Differences Between Broker and Mini-Corr; Jumbo Deals; Lender Financing Alternatives
of the big topics here at the CMBA Western Secondary conference are
margins, compensation, and compliance. Reports show that bank tellers earned an average of $25k in 2012
and other bankers earned 50% more. I have certainly heard my share of
stories about how a lender noticed a pleasant, intelligent teller, and
brought that person into residential lending with good success. How
about techniques on compensating compliance personnel?
Non-bank LOs know that the NMLS Resource Center came out with its Release Notes for the July 28, 2014 NMLS Release (2014.2). They are focused on detailing general enhancements and System maintenance updates.
Vendor and counterparty vigilance is becoming the name of the game
- it isn't enough to police your own company's activities and financial
health; you must also do the same for key companies that your business
relies upon. Law firm Buckley Sandler
tell us, "On July 1, the Federal Reserve Board announced a joint
enforcement action with the Illinois Department of Financial and
Professional Regulation against a state bank that allegedly failed to
properly oversee a nonbank third-party provider of financial aid refund
disbursement services. The consent order
states that from May 2012 to August 2013, the bank opened over 430,000
deposit accounts in connection with the vendor's debit card product for
disbursement of financial aid to students. The agencies claim that
during that time, the vendor misled students about the product,
including by (i) omitting material information about how students could
get their financial aid refund without having to open an account; (ii)
omitting material information about the fees, features, and limitations
of the product; (iii) omitting material information about the locations
of ATMs where students could access their account without cost and the
hours of availability of those ATMs; and (iv) prominently displaying the
school logo, which may have erroneously implied that the school
endorsed the product. The regulators ordered the bank to pay a total of
$4.1 million in civil money penalties. In addition, the Federal Reserve
is seeking restitution from the vendor, and, pursuant to the order
against the bank, may require the bank to pay any amounts the vendor
cannot pay in restitution to eligible students up to the lesser of $30
million or the total amount of restitution based on fees the vendor
collected from May 2012 through June 2014. The consent order also
requires the bank to submit for Federal Reserve approval a compliance
risk management program in advance of entering into an agreement with a
third party to solicit, market, or service a consumer deposit product on
behalf of the bank."
Ballard Spahr provided some elucidation on the recent CFPB/min-correspondent proposals,
specifically with regard to the questions that brokers will need to
answer. "To provide guidance, the CFPB sets forth a number of questions
that it may ask to assess whether a company using a mini-correspondent
structure is actually acting as a creditor, or is acting as a mortgage
broker. The CFPB notes that the questions in the guidance are not
exhaustive and that no single question is necessarily determinative of
how the CFPB may exercise is supervision and enforcement authority. The
questions reflect areas that likely are of concern to the CFPB,
including whether the warehouse line arrangement that the
mini-correspondent uses to fund loans is bona fide and whether the
mini-correspondent is actually performing the functions of a creditor. Among
the various questions are the following. Is the warehouse line of
credit provided by a third-party warehouse bank? Is the warehouse bank
providing the line of credit one of, or affiliated with any of, the
mini-correspondent's investors that purchase loans from the
mini-correspondent? How thorough was the process for the
mini-correspondent to get approved for the warehouse line of credit?
Does the mini-correspondent have more than one warehouse line of credit?
Does the mini-correspondent's total warehouse line of credit capacity
bear a reasonable relationship, consistent with correspondent lenders
generally, to its size (i.e., its assets or net worth)? What changes has
the mini-correspondent made to staff, procedures, and infrastructure to
support the transition from mortgage broker to mini-correspondent? What
training or guidance has the mini-correspondent received to understand
the additional compliance risk associated with being the lender or
creditor on a residential mortgage transaction? What entity
(mini-correspondent, warehouse lender, investor) is performing the
majority of the principal mortgage origination activities?"
Who actually closes the loan is important. Speaking of the closing process, my STRATMOR colleague Garth Graham has a great point on why it's so important to attend closings. Often,
loan officers think they are too busy and that closing is a waste of
time. But the person who is NOT at closing is going to get blamed, and
too often it's only the closing agents and the Realtors who are present
at the closing table. And it's also a great chance for getting
referrals and reinforcing the relationship. Read GET TO CLOSING for more insights.
Financing is all the rage!
What happened to good old warehouse arrangements? America First
Multifamily Investors announced that it has entered into a second
long-term secured debt financing facility with Freddie Mac utilizing
Freddie Mac's Tax-Exempt Bond Securitization or "TEBS" program. Proceeds
from the TEBS Financing totaled approximately $94.7 million which was
used to repay a portion of the outstanding balance due on the
Partnership's Tender Option Bond facilities. The TEBS Financing is a
securitization of 13 of the Partnership's mortgage revenue bonds and
essentially provides the Partnership with a long-term variable rate debt
facility at interest rates that will reflect prevailing short-term
tax-exempt rates. The effective interest rate to be paid on the TEBS
Financing is equal to the weekly Securities Industry and Financial
Markets Association ("SIFMA") floating index rate plus certain credit,
facility, remarketing and servicing fees (the "Facility Fees").
And lenders are setting up alternative funding arrangements. The latest news comes from PennyMac, which is entering into a $550 million loan repo facility with Bank of America
to help fund newly originated mortgages. It sells the mortgages to
BofA, for PennyMac to potentially later repurchase, in a deal fully
guaranteed by PennyMac, for loan that Penny purchased from correspondent
lenders and were pledged for sale and/or securitization, according to documents filed with the SEC.
Fannie Mae announced a $2bn risk-transfer deal - its largest risk sharing MBS sale to date. And BlackRock plans to auction off $3.7 billion, in an "all or nothing" deal, of legacy subprime mortgage-backed securities today. Redwood plans to sell its second prime RMBS of the year,
Kroll said in a presale report, backed by high quality, prime jumbo
mortgage loans. It will have an aggregate loan balance of $306 million,
an average loan balance of $699k, with the top originators being
Homestreet ( 21.5%), FRB (13.3%), and PrimeLending (9.9%). The servicers
include Cenlar (81.9%), FRB (13.3%), and PHH (4.8%), with most of the
production coming from California, Washington, and Texas. Interestingly,
"only" 87% of loans fall under the scope of the QM.
No one ever said non-QM loans are bad loans, and in this pool the
weighted average LTV is 71% and the weighted average credit score of the
mortgage pool is 768.
But wait, there's more! Credit Suisse
is in the market with a new $368 million jumbo RMBS. These loans come
from Quicken, First Republic, Caliber, and Sierra Pacific.
until recently there had been only about 50 prime transactions issued
since the market "re-started" in 2010, with most of that volume placed
over the past 24 months. Given the lack of commercial lending
opportunities there has been strong portfolio demand for high quality
mortgage assets, and challenging securitization incentives. But a growing source of supply in 2014 has come from GSE risk transfer programs, noted above.
Both Fannie Mae and Freddie Mac have issued multiple transactions in
2014 and all indications suggest they will continue to be active for the
remainder of the year. According to the Federal Housing Finance
Agency's 2014 Scorecard for Fannie Mae and Freddie Mac, each is expected
to execute credit risk transfers on residential mortgages of at least
$90 billion of unpaid principal balances. This represents a three-fold
increase from last year's scorecard. In
addition, the GSE's are encouraged to explore other transactions types,
which can include a senior/sub structure or other alternatives. We're also seeing very strong demand for non-traditional mortgage transactions, including non-performing loans, re-performing loans, and single family rental securitizations.
have little to complain about, as the performance of the pools has been
excellent. Heck, they're filled with creampuff loans, right? The most
recent stats I saw said that of the 20,000 loans securitized since 2010,
only one loan is currently more than 60 days delinquent. Recent
issuances contain higher FICO scores (771), lower combined loan-to-value
ratios (68% versus 70%) and more loans that are fully documented (100%
versus 64%) than deals that came to market prior to 2005.
And lenders/investors are also pushing the envelope. AmeriHome Mortgage Company is rolling out a new Core Jumbo Product. For information on this product and other opportunities, visit Amerihome. I spent some time with AmeriHome yesterday at the CMBA conference, and they have a lot of expansion plans in the works!
Athas Capital Group has
lowered rates and fees and expanded subprime guidelines. Some
opportunities available for clients include OO LTV's to 80%, NOO to 75%
with only a 650 FICO, 12 or 24 months personal bank statements
available, Asset depletion program, and Stated income available for
business purpose loans.
Cole Taylor Mortgage
recent bulletin included Jumbo Loan Guideline Enhancements. Several
helpful enhancements and clarifications have been updated which include:
allow new subordinate financing, acreage over 10 acres up to 20 acres
allowed in certain circumstances, increase in maximum LTV for specific
programs and terms, and decreased minimum allowable FICO on some
Carrington Mortgage Services announced FICO Reduction to 550 on Government Programs.
Impac Mortgage Corp. Wholesale
offers FNMA HomePath loans with credit scores as low as 620, up to 95%
LTV for primary residences and up to 90% LTV for second homes and
investment properties. "5-10 Financed Properties, Fixed Rate Loans -
Fully Amortizing, No Appraisal Required- the Sales Price is Used to
Determine LTV/CLTV/HCLTV. No Mortgage Insurance, gifts acceptable and
Lastly, on the earnings front, JPMorgan Chase reported second quarter 2014 net income of $6.0 billion on revenue of $25.3 billion. Mortgage
banking net income was $709 million, a decrease of $433 million from
the prior year, driven by lower net revenue and a lower benefit from the
provision for credit losses, partially offset by lower noninterest
expense. Mortgage application volumes were $30.1 billion, down 54% from
the prior year and up 15% from the prior quarter. And period-end total
third-party mortgage loans serviced were $786.2 billion, down 6% from
the prior year and 2% from the prior quarter.
is not much pushing rates one way or the other, resulting in another
quiet day for rates Monday although MBS prices worsened about .125.
There was no news, unlike today which includes the June Retail Sales
number (expected +.3%), the July NY Fed manufacturing survey, and the
June Import Price Index. Later we'll have Fed Chair Janet Yellen giving
her version of Humphrey Hawkins testimony. The
"benchmark" 10-yr closed Monday with a yield of 2.55% and in the early
going is at 2.53%, and agency MBS prices are better by about .125.
Private Mortgage Insurance company Genworth Financial is seeking a Product Manager located at its headquarters in Raleigh, NC.
The Product Manager will be responsible for leading cross-functional
teams to develop new products and modify existing products, using the
New Product Introduction (NPI) process. They will be responsible for the
on-going management of established products, ensuring products are
positioned appropriately in the market by adhering to and improving upon
the existing commercialization process, and working closely with
Customer Experience, Account Development Managers, Finance & Risk to
evaluate products and lead strategic initiatives to enhance performance
and profitability. The ideal candidate will have 3+ years of mortgage
industry experience, 5+ years of product management experience, and a
background in developing and driving strategic business initiatives
across multiple functions. Candidates should contact Kristin Miller or apply online at Genworth using job number GMI16788.
And Peoples Bank (KS) is searching for Loan Officers in Orlando, Tampa, Ft. Lauderdale, & Jacksonville.
Peoples is a federally-charted (FDIC) community bank that was founded
in the mid-1800's, has a solid mortgage banking culture which has
evolved over 30 years, and which will close $1.5 billion in 2014 in all
50 states. Peoples Bank has Fannie/Freddie approvals, significant
warehouse spread, proven and tested compliance practice, scalable
state-of-the-art Information Technology platform and a solid back office
which delivers consistently competitive service levels (like consistent
72 hour underwriting turn times). Combine that with company provided
leads, a dedicated purchase division and aggressive compensation plans -
and the questions remains: Please visit Peoples for more information and to submit resumes.