Flood Bill Update; Non-QM Investor List; Residential Lending Moving Toward Brokers & Small Lenders?
I have decided that I am ready, mentally and physically, to win $1 billion - and it is out there for the taking. Quicken
Loans is offering a $1 billion grand prize for completing the perfect
college men's basketball championship bracket in March. In addition
to the potential grand prize, Quicken Loans will award $100,000 each to
the contest's 20 most accurate 'imperfect' brackets and a guaranteed $1
million to inner-city Detroit and Cleveland non-profit organizations
dedicated to improving the education of young Detroit and Cleveland
residents. So what if the odds of someone randomly predicting a perfect
bracket: 1 in 9,223,372,036,854,775,808 (yes, that's nine
quintillion-to-one); if he or she knew basketball the odds improve to
1-in-128 billion. Hey, that is still better than when my Cal MBA buddy
Tony Bari told me, "There is no chance that you will pass this stats
class." (I managed to.) We can only expect to hear more about the
contest, which at this point is limited to the first 10 million
entrants, one per household. (And don't hector me with, "Is a lender
encouraging gambling?" questions - write to Quicken or Mr. Buffett. Yes,
Warren is insuring the event.)
the supposed tidal wave of property listings from the shadow inventory
(which disappeared due to modifications, cash buyers, appreciation, and
government programs), we're now experiencing a tidal wave of servicing hitting the market from companies needing revenue.
MountainView Servicing Group, LLC ("MountainView"), as exclusive sale
advisor, is pleased to enclose for your review and consideration this
$150 million FNMA non-recourse servicing portfolio that is being made
available to the national market. It is also the exclusive sale advisor
for a Fannie Mae MSR portfolio with total unpaid principal balance of
$2.4 billion. ("Quality features of this offering include 100 percent
first-lien and 99.7 percent fixed-rate product -86 percent 30-year
fixed-rate loans, a weighted average original FICO of 765, a weighted
average original LTV of 76 percent, a weighted average interest rate of
3.69 percent, and no delinquencies.)
a construction loan investor? No sweat. Non-QM? Piece of cake. Now that
QM is a reality, many lenders are evaluating the risks of doing Non-QM
and some have already decided they want that business while others are
still on the fence. How do you find Non-QM lenders?
Mortgage Elements has added a new category to its database for Non-QM
lenders, so if you are looking for Non-QM Lenders (or any other loan
program like foreign national or super jumbo), go to www.MortgageElements.com.
It's very easy to use and covers all the product types - 3 clicks and
you can view a list of lenders doing that program in your state. It's free
for all mortgage professionals to use and free for wholesale and
correspondent lenders to be listed. Wholesale and correspondent lenders
can e-mail MPaoletti@MortgageElements.com to be added to the database.
(Occasionally folks ask about 2nd/equity lines.
I am not a product specialist - too hard to track scores of lenders in
50 states - but there are currently only a handful of lenders doing
2nd/Equity Lines in the TPO channel and many of them will only do a 2nd
behind their own first. Ten years ago, of course, piggyback loans were
all the rage with borrowers doing 80/10/10 or 80/15/5 to avoid obtaining
mortgage insurance. When those loans went bad, the second lenders took
big hits - and will continue to do so. LOs have been watching for more
2nd lenders to re-enter the market but one suspects, after the big loses
they took and will take, they may not be able to charge a high enough
rate to justify the risk.)
One way to slow down an overheating lending market is to raise the amount of capital banks have to hold. Switzerland knows this, and doubled the amount of mortgage risk buffer. And while we're bopping around the world, the Kenyan home market is out of reach of most wannabe owners - due, in part, to 18% home loan interest rates.
Is business really moving away from larger banks and lenders to smaller lenders?
That is obviously a question that more companies would like to hear
"yes" than would want to hear "no." Here is one reporter's take on it: http://thenationalrealestatepost.com/big-banks-losing-out-to-smaller-banks/.
Although smaller lenders tend to have a better grasp of the community,
many analysts are skeptical. Forget HR, accounting, secondary, shipping,
the advertising budget, whatever. Who is better able to afford a staff
of 5 compliance people at, let's say, $25,000 a month: a company doing
$25 million a month or a company doing $100 million a month? A
simplified example, but plenty of companies who were doing $50 million a
month a year ago who are now doing $25 million a month are running
What does industry vet Al Crisanty think of the broker biz? Here you go. (Hint: brokers are relevant.)
Joel Kan, Director of Economic Forecasting for the MBA, recently sent me the MBA's Builder Applications for New Home Purchases survey for December 2013. The MBA's Builder Application Survey tracks
application volume from mortgage subsidiaries of home builders across
the country. Utilizing this data, as well as data from other sources,
MBA is able to provide an early estimate of new home sales volumes at
the national, state, and city levels. While the survey shows a decrease
of 11% to mortgage applications for new home purchases, this number does
not include any adjustment for typical seasonal patterns. Now, some
fun-with-numbers (all furnished by the MBA). Conventional
loans composed 63% of loan applications, FHA loans composed 19%,
RHS/USDA loans composed 1% and VA loans composed 17%. The average
loan size of new homes increased from $295,523 in November to $300,444
in December. MBA estimates that sales of new single-family homes were
running at a seasonally adjusted annual rate of 402,000 in December
(Read More: MBA Purchase Application Data Suggests Lower New Home Sales)
of the MBA, Bill Killmer (SVP, Legislative and Political Affairs) and
Steve O'Connor (SVP, Public Policy and Industry Relations) sent out the
"MBA Advocacy Update" noting that, "The Senate on Thursday passed the Homeowner Flood Insurance Affordability Act,
which would delay for up to four years significant premium increases
that are being phased in under new government flood maps. The bill
included an MBA-supported amendment to clarify National Flood Insurance
Program escrow requirements - a major area of concern for lenders.
During consideration of the bill, MBA activated its Mortgage Action
Alliance to voice industry opposition to an amendment that would have
placed unnecessary limitations on force-placed insurance and significant
new burdens on the process for tracking insurance. The overall bill, which passed 67-32, now heads to the House where its fate is far from certain."
(The amendment, sponsored by
Senator Kay Hagan (D-NC), clarifies that only first liens originated
after the statute's effective date must have escrow requirements for
flood insurance. Additionally, as a result of strong MBA advocacy, an
amendment by Senator Jeff Merkley (D-OR) was successfully defeated. This
amendment, which was withdrawn, would have placed limitations on
force-placed insurance and prohibited insurers from providing free
tracking and administration services to servicers. Attention now turns
to the House, where MBA has been laying the groundwork for consideration
of the escrow provisions.)
Although the House still has to weigh in on it, NAR's president Steve Brown liked it.
"The Homeowner Flood Insurance Affordability Act, S. 1926, passed by
the Senate...is the time-out Realtors first advocated when dramatic flood
insurance premium increases went into effect on October 1, 2013. 'This
legislation will help homeowners nationwide who are experiencing
financial hardship as a result of extreme flood insurance rates that are
the unintended consequence of the Biggert-Waters reforms to the
National Flood Insurance Program. Congress needs to hit pause on the
unforeseen price increases and negative market effects of the reforms
while the Federal Emergency Management Agency can complete an
affordability study and research the true impact of the law. NAR data
show that through January 2014, four months into the law's
implementation, more than 40,000 home sales were estimated to be either
delayed or canceled because of increases and confusion over flood
Also last week, House and Senate negotiators agreed to a Farm Bill that
contained an MBA-supported provision to ensure communities are not
kicked out of the U.S. Department of Agriculture's rural housing
programs. The House passed the conference report on Wednesday, and the
Senate is expected to follow suit tomorrow. We'll wait for the vote.
For company-specific news, Real Estate Mortgage Network, Inc. (REMN) changed its name to HomeBridge Financial Services, Inc.
REMN, now HomeBridge, is one of the largest privately held mortgage
lenders in the country. "The Company's new name reflects its focus on
providing a bridge to an easier home mortgage process for its retail
customers, wholesale brokers and correspondent sellers. HomeBridge has
come a long way since its founding in 1989. HomeBridge currently
comprises nearly 1,300 associates, more than 70 retail branches from
coast to coast, two separate wholesale operations and a growing
correspondent division. You may remember that in the fall of 2012, the
Company launched its correspondent division, HomeBridge Funding, and a
second wholesale division, HomeBridge Wholesale. These two divisions
will keep their names while REMN Wholesale, the Company's original
wholesale division, will retain its name and continue to operate as a
separate and distinct business unit." You can find more information on
each division online at www.HomeBridgeInc.com.
And sorry for the delay on this one, but Prospect Mortgage acquired former Impac branches
in four Western states. The acquisition should add approximately 40 LOs
to Prospect's origination platform across 12 branches in California,
Washington, Oregon and Idaho. Included in the acquisition are portions
of Impac Mortgage's operations team, including the hiring of
approximately 15 operations personnel in those states. "We are seeing an
increase in acquisition opportunities from independent mortgage bankers
and brokers as we head into 2014." (Prospect Mortgage is backed by
Sterling Partners, a private equity firm with approximately $5 billion
of assets under management and offices in Chicago, Baltimore, and
Rates are actually doing well - in fact MBS prices rallied during January. If
it weren't for the cost of actually doing a loan increasing, the rally
might be passed through to borrowers - I am hearing of margins actually
increasing. That aside, the economic news from last week was useful:
real GDP posted its second consecutive quarterly above-trend gain in
the fourth quarter, rising at a 3.2 annual percent pace, as expected,
and the Fed announced an additional reduction in the pace of its asset
purchase program. (Softer data in recent months, however, bring into
question whether the Fed will announce another round of tapering at the
week is pretty light for scheduled news in the U.S. - except for
Friday. Today is the ISM Manufacturing Composite Index and Construction
Spending. Wednesday is the MBA application index & ADP employment
numbers, along with ISM Services. Thursday has weekly Initial Jobless
Claims and International Trade. Friday we'll see the number of jobs, the
Unemployment Rate, and wage inflation will be the most highly
anticipated economic data of the month. But overseas' news may move our
markets more than in the recent past - think of China's manufacturing
numbers and currency problems with Europe's emerging markets. For
numbers, the 10-yr closed Friday at 2.67% and this morning its yield, and MBS prices, is nearly unchanged.
(Okay, think back to high school chemistry for this one.)
A chemistry teacher is recruited as a radio operator in the First World War.
soon becomes familiar with the military habit of abbreviating
everything. As his unit comes under sustained attack, he is asked to
urgently inform his HQ.
"NaCl over NaOH! NaCl over NaOH!" he says.
"NaCl over NaOH?" shouts his officer. "What do you mean?"
"The base is under a salt!" came the reply.