Mar. 18, 2013: Mortgage job; two Nebraska laws of note; world markets impacted & rates lower due to...Cyprus?
Benford's Law is not part of Dodd Frank. It states that leading digits (the number 8 in 8,456) are unevenly distributed. Benford found that one is the leading digit 31% of the time, two 17% of the time, three 12.5%, four 10%, five 8%, six 6%, and the other numbers 5% each. Authorities are using this information to "screen" for firms that cheat. (And you wonder what all those math majors do after college!) Speaking of big numbers, it is a real horse race between Chase and Wells Fargo. Friday was a tough day for JPMââ‚¬â„¢s shares, dropping 1.92%, but a good day for WFC which was +3.33%. (That all changed today, by the way, with the news from Cyprus ââ‚¬" see comments below.) Apparently Chase is battling Congress whereas ââ‚¬Å“The Coachââ‚¬Â raised its dividend and also reached $200 billion in market capitalization for the first time. (It varies daily, of course, but JPMorgan is around $190 billion.) In an unrelated, but very possibly, related news tidbit, Wellsââ‚¬â„¢ CEO John Stumpf was the highest paid chief executive of the major commercial banks, taking home $22.9mm in 2012. His base pay was $2.8mm, cash bonus was $3mm, pension gains were $3.5mm, and he got stock awards of $13.5mm. (My guess is the rumors that this puts him up with Wellsââ‚¬â„¢ top retail and correspondent producers are not true.)
Speaking of executives, top tier mortgage lender Freedom Mortgage Corporation is looking for a Regional Wholesale Operations Manager in its Minneapolis Region. Candidates should have 5 plus years operation management experience in wholesale lending. Please send resumes to Human Resources at human.resources@FreedomMortgage.com and information on Freedom Mortgage can be found at www.freedommortgage.com/ or https://www.freedomwholesale.com/wps/portal/wholesale/.
And through the hiring and firing that takes place weekly, the law, government, and the mortgage industry become more entwined all the time. And using the law, recently the commentary mentioned "stealing a house" in Florida. ("Adverse possession allows someone who openly maintains a property and pays its taxes to gain title to it. Title, escrow officers, and attorneys should pay attention.ââ‚¬Â) Brian Levy with Katten Temple wrote, ââ‚¬Å“Rob, The article you linked failed to mention it, but state law typically requires 15-20 years of actual ââ‚¬Å“openââ‚¬Â, ââ‚¬Å“continuousââ‚¬Â and ââ‚¬Å“hostileââ‚¬Â possession to adversely possess real property to be able to gain title (thereââ‚¬â„¢s lots of case law on what those requirements mean that title insurance people find interesting). Itââ‚¬â„¢s typically all or nothing too, so if you only do it for 19 years (in a state requiring 20) you get nothing. So, paying someone elseââ‚¬â„¢s taxes and squatting for a couple of years in their house is much more likely to just get you lighter in the wallet and in jail for trespassing. In reality ââ‚¬Å“actual, open, hostile, and continuous occupation typeââ‚¬Â facts used to obtain rights to otherââ‚¬â„¢s property seems to work better for boundary disputes and prescriptive easements, if at all. In any event, youââ‚¬â„¢ll want to consult a lawyer in your state to find out the exact requirements for adverse possession.ââ‚¬Â
Two Nebraska bills amend lender licensing rules: on March 7, Nebraska enacted two bills intended to amend and clarify requirements for installment loan brokers, payday lenders, mortgage bankers, and mortgage loan originators (MLOs). The first, LB 279 (http://nebraskalegislature.gov/FloorDocs/Current/PDF/Slip/LB279.pdf) makes nonsubstantive clarifications to the definition of a "loan broker" and narrows the exemption for accountants to certified public accountants only. The bill also authorizes the Nebraska Department of Banking and Finance to share examination reports and other confidential information with the CFPB and other state regulators. The second, LB 290 (http://nebraskalegislature.gov/FloorDocs/Current/PDF/Slip/LB290.pdf), removes many mortgage licensing requirements previously applicable to individuals and separately identifies MLO duties. Those duties include providing notification to the Department (i) within 10 days of events such as bankruptcy, criminal indictments, and suspension/revocation proceedings; and (ii) within 30 days of certain changes, including changes of employer and address. The bill also allows firms to electronically submit certain required reports and provides that the 120-day period for calculating abandonment of a license application runs from the date the Department sends the applicant electronic notice of deficient items. By state rule, both bills take effect three months after the end of the state's legislative session, which scheduled to conclude May 30, 2013.
Some think that the ââ‚¬Å“deed-in-lieu of foreclosureââ‚¬Â process is somewhat of a legal move, and starting earlier this month (3/1), Fannie Mae and Freddie Mac will allow homeowners to apply for a deed-in-lieu of foreclosure even if they have been making on-time payments. Until recently, Fannie and Freddie borrowers were only allowed to engage in a deed-in-lieu if they were 90 days or more delinquent. In some cases, homeowners were even encouraged to stop making mortgage paymentsââ‚¬"even if they could afford themââ‚¬"in order to qualify. (As a brief refresher, a deed-in-lieu of foreclosure is when a homeowner who can no longer afford their mortgage voluntarily gives back their home to the bank in exchange for having their mortgage debt wiped clean. While a deed-in-lieu of foreclosure has a negative impact on credit scores, it can be the fastest way to escape an unsustainable situation.)
To qualify, current homeowners must prove they are experiencing a hardship such as a job loss, serious illness, death of a co-borrower, or becoming a mortgage commentary writer, and must have a debt-to-income ratio of 55 percent or higher. The property must also be in good condition. ââ‚¬Å“With these changes, borrowers who have certain hardships but are current will be eligible for a mortgage release, also known as a deed-in-lieu of foreclosure,ââ‚¬Â says Andy Wilson, director of media and external relations for Fannie Mae. ââ‚¬Å“The reason we made these changes is that we want to have appropriate options available to homeowners who have a hardship or are having difficulty making their mortgage payments.ââ‚¬Â But Rick Sharga, EVP of Carrington Mortgage Holdings, says he doesnââ‚¬â„¢t expect a large number of homeowners to take advantage of the new plan because home prices are beginning to come back in many areas. He says homeowners will have to decide if they want to wait a few years for prices to improve or if they should take a hit to their credit now and move on.
Folks are wondering what to make of the conflicting headlines from last week which included, Biggest Banks See U.S. Home Prices Surging This Year, Home Repossessions Drop 29% to Lowest in U.S. Since 2007, U.S. Fed Buys $21.6 Billion of Mortgage Bonds, Sells $3.4 Billion, New U.S. Foreclosure Filings Rise in February: RealtyTrac, Mortgage Rates Appear Headed Up on Positive Economic Data, Servicers Complete 108,000 Loan Mods, Short Sales, Underwater Americans Skirting Default as HARP Use Rising, More Homeowners Need Housing-for-One Mortgages (houses for single or divorced people), Forecast: Home Building to Hit Highest Level Since 2007, Housing Heats Up, Still Far from Normal.
Virtually every economic report last week showed the pace of economic recovery gaining momentum, which has many forecasters wondering whether they need to ratchet up their forecast another notch. Retail Sales +1.1%? (Much of the increase was due to higher gasoline prices and higher building materials prices.) The Consumer Price Index +.7%? (Mostly due to gasoline.) So is the U.S. economy shrugging off the effects of the expiration of the 2 percent Social Security tax holiday, higher gasoline prices, and sequestration? Not really: economists say that the rise in the Social Security tax and spike in gasoline price falls most heavily on middle- and lower-income households, and many of these households only have so many ways to cut spending in the short term (like eating in restaurants).
But all this jabbering went out the window when Cypriot President Nicos Anastasiades said in a televised address that he has no practical alternative to applying a haircut to bank deposits as part of a ââ€šÂ¬10 billion rescue by the euro zone. As partial compensation for losses, depositors will receive bonds linked to natural gas revenue, he said. The euro zone agreed on Saturday to hand Cyprus a bailout worth 10 billion euros ($13 billion), but demanded depositors in its banks forfeit some money to stave off bankruptcy despite the risk of a wider run on savings. The eastern Mediterranean island becomes the fifth country after Greece, Ireland, Portugal and Spain (ââ‚¬Å“PIGSââ‚¬Â) to turn to the euro zone for financial help during the region's debt crisis. In a radical departure from previous aid packages, euro zone finance ministers forced Cyprus' savers to pay up to 10 percent of their deposits to raise almost 6 billion euros.
Cyprusââ‚¬â„¢ parliament needs to vote on it: without parliamentary approval, a haircut cannot take place. The deposit levy - set at 9.9 percent on bank deposits exceeding 100,000 euros and 6.7 percent on anything below that ââ‚¬" is scheduled to take place on Tuesday after a bank holiday on Monday. To guard against capital flight, Cyprus took immediate steps to prevent electronic money transfers over the weekend ââ‚¬" ââ‚¬Å“lock down!ââ‚¬Â Keep in mind that the countryââ‚¬â„¢s banking system is somewhat different than the United States. One way to think about it is banking size: in the United States, if our banks kind of equal the size of our economy, Cyprusââ‚¬â„¢ is 8x the size of its economy ââ‚¬" it has set itself up to offer offshore banking benefits.
But the news has rippled around the world: what if money in any bank anywhere was subject to a tariff? That is highly unlikely, but the news has given the financial press, and the markets, reason to move. To tax the bank deposits of savers sends an ominous message to the entire global investment community, and we need to consider what the governments of Europe have done. To be clear, they initiated a surprise assault on the precautionary savings of their own people. Such a move should send shock waves across the entire population of the developed world.
It has the potential to be big news, but letââ‚¬â„¢s come back to this country. Aside from that, the big story this week may be Wednesday's Fed meeting. Investors will be interested in the Fed's reaction to the recent strong economic data and whether it will affect monetary policy ââ‚¬" but donââ‚¬â„¢t look for any change. The most significant economic data will be the housing reports (Housing Starts & Building Permits tomorrow, Existing Home Sales Thursday). Leading Indicators, Jobless Claims, and the Philly Fed will also be released on Thursday. Budget talks also may be an influence on mortgage rates next week, as legislation is needed to fund the federal government past March 27.
But to the relief of any LO who didnââ‚¬â„¢t lock on Friday, or any hedger that didnââ‚¬â„¢t sell some MBS, rates have dropped due to the Cyprus uncertainty. Our 10-yr T-note yield, which closed Friday at 2.00%, is down to 1.93%, and agency MBS prices are easily .250 better.
Dead crow mystery solved
Researchers for the Kansas Turnpike Authority found over 200 dead crows near Topeka, KS recently, and there was concern that they may have died from Avian Flu. They had a Bird Pathologist examine the remains of all the crows, and, to everyone's relief, he confirmed the problem was definitely NOT Avian Flu.
However, he determined that 98% of the crows had been killed by impact with trucks, & only 2% were killed by an impact with a car. Kansas then hired an Ornithological Behaviorist to determine the cause of the disproportionate percentages for truck kills versus car kills.
The Ornithological Behaviorist determined the cause in short order:
When crows eat road kill, they always have a look-out crow in a nearby tree, to warn of impending danger.
His conclusion was that, while all the lookout crows could say "Cah", none could say "Truck."
If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog is how "Basel III Could be a Game Changer for Lenders and Servicers." 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 or to subscribe, go to www.robchrisman.com. Copyright 2013 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)