I just read that last year 4,213,157 people got married. I don’t want to start any trouble, but shouldn’t that be an even number? While we’re gossiping about numbers, Kit Crowne with Right Trac Financial in CT writes that Thucydides observed, “The strong do what they will, and the weak suffer what they must.” Many in the industry are taking a bearish view on the number of lenders currently lending versus the number that will be doing it in a year. There are plenty of companies (fortunately none of the ones I advise) who were worth $X million six months ago, and now are worth half or three-quarters of that – how long do they want to do that? Even on the commercial side, harsh decisions must be made: JCPenney announced that it will be closing 33 underperforming stores beginning this year. Some of these are represented by loans in commercial mortgage-backed securities – you can bet investors are watching closely to gauge their exposure!

Not only did Flagstar recently go through another round of layoffs (“right-sizing”), but it is losing Michael Tierney, the executive vice president of personal financial services at the bank - he is resigning from the bank effective at the end of the month.

As most of you know, in 2013 the Oxford Dictionary proclaimed the new word of the year was “selfie.”  I think Anthony Weiner may have helped awareness of that word.  And the mortgage banking word of the year was certainly “compliance.”  What will the word of the year be in 2014?  My STRATMOR colleague Garth Graham thinks the word of the year will be “Conversion.”  He has a good write up about why, in a series of articles about “Why Conversion Matters Most."

LO compensation continues to be a concern (you can always report sketchy comp plans at whistleblower@cfpb.gov), and I received this note. “We have seen some chatter about originator comp and some wholesalers allowing varying compensation. I am not sure how they deem this within the rules - specifically the ‘Borrower paid’ and ‘Lender Paid’ transactions. Below is a piece from the Preamble of the rule. I am by no means an attorney, but even I can’t imagine this excerpt can be interpreted any way but ‘DON’T VARY COMP’. ‘Consumer Payments Based On Transaction Terms. TILA section 129B(c)(1), which was added by section 1403 of the Dodd-Frank Act, provides that mortgage originators may not receive (and no person may pay to mortgage originators), directly or indirectly, compensation that varies based on the terms of the loan (other than the amount of principal). 12 U.S.C. 1639b(c)(1). Thus, TILA section 129B(c)(1) imposes a ban on compensation that varies based on loan terms even in transactions where the mortgage originator receives compensation directly from the consumer. For example, under the amendment, even if the only compensation that a loan originator receives comes directly from the consumer, that compensation may not vary based on the loan terms. As discussed above, § 1026.36(d)(1) currently provides that no loan originator may receive, and no person may pay to a loan originator, compensation based on any of the transaction’s terms or conditions, except in transactions in which a loan originator receives compensation directly from the consumer and no other person provides compensation to a loan originator in connection with that transaction. Thus, even though, in accordance with § 1026.36(d)(2), a loan originator organization that receives compensation from a consumer may not split that compensation with its individual loan originator, existing § 1026.36(d)(1) does not prohibit a consumer’s payment of compensation to the loan originator organization from being based on the transaction’s terms or conditions.’”

They say that fact is stranger than fiction, just ask any whoever underwrote a SISA loan….on second thought that might be fiction is stranger than fact. Anyway, the CFPB is hoping that the facts stand up against fiction, at least when it comes to QM and Ability to Repay. The agency recently issued a “fact versus fiction guide  on its ability-to-repay/qualified mortgage rule. The guide is intended “to help dispel some of the most common misconceptions about what this new rule actually means for consumers.” Mainly, the misconception (according to the CFPB) is that the rule’s requirements, which the guide describes as “basic guidelines that lenders can follow,” will make it more difficult for consumers to obtain credit. In the guide, the CFPB counters various “fictions” with “facts” designed to show why lenders should not find the rule’s requirements discouraging to lending practices.

Let’s see what some banks and lenders have been up to in recent bulletins to catch some underwriting and documentation trends out there – they are moving targets!

The M&A train continues to chug along, including a bank buying a residential lender! In the last week or so, in no particular order…IBERIABANK Corporation, holding company of the 126-year-old IBERIABANK, and Teche Holding Company, holding company of New Iberia, Louisiana-based Teche Federal Bank, jointly announced the signing of a definitive agreement for IBKC to acquire Teche via merger. BancorpSouth Bank ($12.9B, MS) will acquire Ouachita Independent Bank ($664mm, LA). Tristate Capital Bank ($2.2B, PA) will acquire investment management firm Chartwell Investment Partners. Sonabank ($708mm, VA) will acquire Prince George's FSB (MD) for $11.5mm in cash (50%) and stock (50%). Old National Bank ($9.5B, IN) will acquire United Bank & Trust ($918mm, MI) for $173mm in cash and stock. Community Choice Credit Union ($389mm, IA) will acquire Ace Community CU ($35mm, IA). TriSummit Bank ($262mm, TN) will acquire Community National Bank of the Lakeway Area ($107mm, TN). And Fidelity Homestead Savings Bank ($832mm, LA) will acquire residential mortgage lender NOLA Lending Group LLC for an undisclosed sum.

NewLeaf Wholesale, in a well-written and comprehensive bulletin worth reproducing here, announced to clients that, “As a result of the Financial Reform initiatives taking place, the following is a highlight of the changes being implemented at NewLeaf Wholesale and the steps required to ensure compliance.  As your business partner, we will work with you to make these changes as easy as possible. These changes are effective on all new loan applications and FHA case numbers ordered on or dated January 10. NewLeaf Wholesale will accept submissions with applications and FHA case numbers dated prior to January 10 under the old rules until February 15. These loans must be funded on or before March 31.

“NewLeaf Wholesale will offer the following Lender-Paid compensation: up to 2.75% with no flat fee charged, up to 2.5% with a flat fee not to exceed $1,000, up to 2.0% with a flat fee not to exceed $2,000. We will no longer offer the option to set minimum and maximum compensation. As a company policy, maximum compensation will be $20,000. During Q1 brokers can elect to change Lender Paid compensation plans once a month. Beginning Q2, brokers can elect to change their Lender-Paid compensation on a quarterly basis. Borrower-Paid compensation will continue to be available.  Borrower-Paid compensation can vary from the Lender Paid Compensation plan and can vary by loan transaction. However, Borrower-Paid compensation cannot exceed the contracted Lender-Paid comp.

“NewLeaf Wholesale will allow bona fide third-party processing fees to be excluded from the points and fees test unless prohibited by State Statute. We will allow our NewLeaf Administration fee to be excluded from the points and fee test in several ways: paid by premium pricing, include as a dollar for dollar price adjustment as a LLPA, paid by seller or other third party. Go to our website to read details about Qualified Mortgage, Ability to Repay, HOEPA and to obtain all required forms in connection with these changes.

M&T Bank has rolled out its Treasury Underwriting and Eligibility Standards guide for its suite of Treasury products and has incorporated a number of preliminary updates.  Each borrower on any given loan transaction must have a valid and permanent US SSN, and the second home eligibility criteria state that the property must be a 1-unit located a remote distance from the primary residence and must be occupied by the borrower for at least a portion of the year.  The property may not be subject to rental pools or agreements that require that it be rented; even if there is a rental agreement that is non-mandatory and the borrower waives the option to participate, it will not be eligible as a second home.  The borrower(s) may not more than four 1-4 unit financed residential properties in total and must have verified reserves equal to two months’ PITI for each property, including the subject.  As for location, the property must either be based in a resort/vacation area of, if it is an employment-based second home, in close proximity to the applicant’s employment while the primary residence is more than 50 miles from the place of employment.  In situations where the property is rented for less than 15 days per year and the underwriter finds it reasonable to consider it “limited rental activity,” the resultant income may not be used to qualify the borrower.

There just isn’t much going on with rates these days (up a little, down a little) – which is fine for many originators and Capital Markets kinfolks who just want to do their jobs without worrying about volatility. Certainly if the data continues to improve, it could lead the Fed to pick up its pace of tapering at some future meeting – but for now it is slow and steady improvement. Wednesday both agency MBS and the 10-yr T-note worsened about .125, and mortgage bankers are hedging those locks: supply from mortgage bankers was again over $1 billion.

For thrills and chills today we have Initial Jobless Claims (expected +326k versus +330k last, it came out at 326k, down 2k from a revised 328k) and December CPI (expected +0.3 headline, +0.1 core, it was +.3% and +.1%). We’ll also have homebuilder sentiment (taken by pollsters wandering around developments, yelling up to guys on the roof) and the Philly Fed Index (taken by pollsters munching cheesesteaks). The riskless U.S. T-note saw a 2.88% close yesterday, and is at 2.87% in the early going – rates are roughly unchanged from Wednesday’s close.


1. "I think it should be explained in the brochure that the local convenience store does not sell proper biscuits like custard creams or ginger nuts."
2. "It's lazy of the local shopkeepers in Puerto Vallarta to close in the afternoons. I often needed to buy things during 'siesta' time -- this should be banned."
3. "On my holiday to Goa in India, I was disgusted to find that almost every restaurant served curry. I don't like spicy food."
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8. "No-one told us there would be fish in the water. The children were scared."
9. "Although the brochure said that there was a fully equipped kitchen, there was no egg-slicer in the drawers."
10. "We went on holiday to Spain and had a problem with the taxi drivers as they were all Spanish."