speaking of the President, we’ve all had time to ruminate on the State of the Union Address, and here is Central Coast Lending’s take on the housing angle of the speech: http://www.centralcoastlending.com/2013/02/ccl-analysis-breaking-president-obamas-state-union-comments-housing-market/.


Boy, I sure am glad we’re refinancing everyone* last year and this year, because after that, per CoreLogic, we’ll be down 60% in volumes due to QM & QRM restrictions – but the risk will be down 90%. And don’t forget we’ve got 7 years to change it. CoreLogic says about 60% of loans written today would not be acceptable under the finalized rules for a qualified mortgage (QM), and the anticipated rules for a qualified residential mortgage (QRM), after analyzing 2.2 million loans written in 2010 to determine what percentage of them meets QM and QRM guidelines. The firm chose 2010 because underwriting trends during that year because it believes they are quite similar to today’s. QM rules would eliminate about 48% of today’s mortgage originations, and when the QRM (with a 10 percent down payment requirement) is added to the equation, about 60% of today’s loans would be eliminated – but remember that we don’t have the QRM standards yet. “The combined impact of QM and QRM is that only 25 percent of purchase originations would meet the eligibility requirements of the QM rule’s safe harbor,” according to CoreLogic. And let’s not forget that for the next seven years, loans that meet the underwriting requirements of the GSEs and the Federal Housing Administration (FHA) are exempt from the new guidelines. “The irony of the exemption is that it reinforces the role that the GSEs play in the market, making it harder to enact GSE reform,” CoreLogic stated in its report.


* After some slicing and dicing of refi data, Freddie Mac observed that 27% of borrowers who refinanced in Q4 2012 chose to shorten their loan terms. According to the GSE's Quarterly Product Transition Report, 69% kept the same term as the loan that they had paid off. In addition, borrowers who lived in lower-priced metros last year were generally more likely to shorten their term compared to borrowers in high-cost markets.


On to some MI, investor, and aggregator chatter!


First, a clarification from a note yesterday: Genworth USMI is not a new Genworth unit – its IPO was 9 years ago. But more importantly I wrote, “Genworth has rolled out its ‘Simply Underwrite’ guidelines…Depending on the origination and institution type, the new guidelines consolidate several of the existing overlays into one national underwriting standard for DU- and LP-approved loans…” The way the sentence is written makes it seem the new guidelines vary depending on origination model or institution type, when the changes eliminated previous guidelines that had different rules based on several factors including those mentioned, into one set of underwriting guidelines that apply to all lenders, regardless of institution’s size, whether it’s a correspondent lender, credit union, or mega-bank, etc. It is a significant distinction.


There is a lot of chest thumping over 2012 results. One came from pricing engine Optimal Blue which spread the word that, “For 2012, we achieved our goal of 99.999% accuracy: 821,000 locks, $194 billion in lock volume, and only 16 errors.” On the banking side, the FDIC reported that for the 3rd quarter of 2012 institutions under its regulatory umbrella had, “Net Income of $37.6 Billion Is Highest in Six Years, higher revenues, lower loss provisions combined to boost earnings, twelve failures being the fewest since Q4 2008, insured deposits grew by 2.3%, DIF reserve ratio rose 3 basis points to 0.35 Percent, and they had $1.5 trillion temporarily insured in non-interest-bearing transaction accounts. And Texas’ PrimeLending was ranked #4 nationally in units for purchase business - congrats: http://bizbeatblog.dallasnews.com/2013/02/primelending-is-no-4-in-originating-home-sale-loans-nationwide.html/.


Was last year the glory year for the lending industry? In an interview Wells Fargo CFO Tim Sloan said mortgage lending volume will likely decline as refinancing of existing mortgages slows and isn’t offset by mortgages for home purchases. As you would expect, any investor in any bank that has a huge mortgage influence is, or should be, concerned. During an investor conference, Sloan said the San Francisco-based bank has a “good opportunity” to refinance eligible homeowners in its $1.9 trillion mortgage servicing portfolio, Reuters reported.


Franklin American has updated its policy on refinances that include real estate taxes in the new loan amount that are coming due, pending payment, or past due to allow the inclusion of delinquent taxes in the new loan amount on cash-out transactions. For VA products, FAMC is now allowing veterans to receive cash back for legitimate pro-rated real estate tax credits when taxes are paid in arrears and they are paying their tax escrow out of pocket.  VA appraisal guidelines have been updated as well to allow appraisal transfers/reassignments so long as they are UAD compliant.  Effective for all FHA, USDA, and VA products, the requirement to check the loan processor, officer, and underwriter against HUD’s Limited Denial of Participation and General Service Administration’s Excluded Party lists has been removed. 

Affiliated Mortgage is requiring that all delivered loans that close on or after February 15th have Flood Certificates that carry Life of Loan coverage as per recent regulatory changes.


Clearpoint Funding is now offering DU Refi Plus products with a variety of amortizations and more streamlined income documentation requirements.  Maximum DTIs are now available per DU recommendations, and Property Inspection Waiver recommendations are available without having to resubmit the case file using DU’s estimated value.


We’ve seen rates creep up in the last couple days. Heading into yesterday, U.S. fixed income prices were under pressure due to some decent Italian auctions and higher UK inflation expectations, and it carried right through to the $24 billion 10-yr auction. (The auction, by the way, did not go particularly well, and we have $16 billion of 30-yr bonds today.) And then we learned that Retail Sales for January increased +.1%, their third straight monthly gain and are up 4.4% from a year ago. Maybe the consumer is alive and well?! By the end of Wednesday current coupon agency MBS prices were worse about .250 in price, and the 10-yr closed at 2.02%.


Today we’ve had Initial Jobless Claims for last week which came out showing a surprising drop of 27k down to 341k, much lower than expected. Falling, falling – the labor market recovery is slow but it continues. Jobs and housing, housing and jobs… early on the 10-yr is nearly unchanged at 2.02% as our agency MBS prices.




Remember when we were young? Life was so much simpler...

Symptoms and Diagnosis:

1. Skippy heartbeat when you think of him/her.

Symptoms then: Love

Diagnosis now: Ventricular fibrillation and Myocardial Infarction.

2. Restless trembling of hands, feet and other body parts.

Symptoms then: Love

Diagnosis now: Parkinson's Disease

3. Constant smiling.

Symptoms then: Love

Diagnosis now: Bell's Palsy

4. Absent mindedness, inability to focus on tasks at work or at home.

Symptoms then: Love

Diagnosis now: Early Onset of Alzheimer's Disease

5. Weakening of knees and bursts of energy when he/she calls or visits.

Symptoms then: Love

Diagnosis now: Multiple Sclerosis

6. Inability to stop thinking about her.

Symptoms then: Love

Diagnosis now: Obsessive Compulsive Disorder

7. Bruising on neck and other tender areas.

Symptoms then: Love bites.

Diagnosis now: Leukemia

8. Insomnia.

Symptoms then: Love

Diagnosis now: Benign Prostatic Hyperplasia

9. Feeling that you can smell/hear/feel her when not in her presence.

Symptoms then: Love

Diagnosis now: Schizophrenia

.......Ah, how life has changed!



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(Check out http://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx or www.TheBasisPoint.com/category/daily-basis. For archived commentaries or to subscribe, 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.)




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