Fed's Informal Interpretation of Originator Compensation Regs; Where America is Moving; Free HUD Training;
anyone from your county move in 2008? It is not my job to keep track of them -
but someone does. Privacy issues aside, Realtors may find this interesting: PopulationMoves. By the way,
Detroit is in Wayne County, and Phoenix is in Maricopa County.
Is your company compliant with
the new compensation and anti-steering provisions in Section 226.36 of Reg. Z?
I hope so. But compliance folks are still talking about how, on St. Patrick's
Day, staff members from the Fed's Division of Consumer and Community Affairs
provided their informal interpretations of the rule's requirements and
restrictions related to a number of common questions they received in recent
months. For example, the Fed staff opined on the "point bank"
concept, where the general belief was that some form of point bank was
permissible under the rule. Some plans would have allowed loan originators to
accrue credits in their point banks by charging overages; others would have
credited the loan originator's point bank on a closed loan basis. In either
scenario, the loan originator would have had the ability to
"withdraw" credits from his or her point bank, up to a certain amount
on a given transaction, in order to offer pricing concessions to consumers in a
competitive situation. According to the Fed staff, neither approach is
compliant with the rule because the funding of a point bank in any manner
constitutes originator compensation. The practice of funding a point bank
based on overages would not work because the point bank (again, compensation)
is being funded based on the terms or conditions of a loan.
In the second example, the funding of the point bank is not a violation because
the credits are earned on a fixed percentage of the loan amount - a permissible
means of compensation - but the use of the credits from the point bank to give
a consumer pricing concessions will result in the reduction of originator
"compensation" (i.e., the point bank balance) based on loan terms or
Another item addressed by Fed
staff in the webinar was the issue of compensating mortgage broker entities
with multiple branches. Many were under the impression that compensation could
vary by location based on permissible factors, such as cost of living
differences. However, the staff advised that if a broker has an office in
Anytown, Ohio, for example, and an office in another area of Ohio, a creditor
doing business with the broker must have the same compensation arrangements
with both branches. The theory stated by the staff is that while a creditor may
have different compensation arrangements with different loan originators who
are individuals, the branches are part of the same entity and are not separate
loan originators. The theory completely ignores an important distinction
between an individual and an entity; an entity can be in multiple places at the
same time. Does the staff actually believe that if a broker has branches in 50
states there can be no difference in the compensation arrangements between a
creditor and each of the branches? If so, how can a broker compensate its
individual loan originators differently based on differences in the cost of
living if the broker cannot receive compensation that reflects the differences
in the cost of operating branches in various areas?
HERE are slides from the Fed's webinar presentation
Thursday is a big day for many
investors and lenders. For example, MetLife Home Loans reminded its clients
that all files based on the old compensation rules must be submitted and
received by MLHL by the end of business on March 31, 2011. For MetLife's
consumer-paid broker compensation, the broker will negotiate its consumer-paid
broker compensation with the borrower up to a maximum of 2.500% of the loan
amount. The broker will access the company's Pronto! system to view the current
consumer-paid pricing which will reflect a range of rates with par, premium and
discount pricing. (The borrower's pricing will not include any lender-paid
broker compensation.) The GFE is completed. Per its flyer, "MetLife Home
Loans will not require copies of your loan originator compensation plans, will
not require proof of your anti-steering documentation, will allow changes to
your broker compensation level every 60 days, will allow your borrower to pay
MLHL bona-fide discount points to lower the interest rate, will allow you to
switch between consumer-paid and lender-paid until the loan is locked, and will
allow you to have broker compensation up to 2.50%."
Stearns Lending wholesale's group reminded brokers that they will be offering a
few different lender compensation plans. Specifically, for conventional loans
the comp plan will be in .125% increments between 1.00% and 4.00%. For Stearns'
government lender paid comp plans, brokers can have .250% increments up to 1%
higher than the broker's conventional plan. Stearns, by the way, is hosting a
training Webinar tomorrow from 10AM until 11:30AM PST. Go HERE
to register - space is limited.
The nation saw only one
FDIC-related bank closure Friday, with Advantage National Bank Group (IL)
assuming all the deposits (liabilities) of the Bank of Commerce (IL). Which brings
up the question, "Do regulators see trends in problem banks?"
Generally speaking, regulators see some key characteristics they frequently
find in these institutions, none of which be themselves is usually capable of
bringing a bank down, but when combined with others cause concern. These
include strong growth, concentrations of credit (particularly CRE and
construction & development), out-of-area lending, dominant management,
failure of board oversight, heavy reliance on wholesale funding (brokered deposits),
minimal balance sheet liquidity, and a lack of knowledge of complex
investments. Healthy banks, on the other hand, are urged to focus on
sustainable growth, supported by core deposits - easier said than done.
Here is a story from the weekend,
with a slightly different take, on the mortgage meltdown: In Prison for Taking a Liar Loan
Here's one of those FDIC lists you may or may not want to find yourself on: Recent
HUD has some free training classes coming up that might be of interest to some.
At 1PM EST on the 30th it is presenting a Webinar "Important
Changes to HudHome Sales" for HUD registered real estate brokers
nationwide. "FHA staff will provide information on recent changes &
how they will affect the real estate community." Register HERE.
HUD is also doing some loss mitigation training in Hollywood, Florida on April
28th for housing counselors. "Please Note: The completion of
NSC's Online EClass Training is a "prerequisite" prior to registering
& attending any HUD live classroom training. The NSC EClass training date on
your certificate is a required field when registering for live classroom
training." Register HERE and additional
information regarding EClass requirements can be found in Mortgagee Letter
Friday I mentioned a proposal for paying foreclosed-upon borrowers to help them
start anew. "Sheila Bair, FDIC chairman, raised the idea but people
involved said it was not an official government proposal and was rejected
strongly by some of the banks." I received this note. "Marx, Engels,
Lenin, etc. would be proud that their failed ideas on economics live on in
Sheila Bair and our benevolent banking/mtg industry 'regulators'. How many more
times do we need to listen to our leaders talk about abandoning free market
principles in order to save the free market? 'Congress recognizes that
the country's debt path is unsustainable. While the economics of the matter are straightforward - cut spending, raise taxes, or both - the politics is not. And
if voters cannot insist, or are not going to insist, on fiscal sustainability,
and if Congress is not going to control public finances on its own accord, then
one must conclude that the fiscal process is lacking a necessary ingredient.' A
wise economist once said, 'if something is unsustainable, it will not be
sustained.' If our 'leaders' don't get their fiscal house in order, bond
vigilantes and our creditors will do it for them. Then Helicopter Ben will
start raining more dollars into the economy magic printing press, call it
stimulative quantitative easing III, IV, V or whatever, and then we'll be
Weimar Germany. My parents came to this country by literally escaping communist
Yugoslavia for economic and political freedom, and it scares me to think that,
less than 50 years later, I might have to leave the US for the same reasons my
parents fled communist Yugoslavia....in search of economic and political
Turning to the markets, the 10-yr
closed around 3.44% on Friday, with not much in the way of news aside from GDP
from the 4th quarter and a University of Michigan Consumer Sentiment
Index survey that showed a drop in sentiment back to November 2009 levels. From
the previous Friday's close, however, 10's lost 1.375 in price and its yield
shot up 17 basis points. For the week MBS prices lost between .5-.75 points on
current coupon rates.
For economic news this week today
we will have Personal Income and Consumption/Spending, along with PCE (Personal
Consumption Expenditures) and Pending Home Sales. Tomorrow is the Case-Shiller
20-city Index, which never seems to bring good news, and Consumer Confidence.
On Wednesday the 30th we have the Challenger Job Cuts and ADP Employment
Change. Thursday is Jobless Claims, Factory Orders, and the Chicago Purchasing
Manager's Survey. Friday is all the unemployment data, the ISM index data, and
Construction Spending. FULL ECONOMIC CALENDAR
With the Master's golf tournament
At dawn the telephone rings . . .
"Hello, Senor Rod?" This is Ernesto, the caretaker at
your lake house in Bella Vista."
"Ah yes, Ernesto. What can I do for you? Is there a
"Um, I am just calling to advise you, Senor Rod, that your parrot - he is
"My parrot? Dead? The one that won the International
"Si, Senor, that's the one."
"Damn! That's a pity! I spent a small fortune on that
bird. What did he die from?"
"From eating the rotten meat, Senor Rod."
"Rotten meat? Who the
heck fed him rotten meat?"
"Nobody, Senor. He ate the meat of the dead horse."
"Dead horse? What dead horse?"
"The thoroughbred, Senor
"My prize thoroughbred is dead?"
"Yes, Senor Rod, he died from all that work pulling the water cart."
"Are you insane?? What water cart?"
"The one we used to put out the fire, Senor."
"Good Lord!! What fire are you talking about, man??"
"The one that destroyed your house, Senor! A candle fell and the
curtains caught on fire."
"What the devil?? Are you saying that my house is destroyed because
of a candle??!!"
"Yes, Senor Rod."
"But there's electricity at the house!! What was the candle
"For the funeral, Senor Rod."
"WHAT BLOODY FUNERAL??!!"
"Your wife's, Senor Rod. She showed up very late one night and I
thought she was a thief, so I hit her with your new Taylor Made Super Quad 460
SILENCE........... LONG SILENCE.........
"Ernesto, if you broke that driver, you're in deep trouble!!"