The CFPB and Non-banks; Yes, Mortgage Companies are Making Money; Lots of Training, Conferenceand M&A Updates
In mortgage banking, just like gymnastics, you have to get up after you
Totaling through May, California (133,000), Florida (92,000), Michigan
(60,000), Texas (58,000), and Georgia (57,000) accounted for nearly half
(400,000) of the completed foreclosures in the entire country during the last
12 months. The foreclosures in May brought the 12 month total to 819,000
foreclosures which is an average of 2,440 each day. Since the financial crisis
began in September 2008 there have been approximately 3.5 million completed
foreclosures across the nation and, as of the end of May, another 1.4 million
homes were in the national foreclosure inventory, down from 1.5 million in May
2011, but still 3.4 percent of all homes with a mortgage. Though the national
foreclosure inventory levels remain steady, there have been dramatic shifts at
the state level with foreclosure inventories in most states are declining,
but foreclosure inventory is still rising in many judicial states. The five
states with the most completed foreclosures are also the top states in terms of
their foreclosure inventory. Four of the five states, Nevada being the
exception, use primarily a judicial foreclosure process which has been blamed
for much of the backlog of loans that are severely delinquent but not yet
"Rob, here we are in the mortgage business. Congress is gunning for
us, the CFPB is gunning for us, the public is gunning for us, and the press is
gunning for us. Everyone is upset about all the compliance, rules, and
regulations that have been put in place. Yet, volumes are through the roof,
margins are high, and many companies are 'going gangbusters.' How am I supposed
to complain about the cost of doing business when this is happening?" That
is a good question. It seems like it is a dirty little secret that mortgage
companies, in general as I am sure that there are exceptions, are very
profitable right now. Remember, however, that a portion of this money is a) due
to less competition, b) servicing value fluctuations, and c) companies
increasing margins to reserve against future liabilities, litigation, and
buybacks. But yes, from a money perspective it is a good time to be a
mortgage origination company, and the government & regulators continue to
install hurdles against new companies.
Where are the loans coming from? Many borrowers can't take advantage of these
incredibly low mortgage rates due to negative equity, strict underwriting, and originator
backlogs. The only thing that can really extend refi activity in a low rate
environment is a loosening of underwriting or documentation or appraisal standards
to bring more borrowers into the market, something that isn't likely to happen
anytime soon. Twice this year the market did see a surge in refinancing, with
the expanded the Home Affordable Refinance Program for borrowers who owe more
on their mortgages than their homes are worth and the FHA changing the rules on
its streamline refi program for borrowers who already have FHA loans, dropping
underwriting almost entirely. Some LO's tell me that most of the activity in
recent months are from the same borrowers who refinanced a year or so ago
refinancing again. While programs like HARP and FHA's Streamlined Refi can
provide a temporary surge in refi's, especially for banks, they still only
account for a relatively small share of borrowers.
lenders are often confused as to whether or not they will be subjected to CFPB
scrutiny. They will be, just as several non-banks are being audited. The
Consumer Financial Protection Bureau's Office of Fair Lending and Equal
Opportunity released expectations for non-banks concerning compliance with fair
lending and unfair, deceptive, or abusive acts or practices ("UDAAP")
laws. The Bureau intends to create a level playing field between banks and
non-banks, but CFPB representatives have indicated that they understand that
fair lending programs take time to develop and that they will need to help
educate executive and senior management at non-banks concerning the importance
of fair lending laws and the risks of non-compliance. As a result, the
CFPB does not expect to find fully developed and implemented fair lending
programs in place at non-banks during the initial examination cycle and recognizes
that such programs will evolve. Nonetheless, non-banks will be expected
to quickly develop and maintain fair lending programs that are comparable to
those at banks. Similarly, it is expected that UDAAP programs will evolve for
both banks and non-banks as the CFPB continues to define "abusive"
practices through examinations and enforcement actions. Fair lending risk
assessments will continue to be required for banks and are expected for
non-banks. One issue that continues to garner discussion among both banks and
non-banks is the presence of enforcement attorneys in examination meetings
throughout the examination process. The Bureau understands that both banks
and non-banks will want to have their attorneys present if CFPB enforcement
attorneys attend compliance examination meetings. The CFPB would not object
to the presence of in-house or outside counsel for financial institutions at
these meetings so long as such attorneys are not acting in a manner that
obstructs the examination process reports law firm BuckleySandler LLP.
When in doubt, attend training or a conference! Seriously, the
training and conference calendar is important to know, as are relatively recent
investor/agency updates to give one a flavor for trends in the industry.
The Community Mortgage Lenders of America (CMLA) represents nearly 90
mid-sized community bankers and mortgage bankers from throughout every major
metropolitan region throughout the country. The CMLA is holding its Annual
General Session and Business Meeting this Sunday, August 5. The
General Session will feature a presentation from Christopher Lombardo -
Assistant Regional Director of the CFPB's Midwest Region. The CMLA is
determined to establish sustainable business and regulatory strategies to
support community based lending, competition and consumer advocacy while
fighting policies that would increase concentration in the marketplace among
the nation's largest financial institutions. To learn more about the CMLA,
please visit www.thecmla.com or contact
Kevin Cuff, Executive Director, at kmcuff@thecmla .com.
FinCen's August 13th is fast approaching and with it, the new requirement
for Anti-Money Laundering policies for Mortgage Bankers and Brokers. Barbara
Werth is hosting a free webinar on Anti-Money Laundering policies on August 1st
from 1-2PM CST. There is no cost of the webinar, and anyone interested
should email Barbara at: barb@MTToday .co
so she can send you call-in information.
is offering its servicers free loss mitigation training under the Know Your
Options Customer CARE initiative. The training complies with the Single Point
of Contact Standards set forth by the Office of the Comptroller of the Currency
and the Consumer Finance Protection Bureau as well as the FHFA's Alignment
Initiative. See the Know Your Options website for more information.
On August 14th in Boise, ID, the FHA will host a realtor training
session in the local HUD Field Office. The event will cover topics
such as FHA updates, rehabilitation loans, Energy Efficient mortgage programs,
and selling HUD-owned properties. Interested parties can register here.
A full-day training on FHA appraisals will be held in Little Rock, Arkansas
on August 22nd. The session will cover appraisal protocol, updates to FHA
appraisal policy, and property eligibility and is suitable for both new and
experienced FHA appraisers. Register here.
On August 23rd, the FHA will be hosting "A Day with the FHA," an
event that will cover a number of fields relevant to those who work with the
organization. Policy updates, refinances, and REO calculations are all on
the agenda. Registration info is available here.
Who says that there are no new investors? Norcom Mortgage, one of the
fastest growing non-bank lenders on the East Coast, is launching a correspondent
program. It will focus on high quality credit unions, banks, and select
mortgage companies. Effective immediately, Vice President's Patti White
and Susan Sheffer will be leading the correspondent team's expansion
efforts on the East Coast. (Norcom is a FHLMC seller/servicer and a GNMA issuer.)
Under its "Just Miss" program, Mid America Mortgage is offering
clients the option of having MAM purchase closed FHA-, VA-, and USDA-insured
loans that aren't able to be sold in the traditional manner due to "just
missing" investor guidelines. To qualify for the program, loans must be
RESPA-compliant and insured with MIC, LGC, or LNG.
Turning to merger and acquisition and closure news, West Virginia's WesBanco
will buy Pennsylvania's Fidelity Bancorp for $70.8mm million in cash and
stock, or about 1.62x tangible book. New York Private B&T, the parent
company for Emigrant Savings Bank, has reached agreement to sell 30 branches
and $3.2B in deposits to Apple Bank for Savings ($8.4B, NY) for an
undisclosed sum. This is the largest branch transaction of 2012 and the largest
in the New York City area in over 10 years. KeyCorp said it will close
5% of its branches (about 50) in an effort to reduce expenses by $150mm to
$200mm. And Bank of America continues to sell branches in smaller
"noncore" markets with populations of less than 150k people or MSAs with less
than 500k people, as it works to close 750 branches over the next few years.
To improve performance, Iberiabank ($11.7B, LA) said it will close
10 underperforming branches. Keefe, Bruyette & Woods announced that Mission
Bancorp, the Bakersfield-based parent holding company for Mission Bank, has
entered an agreement with Mojave Desert Bank whereby it will acquire the
latter's branches in Mojave, Ridgecrest, Lancaster, and Helendale.
Osage Bancshares announced their agreement for Osage to be acquired for
an aggregate value of $27.4 million by American Heritage Bank through a merger
One will pay $12 million to military customers to settle charges from the
DOJ and OCC that it improperly foreclosed on them and overcharged for credit
card and auto loans.
A few weeks ago Stonegate Mortgage released its 2nd
Quarter results that were of note. Its revenues year-to-date had increased 340%
over 2011, servicing portfolio increased by 235%, and its correspondent channel
has grown 519% over 2011. The Indianapolis-based company was recognized last
month by Indianapolis Business Journal as the 9th fastest growing privately
held company in the city. "At Stonegate, we are always focused on the next
few years ahead and that includes expanding into more states, increasing
originations in our wholesale and correspondent channels, expanding our retail
branch network through acquisitions, building our servicing portfolio and brand
awareness," said Jim Cutillo, CEO of Stonegate Mortgage. In March Long
Ridge Equity Partners, a New York based private equity firm invested $25
million in Stonegate Mortgage to support the company's continued growth and
Monday - another summer day in the fixed-income markets. There was little
news over the weekend and nothing here in the United States. Demand for agency
mortgage-backed securities was steady, and supply from originators dropped off
a little. But where the heck did July go? Anyway, by the end of the day the
U.S. T-note closed at 1.50% and MBS prices were better by about .125-.375,
depending on coupon.
Today, however, we have a heckuvalot of data, along with the start of a
2-day Fed meeting. (The Fed announcement is tomorrow, but don't look for a lot
of change in their statement.) We've had Personal Income and Consumption,
unchanged and +.5% respectively. Although pretty much on target, the numbers
are somewhat disappointing for the economy given that consumer spending drives
growth. No spending = no growth. The Employment Cost Index was on target. 9AM offers
May's S&P/Case Shiller home price index (+0.4 vs. +0.7 last - but there is
always a two month delay in this number), 9:45AM EST has July's Chicago PMI
(52.4 vs. 52.9 previously), and 10AM EST we'll have July's Consumer Confidence
(less so at 61.4. vs. 62.0). Early on the 10-yr is at 1.46% and MBS prices
are again better by .125-.250.
RETIRE WHERE? Here are some of your choices - I keep
receiving them from readers, part 7 of 7:
You can retire to the Deep South where...
1. You can rent a movie and buy bait in the same store.
2. "Y'all" is singular and "all y'all" is plural.
3. "He needed killin" is a valid defense.
4. Everyone has 2 first names: Billy Bob, Jimmy Bob, Mary Sue, Betty
Jean, Mary Beth, etc.
5. Everything is either "in yonder," "over yonder" or
"out yonder" It's important to know the difference, too.
You can retire to Colorado where...
1. You carry your $3,000 mountain bike atop your $500 car.
2. You tell your husband to pick up Granola on his way home and so he stops at
the day care center.
3. A pass does not involve a football or dating.
4. The top of your head is bald, but you still have a pony tail.