Apr. 26, 2013: The pricing on Redwood's latest deal; a gaggle of vendor, investor, agency, and seminar updates
I receive a fair number of questions regarding Fannie Mae. These range from “Is Fannie going to be around in 6 months?” to “I have a borrower who wants to do a cash-out refinance on a 2 bedroom yurt in a vineyard on 12 acres – will Fannie do this loan?” Well, you won’t need ol’ Rob to act as an intermediary for long! Starting Monday Fannie is rolling out a web site for folks who want to ask questions – think of it as a Fannie chat room. The site will be ___________. (The blank will be filled in Monday – little point in jumping the gun.) Seriously, the intent is not to dwell on underwriting questions but instead to cover industry-wide topics of strategic interest and create a dialogue on things of importance to a wide range of readers (HARP, delivery limits, the new rep and warrant framework, etc.). I am sure that the agency relationship managers from the big banks will be watching the web site closely to see how, and the type of, the information flows.
Flipping over to the non-agency sector, uh oh: is the demand for “private label,” nongovernment-backed residential mortgage securities dropping, or is the supply increasing? Bloomberg reports that, “Yields on $397.3 million of top-rated securities sold yesterday by Redwood Trust Inc. were 175 basis points more than benchmark swap rates, up from 170 basis points on bonds it sold earlier this month and 97 basis points, or 0.97 percentage point in January. Sales this year of home-loan bonds without government backing have already surpassed the highest annual total since the debt sparked the global financial crisis.” Here is the story: http://www.bloomberg.com/news/2013-04-26/investor-passion-cooling-for-private-mortgage-securities.html.
What does this Redwood Trust price action mean for the average guy on the street? In simple terms, investor demand helps drive rates, as does the supply: if no investor wants to own a security at a certain price and yield, the price drops (and the yield goes up) until an investor wants to own it. So with these (basically) jumbo securities, we’re seeing the supply increase. On top of that we may be seeing a slight loss of appetite by investors. For those setting prices for jumbo loans, and those helping determine gfee levels for agency loans, this kind of information is critical.
There is too much conference, vendor, agency, and investor news to ignore it. As always, with underwriting changes, it is best to read the full notice, but these will give you a flavor of the trends.
The Maryland Mortgage Bankers Association will be hosting its annual conference on May 9th in Columbia, MD. The conference includes panels on a variety of topics, including strategies for purchase business, referral sources marketing agreements, and approaches to QM. For more information, go to https://netforum.avectra.com/eweb/StartPage.aspx?Site=MMBA&WebCode=HomePage.
In the “vendor space”, California’s CoreLogic announced that it had acquired Case-Shiller from Finserv, Inc. To be honest, I didn’t even know that “Case-Shiller” was a separate company – shows how much I know! Most folks know Case-Shiller from their reporting of price data that has a two month lag: the Indices track home price changes in one group of 10 metropolitan areas and a second group covering those and 10 additional areas. The 10-City and 20-City indexes are also combined into a composite index. Both Case Shiller and CoreLogic use the "repeat sales" method for index calculation, analyzing data on single-family properties that have two or more recorded sales transactions.
WFG Lender Services has acquired Kansas-based mortgage technology company Valutrust Solutions, allowing it to offer appraisals in all 50 states as well as a full array of mortgage-related services, including collateral review, flood certifications, 4506 tax returns, and closing services.
Software provider ValuTrac has partnered with Platinum Data Solutions to provide single end-to-end appraisal quality verification and management technology that will combine the ValuTrac Pro and Platinum RealView platforms. “The technology is fully customizable and lets user manage workflow, ensure compliance, and mitigate risk all in one.”
Wells Fargo correspondent reminds sellers that they must begin providing 2012 tax return transcripts for all loans closed on or after June 15th for them to be considered eligible for purchase. For borrowers that have filed extensions, Wells requires evidence in the loan file that the extension was filed, a 2012 Tax Transcript showing “no record of return filed,” a 2011 transcript, a current paystub, and a 2012 W-2. Self-employed borrowers need to supply a 2011 transcript and P&L for 2012, while retired borrowers need to provide transcripts even if they were not required to file.
PennyMac has revised the maximum net price for Jumbo 15-Year Fixed transactions such that loan amounts of $1 million and under are subject to a cap of 102.00 and loan amounts over $1 million are subject to a cap of 101.75. Jumbo 5/1 and 7/1 ARMs of $1 million or under are capped at 101.75; loans over $1 million are capped at 101.50.
Tired of this talk about vetting closing agents? Check out one marketing site: www.ihatesecuresettlements.com
MSI has announced that loans locked under its 5/1 ARM product are eligible for DU underwriting only, regardless of when they were locked or registered. Jumbo 5/1 ARMs are not affected.
Effective immediately for all Conventional loans, MSI has begun accepting properties up to 20 acres so long as the property is residential, value is not assigned to the “excess” property, and comparables with similar size are included in the appraisal.
MSI has added guidance on relocation company involvement for Conventional and government purchases that requires borrowers to provide the complete agreement that ties them to their employer and the relocation company. In order to eliminate the departing property PITI in the qualifying DTI, the agreement must specifically state the buy-out terms and deed transfer and stipulate that the relocation company is responsible for payment, and MSI must be supplied with evidence from the internet that the company is legitimate. In cases where the relocation company is acting as the seller, the deed must transfer at closing from the original seller with the POA granted to the company, and the full agreement must state why the corporation is the property seller and grant Power of Attorney to act on the seller’s behalf.
Affiliated Mortgage is now allowing condo purchases in Florida to be locked under its Conventional Conforming Fixed, DU Refi Plus, Conforming High Balance Fixed, and Conforming LIBOR ARM products. The subject property must be owner-occupied and part of an existing condo project, and all loans are subject to a maximum LTV of 75% and must be underwritten by DU.
Plaza Home Mortgage has made several changes to its HARP products, including raising the maximum LTV from 105% to 125% for owner-occupied and second home transactions. Transactions with LTVs up to 125% require a FICO score of at least 680 and 50% DTI, are restricted to one unit for second homes and four units for primary residences, and must be Conforming balances. For transactions with LTVs up to 105%, the minimum FICO has been lowered from 680 to 620 for DU Refi Plus loans, and high balance 2-4 unit properties are now eligible for DU Refi Plus.
Bay Equity has rolled out its Open Access, DU Refi Plus, and LP High Balance products, all of which are available to lock. HARP programs allow unlimited LTV/CLTVs; owner-occupied, non-owner occupied, and second homes; and credit scores as low as 620 for LTVs up to 105%. LP High Balance transactions permit blended ratios for non-occupant borrowers, credit scores down to 620 for primary 1-unit residences, and cash-out up to 75% for primary residences.
Genworth has redesigned its Commitment/Certificate of Insurance with the intention of making it easier for customers to understand the terms of their mortgage insurance. The updated certificate features several new data fields, including DTI, loan purpose, and submission method. In addition, clients are now able to print their own copy directly from the Genworth website at https://miservicing.genworth.com/.
The Tennessee Department of Financial Institutions has revised its pre-licensure education requirements, which now stipulate that anyone pursuing licensure complete three hours of Federal Law, three hours of Ethics, ten hours of General Electives, and two hours of TDFI-Defined Electives. The Nebraska Division Banking & Finance is also requiring an additional two hours of NBDF-specific education, along with the Vermont Department of Financial Regulation. NMLS has been notified of the changes, all of which take effect on July 1st.
Manhattan Capital, in conjunction with the CFA Society of Los Angeles, is hosting a mortgage and MBS boot camp on May 16th and 17th. Participants will get an overview of MBS market logic, product descriptions, pool creation, and trading on day one before moving on to prepayments, mortgage credit, and structured agency and non-agency MBS on day two. Private equity associates, fixed income traders, secondary markets associates, accounting professionals, and regulators are all encouraged to attend. To find out more and to register, contact Bill Berliner at firstname.lastname@example.org.
Law firm Ballard-Spahr will be hosting a webinar on regulatory changes affecting lender-placed insurance on May 29th. The training will cover recent changes to the National Flood Insurance Program, Dodd-Frank revisions to RESPA, the likelihood of future CFPB action, class action litigation pertaining to force-placed insurance, and insurance-related risk management. To register, go to http://www.ballardspahr.com/en/EventsNews/Events.aspx
There just isn’t much going on in the markets, at least until this morning. The only thing exciting about yesterday was that it was the day before Friday. The usual folks (mortgage banks, banks) were selling the usual things (residential agency 3% MBS containing 3.25-3.75% 30-yr loans) and the usual buyers (the Fed, insurance companies, pension funds, and hedge funds) were buying them. The Fed continues to buy $3 billion a day. At the end of the day MBS prices were unchanged, which meant that they haven’t done much all week, and the 10-yr closed at 1.71%.
This morning we had some exciting news with the initial report on first quarter GDP at 5:30AM PST. The consensus called for an impressive 3% growth from +0.4 percent in Q4, but it only came out at +2.5%. The consumption index was strong, however, but nonetheless the headline number was weak. And a weak economy tends to nudge rates lower. (Later this morning we’ll see the final read on April Consumer Sentiment, expected higher to 73.2 from the mid-month report of 72.3.) The weaker-than-expected GDP number has pushed rates lower, and the 10-yr is currently at 1.68% and MBS prices are better by .125-.250.
(Warning: parental discretion advised.)
Last week, we took some friends to a new restaurant and noticed that the waiter who took our order carried a spoon in his shirt pocket.
It seemed a little strange.
When the busboy brought our water and utensils, I observed that he also had a spoon in his shirt pocket.
Then I looked around and saw that all the staff had spoons in their pockets. When the waiter came back to serve our soup I inquired, “Why the spoon?”
“Well,” he explained, “the restaurant's owner hired Andersen Consulting to revamp all of our processes. After several months of analysis, they concluded that the spoon was the most frequently dropped utensil. It represents a drop frequency of approximately 3 spoons per table per hour. If our personnel are better prepared, we can reduce the number of trips back to the kitchen and save 15 man-hours per shift.”
As luck would have it, I dropped my spoon and he replaced it with his spare. “I'll get another spoon next time I go to the kitchen instead of making an extra trip to get it right now.” I was impressed.
I also noticed that there was a string hanging out of the waiter's fly.
Looking around, I saw that all of the waiters had the same string hanging from their flies. So, before he walked off, I asked the waiter, “Excuse me, but can you tell me why you have that string right there?”
"Oh, certainly!” Then he lowered his voice.
“Not everyone is so observant. That consulting firm I mentioned also learned that we can save time in the restroom. By tying this string to the tip of our you-know-what, we can pull it out without touching it and eliminate the need to wash our hands, shortening the time spent in the restroom by 76.39%.”
I asked quietly, “After you get it out, how do you put it back?”
“Well,” he whispered, “I don't know about the others, but I use the spoon.”
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.
(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.)