Apr. 2, 2013: Mortgage jobs; Chase cutbacks; FHA MIP clarification; modified loan performance; thoughts on the future of securitization
Rob Chrisman



 

In 1981 Jimmy Carter handed the reins to Ronald Reagan. The prime rate hit 20.5%, and yes, people still bought houses. (It has been at 3.25% for the last four years.) Freddie and Fannie 30-yr net required yields were well into the teens. The Dow Jones was treading water around 900 (it is now around 14,500). 1981 was also the year that Dan Segersin, who runs correspondent lending in the Western Region for Wells Fargo, began working at Norwest  Bank, many years prior to its acquisition of Wells Fargo. I mention this because, after 32 years, last week Dan announced his retirement, slated for this summer. Congratulations to Dan and congratulations to the lending industry for having someone like Dan in it for so long. And yes, some folks actually do retire from this business prior to retirement age!

 

One place that Dan will probably not go after 32 years with Wells is JPMorgan Chase, who announced it will eliminate as many as 19,000 jobs in mortgages and community banking through 2014 as Chief Executive Officer Jamie Dimon trims expenses. Chase, with nearly 300,000 employees, will cut 13-15,000 jobs in its mortgage unit and 3-4,000 in community banking excluding home lending through the end of next year, the company said today in presentations on its website. Some will be redeployed, some will be let go: http://www.businessweek.com/news/2013-02-26/jpmorgan-expects-headcount-to-fall-by-about-4-000-this-year.

 

Some of those folks may apply to Envoy Mortgage, as it is now actively recruiting seasoned Regional Account Managers for positions across the country. Envoy has hired Todd Potter as SVP/National Sales Manager of the new Correspondent Lending Division, whose management team now has “over 300 years of experience” in the correspondent channel. “The strength of the organization and the technology of Envoy create an ideal opportunity to join a champion mortgage team leading the new era of lending. Find out more about the company at http://envoymortgage.com/, and to submit for the position, please email John Wood, VP of Human Resources, at jwood@envoymortgage.com. All resumes will be handled in complete confidence.

 

And if someone is looking for opportunities out in Northern California, I have been asked to help a Northern California retail mortgage lender that is looking for a branch manager to oversee branch operations, including a processing center and loan origination activities. The branch employs 75 loan officers and a 10-person processing staff, and has annual production of over $400 million. The candidate must have management and origination experience, strong organizational and communications skills, as well as a full understanding of today's origination and processing functions. Compensation is commensurate with experience. Submit confidential resumes to me at rchrisman@robchrisman.com.

 

Yesterday the commentary noted, “Every FHA lender in the nation knows that the monthly Mortgage Insurance Premium (MIP) for FHA will be increasing with all case numbers pulled after April 1, 2013. What perhaps fewer know is when borrowers are able to stop paying MIP. Currently if a borrower has a loan with a term greater than 15 years and the loan to value is greater than 78%, then they will have MIP for 5 years and must pay the loan down to 78% LTV based on the original sales price (unlike a conventional loan which will use current market value to determine LTV). After today, not only is the MIP going up, the amount of time the borrower has MIP is changing too. For loans with an LTV greater than 78% up to 90% LTV they will be living with MIP for 11 years. If the LTV is greater than 90% they are in for life of the loan (ouch). Bailing out of MIP using LTV is out - it will become strictly a function of time.” The MIP duration issue actually takes effect in June. So effective with case #’s starting June 3, 2013 is when FHA MI is no longer cancelled: http://portal.hud.gov/hudportal/documents/huddoc?id=13-04ml.pdf. The annual MIP assessment period will not change until case numbers ordered on or after June 3rd, per Mortgagee Letter 13-04.  Also effective with case numbers ordered that day, 15-year loans with a 78% or less LTV will also begin to carry annual MIP.  The rest of the MIP factor changes occurred yesterday, but we have a bit of a reprieve on the drop off periods. And thank you to all those who helped clarify this!

 

Hey, just because you modify a mortgage, and give the borrowers a new deal, doesn’t mean they’ll pay it. In fact, modified mortgages’ lack of performance is attracting some attention: http://www.reuters.com/article/2013/04/01/fitch-modified-mortgages-still-pose-cred-idUSFit65331520130401.

 

For trends in the secondary market, I received this note from Bob Davis, EVP of the American Banks Association. “Last week you reported claims by some that the Bipartisan Policy Center's Housing Commission report would deny secondary market access for smaller lenders. While I'm sure improvements can be made to any proposal, reading the report leads to the opposite conclusion. I think talking to BPC staff and consultants like Pam Patenaude and Kent Colton, to any of the stalwart commissioners like Nic Retsinas who produced the report and recommendations, or most other reliable analysts will reinforce that the report is smaller lender friendly. Sources and opinions aside, the BPC Housing Commission report speaks for itself. Details of the proposals for a single family housing finance system are on pages 50-79 of the report. Duties of the new Public Guarantor are listed on pages 56-58. One of those duties is as follows: ‘Ensure access to the government-guaranteed secondary market on full and equal terms for lenders of all types, including community banks, independent mortgage banks, housing finance agencies, credit unions, and community development financial institutions. The Public Guarantor must ensure that issuers of securities do not create barriers using differential guarantee-fee pricing or other means to unfairly restrict or disadvantage participation in the government-guaranteed secondary market.’”

 

Mr. Davis’ note goes on. “The Public Guarantor sets the rules for access and the types of mortgages that can be guaranteed. Does this sound familiar? Yes. Does the Public Guarantor need to issue the securities to ensure fair and equal market access? I think not. Consider the following. ‘Ginnie Mae neither originates nor purchases mortgage loans. It does not purchase, sell, or issue securities. Accordingly, Ginnie Mae does not use derivatives to hedge and it does not carry long-term debt (or related outstanding securities liabilities) on its balance sheet. Instead, private lending institutions approved by Ginnie Mae originate eligible loans, pool them into securities, and issue the Ginnie Mae MBS. These institutions include geographically diverse mortgage companies, commercial banks, and thrifts of all sizes, as well as state housing finance agencies.’ It is not an accident that former presidents of Ginnie Mae were among the BPC Housing Commission members, or that the recommendations bear similarities to existing government structures. The Public Guarantor would be a full faith and credit government institution that sets standards and controls that will govern the guarantee, the issuers and the originators, including proper pricing and access. There is no reason to believe that access to a secondary market backed by the Public Guarantor will be any less open than are Fannie Mae or Freddie Mac today.  Given the number of seller-servicers that have lost direct access to the GSEs since the crisis began, one might even expect a Public Guarantor to foster a more open market.

 

“Even as the BPC Housing Commission envisions a shift from the conservatorships to a Public Guarantor that will provide permanent and open market access to lenders of all types, it also calls for development of incentives to attract private capital and lenders to a large private housing finance market without government support. On page 51, immediately after calling for establishment of the new Public Guarantor, the Commission says: ‘The private sources of capital that are available today would continue in this new redesigned housing finance system. These sources of capital include a private secondary market for mortgages (private-label MBS without any government guarantee), jumbo loans originated and held in portfolio or sold by private lenders, adjustable-rate mortgages originated and held in portfolio by private lenders or sold into the secondary market, and other product offerings outside of the governed guarantee.’ Unless such a market can be encouraged to develop, the mostly all government market of today will continue forever. That is a result that both political parties and most market analysts reject. To be sure, we have a ways to go to shrink the footprint of government, reduce taxpayer exposure and create the sustainable and liquid mortgage markets that we want. Proposals with other features may emerge. However, we surely won’t get the progress needed if we can’t even understand and debate credible additions to the public discourse. Let’s encourage a more informed public debate started, to which your reports make important contributions.” Thank you Bob! (And by the way, the American Banks Association is holding its annual Real Estate Lending Conference in New Orleans April 10-12. Details are at http://www.aba.com/training/confernences/pages/REL.aspx.)

 

On to some recent bank M&A and investor news!

 

In M&A news, Heritage Financial Corporation has signed a definitive agreement to acquire Valley Community Bancshares, which is the holding company for Valley Bank of Puyallup, WA.  The acquisition, which is slated to take place in Q3 of 2013, will increase Heritage’s assets to $1.6 billion and expand its market share in the Puget Sound region.  Down in Georgia, HeritageBank of the South, for which Heritage is the holding company, has entered into a definitive whole-bank purchase with the FDIC to acquire Frontier Bank, a full-service bank headquartered in LaGrange.  HeritageBank of the South will acquire three branches between LaGrange and Auburn, AL, $224 million in deposits, and $111 million in loans.  Investment bank Keefe, Bruyette & Woods served as a financial advisor for both transactions.

 

Riverview Financial Corporation and Union Bancorp have announced plans to consolidate their holding companies and merge their bank subsidiaries, with the resulting bank set to operate under the name of Riverview Bank and its operating divisions of Halifax Bank, Marysville Bank, and Riverview Financial Wealth Management.  The combined assets of the two corporations are anticipated to be around $450 million as per financial advisor KBW.

 

360 Mortgage Group, LLC announced that any owner occupied purchase with a minimum 740 FICO up to a maximum 95% LTV will have no MI.  There is no price adjustment, no special program code and no other qualifiers.  Any loan closing on or after April 1st, meeting the above guidelines, has no MI regardless of what the AUS states.  Excluding My Community products, all conventional FNMA programs are eligible.  Brokers do not even have to request the NoMI product.  Any eligible loan will have MI waived off.  Existing loans in the pipeline are also eligible, no cancellation, resubmission or relock is necessary.  360 Mortgage continues to offer the full suite of FNMA products with no overlays or additional documentation requires.  Whether it's a 300% LTV HARP investment property with EA3 findings or a 60% LTV purchase we underwrite directly off the AUS.

 

Freddie Mac’s total mortgage portfolio continued to shrink in February, contracting at an annualized rate of 4%. February saw $43 billion in purchases and issuances, roughly unchanged from January and about 21% above last February’s $36 billion. But nearly $50 billion of business was sold or liquidated, resulting in a net $6.7 billion decrease. As of the end of February, the portfolio’s ending balance was about $1.94 trillion, down from $1.95 trillion previously. Single-family refinance-loan purchase and guarantee volume was $35 billion, representing 82% of total mortgage portfolio purchases or issuances. Relief refinance mortgages comprised about 30% of February’s total refinance volume based on unpaid principal balance. And single-family delinquencies declined, falling from a rate of 3.20% in January to 3.15% in February. The multifamily delinquency rate fell as well, dropping to 0.16 percent from 0.18 percent previously. Look at those multifamily numbers!

 

There just isn’t much going on with interest rates, so I am not going to waste your time. The 10-yr’s yield seems temporarily content around 1.84%, and the Fed and others continue to soak up the below-average mortgage banker selling nudging agency MBS prices higher/better by about .125. Today we’ll have the non-market moving Factory Orders number at 8AM MST, and we’re looking at an unchanged market from Monday afternoon in the early going.

 

 

Last year, I replaced, like, all the windows in my house with those expensive, double-pane, energy-efficient kind.

Today, I, like, got a call from the contractor who installed them.

He complained that the work had been completed a year ago. And I still hadn't, like, paid for them. OMG!!

Duuhhh…like…helllooOOoOooo…???  Just because I'm blonde doesn't mean that I'm, like, automatically stupid.

So, I told him just what his fast-talking sales guy told me last year -- that these windows would, like, pay for themselves in a year.

HelllooOOoOooo…???  It's been a year, so they're, like, paid for, I told him.

There was only silence at the other end of the line, so I finally hung up.

He never called back.

Poor guy…!!! I bet he felt like an IDIOT…!!!

 

 

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 Changes in FHA Loan Pricing Will Lead to Changes in Investor Demand." 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 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.)

 

 



                  










Copyright - Rob Chrisman