Chase Layoffs; Servicing Continues to Trade; OCC Issues Mortgage Handbook for Banks
know you're old if they have discontinued your blood type." You also
know you're old if you think "vendor management" consists of making sure
there is enough soda pop and Skittles in the lunch room machines. But
under Dodd-Frank, and its enforcement arm the CFPB, making sure your
vendors are compliant will be critical.
Once again, one must ask, "Can small companies really afford to
dedicate resources to do this in a thorough manner, knowing that the
costs are passed through to the borrowers' price?" Or perhaps can they
not afford to...
Maybe they'll pick up some resources from Chase. JPMorgan
Chase announced that a couple thousand positions would be eliminated,
changed, restructured, whatever term you'd like to use. I'd heard rumors of large numbers of LOs leaving the bank for several weeks now - perhaps they saw the writing on the wall. Or is it 5,000? Or 6,000. Or 8,000? I can't keep track.
I knew that I should have grown up and become a compliance guy!
Seriously, many attribute these activities to QM, and thus the CFPB.
("JPMorgan Chase is scaling back its mortgage products as the market
cools. The company plans to eliminate 22 of its 37 mortgage products and
programs by the end of 2014, according to a Tuesday presentation to
investors. It has already jettisoned 12 and plans to get rid of 10 more
by the end of the year.") And thus the consumer loses 60% of the
available mortgage programs at Chase. And should we assume some of those
15 programs left are Private Banking? In that case, most consumers do
not have $1 million in cash in JPM, so the damage could be even worse.
One wonders when the other big guys will follow suit.
Yesterday the commentary discussed signing bonuses and LOs moving from one lender to another.
I received this note from the Atlantic Seaboard. "I went through this
in 2006-2007 as well. In my market I can literally fill up my calendar
with lunches/meeting with management from competing mortgage companies,
big banks, small banks, and correspondent lenders. They all ask for me
to break out production from 2013 and to prove how much of my volume was
purchase volume. Two weeks later I have an offer for a 3 month sign-on
bonus (usually from $5-10k), accelerated basis points payout for 3-6
months, and a more aggressive comp plan overall. The colleagues that I
see leaving for these offers are mostly big refi producers, and their
business is slow now. They need the sign on bonus as a salary for three
months and hope to convert to purchase producers. They will likely fail,
however, as three months is not a long enough period to make that
change. Some were probably on the verge of being fired for lack of production and were approaching 4-6 months negative on their draws.
So an offer from another lender with a 3 month sign-on bonus was a no
brainier for them. In one move they went from being -$8-12k in the hole
to positive $5k a month."
are a lot of folks predicting what is going to happen to housing.
(Meanwhile, "down in the trenches", LOs, processors, and underwriters
are grappling with every deal.) Continued stagnant mortgage credit
supply and demand conditions likely were anticipated three years ago in the Treasury report, Reforming America's Housing Finance Market.
We do not think it is just the weather. Benign technical conditions
persist but valuation changes warrant a move up to neutral on the agency
MBS basis and down to neutral on AAA CMBS. We reiterate our
constructive views on legacy CMBS and non-agency MBS, with a preference
for CMBS. AAA CLOs appear particularly attractive at this point.
back when, the CFPB said that it would only examine banks with assets
north of $10 billion, but was capable of examining non-depository
mortgage banks of any size. And thus it spoketh, and banks with assets
of less than $10 billion breathed a sigh of relief. And there was peace.
But now the OCC has its own supervision manual on safety and soundness - for all banks.
Switching gears, the MBA's Advocacy Group notes that, "Private
mortgage insurers (MIs) have begun filing new master policies with
state regulators, paving the way for clearer coverage and greater
efficiencies in the industry.
The revised master policies were developed at the direction of FHFA and
formalize the implementation of various loss mitigation strategies
developed during the housing crisis to help troubled homeowners. Other
provisions include a robust rescission framework that clarifies when and
under what circumstances a policy may be rescinded, as well as the
establishment of specific timeframes for claims processing. MBA has
advocated for up-front risk sharing, which would bring additional
private capital in front of the GSEs and has the potential to lower
costs for homebuyers. An important component of this effort is
reassuring lenders and investors that MI coverage will be there when it
is needed. The new master policies and enhanced eligibility standards
are both critical in this respect."
February has been a huge month for MSR trades,
so much in fact I believe I may be a little behind in my reporting.
What appears below is what I have seen over the last week, and what I
believe is a great indicator of market appetite at the moment. Phoenix Capital Inc was offering a mix of $1.3 billion bulk Fannie Mae and Ginnie Mae mortgage servicing rights. The package composite for Conventional Fixed Rate:
$770M UPB, 91/9% (30/15yr), WAC 4.021%, WaNSF 0.2505, WaLa $195k,
WaFICO 751, WaLTV 76%, 45% (wholesale) 27% (correspondent) 27% (retail).
The package composite for the portion of Government:
$527M UPB, 75% FHA, 22% VA, 3% USDA, 98/2% (30/15yr), WaC 3.834, WaNSF
0.3131, WaLA $205k, WaFICO 692, WaLTV 96%, 40% (correspondent) 33%
(wholesale) 27% (retail).
MountainView Servicing Group LLC has had plenty to offer as of late, including a FNMA portfolio with a package composite of 99.8% fixed rate 1st lien product, WaC 3.81%, WaFICO
745, WaLTV 80%, WaLA $162k, with production originating in TX (41%), OH
(23%), CO (14% ) and IN (4%). MIAC recently represented a seller of
$404mm in FNMA/GNMA with
a package composite of 100% FRM 53/47% (GNMA II/FNMA), WaC 4.145%,
WaDEL 0.21%, 61% (retail) 39% (wholesale), 86% Full Doc, and 14%
Streamlined, with a geographic concentration of originations in
Colorado; as well as a second offering of $178mm GNMA Multifamily
Mortgage Servicing Portfolio: 100% GNMA FRM, WaLa $8.9mm, WaC 3.714%,
100% Retail Originations, with a weighted average loan Age of 24 months.
And last but not least, Interactive Mortgage Advisors is brokering for a seller, $1.294B in GNMA bulk residential MSR's with 100% (retail), 100% (including IRRRL) Full Doc, WaFICO 688, WaLTV 94.4%, with a WaLa $183k.
recently announced last week the pricing of its offering of MSR-backed
notes through its OASIS program. The company estimates that $123.5mm of
proceeds will be generated. The notes are secured by MSRs relating to
$11.8B of FHLMC
mortgage servicing. Ocwen will pay 21 bps on the UPB of the pool to
note holders. The average servicing fee for the reference pools is 31
bps. The final maturity is February 2028.
pretty sure if Jean-Babtiste Say was still alive and working as a real
estate agent or loan broker, he'd completely forget about his classical
economic theory which, in a nut shell, suggests that "supply creates its
own demand." If it did, Jacksonville, FL would be a boomtown. This
month, Zillow is releasing a new inventory metric to help shed light on
the available housing inventory across the country. The methodology for
the inventory metric is straightforward. Each week, a count of the
number of single-family, condominium and cooperative housing units
listed for sale on Zillow is taken. The median of these values within a
month is calculated as the monthly value, and a seasonally adjusted
value is reported; this seasonally adjusted series is then smoothed
using a three-month rolling average. According to Zillow, currently the
metric is reported for 1,615 counties and 648 metropolitan regions. The Ups and Downs of Rising and Falling Inventory.
Tuesday rates improved while stocks didn't do much. But of particular interest to those in residential lending were the
new Case-Shiller home price figures showing that national home prices
were up 11.3% for 2013. The 10- and 20-City Composites posted increases
of 13.6% and 13.4% for 2013. The rate of increase is slowing, however,
giving "the smartest guys in the room" something to discuss. Brad Hunter
and the team at Metrostudy
expect home prices to rise at a much more moderate pace this year than
they did last year. Many home builders were boosting prices at annual
rates in excess of 20%, and buyers were driven to buy, in order to beat
further increases. That frenzy died out in the second half of 2013,
after the Fed announced the planned "taper" of bond purchases and
mortgage rates spiked higher. In 2014, builders in most areas will find
that pricing power is limited. Homebuilders will still find that they
have some "headroom" for more price increases this year, but not nearly
as much as last year. Higher prices of land and lots, and higher labor
costs will cause builders to look for higher prices, but the realities
of affordability will mean that they can no longer raise prices with
to national trends, price appreciation is slowing as rising mortgage
rates combined with harsh winter weather to "cool" home purchases over
the past few months. Some say that smaller increases mean more homes
will remain affordable as the labor market improves, helping maintain
the rebound in residential real estate that has boosted growth.
(Read More: Two Quarterly Price Reports, Two Conclusions)
Conference Board's index of U.S. consumer confidence fell to 78.1 in
February from 79.4 the prior month, less than expected. I wouldn't be
very confident, either, if it was -18 degrees outside and my kids were
stuck at home beating on each other.
when the dust settled MBS were up/higher about .375, and the yield on
the risk-free 10-yr was 2.70%. (If you'd saved $1 million and buy it
when you retired, you could earn $27,000/year for the next ten years.)
Later today we will have the Mortgage Bankers Association's mortgage
application survey and January's New Home Sales (expected -3.4%). We'll
also have two Treasury coupon auctions: $13 billion in a 2-year floating
rate note at 11:30AM EST and $35 billion in a 5-year note at 1PM EST. In the early going this morning we're at 2.72% and MBS prices are a shade worse.