Loan Servicer Settlement Not Enough for Some; Wholesaler Exits Biz After Regulatory Exhaustion; Citi Name Change; Orig Comp Rules on N/O/O
Reuters ran a story saying, "A proposed rule requiring a minimum 20% down
payment on mortgages that lenders could then sell to investors without keeping
some of the risk on their books might prevent some potential borrowers from
getting a loan, a top U.S. housing official said. While the rule 'is designed
to create a class of loans that have a lower likelihood of default, in its
proposed definition it has the potential to exclude a number of buyers,' Acting
Federal Housing Administration Commissioner Bob Ryan said in prepared
Is this late-breaking news to any mortgage bankers,
Realtors, title company, or MI folks? I hope not. But maybe it will attract
the notice of Senators & Congressman, who many in the industry believe don't
know the difference between a mortgage and a deed of trust.*
*Just so I don't have to write this tomorrow, the basic difference between
the two is in the number of parties involved, the state, and the foreclosure
process. For more details go to: MortgageVsDOT
Like a kid who is waiting outside the principal's office when he knows he's
in trouble but doesn't know just how much trouble, the companies servicing
loans had some of that uncertainty cleared up yesterday: FDICRelease. And of
course, this is not the end of it. "The enforcement orders issued today
are important, but they are only a first step in setting out a framework
for these large institutions to remedy these deficiencies and to identify
homeowners harmed as a result of servicer errors. While today's orders put
these large servicers on a path to improving their management of the
foreclosure process, they do not purport to fully identify and remedy past
errors in mortgage-servicing operations of large institutions. Much work
remains to ensure that the servicing process functions effectively,
efficiently, and fairly going forward. Importantly, these enforcement orders do
not contain monetary remedial measures." FULL STORY
Over time, it looks like all servicers
will need to conform to these standards. But in the near term, the risk is that
this framework is one more ingredient that will slow the clear out of the
foreclosure backlog. And the enforcement actions taken yesterday by the Federal
Reserve, the OCC, and the OTS do not address the issue of fines or
modifications. But the Federal Reserve said in a statement that it believes
that monetary sanctions are appropriate for the affected banks it oversees,
including Ally Financial, SunTrust, and HSBC. Other banks that have agreed
to the enforcement actions include Bank of America, Citigroup, JPMorgan Chase,
MetLife, PNC, US Bancorp, Wells Fargo, Aurora, EverBank, and Sovereign Bank.
The servicers represent nearly 70% of the mortgage servicing industry, or nearly
$7 trillion in mortgage balances.
Ally Financial, the company formerly known as GMAC, quickly issued a
statement. Ally "and certain of its subsidiaries have executed the Consent
Order issued by the Board of Governors of the Federal Reserve and the Federal
Deposit Insurance Corporation related to the servicing operation of its
mortgage business. The company deeply regrets the error in processing certain
affidavits and has acted with urgency and rigor in addressing and remediating
the issue. Through our review to date, Ally has not found any instance
where a homeowner was foreclosed upon without being in significant
default. GMAC Mortgage has substantially upgraded its operations
over the past two years and today has a Tier 1 servicer rating from the
Department of Housing and Urban Development (HUD) and ranks first among large
servicers in borrower workouts by Fannie Mae..."
Of course, there is a segment of
the population that believes that the settlement is not enough. Williteverbeenough? (Yes
- USA Today. The article was sandwiched between articles on "Best
Manicures East of the Mississippi" and "Are Retirees Operating
Lemonade Stands Unfair to Youth?".)
If you're saving up all your LP work to do Easter Sunday, don't. Freddie spread
the word that, "The Loan Prospector system and customer service will be
closed on Easter Sunday, April 24."
Citi will be undergoing a name change. "We're pleased to announce
CitiMortgage, Inc.'s Correspondent Lending channel will become a part of
Citibank, N.A. effective for loans purchased on or after June 18th...
(For) agreements, CitiMortgage, Inc. will assign its purchase rights, duties
and obligations under the Correspondent Loan Purchase Agreement to Citibank,
N.A. Prior to the effective date, you will receive notice of this
assignment including changes to the Correspondent Manual. No action is required
on your part to complete the assignment of the Agreement." For
correspondents, "on the effective date, all of CitiMortgage's rights in
your pipeline loans will be transferred and assigned to Citibank." Citi's
bulleting also addressed MERS changes (with two transfer transactions -
beneficial rights and servicing rights). As always, it is best for Citi's clients
to read the actual bulletin.
Citi also recently announced
"a new feature adjuster of (0.50) will apply to all VA products and
programs, regardless of FICO score and to all executions - best effort and
mandatory" that began on the 11th, and rolled out a program for
Texas veterans. And starting Saturday, for the Freddie Mac Home Possible
program, "the maximum LTV and CLTV are reduced to 95%. A 40-year fixed
rate term is permitted on 1-units only. Buy downs are permitted on 1-unit
properties only; buy downs on 2-4 units are not permitted. In order to meet the
pooling deadline set by Freddie Mac, the last date to register a Home Possible
loan with an LTV/CLTV > 95%, or a 40-year term on a 2-4 unit, or a buy down
on a 2-4 unit is April 15, 2011. Additionally, loans with the previously
listed criteria must be purchased by CitiMortgage no later than April 30,
CitiMortgage, and every other
correspondent investor, performs post-purchase due diligence on a sample of
loans purchased. "Among other check-points, this process identifies
defects or instances of non-compliance with investor policies, procedures, and
quality expectations and regulatory requirements. Our post-purchase
defect rate goal for each Correspondent is 5%." (Let's hope airplane and
surgical implement manufacturers have higher standards.) "Through in-depth
trend analysis, we identified the top post-purchase defects for conventional
and government loans. For assets, one defect that Citi notes is that
the paper trail for large deposits is missing - source documentation for large
deposits is not included in the file, and cumulative smaller deposits are not
being documented as large deposit. Another is in the asset area of source of
gift funds from donor: the file is missing a withdrawal document or bank
statement from donor, or missing the documentation that verifies funds were
from an acceptable source." Citi, and others, is happy to provide best
practice documentation to cure this.
For certain scenarios, ClearPoint
Funding "encourages and accepts the use of streamlined appraisal
alternatives as directed by the DU/DO Automated Underwriting System. ClearPoint
points out that property inspection waivers are "Now permitted when
recommend by DU/DO for the following scenarios: 1 Unit, purchase & R/T
refinances, standard loan balances, all occupancies permitted (excluding
investment properties in TX). If MI is required, refer to MI Guidelines.
Property may not be a REO, recent foreclosure or new construction."
Certain other forms may be required - check the ClearPoint bulletin for
the word to brokers that, "Since N/O/O loans do not follow the new Dodd
Frank Rule, "We can continue 'business as usual' with them when
registering and submitting. Please note you will not have to price them under
Lender Paid, brokers can use the previous procedures, and when registering the
loan (EverBank's system) will not give you that option." EverBank
recommends that brokers "will want to use the Old Broker Cert and
MBFA" but that "they will not need an anti-steering form."
Late last week Southern Trust
Mortgage (Virginia Beach) told its loan brokers that it would exit the
channel, citing what it calls "increasing compliance implications"
tied to the Federal Reserve's new loan officer comp rule, and instead focus on
Chase Correspondent revised the LTV limits for its Home Possible product
Rates declined again Wednesday,
helping anyone who waited to lock. Traders and investors chewed on news from
the Beige Book (relatively upbeat on the economy, but not residential real
estate), the 10-yr auction (poorly received), and President Obama's plan to cut
the budget deficit (anything is better than nothing?). In the fixed-income
arena, 10-yr notes improved by .25 in price and headed down to 3.46%.
Mortgages, and the securities that back them, continue to see slow supply - few
out there are reporting that locks "are on fire" - and agency prices
were better by .125-.250, depending on coupon and agency.
A blonde was driving her car about two hours from San Diego when
she was flagged down by a man whose truck had broken down. The man asked her,
"Are you going to San Diego?"
"Sure," answered the blonde, "do you need a lift?"
"Not for me. I'll be spending the next three hours fixing my truck. My
problem is I've got two chimpanzees in the back who have to be taken to the San
Diego Zoo. They're a bit stressed already so I don't want to keep them on the
road all day. Could you possibly take them to the zoo for me? I'll give you
$100 for your trouble."
"I'd be happy to," said the blonde. So the two chimpanzees were
ushered into the back seat of the blonde's car and carefully strapped into
their seat belts, and off they went.
Five hours later, the truck driver was driving through the heart of San Diego
when suddenly he was horrified! There was the blonde walking down the street
and holding hands with the two chimps, much to the amusement of a big crowd.
With a screech of brakes he pulled off the road and ran over to the blonde.
"What the heck are you doing here?" he demanded, "I gave you
$100 to take these chimpanzees to the zoo!"
"Yes, I know you did," said the blonde, "but we had money left
over, so now we're going to Sea World."