Lenders that act as both mortgage brokers and mortgage bankers need to pay attention to this recent court ruling, noted by law firm BuckleySandler. "Court Rules Lender, Acting as Mortgage Broker, Breached Fiduciary Duty to Borrower. A California court of appeals affirmed a trial court's decision to award damages against a mortgage lender for breach of fiduciary duty and misrepresentation, where the loan officer for the lender acted as a mortgage broker." The case involves shopping a loan for a borrower that didn't qualify, prepayment penalties, and then doing the loan through the agent's mortgage bank thus bringing up the question of their fiduciary duty to the borrower. See BankerBroker.
Many areas of the nation have stabilized, but falling home prices in other areas pushed more borrowers into a negative equity position. CoreLogic's recent study showed that in the 4th quarter of 2010 23% of borrowers nationwide, or 11.1 million, were holding "underwater" mortgages which is a collective $750 billion of negative equity. Negative equity is concentrated in the hardest hit states: Nevada (65%), Arizona (51%), Florida (47%), Michigan (36%), and California (32%). And although banks and servicers didn't plan for this, if negative equity continues to rise the principal write down argument gains strength.
HVCC" is gone but is still with us in other forms.
Unofficially, what services seem to
be popular among retail loan agents in determining property values prior
to the actual appraisal? Any agent would want speed, accuracy, reliability, lack
of cost (e.g., free), etc. The popular choices, not in any particular order,
include Zillow, title company public records, Yahoo Real Estate, Trulia, local
Realtor's MLS listings & opinions, Redfin, BlockShopper, and BAREIS in Northern
California. Please feel free to send me any that you think others might find
useful and don't mind sharing.
The commentary might be a little late tomorrow. I'm going to head to Nevada and
fetch me an empty house! According to the US Census Bureau there were
167,564 empty houses in Nevada, which is about one out of every seven
houses across that state. Although I imagine that many actually have some kind
of occupant, something tells me that home building will not be flourishing
there for a while. For perspective, putting three people in each one would
cover the population of Kansas City, and four people would cover the population
of Seattle. Nevada
Are we really better off winding down Freddie and Fannie entirely?I imagine that most, if not all, of the mortgage and real estate professionals in the US would suggest that we're better off with those agencies staying around in one form or another. Here's one: ShilleronAgencies
Dodd-Frank is not set in stone. There is some small bit of hope that the comp issue will be delayed, although it is not likely. But House Republicans are drafting five bills to repeal or change parts of the Dodd-Frank financial-overhaul law that have been opposed by business groups. A story in the WSJ noted that the bills are to be discussed at House subcommittee hearing today. The group is not trying to reverse the entire bill, but is targeting specific provisions. READ MORE
FHA Commissioner Dave Stevens, who announced his resignation last week, will be merely having a different morning commute: he will become the MBA's president and CEO in early May. The MBA "represents more than 2,400 firms in the nation's real estate finance industry," although critics claim that the membership has such divergent goals and objectives that it is nearly impossible for the MBA to adequately address them. One story noted that, "An administration official said Stevens signed a pledge when he took office not to lobby any official for the remainder of the Obama administration and not to speak on official matters for two years with anyone from HUD, if he left government." FULL STORY
Freddie Mac announced a new offering of multifamily mortgage-backed
securities - $1 billion of Structured Pass-Through Certificates ("K
Certificates"). They are expected to price next week and settle the week
after, and are backed by 76 recently originated multifamily mortgages and are
guaranteed by Freddie Mac. Check out FreddieMulti Goldman
Sachs and Citigroup are marketing $1.4 billion of bonds tied to commercial
property loans: 57 mortgages on 111 properties across the U.S. with the
highest concentration in Texas. According to Reuters & Bloomberg, "the
transaction will bring 2011 sales of commercial- mortgage backed securities to
about $8 billion, compared with $11.5 billion in all of 2010...Top-rated
securities backed by skyscraper, hotel and shopping mall loans are yielding
2.02 percentage points more than Treasuries, compared with 1.91 percentage
points a month ago, according to a Barclays index."
In Florida Freddie Mac pulled its cases from the Law Offices of Marshall C.
Watson, a Florida law firm that is under investigation by the Florida
attorney general. The firm represents lenders in foreclosure cases, but is one
of four foreclosure firms targeted by the AG (Attorney General) investigation.
Wanna buy some Litton servicing? Goldman Sachs may be looking to exit the servicing business entirely: LittonBeGone
Bank of America's correspondent clients were reminded of the UAD requirements being rolled out, and that the Uniform Collateral Data Portal (UCDP) will serve as the portal through which lenders submit electronic appraisal reports to Fannie Mae and Freddie Mac. "Clients should determine how and when in the loan process appraisals should be submitted to UCDP. Both the GSEs and Bank of America recommend submitting early in the loan process to allow sufficient time to resolve any UCDP edit failures. If Clients choose to submit directly to UCDP, they should ensure that their appraisal management company provides them the appraisal in either an acceptable XML (MISMO or ACI) or first-generation PDF format*. There is no lack of training for it: UADTraining
This week GMAC's correspondent
clients saw the removal of the non-delegated adjustment of -.250 on Government
products. And GMAC, who is expanding its wholesale operation, reminded its
correspondent clients that starting April 18, "when requesting FHA case
number assignments through FHA Connection, all lenders will have to certify that
the case number corresponds to an active loan application for the subject
borrower and property in accordance HUD/FHA policy and procedures. The
borrower's name, Social Security Number and property address will be required
for all transactions including proposed and new construction loans. The Case
Assignment screen in FHA Connection will be modified to contain these
certification statements that lenders will need to acknowledge and check."
Flagstar has "added a flood insurance escrow requirement to our
system for all loans falling within a flood zone. However, escrows will not be
required for flood insurance if the property is a condominium, PUD, or
co-op."
Wells Fargo's wholesale also continues to release comp plan information for its brokers. Under the Consumer Paid Plan, for example, the broker or loan officer will directly negotiate with the consumer regarding compensation. "Compensation typically will be paid through the loan principal or cash from the borrower at closing. Compensation must not be paid through the interest rate. A party other than the consumer - such as the seller - may pay the compensation. At no time can the other party who pays the compensation be the lender. There is no fixed minimum dollar amount of compensation. There is a fixed maximum dollar amount and percentage that corresponds to the level the broker owner has selected on the lender-paid model. For example, if the selected lender-paid level is 1.5%, then the consumer can't pay more than 1.5% of the loan amount in compensation. The lender-paid fixed maximum for that state will also apply to the consumer-paid level. Premium pricing can be used to pay third-party costs, but must not be used to pay broker owner compensation. Total premium pricing must not exceed the total of the third-party costs by more than $250. If the rate selected includes discount points, then the borrower will pay those to Wells Fargo at closing. On a purchase transaction, seller concessions may cover the discount points."
Yesterday rates improved again, although they started off the day much better but then tailed off. The Treasury's 10-year notes closed up 6+/32s (3.32%) after being better by almost 1 point earlier in the day. After starting off strong (better by about .5), agency MBS's finished the day only better by about .125 on "below normal" volume. Traders are reporting that the Treasury market volatility is not being mirrored in the agency MBS market - a good thing for hedgers! As expected, the FOMC statement was close to January's (which was identical to December's), but with a little more underscoring of inflation concerns. In short, the statement was slightly more bullish. With all that has happened in Japan and the Middle East, the Fed wanted to emphasis stability so did not deviate too much from last statement.
This morning we learned from the MBA that last week's mortgage applications fell slightly after a 15% jump the week before. The four-week moving average is up 4.9%, while the four-week moving averages for the purchase index and refinance index are up 1.6% and 6.6%, respectively. Refinancing accounts for 66.4% of total applications. MND says "Refinance Demand Stale as Rates Rally"
This morning we also had Housing Starts & Building Permits. Recall that initial Housing Starts numbers jumped 14.6% in January to a 596,000 annual rate, but the entire increase came from a 78% surge in multifamily starts following the rush of multifamily permits in December ahead of building code changes. Single family starts, which comprise 70% of the market, fell 1%. Last month Permits were down about 10%. Housing Starts dropped 22.5% and Building Permits dropped 8.2% - painful numbers.
We also had the Producer Price Index, which for last month was +1.6%, with the core rate (ex-food & energy) was+.2%. After this news, and given the continued impact of Japan, Europe, the Middle East, etc., the 10-yr's yield is down to 3.28% and MBS prices are better by roughly .125.
New High School Exit Exam - you only need 4 correct out of 10 questions to
pass.
1) How long did the Hundred Years' War last?
2) Which country makes Panama hats?
3) From which animal do we get cat gut?
4) In which month do Russians celebrate the October Revolution?
5) What is a camel's hair brush made of?
6) The Canary Islands in the Pacific are named after what animal?
7) What was King George VI's first name?
8) What color is a purple finch?
9) Where are Chinese gooseberries from?
10) What is the color of the black box in a commercial airplane?
Remember, you need only 4 correct answers to pass. Check your answers below:
1) 116 years
2) Ecuador
3) Sheep and Horses
4) November
5) Squirrel fur
6) Dogs
7) Albert
8) Crimson
9) New Zealand
10) Orange (of course)
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