Wells Cuts 1,900 Mortgage Staffers as Production Slows; Government Shutdown Tips from Lenders; GNMA Pooling Policy Update
Rain or shine, whether or not the
US government is closed or open, the US Treasury will be open next week to
auction off $32 billion in 3-yr notes, $21 billion in 10-yr's, and $13 billion
But in the event of a shutdown,
what about the rest of government? A LO from Michigan wrote, "I can't
believe this. First the comp thing, and now our entire government may take a
break. No wonder folks are making jokes like, 'Ruger is coming out with a
new pistol in honor of Obama. It will be named the 'Union Worker.' It doesn't
work and you can't fire it." If the government shuts down today, every
non-essential government employee should wake up really late and smile. After all,
they are lucky. When private companies have budget problems, the people on
the non-essential worker list don't get a three-day weekend. They get a
six-month "vacation" of filling out resumes, eating Ramen noodles,
worrying about their mortgages, and looking for a job. In comparison, the
furloughed government workers will get an extra day to enjoy the Cherry Blossom
Festival in D.C."
Caroline Baum wrote a notable
blurb, "What if the U.S. government shut down and no one noticed? Even
worse (or better, depending on one's point of view), what if all federal
workers went on furlough and the public realized there were benefits, not just
costs, to smaller government? Essential services will be maintained, including
the distribution of Social Security checks. Employees involved in the military,
national security and law enforcement will stay on the job. Non-essential
workers will be furloughed. President Barack Obama says a shutdown would
further reduce confidence in government. Guess what? It can't go much lower. The
approval rating for Congress dropped to 18 percent last month, near the lowest
in the Gallup poll's 37-year history of tracking the trend."
Word has it that since it doesn't
rely on Congressional funds, the Federal Reserve (central bank) would remain
open for business as usual, with normal staffing levels. The Fed would
therefore be able to continue with its day-to-day operations. The SEC is
expected to continue operations as well. But lenders and vendors were out
warning originators about possibilities. CoreLogic told clients that,
"If the government does a shutdown, the last date of service for 4506-T
and SSA-89 orders would be this Friday April 8...We will make every effort to
transmit orders to the IRS and SSA as quickly as possible once received. All
SSN orders will be processed during standard business hours and may not be
affected by the shutdown. In the event of a shutdown, we will still continue to
submit all 4506-T Direct and SSN orders but service time is expected to be
affected due to the IRS and SSA being unavailable to respond."
For licensing, "Since CSBS
is the nationwide organization representing state banking regulators, a
shutdown of federal government agencies will not have an immediate impact on
day-to-day operations. NMLS offices will remain open during any
government shutdown and NMLS staff will continue to report to work...Test
candidates should not expect their appointments to be cancelled or be affected
by a shutdown of federal government agencies."
suggested clients, "Run CAIVRS' checks immediately on all loans that you
want to close in the next week or two in case the shutdown does occur. A
CAIVRS' problem is likely the most immediate impediment to obtaining insurance
once the loan the program is reinstated. Remit any collected MIP as FHA
Connection will not be available if a shutdown occurs. Complete the insuring of
any closed FHA loans. If the government does shutdown, we expect FHA to publish
a FAQ and answers on their website to address program operations.
However, we wanted to give our lenders some notice of items they could do to
avoid any penalties or process interruption of their government loan
Plaza Home Mortgage told
producers, "We have been advised that VA will continue business as usual
during the shutdown. Therefore, we anticipate that the WEB LGY (formerly TAS)
system used to order VA Case numbers and Appraisals will be available, and so
will the issuing of VA Loan Guaranty Certificates. Plaza will send out
additional communications should we learn anything new about how the VA will be
handling loans during the furlough."
Stearns Wholesale warned
brokers, "To best prepare in the event the government moves to enforce a
temporary shutdown, Stearns strongly recommends that any pending Case Number,
LDP, GSA, CAIVRS, 4506T, and SSI Validation be ordered as soon as possible. If
a shutdown does occur, FHA Connection and VA Information Portal may or may not
be available, 4506T, IRS Transcript processing and SSI Validation will not be
available. To avoid any delay in closing your loans, we strongly recommend you
ordering any pending FHA, VA, IRS, or Social Security items today."
Independent of the government
shut-down, Wells Fargo gave 1,900 mortgage employees their notice. The cuts add
up to about 3% of Wells Fargo's mortgage staff, including interim positions
that are tied directly to origination volumes. Most of the layoffs are these
interim employees, who were told when hired that their position could be short
term." Wells Fargo's overall headcount was 272,200. WellsCuts
known for being the world's largest asset manager and its huge institutional
bond accounts & iShares exchange-traded funds, is planning a massive
expansion in old-fashioned mutual funds and related retail offerings. BlackRock
wants to double its $300 billion U.S. retail business by the end of 2014, with
the managing director saying, "The firm has identified U.S. retail as a
strategic priority. We think we can double our business from where it is now."
Wednesday HUD issued a
memorandum (APM 11-04) that is not a surprise, but turned some investor heads.
Ginnie Mae will change its policy with regards to the delinquency status of
loans being pooled into their MBS. "Effective for single-family securities
with an issue date of June 1, 2011 and later, all loans pooled into Ginnie
Mae single-family securities may not be delinquent by more than the monthly
installment of principal and interest that is due on the issue date."
In other words, the loan being pooled would need to be current till the month
prior to the issuance of the MBS pool - no more allowing new up-to-60-day
delinquent loans to be pooled into Ginnie securities. Ginnie Mae was already
requiring "re-performing" loans to be current at the time of the
issuance. The impact on the market and investors is not huge, as analysts
estimate that at most 0.5% to 1% of loans being securitized into Ginnie Mae MBS
were delinquent at issuance.
Fitch Ratings downgraded Republic
Mortgage Insurance Company's (RMIC)'s "Insurer Financial Strength"
(IFS) rating to 'BB' from 'BBB-'. "The downgrade of
the IFS rating is driven primarily by RMIC's comparatively weak capital levels,
continued operating losses and uncertain business prospects." RMIC's
weak capital ratios are reflective of Fitch's view that the insurer's
delinquent risk-in-force is currently greater than its total capital resources
(comprised of policyholders' surplus, contingency reserve and loss & loss
adjustment expense reserve).
GMAC Bank passed
on the word to its correspondents, and brokers in the wholesale channel, that
"all Jumbo loan appraisals must now be ordered through the Veros Appraisal
Management platform provided by GMACB. This includes Jumbo loans underwritten
by the Client under delegated authority as well as those underwritten by GMACB.
GMACB's Valuation Team, comprised of licensed and certified appraisers, will
conduct a due diligence on every appraisal ordered through the Veros
platform" to check items including value validation, appropriateness of
the comparable selection, adequacy of the market adjusters and individual
adjustments to comparable sales, dates of sales, application of appraisal
principles, etc. "GMACB clients will benefit on Jumbo loans where the
appraisal is ordered through the Veros Appraisal Management Service, as loans
will not be denied for purchase or returned for repurchase solely because the
value of the collateral is not sufficient or the appraisal does not meet
Flagstar let its
clients know that, "The FHA continues to require lenders to underwrite FHA
loans using the original appraisal performed for a case number, regardless of
whether the lender and or borrower(s) on the loan change...In no circumstances
will Flagstar accept an appraisal transferred or uploaded to Flagstar by the
loan originator or any employee of the originating lender." And starting
in 10 days, "The FHA will limit the maximum LTV and loan purpose for
borrowers who re-occupy their investment property less than 12 months prior to
the application date of the refinance transaction. To determine the maximum
allowable LTV and loan purpose, refer to the matrix in the memo."
In the markets on Thursday, MBS volumes were anemic, as opposed to Wednesday
when they were decent. 10-year notes were worse by a smidge and closed with a
yield of 3.55% while current coupon MBS prices were slightly better than
Wednesday's close. Rates were pushed around a little by the .25% rate hike by
the ECB, another strong earthquake in Japan, more hawkish comments from a Fed
official, and the potential for a government shutdown as Republicans and
Democrats are unable to reach an agreement on the budget.
The week closes out with gold marching toward $1,500 per ounce, oil over $111 per
barrel, and another day of no substantive scheduled economic news (unless one
counts Wholesale Trade for February later today). Even though the markets
assume a shutdown will be averted, these factors have served to push rates
higher, and the 10-yr yield is up to 3.61% and MBS prices worse by .250.
On a transatlantic flight, a
plane passes through a severe storm. The turbulence is awful, and things go from
bad to worse when one wing is struck by lightning. One woman in particular
Screaming, she stands up in the front of the plane. "I'm too young to
die," she wails. Then she yells, "Well, if I'm going to die, I want
my last minutes on earth to be memorable! Is there anyone on this plane who can
make me feel like a WOMAN?"
For a moment there is silence. Everyone has forgotten their own peril. They all
stare, riveted, at the desperate woman in the front of the plane. Then a cowboy
from Wyoming stands up in the rear of the plane. He is handsome: tall, well
built, with dark brown hair and hazel eyes. He starts to walk slowly up the
aisle, unbuttoning his shirt.
One button at a time.
No one moves.
He removes his shirt. Muscles ripple across his chest.
He whispers in her ear:
"Iron this...then get me a beer."