Cinco de Mayo: HAMP Incentives Denied to NonCompliant Servicers? High Balance Loans; Penny Mac Earnings; Flood Zone Alert
An article by Kate Berry, with American Banker, states that "the
Treasury Department is threatening to deny or even claw back incentive
payments to mortgage servicers that are not modifying loans according to
the administration's guidelines."
Some say that noncompliance is
rampant in the voluntary Home Affordable Modification Program (HAMP),
mostly in the area of communications with borrowers about their rights
surrounding foreclosure. The Treasury Department pays $1,000 for each
completed permanent modification for a delinquent borrower and $500 for
each modification given to a current borrower, along with $1,000 per
year for borrowers who stay current after being modified. So far,
servicer payments have totaled $68.4 million to the 109 servicers who
are participating in the program and through March 31st only 230,801
borrowers had received permanent loan modifications and more than a
million borrowers were in trial modifications. Given that the program
is voluntary, too many penalties can cause servicers to drop out of
the program - contractually, there is very little to compel the banks
and servicers to do anything.
In a related word from the trenches: "Large investors and
servicers are receiving incentives to modify loans, and then they can
turn around and pass the loss portion onto the originator. The most
frustrating part is that while the loans were
underwritten responsibly (reasonable income, not inflated with a strong
likelihood of the income continuing), the servicers are now contacting
borrowers or employers and verifying the past income - but how they are
getting the authorization from the borrower to do so when there is no
loan modification in progress? If there is a discrepancy in income,
the result is a repurchase request with complete disregard to the fact
that it was their product design that you had to comply with, requiring
'when verifying employment, no income may be disclosed'. I am sure that
there are borrowers that inflated income levels, but on the loans I have
reviewed, this does not appear to be the case. I am trying to figure
out how this scenario is supposed to be acceptable to those who
responsibly played by the rules!"
Yesterday I noted that "Fannie Mae has suspended its Permanent High Balance product lines, so most pricing systems are no longer offering them." It turned out that this is not precisely the case. Pricing engines such as Optimal Blue did not suspend all of the High Balance Mortgage Loans, but instead are no longer allowing HBL's underwritten according to the prior eligibility guidelines (less restrictive eligibilities) as specified in Announcement 08-27.
Optimal Blue called these products "Permanent High Balance" Products. OB is still supporting the eligibility guidelines as specified in Announcement 09-08R, which it calls "Temporary High Balance" products, and this product is available with DU 7.1 thru June 19th and DU 8.0. Fannie Mae, on the other hand, has never labeled its revised eligibility for HBL "temporary" or "permanent" -- it's just HBL. The same eligibility, which was revised, applies for all loans over $417K regardless of whether the applicable loan limits were established by Congress as temp or perm.
A reader made a good point on an article that I mentioned yesterday which stated, "Next were frauds related to appraisal and valuation misrepresentation, which increased from 22% of reported misrepresentation in 2008 to 33%. With an 11% increase, this is the most notable increase in reported fraud types in 2009. Thank you HVCC." Vicky (from Valuation Management Group) wrote to point out, "The reported fraud was seen in 2009, but most likely took place in the years prior to 2009. HVCC was not in place until 5/2009, so the results of this will not be realized until the 2011 or 2012 reports."
There is also more on the job front. Overland Mortgage (TX) is looking to add branches and loan officers in TX, NM, MO, AR, TN and MS. Anyone interested should contact firstname.lastname@example.org And Pinnacle Capital (CA) is in need of FHA & VA underwriters, along with AE's in Hawaii. Contact email@example.com. Who says that there are no jobs out there?
PennyMac Mortgage Investment Trust reported net income for the first quarter of $1.3 million on total net investment income of $3.9 million. During the first quarter the company acquired five residential mortgage whole loan pools valued at $115 million in aggregate, with unpaid principal balances at the time of purchase of $208 million, of which 86% of the loans were either 90 days or more delinquent, or in the foreclosure process. In a related but unrelated matter, the FDIC announced a bid confirmation letter to sell a 40% equity interest in a limited liability company created to hold assets of SFG, a subsidiary of Silverton Bank (GA) to Square Mile Capital Management LLC. The FDIC will initially hold the remaining 60 percent equity interest in the LLC. The assets are mostly performing hospitality loans and loan participations with an unpaid principal balance of approximately $421 million.
Effective immediately, due to the present flooding activity in the Nashville TN area, Flagstar Bank will be temporarily suspending loan fundings in Davidson County. And when funding resumes, a satisfactory re-inspection will be required (as it already is for Cheatham, Rutherford, Sumner, Williamson, and Wilson counties) that include a statement from the appraiser that the subject property has not sustained any damage, a statement from the appraiser on the neighborhood conditions as they relate to any flooding or mudslide damage, and a photograph of the subject property.
US Bank Wholesale Sales Division came out with an additional enhanced "tier" level for its Second Mortgage and Simultaneous HELOC products. After this Friday LTV's will be adjusted. States removed from the 75% restricted declining markets list and will have the new enhanced "tier" maximum TLTV / HTLTV of 80% include IL, OH, OR, SC, UT, and WA. These states represent a maximum 75% TLTV/HTLTV on the above mentioned products: AZ, CA, FL, MI, NV, NJ, and NY. All other eligible states will remain at 85% TLTV/HTLTV for a Purchase / Rate Term Refinance.
The drop in the equity markets yesterday, and possibly again today, certainly helped the flow of funds into "safer" investments - such as Treasuries and MBS's. But we also had some economic news of note, the first being Pending Home Sales. The index was up 5.3% in March, with sales in the South up 13%, up 2% in the West, up 1% in the Midwest, but fell 3.3% in the Northeast. Second, Factory Orders here in the US were up 1.3% in March. And the Federal Reserve released its "Senior Loan Officer Survey" which showed that banks kept their lending standards tight during the first quarter - no surprise there, huh? There may have been a little movement in commercial and industrial loans to large and medium-size firms.
Returning to the Greek issue for a moment, some believe that this will be the end of the Euro currency, at least in Greece. Let them print their own currency! The odds of sharp recession have increased, obviously, and naysayers are skeptical about any bailout plan based on the recession-stricken Portuguese and Spanish contributing billions of Euros to the cause. We have the ECB adopting a pure bailout strategy by accepting all Greek collateral and have seen almost $150 billion in potential economic aid offered to the Greeks. This figure is almost 50% of Greek GDP, and is the equivalent of the United States needing 10x the TARP funds! Greece's GDP is only about 2% of US GDP and slightly less than that of Eurozone GDP, and one analyst likened it to Ohio going bankrupt and taking the entire US economic system with it.
In our market, yields hit their lowest level in more than four months due to the continued "concern" that European governments haven't yet overcome the region's debt crisis boosted demand for the safest assets, although there are continued worries about the debt situation in our own country. The difference in yield, however, between Fannie Mae & Freddie Mac mortgage securities and Treasury yields climbed to its highest level in several months. Spreads have not skyrocketed, but have moved up on increased volatility and since investors are very much preferring the safest of Treasury securities. "If Greece could default, couldn't Fannie or Freddie?" Fortunately for possible borrowers, all rates have dropped, masking the difference. (Greater volatility harms mortgage-bond prices because it makes bigger rises or drops in rates more likely, pushing refinancing and other sources of prepayments on the underlying loans either much higher or lower than expected.)
This morning we learned what locks desks already knew about last week: mortgage applications rose 4% after declining 2.9% during the previous week. Refinancing apps were down 2.1% from the previous week but purchases increased 13.0% from one week earlier - there's that homebuyer tax credit at work. In fact, purchase applications were up almost 24% over the last month. We also had the ADP private-payroll number for April which showed job growth coming in at 32,000. After these, and in the face of further stock sell-offs, the yield on the 10-yr is down to 3.50% and mortgage prices are better by between .125 and .375.
Most people don't know that in 1912, Hellmann's mayonnaise was manufactured in England.
In fact, the Titanic was carrying 12,000 jars of the condiment scheduled for delivery in Vera Cruz, Mexico, which was to have been the next port of call for the great ship after its stop in New York.
This would have been the largest single shipment of mayonnaise ever delivered to Mexico. But as we know, the great ship did not make it to New York. The ship hit an iceberg and sank, and the cargo was lost forever.
The people of Mexico, who were crazy about mayonnaise, and were eagerly awaiting its delivery, were disconsolate at the loss. Their anguish was so great that they declared a National Day of Mourning, which they still observe to this day.
The National Day of Mourning occurs each year on May 5th and is known, of course, as Sinko de Mayo.