HUD recently took took action against a California lender for "denying or delaying mortgage loans to women because they were on maternity leave." The complaint, made by a married couple, to HUD claimed that the lender denied their refinancing application because the wife was on maternity leave.  HUD's ultimate investigation revealed the lender also allegedly denied four other applicants who were on maternity leave, or delayed their applications until after the women returned to work. The agreement requires the company to pay $20,000 to the couple that filed the complaint, and $7,000 to each of the other four applicants identified by HUD.

Are you reducing your compliance costs? No worries - neither is anyone else, and they are mostly being passed on to borrowers anyway. On the positive side, the MBA released its Credit Monitor showing that things may be loosening up somewhat. (Heck, there is nowhere else to go, right? But back to the mounting cost of compliance... there are plenty of resourceful folks out there in banks and in the industry, and where there is a will, there's a way to outsource compliance.

Along those lines, the economy is doing well in Texas, property values, which didn't skyrocket ten years ago, didn't drop off a cliff five years ago. So it is interesting to note that the state supposedly has the highest loan fees. Does it mean that it is more expensive to do a high quality loan? That it costs more to do business in Texas? Does it mean that it will put a crimp in lending, therefore driving prices down? Does it mean lenders in Texas make more money than other states, since the loans are sold into the same secondary markets as loans from other states?

I received this note about the latest "tiff" between New York and Ocwen: "Is the servicing deal between Wells and Ocwen dead in the water?" Pretty much, but coincidentally Compass Point Research and Trading wrote its opinion on the "Increased risk to Wells Fargo deal. Since the Wells deal was officially put on hold in February, Benjamin Lawsky has written a series of letters and other public statements questioning the capacity of OCN to handle the acquisition of another large servicing portfolio and the dealings between the different OCN-related companies. While we do not believe OCN is intentionally harming borrowers or being fraudulent in the way it conducts business, there is a risk the deal does not happen. If the deal were to be cancelled or shopped to another servicer, it could be a negative catalyst for OCN. Even if the deal did happen, we believe the initial costs of integrating the portfolio onto the current platform combined with the additional interest expense to fund the transaction will mute the potential accretion in the first year of closing the deal."

Yes, companies continue to scramble to cut overhead and still strive for the perfect loan. I received this note from the STRATMOR Group. "Paying the right amount to the right employee at the right time is fundamental to ensuring that your organization hires and retains the best talent while simultaneously controlling costs and justifying compensation to your stakeholders. Did you miss participating in STRATMOR's Compensation Connection Survey earlier this year? By popular request, STRATMOR is reopening all of the original modules (Retail Sales, Retail Fulfillment, TPO Sales, TPO Fulfillment, Consumer Direct Sales, Consumer Direct Fulfillment, and Executive Management) for a second round of evaluation. Be armed with compensation data from 40+ participant companies as you head into budget season.  The results will be cumulative from both rounds.  For full details, visit the 2014 STRATMOR Compensation Connection Survey website or email Angie Middlebrook for more details.

Here's a question that is opening up a can of worms: "Do LOs have to be paid minimum wage?" Interestingly enough, there is no clear answer in the industry, as some lenders do and some don't, and of course the ones that do pay their LOs point fingers and whisper about the ones that don't. Even companies served by the same law firm may interpret it differently! My dog Sweetie had no interest in doing the research, so I did a little digging - and invite any attorney or compliance expert to weigh in.

In one state, "California employers must comply with both the California Labor Code and the federal Fair Labor Standards Act. When state and federal law covers the same subject (e.g., minimum wage), employers must comply with the law that provides greater benefits or protections to employees. In most cases, California law provides greater wage and hour protections than the federal Fair Labor Standards Act. Most in-house mortgage employees and commissioned stockbrokers would likely be found overtime exempt under state law. However, the federal inside sales and administrative exemptions appear not to apply to many inside mortgage company employees and securities brokers who receive no base compensation. Because both of these groups of employees are often very highly compensated, the amount of back overtime liability can be quite staggering. A number of large nationwide brokerage firms recently settled FLSA overtime cases where the back overtime topped $25 Million per case.

In Washington DC "it would appear that financial services institutions may classify their mortgage loan officers as exempt employees, if they meet the administrative exemption requirements."

Things may hinge on what are the duties of an outside sales person. Prospect Mortgage found out after incurring a good chunk of legal bills.

A month ago the commentary created a bit of a tempest in a teapot by discussing "What is required to prove rental income in order for a loan to be a Qualified Mortgage?" The CFPB is in charge of underwriting criteria now for QM loans, of course, and Appendix Q is under its jurisdiction. A highly placed source has alerted me that the CFPB definitely wants the leases AND the schedule E. If you only have a few leases, you can use the income from those leases. If you don't have the leases you cannot use the income. And if you don't need the schedule E income you don't need to provide any leases. At some point in the near future the CFPB may change this, but for now a loan is non-QM if you don't have the leases. Feel free to drop them a line if you support any changes: CFPB.

The Fed Senior Loan Officer Survey is out, and it discusses non-QM lending. The majority of banks reported that the rule had no effect on prime conforming mortgages (unsurprising since if it is conforming, it is QM compliant), but about half the respondents indicated QM reduced approval rates on applications for prime jumbo loans and non-traditional mortgages. Of course, the last thing that the CFPB wants to be accused of is restricting credit to borrowers.

As a quick aside, in case you've been sleeping for a few weeks, as many already know or will soon find out, the CFPB is tasked with enforcement of HMDA and Reg C violations, and has been directed, by way of Dodd-Frank, to "expand the collection of mortgage origination data." Currently this includes items such as length of the loan, points and fee information, applicant information, etc. However, Dodd-Frank also gave the Bureau discretionary authority to substantially expand the number of new data points required to be reported. In the CFPB's newest proposal, the Bureau would start requiring lenders to report items such as, dwelling-secured loans, which would include some loans not currently covered by Regulation C, including reverse mortgages, and all home equity lines of credit irrespective of their purpose. The proposal follows a review initiated by the CFPB earlier this year to assess the potential impacts of a HMDA rulemaking on small businesses.

The press doesn't know the difference between retail and correspondent, so make sure you remember the business channel that is impacted by any story titled, "Wells Fargo Loosens Standards for Jumbo Loans."

Turning to the markets, everyone wants "private money' to come back to the MBS market. Of course, no one wants it if it is going to push mortgage rates to 6%! But the MBA submitted a letter to Treasury identifying existing barriers to activity in the private-label RMBS market. The outreach by the Treasury department is part of a larger effort to engage stakeholders and spur private capital to assume more mortgage credit risk.

We did have a smattering of news yesterday, of little or no consequence in terms of moving rates. The ISM Non-Manufacturing Index increased nicely in July, and is at its highest point since inception (with the caveat the index started in Jan 2008). And Factory Orders increased 1.1% as well, but the IBD / TIPP economic optimism index declined.

Will Russia invade Ukraine? Will the cease fire hold in Israel? Will the Ebola virus move the market, or confusion in Libya? I am not a student of the history of the bond market, but these skirmishes (see usual humor section below) remind us of how quickly traders can move the markets. Imagine what volatility would be like during World War II - the current securities market in the U.S. certainly doesn't give one much time for thoughtful action, investing, or charting a course, rather than reacting while trying to hedge a pipeline given all the hype in the media

Despite a little intra-day volatility, by the time the dust settled Tuesday we were basically back to where we were Monday, and on Friday - or a shade lower. At the close the 10-yr was at 2.48% and agency MBS prices were about flat. For today's thrills we've had mortgage applications (+1.6%) and will see some June trade balance numbers & auction numbers for next week. Early on the 10-year is at 2.45% and agency MBS prices are better by .125.

Jobs and Opportunities

Citadel Servicing Corporation continues to expand seeking to hire a National Funding Manager.  Founded in 2003 and located in Irvine California, "Citadel is the leader in the origination and servicing of Non-Prime and Specialty Finance mortgage loans. This position is responsible for all facets of the funding process. A minimum 5 years' experience is required and must include management time. Confidential inquires, resumes, and references can be sent to

Also, KPMG's National Mortgage and Consumer Lending ("MCL") group, which is part of the Risk Consulting Advisory Practice, is looking for experienced and motivated individuals with backgrounds in mortgage servicing rights ("MSR") valuation and analytics, mortgage credit risk modeling, and MBS Valuation Modeling. The MCL group is comprised of over 300 KPMG professionals in the United States who focus specifically on the mortgage and consumer lending industry that provide a broad array of advisory services to a variety of financial institutions, government agencies, and specialty finance companies that originate, service, and securitize consumer finance products. MCL uses valuation techniques, credit analytics, financial analysis, monitor capital markets and regulatory changes for their projected impact on MSRs, valuations, and operations. More information about career opportunities can be found at KPMG Credit Risk Opening, and confidential questions can be directed to Jacqui Ambrosino, KPMG Recruiter.

And the product selection continues to expand. For example, PMAC Lending Services correspondent division fully supports the USDA Rural Housing mission to provide housing to low- and moderate-income families in rural America. PMAC's correspondent USDA program has no overlays, no minimum score requirements, recently reduced LLPAs, and improved pricing on both 700+ scores and $200+ loan amounts - and the team has more than 25 years of combined USDA experience. Contact PMAC at the link above to learn about the new guidelines effective September 1st, "subject to" commitments in the new fiscal year, and future eligible areas.

Congratulations are in order. StoneHill Group (quality control, due diligence, and mortgage fulfillment solutions) has appointed Wade Hamby as the company's national director of sales and marketing. And FirstKey Holdings (specialty residential and commercial real estate financing products and loan servicing solutions) announced that Jeffrey Mayer has joined the company as Executive Chairman of the Board of Directors. Mr. Mayer, and ex-Bear Stearns exec, joins FirstKey from Deutsche Bank, where he was most recently Head of Corporate Banking & Securities for North America.