Upcoming Events; CFPB/PHH Court Date; MGIC Earnings, UG to be Sold? Risk Swapping Primer
Rumors are swirling that AIG has decided to pursue a partial spin-off of its mortgage insurance business,
United Guaranty (UG). Stay tuned for tomorrow when AIG releases it
strategic plan. Those "in the know" know that UG utilizes a "black box"
model for pricing mortgage insurance policies, unlike many competitors
who use published rate cards (see next paragraph). KBW reports that UG
loss ratios "have been about 20% or slightly above over the last year,
while the expense ratio has been about 25%. As of 3Q15, the equity
allocated to AIG's mortgage insurance segment was $3.4 billion."
MGIC Investment Corp.
had its earnings sliced and diced. In general MGIC's earnings beat
forecasts due to lower incurred losses. The company announced it was
revising its rate card but noted that returns should remain in the
mid-teens: it should generate comparable returns across the spectrum of
loans, so this would result in lower premiums on higher FICO loans and higher premiums on lower FICO loans.
Net premiums earned of $226.2 million came in below some estimates, and
NIW of $9.8 billion was down from $12.4 billion in 3Q and up from $9.5
billion in 4Q14. Insurance in Force (IIF) increased Q/Q to $174.5
billion from $172.7 billion. As of December 31, 2015, the company is
compliant with the financial requirements of PMIERs.
It's hard to keep up with training and events but let's give it a shot.
The next free monthly conference call of the California Mortgage Bankers Association's Mortgage Quality and Compliance Committee is this Thursday the 28th. The topic this month is Upcoming Economic and Legal Challenges and Solutions for Lenders.
The Illinois Mortgage Bankers Association is sponsoring a TRID update seminar
on January 27 in Oak Brook from 8:30 to 12:30. The session is
comprised of three panels: correspondent investor panels on TRID
requirements prior to funding; title insurance and software provider
panel discussing updates and best practices; and a lender panel
discussing TRID from a strategic and executive perspective. Advance registration is required.
The Mortgage Collaborative will be holding its Winter Lender Member Conference
from February 21-23 at the Ritz Carlton, Dove Mountain Resort in
Tucson, AZ. The conference will have a central theme focused on the
future of the mortgage industry and will feature appearances by top
industry leaders, educational panels, and peer to peer networking
sessions. For more information on the conference and membership, contact
MBA's CREF/Multifamily Housing Convention & Expo 2016 (CREF16) is
right around the corner. This convention is bringing together more than
70 of the most informed and inspirational speakers, including two
influential sports figures from football and basketball; and more than
3,000 attendees representing 400 of the top companies in the industry. There is still time to register for MBA's CREF16, January 31-February 3 in Orlando.
rental loans are one of the largest untapped components of the US
housing finance market and one of the fastest growing. Register now for MBA's Single-Family Rental Financial Workshop on April 7th in D.C.
Plaza has quite a February training line-up. All About MI: Radian Tools to Make Your Job Easier: Monday, February 8 at 10AM PST. Plaza's Condo Financing Options: Wednesday, February 10 at 11AM PST. How to Use the Reverse Mortgage to Purchase a Home: Tuesday, February 16 at 11AM PST. NEW! - Condos as Collateral: Reviewing Appraisal Form 1073: Wednesday, February 17 at 11AM PST. The New Reverse: Understanding the Changes, Benefits and Risks of the HECM Reverse Mortgage: Thursday, February 18 at 11AM PST.
The Department of Veterans Affairs (VA) 17th Annual Lenders Conference
at the Hilton San Diego Bayfront hotel is scheduled from April 19-21,
2016. Join senior VA home loan program officials from Washington, DC and
Regional Loan Centers to discuss topics related to loan limits, the
eligibility process, and the Lenders Handbook.
cat Myrtle was on the computer the other day, using Google (search
words: salmon, kibble, Amazon prime). I mentioned that there are other
search engines, perhaps ones that give more privacy to users. She didn't
seem impressed - probably because, in cat years, she's a Millennial and
for them privacy is nearly a foreign concept. She was, however, very
interested when I told her that the CFPB, in an effort to publicize its online complaint system and bring in more complaints, is now soliciting complaints through internet advertising.
Barbara Mishkin with Ballard Spahr wrote that when browsing the internet one can find Google ads which appear to be placed by the CFPB.
It prompted one industry vet to write to me saying, "This has to be a
first: a regulator advertising for complaints. I guess that the CFPB's
management is trying to pump up complaints ahead of the election to
better justify their existence."
explained to Myrtle that the CFPB has several groups, but the one that
has garnered the most attention is its enforcement division for its
heavy-handed tactics and seemingly endless authority. Once again Myrtle
didn't react too much, but others are as the industry awaits the
enforcement action. For example, October Research provided a copy of 2016 State of the Industry Special Report.
Topics for discussion include: How closing agents are handling new
lender expectations, What will the CFPB do about MSAs, Issues affecting
title and settlement agents, Preparing for HMDA technologies changes,
Continued adoption of new appraisal technologies. Download your free
copy of the 2016 State of the Industry special report today!
of eroding privacy rights and CFPB input, a couple weeks ago Elena
Babinecz, a CFPB attorney, spoke as part of a panel relating to the
revised HMDA rule at an American Bar Association-related event. She
confirmed that the CFPB is engaged in a follow-up policymaking process
to allow the public to provide input on privacy concerns relating to new
data that those subject to HMDA's reporting requirements are required
to collect, record and report. Remember that although the new HMDA
process (and increased new data points) doesn't take affect for a couple
years the industry is gearing up for it.
example, "Covered Institutions" will be required to collect, record and
report information about applicants and borrowers, including age,
credit score, and debt-to-income ratios. For data collected in or after
2018, the new rule will require a Covered Institution to allow
applicants to self-identify ethnicity or race using disaggregated ethnic
and racial subcategories, which information will be reported
accordingly. So the new rule will require Covered Institutions to
collect and record sensitive information about individuals, which will
be accompanied by additional data security burdens.
CFPB has not provided details on how it intends to ensure that the
sensitive information about consumers that will be reported to, and
maintained by, the CFPB will be protected from unauthorized access or
while the public will be able to obtain HMDA data using the new
Internet-based tool being built by the CFPB, what portion of the
reported data will be made publicly available is still under
consideration by the CFPB.
And it looks like we have a date for the PHH - CFPB case: April 12th
in the District of Columbia Circuit Court of Appeals. Remember that
CFPB Director Richard Cordray decided to overrule an in-house judge's
decision that slapped New Jersey-based lender PHH Corp. with a $6
million fine for taking illicit "kickbacks" from mortgage insurers that
led to a rise in cost for borrowers. Mr. Cordray demanded PHH Corp. to
pay 18 times more, or $109 million, for ill-gotten gains and continually
violating the law with monthly payments from its reinsurance contract.
There's a lot of chatter among capital markets folks, and those who watch the bottom lines, about a move toward swapping risk exposure for lower fees.
A while back Bloomberg's Matt Scully reported that, "Mortgage bankers
are offering to take on increased up-front default risk under a plan
that would reduce the insurance fees they pay when their loans are
bundled into Fannie Mae and Freddie Mac securities. The originators
would purchase private mortgage insurance to limit their exposure to
losses on the loans. Borrowers might also benefit from lower guarantee
fees promised to participating mortgage providers..."
our view, the upfront approach is preferred because Fannie and Freddie
have so little capital and that amount of capital is declining over
time,' Mike Fratantoni, chief economist of the mortgage-bankers group,
said in an interview. 'The system may be better off if the risk is
dispersed before it gets to the GSEs, particularly if they are
aggregating risk and then distributing it later.' Mortgage bankers
contend that transferring risk to private insurers would mitigate
chances that the GSEs would need a bailout from the Treasury Department
under dire circumstances. It also would avoid exposure to volatility in
yield spreads, such as the market swings in the third quarter that
contributed to losses on derivatives positions that Freddie Mac used to
hedge its risk...Fannie and Freddie would essentially serve as
Wall Street Journal reports that sales of private mortgage-backed
securities reached $61.6 billion in 2015, a five-year high, according to
Inside Mortgage Finance data. However, most were repackaged old loans,
rather than new mortgages being securitized.
haven't budged much, or not as much as they could, for quite some time.
Most U.S. long-term interest rates are lower than when the Fed raised
short term rates. (This phenomenon where the difference between
short-term and long-term rates decreases is referred to as a flattening
yield curve.) This drop reflected weak inflation and the flight to the
safety offered by U.S. fixed-income securities. Although they don't
always move together, the recent market activity suggests investors and
traders have been dumping stocks and buying bonds.
were up a little Friday although the selling could have been worse
given the surge in oil prices. Equities also gained ground, aided by
both the oil rally and the prospect for more monetary easing from the
European Central Bank at its March meeting. The better-than-expected
growth of existing home sales in December, reported Friday, was largely
discounted because of non-economic factors that may have contributed to a
kink in the data series.
There sure is a lot of news coming out this week - not that anyone pays attention to news here in the U.S. anymore
- especially housing news. We have zip today. Tomorrow is the November
Case-Shiller 20-City Index with its two-month lag, the November FHFA
Housing Price Index, January Consumer Confidence number, and a $26
billion 2-year Treasury auction. Wednesday is the MBA's app numbers,
December New Home Sales, a $35 billion 5-year Treasury auction, and the
Federal Open Market Committee rate decision (look for no change).
wait - there's more! Thursday we'll see Initial Jobless Claims &
Continuing Jobless Claims, December Durable Goods, December Pending Home
Sales, and a $29 billion 7-year Treasury auction. Friday is the GDP
numbers for the 4th
quarter, the Employment Cost Index, January Chicago PMI, and January
University of Michigan Sentiment figures. We closed the 10-year last
week at 2.05% and this morning it is sitting around 2.03% and agency MBS prices are slightly better.
Jobs and Announcements
to make a career change or break into the wholesale industry? Freedom
Mortgage's continued growth presents a unique opportunity for
non-industry professionals or those currently in operations seeking to
transition to sales. Freedom
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looking to hire inside sales reps for their new Regional Account
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is a privately held, full service residential mortgage lender, licensed
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We are one of the largest and fastest-growing privately held mortgage
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Continuing on with the "looking toward the future" theme, Essent Guaranty,
a leading mortgage insurance provider, is seeking an Account Manager in
Northern California for the East Bay and surrounding areas. "This
is a great opportunity for an individual with outside sales experience
in the mortgage or mortgage insurance industry or an underwriter with
great customer service skills and a strong desire to move into outside
sales. As an Account Manager at Essent you will be responsible for
helping to grow our business with our existing customers as well as
expanding our customer base by introducing Essent to new lenders. If you
have 5 to 7 years of related mortgage industry experience and the
desire to join a highly motivated sales team, please send us your
resume. If you are looking to join a strong team and a great Company,
respond via e-mail to email@example.com."