Huh? "Fannie Mae and Freddie Mac will let some borrowers who kept up payments as their homes lost value erase their debts by giving up the properties, helping Americans escape underwater loans while adding to losses at the mortgage giants bailed out with $190 billion of taxpayer money." Here's the story from Bloomberg.

In spite of what F&F are up to, small and mid-size companies are continuing to expand. PMCA Lending Services is seeking a Correspondent Lending Manager who will be responsible for developing and managing all aspects of correspondent lending nationally. PMAC Lending Services, Inc., is an independent mortgage lender and servicer supplying and delivering quality servicing to customers throughout the US.  PMAC offers a variety of conventional loan programs including Fannie Mae, Freddie Mac and Ginnie Mae. This person can be located anywhere within the US.  Skills include the ability to manage origination relationships, the ability to translate market knowledge into new and enhanced mortgage products, have a general understanding of all contractual relationships between an originator and correspondent, be open and curious to contributing to unique and cutting edge technology solutions in order to enhance liquidity in the secondary market, and be interested in building things from the ground up.  Interested parties should send their confidential resumes to Shelley Tam, VP of Human Resources at shelleytam@pmac .com. 

And an Orange County-based Mortgage Banker is seeking an Underwriter Manager to build a retail underwriting department and build a successful team of underwriters. This is an exceptional opportunity for an experienced Underwriting Manager to create and influence the development of this department from the ground up and finally do it right. Minimum 3 years D.E. underwriting experience; prior working experience with Santa Ana HOC;  ability to underwrite to Fannie and Freddie, run DU/LP AUS, interpret findings and verify file requirements. Ability to write underwriting department's credit policy & procedures and function in leadership role to ensure overall credit quality of loan files. The lender has expected 2013 volumes of $300 million, and more information can be found here. If you are interested in building and leading a newly created underwriting department, send your resume to margarita.arvizu@ahlend .com.

"Rob, what is a 'Texas Ratio' and why should I and other ops staff care about it?" The briefest definition I have ever heard is, "For a bank, it's the bad stuff divided by the good stuff." So if they're equal, the ratio will be 100%. That level, and anything above it, is not good, as it is a measure of a bank's credit troubles. The higher the Texas ratio, the more severe the credit troubles - most healthy banks are well below 50%, some even below 10%. Becoming more precise, it is calculated by dividing the value of the lender's non-performing assets (nonperforming loans + real estate owned) by the sum of its tangible common equity capital and loan loss reserves. So although it doesn't directly impact you or the rest of the ops staff, if you work for a bank, it is worth knowing what the Texas ratio is it - although you should also know that regulators like the FDIC do not focus on it.

Speaking of banks, and money, many will be interested to know, but probably not shocked, to learn that clients of the largest U.S. banks withdrew funds this month at the fastest weekly pace since the Sept. 11 attacks as a deposit-insurance program ended and customers tapped into their year-end cash hoards. In the first week in January, net withdrawals at the 25 largest U.S. lenders totaled $114 billion, pushing deposits down to $5.4 trillion, according to Federal Reserve data. (The magnitude of the drop was second only to the decline after the Sept. 11, 2001 terrorist attacks, according to Jason Goldberg, a New York-based analyst at Barclays.) Customers may be moving money no longer insured by the U.S., drawing down year-end balances and investing in advancing equity markets. A Federal Deposit Insurance Corp. backstop, the Transaction Account Guarantee program, ended last month, prompting some analysts, investors and trade organizations to predict it could drive funds from the banking system.

I don't know if this bank saw a big outflow of funds, but SunTrust is cutting costs. According to an article in American Banker, The $173 billion-asset company is intent on reducing its salary and benefits costs this year as it looks to raise its efficiency ratio. SunTrust has been working to boost revenue and cut costs, quadrupling net income in Q4 to $350 million and lowering the efficiency ratio to 65.9% at Dec. 31, compared to 81.5% a year earlier. High compensation costs have forced SunTrust to close 43 branches and cut 2,400 jobs this last year, with nearly half of those coming in the fourth quarter. Despite this, employee compensation and benefits rose 18% from a year earlier, to $738 million. This is not limited to SunTrust, as around 80% of earnings growth for banks this year should be tied to expense cuts and capital deployment. SunTrust plans to save money elsewhere, but has been spending $10 million to $15 million quarterly on consultants to work on the industry's recent $8.5B foreclosure settlement and will pay $100 million in relief to borrowers as part of the settlement.

SunTrust occupies a prominent place in the mortgage origination chain. On the 19th the commentary had this note regarding the hurdles for new originators, and the industry in general: "And there are few mortgage companies being created, which certainly helps existing lenders. The government frowns on lack of competition, but this situation has been created in the mortgage banking world - is it yet another in a long list of unintended consequences? Banks such as JPMorgan and Wells Fargo have gobbled up the mortgage market since the recession, as Bank of America and Citigroup stepped back to raise capital. And the consumer pays, now and in the future, through higher rates but also higher prices for loans. Underwriters in the past who could go through 6-8 files a day can now audit 2-3, so companies have to pay 2-3 times the price for underwriting as they did in the past. That is just one quick example of the process, and one quick example of something that is passed on to the consumer - lenders have not become non-profit institutions yet."

I received this response: Direct Valuation Solutions, Inc., a software company that utilizes robust cloud-based technology to provide lenders Dodd-Frank/AIR-compliant valuation solutions without the need to outsource appraisal workflow to a middleman, has added DVS Underwriter AssistTM, to its platform.  CEO Mike Ousley says "reading your January 19th report about underwriting capacity going from 6-8 files a day to 2-3 - doubling or tripling the cost of underwriting - reminded me of, and confirmed, our focus group interviews with originator underwriting departments that are struggling to get through their workload.  In response to these interviews, we developed our Underwriter AssistTM document which provides tools and guidance to enhance the review of the appraisal file by integrating AVM technology and automating a number of manual processes underwriters perform, while alerting them to over 200 factors in the appraisal or about the property that may need to be resolved prior to funding.  By all accounts, it is saving underwriters between 15 and 45 minutes per file, which can add up to a significant amount of time and productivity over the course of a year - upwards of 48 additional days per year at an hour and half per day savings.  Add to that, the product minimizes oversight errors that could lead to repurchase or investor rejection of the loan, and the benefit of this product is really tangible."  (To get more information or schedule a demo, go to - and no, this was not a paid ad!)

The American Securitization Forum's annual conference takes place this week, and regulatory issues will once again be at the forefront. ASF 2013 in Las Vegas will spend less time handicapping regulators' next moves and more time discussing how to implement newly adopted rules due to recent progress pertaining to "qualified mortgages," regulatory-capital requirements and other financial-crisis reforms. SEC Commissioner Troy Paredes will hold a Q&A session at the event, as many attendees wish to know how they are going to implement all the regulations coming out in 2013. More regulators than ever before will be in attendance as 2013 is all about implementing and complying with new regulations. Over 5,000 people in the industry are scheduled to be at the Aria Hotel & Casino Jan. 27-30, including the entire J.P. Morgan securitization-underwriting team, with events scheduled to be hosted by Barclay, Citigroup, RBS, and Wells Fargo. There is expectation of deal-making talk over the recent uptick in issuance of collateralized loan obligations, as well as other surging asset classes, namely subprime auto loans and credit cards.

I have been in Florida this week, but at the conference noted above I am sure they've been discussing the securities markets. In the aftermath of the housing crisis, many of these securitized markets are experiencing a revival, with the exception of one: residential securitized credit, chief investment manager and co-head Daniel Dektar of Smith Breeden Associates said. Remember that securitized credit was a huge development in credit provision over the past 30 years, beginning with mortgage-backed securities, followed by commercial mortgage-backed securities and then back to housing-related securities. But as we all know the market for non-agency loans has dried up, aside from the periodic Redwood Trust deal. In fact, in the aftermath of the housing crisis, many of these securitized markets are experiencing a revival, with the exception of one: residential securitized credit. Chief investment manager and co-head Daniel Dektar of Smith Breeden Associates said, "They haven't figured out the regulatory or securities structures to make new residential securitized issuance work. That's coming and I think it'll be an important element in housing finance in the U.S. as the government-sponsored enterprises - Fannie Mae, Freddie Mac and Ginnie Mae - shrink in the future. The heart of the crash in 2007-2008 was money market funds shrinking and then all the funding getting pulled for huge vehicles that held securitized assets, off balance sheet or outside of the traditional banking system. So securitized credit prices got hammered. Prices went down either because credit was bad, like in many of the housing-related securities, or often just because the funding went away."

The earnings gods were not kind to Old Republic International, which posted a loss of $20.2 million for the fourth quarter of 2012, "dragged down by the continuing losses from Winston-Salem-based subsidiary Republic Mortgage Insurance Co." RMIC and another unit of the Chicago-based Old Republic that deals in consumer credit indemnity are both in "run off" status and not generating new business. According to Old Republic's earnings announcement, those two units had a combined net loss of $80.4 million in the quarter. The company's other divisions, which sell general and title insurance, had net income of $60.1 million. For the full year 2012, the run-off businesses had net losses of $321.8 million, compared to 2011 losses of $421.1 million. CEO Al Zucaro told analysts that the mortgage guaranty business has stabilized over the past several months after regulators approved a plan for it to wind down its business over the next several years. "The mortgage insurance business has effectively been side-tracked, so to speak, from the main lines of our operations and it is no longer a factor in managing both the risk as well as the capital structure of the overall Old Republic enterprise."

For a little training news, the Mortgage Bankers of the Carolina's presents a Review of NAR Profile of Home Buyers hosted by Steve Richman of Genworth. (Steve and I have spoken at a few events together, and he is very good!) The event is next Friday the 8th at 10AM EST. It is free, there is no password required, and the Session Number is 716 994 591. Go here to register. Once you are approved by the host, you will receive a confirmation email with instructions for joining the session.

(Sorry for the pre-market, early commentary today, but heading from Florida to California. And while no one expects rates to move too far to the upside - is the economy really doing that well? - there are renewed concerns and fresh reminders that with QE3 the Fed is holding MBS prices artificially low. In addition, you'll notice European debt issues have not been making much news lately - there is progress there. So we have the 10-yr closing Monday at 1.97% - watch that 2% level!)

Superb Famous Last Words (Part 1 of 2)

I'll get a world record for this!

It's fireproof.

He's probably just hibernating.

What does this button do?

It's probably just a rash.

Are you sure the power is off?

Yeah, I made the deciding vote on the jury, so what of it?

The odds of that happening have to be a million to one!

Pull the pin and count to what?

Which wire was I supposed to cut?

I wonder where the mother bear is...

I've seen this done on TV.

(Part 2 tomorrow)