Legal Landscape Continues to Change; Whole Loan Trading Methods; Optimal Blue and MERS Sold
There are plenty of owners remodeling their houses. (If you want to take the time, the National Association of Home Builders ranks the 25,000 ZIP codes in terms of estimates for remodeling money to be spent this year see where your ZIP code ranks.) And there are also plenty of renters. The Census Bureau tells us that the U.S. homeownership rate is nearing a 48-year low. The seasonally adjusted first quarter 2016 homeownership rate of 63.6 percent slipped from 63.7 percent in the last quarter of 2015. Moreover, the most recent decline is occurring despite two-thirds of new households being renters, primarily because most millennials remain too young to buy. Just think of that pent-up demand!
Switching lanes into legal news, I can sue anyone for anything, right? For example, someone suing Starbucks for putting too much ice in its ice drinks.
Sometimes I am asked if individuals are being held accountable for breaking the law. There is the case of where 39-year old Joseph Pasquale (Fort Myers, FL) was found guilty of bank fraud and was sentenced to four years in prison on multiple counts. He was found responsible for the loss of about $937,000 to Wells Fargo Bank after he failed to disclose details about sales incentives to mortgage lenders. Pasqual, who worked as a real estate sales associate out of a Cape Coral firm, funneled funds to two clients in California and Massachusetts between October 2007 and March 2008. A federal jury found him guilty of four counts of bank fraud and one count of conspiracy to commit bank fraud.
Pasquale participated in the negotiation and sale of four condominium units at the Arbors of Carrollwood, to clients in California and Massachusetts, and engaged in a conspiracy to conceal sales incentives that were given to these clients by the seller from mortgage lenders. Pasquale also allegedly facilitated private loans to the buyer-clients. The buyers then used the secret sales incentives and the private loans to bring cash to their respective real estate closings. The mortgages involved in the case went into foreclosure, of course.
A suspended Manhattan attorney who specialized in trusts and estates and real estate matters will serve 2 1/3 to 7 years in prison after admitting to stealing money from clients.
It was about a month ago we learned that the United States is suing Guild Mortgage in the U.S. District Court for the District of Columbia for allegedly violating the False Claims Act by improperly originating and underwriting mortgages insured by the Federal Housing Administration (FHA).
And Quicken Loans, of course, is being sued by the Department of Justice under the False Claims Act. (In somewhat related, but non-mortgage news, Dan Gilbert, the founder of Quicken Loans and owner of the Cleveland Cavaliers basketball team, reportedly bid $5 billion for Yahoo. Per Bloomberg, Gilbert, whose bid was backed by Warren Buffett, isn't looking for more outside financing. He's not alone: one report shows private equity suitors TPG, Advent International Corp., a partnership of Sycamore Partners and Vector Capital Management, Verizon Communications Inc., AT&T Inc., and Mr. Gilbert are all in the running.)
I run across plenty of people who worked at Waterfield. "Affinity Financial Corporation, Newport Beach, California, and Waterfield Financial Services, Inc. (now known as Affinity Financial Centers, Inc.), Indianapolis, Indiana Consent Order to Cease and Desist dated June 13, 2016."
Bankruptcy rules always seem to be shifting. Come December, the requirements surrounding notices of payment change ("PCNs") for certain mortgage loans in bankruptcy will change. The Supreme Court, on April 28, 2016, adopted various proposed amendments to the Federal Rules of Bankruptcy Procedure, including amendments to the language of Rule 3002.1.
Same with foreclosures. Yes, they've become much less of a problem than a few years ago, but attorneys are still watching the shifting sands of law. For example, last year the Chicago City Council committee took steps to ensure a speedy turnaround for tenants who are living in foreclosed properties and are entitled to get a new lease or moving assistance under city code.
And from a year ago there was the case of Mbazira v. Ocwen Loan Servicing, LLC where the United States Bankruptcy Court for the District of Massachusetts determined that a bank, which was an assignee of a mortgage, lost its mortgage in bankruptcy due to a faulty acknowledgment appended to the mortgage document. The decision sent the message to borrowers that they can use bankruptcy as a device to wipe out otherwise valid mortgages encumbering property by pointing to purported flaws in a lender's recording of the mortgage document in real property records.
"One mechanism for the avoidance or "wiping out" of mortgages, liens, and other encumbrances on real property of the bankrupt debtor is section 544(a)(3) of the Bankruptcy Code. Pursuant to section 544(a)(3), a debtor or trustee in bankruptcy stands in the shoes of a bona fide purchaser ("Bona Fide Purchaser") of real property that has perfected its interest in the real property as of the bankruptcy petition date. Further, if, under applicable state law, a Bona Fide Purchaser of the debtor's real property that has not received notice that title to the real property is clouded by a mortgage or other encumbrance could take title to the property free and clear of the encumbrance, then a debtor in bankruptcy likewise, for the benefit of the bankruptcy estate, takes title free and clear of the encumbrance. In short, a debtor's successful lien avoidance action in bankruptcy wipes out a lien or other encumbrance on a debtor's property.
Yes, banks can lose out on a mortgage due to technicalities.
And sometimes you just can't win. In the case of Ryland Mews v Munoz, the HOA (Mews) sued the homeowner (Munoz) because the homeowner replaced the carpets in his unit with hardwood floors to accommodate his wife's severe dust allergy. In doing so, the downstairs neighbors started to experience "sound transfer" through the floor that was never a problem before and claimed the noise was intolerable and therefore made it difficult to relax, read or sleep. The HOA sued the homeowners for the floor installation stating they violated the CC&Rs and then applied for a preliminary injunction. The homeowner opposed the motion on the fact that hardwood floors were necessary in his home and removing the floors and installing new ones would be expensive and endanger his wife's health. The court agreed with the HOA, that the HOA sought a "proposal through a contractor" for a modification consistent with the HOA rules.
Let's shift to some news on the loan trading front...
Bank of America Merrill Lynch's new electronic trading platform, Instinct Loans, allows multiple bidders to make offers on leveraged loans, a move it says will increase market liquidity. "Dealers aren't making markets in the same way they had in the past, so the ability to find other counterparties is increasingly important," said Sean Davy, a managing director at SIFMA.
CrediFi introduced CMBS data into its platform (including a mapping feature allowing users to assess CMBS investment worthiness).
Prosper Marketplace has stopped accepting borrowers from at least two large loan referral websites in the latest sign of how funding woes are impacting the industry.
But Resitrader, Inc., a provider of whole loan mortgage trade management software, announced that more than $1 billion in loans have been presented and delivered on its mortgage trading platform since its introduction late last year. John Ardy, Resitrader's CEO, stated, "Our sellers like the fact that loans are delivered either to external bidders or to standard execution models. And our buyers love the loan-level trade color," which is the pricing spread for each loan transacted on the platform.
In terms of interest rates, the 10-year treasury note yield opened at 1.56% and pretty much ended the day there. Bond markets are focused on Brexit (British exit from the European Community Union) worries, and concerns about global growth versus a U.S. economy that is statistically doing well.
(And certainly few are arguing that housing is in any kind of slump, or even near one. The Fed's statement from earlier this week observed, "Since the beginning of the year, the housing sector has continued to improve." In fact, we're seeing the opposite problem: housing affordability is a greater problem.)
At the start, and finish, of Thursday the 10-year note was better by about .250 with a yield of 1.56%. But that was yesterday, and today we've already had May Housing Starts and Building Permits (respectively -.3%, better than forecast, and +.7%, worse than expected). That about does it for scheduled news, and in the early going we find the 10-year yielding 1.57% with agency MBS prices roughly unchanged.
Jobs and Announcements
Indecomm Global Services, a leading provider of mortgage technology, training, and outsourcing services is seeking experienced underwriters. Clients include prominent top tier, mid-tier lenders, and regional lenders as well as title and settlement companies. The underwriter will review regulatory compliance with disclosures, validate data used by an automated underwriting system to decision loans, and perform a comprehensive review of the appraisal report. The underwriter will determine if the loan meets underwriting guidelines, product guidelines, investor requirements and eligibility requirements. Interested candidates should send their resume to HR Manager Candy Mechels.
New American Funding's continued growth is driving the need for expansion and is opening up an Operations Center in Tampa, FL and new branch in Tempe, AZ. We are hiring in multiple departments in Operations for Funding, Processing, Underwriting and more! The company is committed to its steady expansion reaching out to consumers and real estate partners nationwide and is in need of experienced and Licensed Loan Officers for both its retail branches across the nation and regional call centers in Tustin, CA, Riverside, CA, Tempe, AZ, Plano, TX and Southfield, MI. With their continued growth, New American Funding, is rated as one of America's Top 100 Mortgage Companies by Mortgage Executive Magazine six years in a row. To see a list of openings, click the link above and/or contact Baron Obrien, VP of Talent Acquisition (877-478-5476).
In somewhat random vendor news...
Optimal Blue, the cloud-based provider of enterprise lending services to the mortgage industry, announced that it has been acquired by GTCR, a leading private equity firm. It was also announced that founders and co-CEO's, Larry Huff and Ivan Darius, will betransitioning leadership of Optimal Blue to Scott Happ, Founder and former CEO of Mortgagebot. Congrats to Scott.
MERSCORP Holdings, Inc. and Intercontinental Exchange (NYSE: ICE), announced that ICE will acquire a majority equity position in MERSCORP Holdings, Inc., owner of Mortgage Electronic Registrations Systems, Inc. (collectively "MERS"). In addition, ICE and MERS have entered into a software development agreement to modernize and enhance the MERS System. ("MERSCORP Holdings owns and operates the MERS System, a national electronic registry that tracks the changes in servicing rights and beneficial ownership interests in U.S.-based mortgage loans. ICE is a leading operator of global exchanges and clearing houses and provider of data and listings services.")
Dart Appraisal has announced its integration with FHA's Electronic Appraisal Delivery (EAD) portal. The portal is a web-based technology system that enables electronic transmission of appraisal reports to FHA from FHA mortgagees and/or their designated third-party service provider(s) prior to loan endorsement. FHA-approved lenders will be required to use the EAD portal effective June 27, 2016. Through the EAD portal, mortgagees can simultaneously submit multiple appraisal reports, search for previously submitted appraisal report files, clear "hard stops," and view reports.
Ellie Mae has developed a process with Wells Fargo to enable joint customers to deliver loan data in a streamlined, efficient and secure manner. The process helps facilitate loan data directly from Ellie Mae's Encompass to Wells Fargo with a single click. Today, upon completion of a loan, lenders typically export the completed data from their LOS and then take several steps to upload the data to a dedicated secure Wells Fargo portal. Going forward, the process with Encompass will eliminate the need to download and upload loan data in multiple locations, and instead provide a seamless transfer of data directly from Encompass to Wells Fargo. Additionally, the [process/technology] helps to ensure that the data is accurate, organized and securely transmitted.
Essent Guaranty announced its Essent MI services is available to lenders through the Mortgage Cadence Enterprise Lending Center (ELC) loan origination solution (LOS). All lenders now have access to Essent MI for delegated and non-delegated loans and real-time rate quotes through Mortgage Cadence's LOS. Mortgage Cadence's Enterprise Lending Center helps lenders reduce cycle time and decrease cost, while providing lenders with control over their system through built-in business rules and workflow. This integration with Essent Guaranty complements these core features of the ELC so that lenders can further streamline processes by checking rate quotes and ordering MI without leaving the Mortgage Cadence platform.