With all of the talk lately about owning a bank or not owning a bank, it is interesting to keep in mind some recent findings of the semi-annual MBA/STRATMOR Peer Group Survey. The study divided mid-level retail mortgage originators into two groups, one owned by banks and the other independent mortgage bankers. Most every mortgage bank had a grand year in 2009, but the study found that bank-owned lenders were the top earners by a rather large margin due to lower expense levels and higher net interest spreads. The next profitable group, earning a margin 20% less than their bank-owned brethren, was net branch lenders. This group actually saw higher revenues, but had the highest expense levels. Standard branch independents came in third, about 20% less in profits than net branch lenders.

The MBA/STRATMOR study raises some interesting questions, fine for me to raise but far above my pay-grade to answer. Can the bank-owned lenders sustain their cost advantage in 2010 with lower industry volumes?  Is some of this cost advantage due to the bank exemption from state and LO licensing requirements, and if so will it continue under consumer protection legislation? Do these results validate the net branch business model in comparison to the corporate branch model? And, if the mortgage industry ever has a "normal" year, will standard branch lenders fare relatively better or worse? By the way, anyone interested in learning more about the study, or about joining the MBA/STRATMOR Peer Group Program should visit their website at www.mbastratmor.com.  (They are moving headquarters today, so hopefully the site is functioning.)

Flood news continues to, uh, flood the lender community after the NFIP's authority expired earlier this week. GMAC's correspondents learned of its interim policy for properties requiring flood insurance. "GMACB continues to require Flood insurance on properties located in a Flood Hazard Zone and loans without coverage are ineligible for purchase by GMACB. Once the NFIP's authority to issue policies is restored and evidence of acceptable flood insurance is in the file, GMACB will again purchase loans located in a Flood Hazard Zone."

Provident Funding's requirement for flood insurance has not changed. Acceptable evidence, pending NFIP's final policy, includes "a completed and executed NFIP Flood Insurance Application plus a copy of the borrower's premium check or agent's paid receipt, a completed and executed NFIP Flood Insurance Application plus the final HUD-1 form reflecting the flood insurance premium collected at closing, a completed and executed NFIP General Change Endorsement Form showing the assignment of the current flood insurance policy by the property seller to the borrower, or an agent-executed NFIP Certification of Proof of Purchase of Flood Insurance.

Please note that the Federal Insurance and Mitigation Administration, which administers the NFIP program has a standard process for its insurance agents to follow when there is a lapse in the NFIP's authority. Private flood insurance is not affected by a lapse in the NFIP's authority."

GMAC Bank, one of the HomePath product lenders, reminded its correspondent clients that "Fannie Mae requires delivery of property data such as the number of bedrooms and year built...since the HomePath product does not mandate an appraisal, it will be necessary to print out the property information containing number of bedrooms and year built on Fannie Mae's HomePath web site. This information must be in the loan file when submitting to GMACB for underwriting and/or purchase." GMAC also updated its policy requirements for processing the fabled IRS form 4506-T. It is best to check their grid for details, but suffice it to say that the updated policy applies to all financing types - Conforming, Jumbo and Government loans, subject to some exceptions.

Many originators are waiting for HUD to publish more guidance on correspondents, and whether brokers will be allowed to offer FHA loans to their clients. HUD announced that it will soon issue a Mortgagee Letter which provides specific information regarding the implementation of its recently released final rule entitled, "Federal Housing Administration: Continuation of FHA Reform-Strengthening Risk Management Through Responsible FHA-Approved Lenders". In the meantime, lenders know that they are, or will be, seeing increased net worth requirements for FHA-approved mortgagees over the next few years. As of May 20, FHA no longer approved loan correspondents for participation in FHA programs, and existing FHA-approved loan correspondents that satisfy the requirements to renew their approval for 2010 will maintain that approval through the end of calendar year 2010. "Underwriting mortgagees will now be held responsible for the performance of all the loans they underwrite." I hope originators know what that means. The FHA is using the Small Business Administration's (SBA) size standards (less than $7 million in annual receipts for non-depository institutions and less than $175 million in assets for depository institutions) to determine if a lender can be classified as a small business. "The rule permits non-FHA-approved mortgage brokers to originate single family FHA-insured loans through sponsorship by an FHA-approved mortgagee. Sponsored brokers may originate, process, and fund loans, as permitted by their sponsor. However, only FHA-approved sponsoring mortgagees may close broker-originated loans and submit them for insurance endorsement."

Lenders One continues to roll along. The latest news from them included adding PHH Mortgage to its "Preferred Investor" list under a 3-year contract. For those playing at home, PHH is the 10th largest wholesale/correspondent lender in the US, and the 7th largest originator overall.

Servicers took note that Fannie Mae issued a Lender Letter which provided an "Extension to Fannie Mae's Alternative ModificationTM to the Home Affordable Modification Program." It extends the eligibility timeline and clarifies "certain requirements for participation in the Alt Mod program."  HERE IS THE RELEASE

Any lender that is in the FHA manufactured home space should read HUD's latest release focused on Title I Letter. Maybe they will understand it better than I do: READ MORE

Reverse Mortgage acceptance continues to increase, especially among dealers. Cantor Fitzgerald, for example, announced that it is now involved in the reverse mortgage market. The desk will be trading both GNMA and Non-Agency Reverse Mtgs. "Investor involvement in GNMA Reverse mortgages has gained enormous momentum over the past few years. To be set up, contact Dave Gottfried at Cantor: dgottfried1@bloomberg.net

What difference does it make that after the commentary went out yesterday, the market saw Factory Orders come out at +1.2%, lower than expected? Or that the ISM Non-Manufacturing Index was steady at 55.5 for May - still expansionary. Yesterday the decent news pushed the 10-year note's yield to its highest level in two weeks, and mortgage selling really picked up yesterday, especially while the Treasury market was rallying. Traders estimate about $1.5 billion of new production came through their phone lines, but buyers were waiting and mortgage prices did well relative to Treasury prices. Not that this impacts current-coupon originators, but 5.5%-6.5% MBS's hit record high prices of 107, 108, and 109! Where's the prepay risk?

Everyone seemed to think that Nonfarm Payrolls were going to increase significantly. Census hiring, a big wild card in this government-sponsored era, has fallen way below the Bureau's original estimate of 700-800,000 jobs, and is probably less than 200,000. But even the Census Bureau numbers have been called into question lately. The New York Post reports that although this hiring has been decent over the last few months, the Labor Department" doesn't check the Census hiring figure or whether the jobs are actually new or recycled. It considers a new job to have been created if someone is hired to work at least one hour a month. One hour! A month! So, if a worker is terminated after only one hour and another is hired in her place, then a second new job can apparently be reported."

Non-Farm Payrolls were up 431,000, but the private sector was up only 41,000. In fact, the census workers accounted for 411,000. Although there were March and April revisions, this is a weak number, and stock market numbers plunged on the news. The unemployment rate fell to 9.7% from 9.9% - certain to make the headlines tomorrow. Hourly Earnings were up 0.3%. A jobless recovery anyone? The 10-yr. is down to 3.24% after being above 3.40% yesterday and 30-yr mortgage prices are better by around .5. Yesterday not only did rates go up, but the stock market fell as well. What a difference a day makes, as today we are seeing stocks tumble after a weak jobs number, but fixed-income prices improve nicely.  You can read all the flowery language you want, but it boils down to a poor job market continuing to show that our economy is sluggish, leading to a lower stock market and continued lower rates.

(The joke does not necessarily reflect the view of the author.)

A woman, married three times, walked into a bridal shop one day and told the sales clerk that she was looking for a wedding gown for her fourth wedding.

"Of course, madam," replied the sales clerk, "exactly what type and color are you looking for?"

The bride to be said: "A long frilly white dress with a veil."

The sales clerk hesitated a bit, then said, "Please don't take this the wrong way, but gowns of that nature are considered more appropriate for brides who are being married the first time - for those who are a bit more  innocent, if you know what I mean. Perhaps ivory or sky blue would be nice?"

"Well," replied the customer, a little peeved at the clerk's directness, "I can assure you that a white gown would be quite appropriate. Believe it or not, despite all my marriages, I remain as innocent as a first time bride.

You see, my first husband was so excited about our wedding; he died as we were checking into our hotel. My second husband and I got into such a terrible fight in the limo on our way to our honeymoon that we had that wedding annulled immediately and never spoke to each other again."

"What about your third husband?" asked the sales clerk.

"That one was a Democrat," said the woman, "and every night for four years, he just sat on the edge of the bed and told me how good it was going to be, but nothing ever happened."