Whenever I riffle through my neighbor's trash cans looking for paystubs and trying to figure out how much money they make, the motion light comes on and I have to run away. Seriously, I continually hear from underwriters and LOs about how not only is the gap between the "haves and the have-nots" is widening but about how people driving fancy cars and living in fancy houses have nearly no savings. As one veteran broker wrote to me, "Welcome to what we see daily. It is my experience dealing with higher net worth people that this paycheck-to-paycheck group is rapidly growing. The number of people we see who are commissioned or self-employed who have taken a 50% pay cut over the past 4+ years is staggering. At the time they had DTIs below 25 and are now living pay check to pay check, and can't sell their house for a number of reasons. For many the rent would cost more even for a smaller home." The mainstream press has picked up on it.

Companies looking for talent continues. Out west, Peoples Bank (KS) is searching for retail loan officers, focused on purchase business, in the San Francisco Bay Area. Peoples is a federally-charted (FDIC) community bank that was founded in the mid-1800's, has a solid mortgage banking culture which has evolved over 30 years, and which will close $1.5 billion in 2014 in all 50 states. Peoples Bank has Fannie/Freddie approvals, significant warehouse spread, proven and tested compliance practice, scalable state-of-the-art Information Technology platform and a solid back office which delivers consistently competitive service levels (like consistent 72 hour underwriting turn times). Please send your confidential resumes or questions to Marcia Robertson at mrobertson@bankingunusual.com.

And recognized as one of the nation's top 25 mortgage companies, Supreme Lending continues to put its customers and associates first. Supreme's innovative core retail model is comprised of branch locations in over 40 states, with 5 additional states coming soon, giving Supreme the flexibility to ensure local loan processing while enlisting the expertise of underwriting & closing teams nationwide. "Supreme's laser focus on retail originations allows for a wider variety of loan product offerings for all locations nationwide with a team-oriented production support environment founded on principals of clear communication, best-in-class service, cutting-edge technology and a dedication to close and fund loans on-time." To learn more about Supreme Lending's exciting Retail Branch opportunities and become a valued member of this team, visit www.supremebranch.com or e-mail recruiting@supremelending. com.

Yesterday the commentary discussed MI, and the ability, or lack thereof, of borrowers to have the servicer remove it. Michael U. contributes, "The answer you got on MI was good but it was missing one component. For less than 2 years of ownership, if you can prove that you made dollar for dollar improvements that bring the property down to 75% LTV, MI can drop off. Our servicing department quotes this to clients and we are following agency guidelines. In his client's case, as the rep from MGIC stated, after 2 years Ocwen will likely drop it if they can prove a 78% LTV with an appraisal at the client's cost."

And Scott D. chimed in, "Rob, one clarification of the Homeowners Protection Act that is often overlooked but is terribly important:  the PMI will automatically be dropped when the loan reaches 78% of the original value through amortization of its scheduled payments (which means that if a borrower prepays, the prepayments are ignored).  99% of mortgage professionals never knew that it's based on the scheduled payments not the actual payments. 'B. Automatic Termination. The Act requires a servicer to automatically terminate PMI for residential mortgage transactions on the date that: the principal balance of the mortgage is first scheduled to reach 78 percent of the original value of the secured property (based solely on the initial amortization schedule in the case of a fixed rate loan or on the amortization schedule then in effect in the case of an adjustable rate loan, irrespective of the outstanding balance), if the borrower is current; or if the borrower is not current on that date, on the first day of the first month following the date that the borrower becomes current (12 USC 4902(b)).'"

And another knowledgeable MI person let me know that MI consumers (lenders) need to be careful in selecting MI companies - in this "brave new world" they are not all alike. "Lenders need to check options with regard to the number of months, variations, and requirements for the closing package & re-verifications. And after the payment threshold is met, lenders should know who will be carrying out any investigations, and what is the MI company's policy on rescission based on issues with the appraisal overstating value." Thanks - it's all Greek to me!

Essent announced upcoming updates to "our Underwriting Guidelines and Rate Cards. Guideline changes will be effective for MI applications received on or after May 5, 2014. Rate changes will be effective for commitments issued on or after May 5, 2014, or as otherwise indicated in the Rate Availability Chart. Details of these changes along with the updated Guideline Summaries and Rate Cards can be found in the Announcement. The complete Underwriting Guideline Manual will be available on Essent's website on May 5."

Lastly, Standard and Poor's Ratings Services (S&P) has announced the upgrade of the Financial Strength Rating and Issuer Credit Rating of Arch Mortgage Insurance Company (Arch MI) to BBB+, with a Stable Outlook. This announcement follows the January 30th completion of Arch Capital Group's acquisition of CMG Mortgage Insurance Company (now known as Arch Mortgage Insurance Company).

I never went to law school. I can safely say that I never will go to law school. But issues of law have certainly pervaded the mortgage industry more than ever, and Offit Kurman has created the Lender Legal Update. "The Lender Legal Update is a monthly free half-hour call-in to address the latest regulatory and legal information from a practical business perspective. In this information-packed half-hour, attorney Ari Karen will examine the latest trends, strategies and practices impacting the lending industry, the impact they may have on your business, and potential solutions and opportunities. This briefing will provide analysis and guidance to keep lenders a step ahead of potential problems in this fast changing and highly competitive regulatory environment. This event requires no pre-registration and doesn't require an internet connection." To participate, the toll free number is 844-LENDER LAW (844-536-3529 - I guess we have a new toll free number out there), entry code: 8628097#, and then your PIN number. To obtain your unique PIN, contact Jeanne at jhyatt@offitkurman. com. The first call is Friday, April 4th at 12PM EST, 6AM Hawaii time.

For a smattering of lender and vendor and association news...

Western Bancorp, a California lender that is well-known for 6-month and 3, 5, 7, and 10-year Jumbo ARMs, has enhanced its Alternative Income Verification (AIV) program for self-employed borrowers. Western Bancorp CEO Rick Soukoulis says, "Many self-employed borrowers have been locked out of the market for years. We are bringing back makes-sense underwriting for business people." The 5/1 AIV ARM program Western Bancorp released earlier this year no longer requires a P&L signed by a CPA. The underwritten income will be calculated by using the previous 12 months of bank statements to calculate net income based on cash flow - not tax returns or 4506Ts. Contact a Western Bancorp Account Executive to learn more.

Agri-Access recently introduced a brand new correspondent product called RuraLiving Home Mortgage. This niche program is dedicated to providing long-term financing for non-conforming secondary market acreages and hobby farm properties, with agricultural characteristics. Properties generally range from 5-160 acres and are owner-occupied, single family primary residences.  Loans up to $1.5 million are eligible for 15 and 30 year financing with rates typically 50 bps above conforming.  To learn more about this program, please contact Matt Morrow at matthew.morrow@agri-access. com.

The first Legislative Update Conference Call for the Mortgage Bankers Association of Missouri will be held this Friday, March 28, at 9AM CST. The phone number is 877-273-4202, Conference room #:  2922280. Click here to download the Missouri MBA Legislative Summary Report 03-14-2014.

And lastly, ResCap has been purchased by John Paulson. (I think more specifically, its potential to sue has been purchased.)

We have a lot of home sales information seemingly coming at us every week. Steve Kaye with Catalyst Lending reminds us, "Regarding the information on anemic home sales that is periodically released, ('One reason existing home sales are so anemic is because few homeowners can afford to sell. There are roughly 75 million owner-occupied households, of which 10 million are underwater and 10 million have insufficient equity in their homes to afford a down payment on a new home. So 27% of all owner-occupied homes are effectively off limits under standard loan programs. As such, the 5 million expected home sales this year, 10% of the available stock, is good,' per economist Dr. Elliot Eisenberg.) Another factor that few include in this conversation is the millions of former homeowners who fell victim to either foreclosure or short sale, thus removing them from the market, at least for a while. The housing market thrives on the 'move up' buyer and we have literally removed this sector from the marketplace (or, rather, they removed themselves). Combine this with the 27% of 'off limits' homeowners, and one can see how home sales will more than likely continue to trickle more than pour for the next few years at least." Thanks Steve!

Sure enough, New Home Sales dropped 3.3% in February to 440k, a five-month low. You can blame it on the weather, rising mortgage rates & costs, or whatever, but year-over-year sales (Feb 2014 vs Feb 2013 in this case) were negative for the first time since September 2011. New home sales represent about 10% of all home purchases.  The median price for a new home sold in February fell 1.2% from the same period a year earlier to $261,800, and the average sales price was $317,500.  There were 189,000 new homes for sale at the end of February, which represents a supply of 5.2 months at the current sales rate.

(Read More: New Home Sales Turn Negative Year-Over-Year, First Time Since 2011)

(But heck, per the Office of Federal Housing Enterprise Oversight, the average US home has increased in value by +14% over the past 2 years, i.e., 2012-13.) 

We also learned Tuesday morning that the Conference Board's index increased to 82.3 in March, exceeding all estimates and the highest since January 2008, from 78.3 in February.  And the S&P/Case-Shiller, with its two-month lag, showed that the pace of home price gains slowed. Hey, no tree grows to the moon, right? "The 20-city home value index cities advanced in the year to January at the slowest pace since August." Better than going the other way, right?

So when all those numbers were put in the kettle, and some Treasury supply was added, and an ongoing underlying flight to safety bid associated with Russia was sprinkled on top, rates were...basically unchanged.

This morning we've already had the MBA's application numbers. (I guess those guys get up earlier than everyone else, since their number comes out every Wednesday at 4AM PST.) The average number of mortgage applications slid 3.5% on a seasonally adjusted basis from last week's revised level. Application volume has now dropped in five of the past six weeks according to the MBA. (Some of the stronger companies out there, however, are bucking that trend - good for them!) We've also had the volatile Durable Goods number for February. Expected +1.0 from -1.0 last, it was actually +2.2% with January revised to -1.3%. There are two Treasury auctions on tap: a $13 billion 2-year floating rate note and a $35 billion 5-year note. In the early going rates are nearly unchanged: we had a 2.74% close on the 10-yr yield Tuesday and it is 2.75% this morning; agency MBS prices are worse a smidgeon.


Phil felt employees might be getting a little complacent.  He thought a little shake-up was in order and decided it was time to rid the company of any slackers.

He went out into the shop and noticed a guy leaning against a wall doing nothing.  There were workmen everywhere and he wanted them to know that he meant business.  He asked the guy, "How much money do you make in a week?"


A little surprised, the young man looked at him and said, "I make $400 a week. Why?"


Phil walked out to the street, found a nearby ATM, made a withdrawal, came back in two minutes, and handed the guy $1,600 in cash and said, "Here's four weeks' pay. Now GET OUT and don't come back."


Phil watched the guy leave and felt pretty good about himself.  He looked around the room and asked, "Does anyone want to tell me what that goof-off did here?"


From across the room a voice said, "Pizza delivery guy from Domino's."