Citizens of the U.S. have well-documented accents, but do you ever wonder what linguistics majors do when they graduate? 

At certain phases of the economic cycle, loan originators often wonder about how bankruptcies impact credit ratings. Now many wonder how loan modifications impact bankruptcies.

Yesterday this commentary noted several upcoming conferences sprinkled around the nation. The problem with any list, whether it is investors, best teen movies, vendors, Jewish football players, conferences, favorite BBQ joints, broker dealers, warehouse banks, is that producing an all-inclusive list is nearly impossible. Of course I received information on several conferences & events that I had not listed. For example, the MBA's National Advocacy Conference is April 18-19 in Washington DC. "It gives you the opportunity to speak directly to lawmakers about what you do in your community as well as the practical effect proposed changes may have on your business and the industry." 

For those who are comfortable operating in the "leads generating" business, February 28-29 offers LeadsCon in Las Vegas has become quite popular with lenders doing on-line lending. Out in San Francisco, on April 10 & 11, the CMBA's Sales & Marketing Conference takes place. "This event focuses on Retail, Wholesale & Correspondent Sales and Marketing ideas for the coming year. This year's event has a focus on Mini-Correspondent (broker to banker) as well as Compliance, the future of retail with emphasis specifically on the competition from larger aggregators exiting the correspondent and wholesale business."

Down in California, Lenders One, the largest national alliance of mortgage bankers, is hosting their member conference in Huntington Beach March 5-7. The expected attendance of members, partners and industry speakers is over 600 people.  Information can be found at

If you are in the reverse mortgage biz, and would like to visit New York on March 26 & 27, you may want to take in The National Reverse Mortgage Lenders Association's Eastern Regional Meeting & Reverse Mortgage Securitization Forum. It includes "an update on the CFPB study on reverse mortgages called for in the Dodd-Frank legislation, a review of the state of loan officer compensation throughout the country, reports on successful selling of the HECM Saver and HECM for Purchase, and a perspective on what loan originators should know about the secondary market." Registration is available at

For those of you unable to cruise down in the middle of winter to balmy Arizona last week for the NMLS conference, it hosted its annual user conference last week in Scottsdale. Through the wonders of technology, the NMLS has the slides available, posted under the "agenda" tab of the conference web site.

Turning to the usual news these days, it was Citigroup's turn to settle a lawsuit. It has agreed to pay $158.3 million to settle claims that its mortgage unit fraudulently misled the government into insuring risky mortgage loans for over six years. Before you skip to the next story, check out these stats: the government said that CitiMortgage had certified 30,000 mortgages for insurance provided by the FHA and submitted many certifications that were "knowingly or recklessly false." More than a third of those mortgage loans went into default, resulting in millions of dollars in losses for the government because of the insurance claims. Per the NYT, "Since 2004 more than 30% of loans originated or underwritten by CitiMortgage have gone into default. The Department of Housing and Urban Development said that CitiMortgage's default rate soared to over 47% on loans originated in 2006 and 2007..." Here is the story.

While we're on lawsuits, a while back news broke on a lawsuit against BBVA Compass for alleged labor law violations. "Compass systematically violated federal labor laws by denying overtime pay to its mortgage banking officers, Lee & Braziel, LLP and the Rowdy Meeks Legal Group, LLC allege" in a lawsuit filed in Texas federal court. "Filed on behalf of former mortgage banking officer (MBO) Keith Vaughn, the lawsuit alleges that the bank illegally misclassified MBOs nationwide as overtime-exempt employees until approximately April 2011 in violation of the federal Fair Labor Standards Act (FLSA). In April 2011, the bank reclassified its MBOs to make them eligible for overtime pay. Although Compass instituted a time-tracking system last year, it discouraged MBOs - who regularly work overtime - from entering more than 40 hours per work week so the bank could avoid paying overtime compensation, according to the lawsuit. More information about the litigation is available at

A few weeks ago Barclays Capital produced some findings from the ASF (American Securitization Forum) which are worth noting. Analysts agree that, compared to other risk assets, non-agencies are "cheap", with many preferring stable profile, high carry, bonds.  Some analysts, however, believe that technical pressures are unlikely to subside in the short run and recommend trades such as Jumbo and Alt-A FRM, both sectors that have experienced widening for which lower rates have compensated. It is no surprise that in light of the Eurozone crisis and lack of vigorous economic recovery here in the US, certain investors remain concerned about still-declining home prices.  Prices are predicted to drop by around 5% and to trough in March of this year, with the worst scenario being a 15%.  This, however, is unlikely, as the actual oversupply of homes is around 3 million, and the market has proved able to absorb about 1.5 million distressed liquidations per year.

The ASF consensus is that while rental programs would be helpful for home prices, it would be difficult to implement.  That rental yields are significantly lower than bond yields makes it much less attractive in terms of equity, and centrally-organized bonds are far more manageable than properties. Analysts expect timelines for loans liquidated in the next 18 months to be longer than those for loans being liquidated at present, which means severities will stay high for the next year and a half.  Liquidation should get faster, though, as servicers continue to make their foreclosure processes more efficient. The disparity between received cash flows versus actual loans levels is being chalked up to servicers ceasing advances and recapitalizing advances on modified/cured borrowers, as well as inconsistent reporting. This issue appears to affect subprime deals, in particular, and Alt-B/Option ARM deals to a lesser extent.

According to Moody's, losses for lenders are about 15% lower on short sales of troubled SFR real estate when compared to traditional foreclosure sales. While the discounted loss is greater in short sales, the longer period of legal, taxes, maintenance, carry, insurance, liability and other costs usually result in a greater loss at banks for foreclosures. A recent report from McKinsey finds the vast majority of reduction in consumer debt is from defaults. Overall, household debt outstanding has fallen $584B from the end of 2008 to the 2Q of 2011 and defaults accounted for about 70% of the decrease in mortgage debt and 80% of the drop in consumer debt.

I am sure that some of those short sales and foreclosures involve fraud. Has fraud gone away? No it has not. Interthinx has released its quarterly Mortgage Fraud Risk Report covering data collected in the fourth quarter of 2011. Property valuation fraud risk is increasing, as is income/employment fraud. Interthinx's national "Mortgage Fraud Risk Index" was up 1.4% over the last quarter and 3.6% from a year ago.  And Arizona overtook Nevada as the nation's "Riskiest State" per the company, with Florida #3 (which is home to the Cape Coral/Fort Meyer area, the riskiest ZIP code in the nation - quite the honor!). Check out the report at

Homebuilders are more confident. In fact, per the NAHB index, they are more confident than any time in the last five years. On the one hand, they should be reminded of the huge inventories and future short sale and foreclosure numbers on the horizon - why build a new house when there are plenty of used ones around? And in many areas appraisals are coming in less than the cost of construction. But on the other hand, perhaps an improvement from "suicidal" to "deeply depressed" is something to be excited about. U.S. home construction in the last 4-5 years has been well below the normal replacement level of household formation. And at some point some areas will have burned off the boom-time overbuilding and will actually need to start building homes again. The NAHB Chief Economist noted that five months is the longest period of sustained improvement for the HMI since 2007 and called it encouraging.

That was one piece of news that might have nudged markets yesterday, but the focus is still on Europe, as it has been for years and will be for the foreseeable future. Yes, mortgage prices are doing well - why shouldn't they when the Fed is buying, in effect, as many MBS's as originators are producing? No matter about that or the release of the FOMC minutes - rates yesterday were nearly unchanged from Tuesday's closing levels, and the 10-yr closed at 1.93%.

Today is a new day, and a bold departure from recent trading. Not. We did, however, have slurry of economic news. Initial Jobless Claims came in at 348k, down from 361k and the lowest level in nearly 3 years. Housing Starts were +1.5%, better than expected at 699k, with a revision higher the previous month, and at 676k Building Permits with a slight downward revision last month were about as expected. And remember when we cared about inflation? January's PPI as +.1%, with its core rate +.4%. (We still have a Philly Fed Survey later, and at 8AM PST the Treasury announces details of next week's auctions of 2-, 5- and 7-year notes - estimated unchanged at $99 billion.) Currently the 10-yr is nearly unchanged at 1.95% and MBS prices are down.

Two   rednecks   are drinking in a bar.
One says, "Did you know that elks have sex 10 to 15 times a day?"
"Aw darn...," says his friend, "and I just joined the Lions club!"  

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at The current blog discusses residential lending and mortgage programs around the world, part 2. 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.