Agencies Absolved of Causing Meltdown; Fifth Third Cuts HARP 2.0; Europe Approves Basel III
I'm supposed to be more outraged by what Mitt Romney does with his money, than
by what Barack Obama does with mine." So wrote a witty LO, regarding our
presidential race which seems to have been going on for over a year already,
and we still have almost another six months. Regardless of one's political
outlook, what is a concern to many of our banks is that in Brussels the European Parliament voted through its version of
legislation transposing Basel III capital and liquidity requirements into law.
outcome of the vote is a very strong statement by Parliament to the Council
that all political parties are determined to go ahead with stabilizing banks
and financing growth," said Othmar Karas, the MEP in charge of pushing the
legislation through parliament. "The new capital requirements are not only
a pivotal piece of banking regulation, but a law to finance the real
economy," he said, adding that the main challenge is to find the right
balance. Among many things, and very simply put, Basel III limits banks to the
amount of mortgage servicing rights they can own relative to their Tier 1
capital. IF the U.S. adopts the accord, banks over that limit, which currently
includes Wells Fargo, have a limited set of options, some of which will impact the value of servicing, which
in turn impacts the price of loans to borrowers.
A working paper just released by the Federal Reserve makes it official: the agencies had no responsibility for the
financial crisis. "The GSE and The Mortgage Crisis: The Role of the
Affordable Housing Goals", the author estimates only between 2.5-5% more
credit to high risk borrowers was made available than would have been extended
otherwise to meet Underserved Areas Goals (UAGs). "The GSE purchases of
single family mortgages to satisfy the goals did not drive the subprime lending
boom of 2002-2006." Okay, let's move along - nothing to see here...
I have an idea! Let's take all the foreclosures in some really hard hit state,
and possibly erase them. The question before the Florida Supreme Court is, "Can banks that file fraudulent
documents (e.g., robo-signing) in foreclosure proceedings voluntarily dismiss
the cases only to re-file them later with different paperwork?" Servicers
everywhere are watching this story.
The GMAC/ResCap bankruptcy has long
been anticipated - heck, even this commentary has been mentioning it for
months. Clients received this note: "GMAC Residential Capital, LLC (ResCap)
announced they have filed for bankruptcy protection. Ally Bank (dba GMAC Bank)
is a separate legal entity from ResCap and operates independently of ResCap.
Business Lending is an operating division of Ally Bank consisting of Warehouse
Banking, Correspondent Lending and Wholesale Lending. The decisions made by
ResCap do not impact ongoing operations of Ally Bank's Business Lending
Division. We would like to reassure all of our clients that your business relationship with Ally Bank
will not be impacted by these changes. Ally remains an active participant
in the Correspondent and Wholesale lending channels, and will continue to honor
its commitments and purchase and fund those loans. Ally Bank continues to
maintain lending relationships and continues to provide warehouse financing to
those customers. In addition, Ally Bank is a direct seller to FNMA and FHLMC
and maintains a servicing portfolio of both agency and non-agency loans."
How do Ops
and compliance folks keep up with things? Here are some somewhat recent lender/investor/agency updates. As always, it is
best to read the actual bulletin, but this will give one a flavor for what is
happening out there. In no particular order...
With a few sentences Fifth Third Bank
(affectionately known as 1 2/3 Bank) dropped the number of investors
offering HARP 2 by one: "Effective May 14, 2012 on all new loans
registered, the LTV for DU Refi Plus and Hasp Open Access has been changed to a
maximum of 105%, CLTV and HCLTV remain unlimited. For non-Fifth Third to Fifth
Third loans, transferred mortgage insurance will no longer be allowed."
After conducting on-site reviews of document custodians, Fannie Mae has revised its policies on custodians' responsibilities
such that they're now required to use the services of an independent third-party
audit firm to complete an annual audit that evaluates eligibility and
operational compliance. In case where the most recent Fannie on-site
review was performed before August 1, 2011, document custodians should have an
independent third-party auditor complete their first audit before July 31, 2013
and the continue to do so annually. Document custodians whose last Fannie
on-site review was completed between August 1, 2011 and July 31, 2012 must have
their third-party audit completed by December 31, 2013. Fannie will be
revising the relevant forms and sections of the Requirements for Custodians
Document custodians will also need to establish a monthly quality control
program as per Fannie's new requirements. The program must be in place by
September 30, 2012, and the first review should be completed by October 31st
for September 2012 document and data certifications, and Fannie reserves the
right to review any quality control results as it needs.
Servicers of Fannie loans are subject to new requirements regarding liens for
delinquent HOA dues for PUD and condo properties acquired through
foreclosure. If a servicer is notified by an HOA that the borrower is
more than 60 days late with their payments for a PUD or condo project and/or
any charges levied by the HOA, the servicer must advance the necessary funds so
as not to compromise the Fannie mortgage lien. This advance can be
reimbursed; the time limit depends on the state. Servicers should also
clear any property liens for delinquent HOA dues and assessments on acquired
properties no more than 30 days after the foreclosure sale or acceptance of a
deed-in-lieu. Should the HOA refuse to release its claim of disputed lien
after "reasonable efforts to reach agreement," the servicer should get in contact
with Fannie's legal team.
A few weeks back the updates to Desktop Underwriter (DU) 8.3 are the big news
from Fannie Mae. Fannie implemented enhancements that increase the
transparency of the loan process by providing lenders with estimated property
values for select DU Refi Plus loan case files. This will affect all DU
Version 8.3 loan case files that were submitted or resubmitted after April
28th. If, upon submission, a DU Refi Plus property fieldwork waiver (PIW)
is offered, the underwriter may either resubmit the case file using the
DU-provided estimated value or use the value entered by the lender. If a
PIW is not offered, the underwriter may either use the DU-provided estimated
value or obtain an appraisal. The PIW cannot be used if it is more than
four months old on the date of the note and the mortgage or if the property is believed
to have been in a recent natural disaster. Fannie has provided an FAQ on
the updates on its website as well.
Fannie has updated the terms on which it can change the pricing applicable to
lenders' deliveries of loans such that it has the right to change the pricing
any number of times during the term of any master agreement or related MBS
contract at any time. Before making any updates, Fannie will provide
lenders with written notice, and, if Fannie and the lender aren't able to agree
on the new pricing before the effective date, either one may cancel the
relevant agreement in writing.
The May Uniform Mortgage Data Program® (UMDP) Yardstick is now available.
This edition covers the new Loan Delivery application for the Uniform Loan
Delivery Dataset (ULDD) requirements and the Loan Delivery Test Environment
Fannie's Capital Markets group has raised the maximum premium price available
in eCommitting and eCommitONE, effective for the bulk of fixed rate loans.
Fannie Mae has posted updated instructions for Illinois and Mississippi
security instruments. In Illinois, lenders may now include the interest
rate for fixed-rate loans and are no longer required to do so for ARMs, as the
interest rate for the latter is listed in the instrument's Adjustable Rate
Rider. Fannie now permits lenders to include a street address for the
Mortgage Electronic Registration System (MERS) when working with Mississippi
deeds of trust; this update should be implemented where appropriate within the
next six months.
Release notes on Fannie's EarlyCheck 2.0, which will be implemented on July 23,
2012, are now available.
In addition to the current delivery eligibility and data edits available, the
new EarlyCheckTM will include new loan-level edits that accommodate ULDD.
For those interested in learning more, there are live webinars available;
Loan Delivery users are reminded that their credentials for accessing the new
Loan Delivery Test Environment (LDTE) were sent to them in two automated emails
at the beginning of May.
Every lender could hang a "Great Rates" sign on the front of their building.
Yesterday fixed income markets (which of course include mortgage-backed
securities) rallied as speculation of a Greek exit from the Euro increased and
Euro-area concerns drove the dollar and U.S. bond prices higher. Mortgage
prices lagged somewhat - investors become nervous about prepayment risk when
rates improve too much. And at some point you'll notice this at the pump: commodities
sold off as the dollar strengthened: gold dropped $23/ounce, and oil has
dropped $10/barrel in the last two weeks.
Lock desks say business is brisk, and sales volumes from originators
continue at a strong, above-average pace. By 3PM EST, the close of the futures
market, the U.S. T-note was better by .5 in price (1.79% yield, and its lowest
since October 2011) and MBS prices improved by about .250. It's still pretty
early here in Ohio, but today we'll make up for the lack of news yesterday with
CPI (expected +.1%), the Empire State Manufacturing Survey, Retail Sales for
April, and the National Association of Home Builders sentiment Index.
Church Ladies with Computers. (Part 2 of 3) - these sentences (with all
the bloopers) actually appeared in church bulletins or were announced in church
Irving Benson and Jessie Carter were married on October 24 in the
church. So ends a friendship that began in their school days.
A bean supper will be held on Tuesday evening in the church hall. Music will
At the evening service tonight, the sermon topic will be 'What Is Hell?' Come
early and listen to our choir practice.
Eight new choir robes are currently needed due to the addition of several new
members and to the deterioration of some older ones.
Scouts are saving aluminium cans, bottles and other items to be recycled.
Proceeds will be used to cripple children.
Please place your donation in the envelope along with the deceased person you
The church will host an evening of fine dining, super entertainment and
Potluck supper Sunday at 5:00 PM - prayer and medication to follow.
The ladies of the Church have cast off clothing of every kind. They may be seen
in the basement on Friday afternoon.