Apr. 30, 2013: Mortgage jobs; organization's roles in LO comp developments - give us clarity! A change to Florida's foreclosure process?
Rob Chrisman


A while back a loan officer told me, “Money can’t buy you happiness, but poverty can’t buy you anything.” This particular LO went on to say that 2012 was the best year of her life – a tough year to follow. As expected, mortgage origination volume slowed down a bit in the first quarter, with the usual suspects holding the bulk of market share. According to data from Inside Mortgage Finance, originations totaled about $500 billion in Q1, down 4.8 percent quarter-over-quarter (from $525 billion) as most lock desks already figured. Down for the quarter, but certainly up versus last year for most lenders (as an industry the first quarter of 2012 saw $420 billion). Bank of America and JPMorgan Chase both recorded gains in originations last quarter, while Wells Fargo saw a dip (but still, per the publication, had a 22% market share). Chase had an 11% market share, and Quicken Loans and Bank of America were tied at about 5% of the market each. And it doesn’t take much of a drop in Wells’ business to be spread around and give a lot of servicing-retained lenders cause for optimism.


And companies are indeed expanding. San Francisco’s Pacific Union Real Estate is seeking a president for its in-house mortgage operation. The candidate must be dynamic team leader, motivational with people, and accomplished in pipeline management. A proven track record, exceptional leadership, and competitive approach to business are required. San Francisco Bay Area candidate preferred – exceptional references required. Pacific Union (http://www.pacunion.com/) has 2013 potential of $550 million in originations, and a three year target at $1 billion in origination. Send cover letter and resume to president@msploan.com.


And I have been asked to help a national mortgage consulting firm who specializes in placing distressed loans to the secondary market who is seeking seasoned Account Executives. The position offers the opportunity to enjoy the values of working from your home. The company assists mortgage companies, banks and credit unions with liquidating their unsalable loans, either agency eligible (loans that have an AUS approval or are GNMA-insured that violated an aggregator’s overlay or had a subjective interpretation of value or income that disagreed with the originator’s) and true scratch and dent loans. The company is seeking current or recent correspondent AEs with 3+ years of experience, who can bring a book of business with established relationships and with a working knowledge of GSE guidelines and with basic RESPA and REG Z knowledge. Please submit your resume to me at rchrisman@robchrisman.com.


Innovation among vendors appears to be alive and well, as does taking customer surveys. Have you ever read reviews of hotels on Trip Advisor or product reviews on Amazon?  90% of homebuyers look online prior to buying a home according to Trulia.com and 72% say they trust online reviews as much as personal recommendations.  Now there is a mortgage specific site that will let your customers rave about the great service you provided: http://www.rateyourlender.com/. Check it out or email Theresa Angelo at tangelo@rateyourlender.com for more info.


Lenders in the Sunshine State know what HB87 is. The Florida House voted overwhelmingly Monday to speed up the residential mortgage foreclosure process, with the writer of the bill saying her bill preserves due-process rights for distressed homeowners while trying to stimulate Florida's real-estate market by getting foreclosed property "back into the stream of commerce." Before Florida loan servicers celebrate, however, they should know that HB 87’s fate is not certain: the Senate is considering similar legislation as Florida lawmakers face a Friday deadline to pass bills in their 60-day session. The legislation would make banks prove in more detail that they own a mortgage or explain why they can't prove ownership, but creates a process for others besides mortgage-holders to ask the court to speed up foreclosure cases. In addition, it would reduce the statute of limitations, or amount of time, for banks to go after foreclosed homeowners on deficiency judgments — from five years to one year. Deficiencies are the difference between the money obtained from selling a foreclosed home and what the original homeowner still owes on it. And the measure also would allow senior, or semi-retired, judges to hear foreclosure matters to relieve the backlog of cases.


Yesterday the commentary mentioned the ability for the FDIC to sue bank consultants. I received this note: “Rob, you should have also mentioned recent developments at the OCC. A couple weeks ago the Office of the Comptroller of the Currency asked lawmakers for the power to issue sanctions directly against independent contractors, who are often hired by a bank under an enforcement action. As you might imagine, this effort to gain enforcement authority over bank consultants has sparked objections from contractors who argue the agency's move threatens their independence. The American Banker reported that, ‘Such a move would expand the OCC's power to penalize or ban any bank consultant, including lawyers and auditors, at the agency's discretion. But many consultants say that won't necessarily fix problems at banks and will spark other issues…The OCC has already said that it is reviewing the current process with banks and consultants after regulators scuttled the independent foreclosure review in favor of a $9.3 billion settlement in January. The OCC required banks to hire outside consultants to review loan files, a process that proved lengthy and expensive….’The OCC would welcome a legislative change in this area that would facilitate our ability to take enforcement actions directly against independent contractors that engage in wrongdoing - such a legislative change would be useful not only with respect to the use of independent contractors in an enforcement context but also, and perhaps more importantly, in cases where a bank has chosen to outsource significant activities to an independent contractor.’ But consultants say the OCC already has significant power over a bank's relationship with an independent contractor, making more enforcement authority unnecessary.’ Consultants also say if there are deeply-rooted concerns at the OCC with the work being performed at the bank on the advice of an independent firm; it's ultimately up to bank's management to stay in compliance.”


LO comp is still a confusing issue two years after the CFPB’s mandated a major change in the way loan officers are compensated. I received this note: “I was talking with a correspondent lender who told me that if you work as a Loan Officer for a mortgage brokerage company and you are getting paid a salary plus bonus that the max bonus a broker can pay is 10% of the loan officers’ annual salary. He said it just came down, have you heard about this?” I have not heard that, nor, in recollection, have I heard anything about a 10% rule. But honestly, I lose track of “Proposed Rules,” “Final Rules,” “Amended Final Rules” and so on.


The problem is, of course, that lenders across the nation hired attorneys to look at the same rules, and those rules can be interpreted differently depending on how aggressive the lender wants to be. The intent is to not have loan officers steer borrowers to certain products or programs. For example, I know that “point banks” are pretty much history, especially for those who shy away from attracting attention. The CFPB is attempting to clear things up on compensation, so hopefully it doesn’t muddy the waters even further. “We are amending Regulation Z to implement amendments to the Truth in Lending Act made by the Dodd-Frank Act. The final rule implements requirements and restrictions imposed by the Dodd-Frank Act concerning loan originator compensation; qualifications of, and registration or licensing of loan originators; compliance procedures for depository institutions; mandatory arbitration; and the financing of single-premium credit insurance. The final rule revises or provides additional commentary on Regulation Z’s restrictions on loan originator compensation, including application of these restrictions to prohibitions on dual compensation and compensation based on a term of a transaction or a proxy for a term of a transaction, and to recordkeeping requirements. The final rule also establishes tests for when loan originators can be compensated through certain profits-based compensation arrangements. At this time, the Bureau is not prohibiting payments to and receipt of payments by loan originators when a consumer pays upfront points or fees in the mortgage transaction. Instead the Bureau will first study how points and fees function in the market and the impact of this and other mortgage-related rulemakings on consumers’ understanding of and choices with respect to points and fees. This final rule is designed primarily to protect consumers by reducing incentives for loan originators to steer consumers into loans with particular terms and by ensuring that loan originators are adequately qualified.”


The CFPB goes on to give us that the effective dates for the rule. “The amendments to ยง 1026.36(h) and (i) are effective on June 1, 2013. All other provisions of the rule are effective on January 10, 2014.” All the industry wants is clarity, and an even playing field, and the MBA is on top of it. The Ohio Mortgage Bankers Association wrote, “Recently OMBA Executive Director Marianne Collins and OMBA Treasurer Susan Stevenson, along with a group of lenders and MBA staff, met with key officials at the Consumer Financial Protection Bureau regarding the final rule on the Qualified Mortgage (QM). The main purpose of the meeting was to discuss the requirement to include certain items in the 3% limit on points and fees. “The items of concern are as follows: Loan Officer Compensation. The concern is that those lenders that pay higher compensation to loan officers will be at a competitive disadvantage, even when the rate and closing costs are exactly the same in both instances. Those loan officers that are on a sliding commission scale, based on volume of loans closed, will have difficulty determining the number to use in the calculation. Also, some lenders will be forced to use lower paid, inexperienced loan officers in order to keep the number as low as possible. The reasoning behind including the loan officer compensation is perplexing, given the fact that it has no effect on the borrower's rate and costs.”


Lender Compensation to a Mortgage Broker.  A retail lender charges a retail price and gives a wholesale price to the broker. After adding compensation the broker gives the consumer a retail price. It seems extremely unfair to the mortgage broker, when all terms to the borrower are equal, that the broker's loan will have higher points included in the calculation. Again, the inclusion of this fee has no effect on the consumer. Fannie Mae Loan Level Price Adjustments. These fees are a requirement of the GSE's, and not retained by the lender. Two loans at the same interest rate can result in one being a QM and one not being a QM, based on characteristics of the loan. In many cases lenders would be forced to raise the rate to the consumer, in order to keep the points and fees under 3%, in loans with characteristics that require the add-ons. How is that protecting the consumer? And Affiliate Fees. Lenders that own title companies will have to include the title company's fees in the calculation, even if the cost may be lower to a consumer than going to an outside title company.”


“We are also concerned about the validity of the APOR calculation, due to the fact that the survey upon which the APOR is based understates true market conditions, resulting in a smaller number of loans legible for inclusion in the safe harbor. While in Washington several members of the OMBA visited members of Congress to ask for their support of The Consumer Mortgage Choice Act (H.R. 1077), a bipartisan bill which eliminates the above fees from the points and fees calculation.”


And for anyone who wants a refresher on CFPB LO comp rules, here you go: http://www.consumerfinance.gov/regulations/loan-originator-compensation-requirements-under-the-truth-in-lending-act-regulation-z/.


The news out yesterday was not enough to move the markets much. And anyone “hoping” for inflation were sorely disappointed (again) when the Producer Price Index came in lower than expected (only +.2%, less income and more spending, and the savings rate was 2.7%). Sluggish economies around the world, combined with the Fed’s QE3, mean that rates will stay low for a very long time – probably easily into 2014. But on the mortgage side, with rates near their all-time lows, investors in residential MBS are a little worried about prepayments/early-pay-offs, and the Fed has increased its buying of Fannie 2.5% securities (containing 2.75-3.25% mortgages). By quittin’ time the 10-yr was sitting at a yield of 1.67% - that is a long time to tie up $1 million of one’s money and only make $16,700 per year – and MBS prices were better by less than .125.


It’s a new day, and rates are actually lower. We had the Employment Cost Index for Q1 today (+.3 versus +.4 in the 4th quarter), and the Case-Shiller index with its two month lag, the Chicago PMI, and Consumer Confidence, but the bulk of the data starts tomorrow with ADP, ISM & the FOMC meeting, a key ECB rate decision, Jobless Claims, and finished off by the employment data on Friday. (Expectations for Non-Farm Payrolls seem to be around +125k, and a small uptick to 7.7% unemployment.) The 10-yr is down to 1.65% and MBS prices are better/higher by “a couple ticks.”



It is well documented that the average age of folks in the mortgage biz and real estate industry has been steadily increasing. Here is a 90 second ad (yes, an ad) dedicated to turning back the clock: http://www.wimp.com/thebabies/.



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.


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