Amerisave's $19 Million CFPB fine; Ginnie & Nonbank Servicers; New Correspondent and Non-QM Programs
"The Bureau found that Amerisave lured consumers
by advertising misleading interest rates, locked them in with costly
up-front fees, failed to honor its advertised rates, and then illegally
overcharged them for affiliated "third-party" services." And thus Amerisave finds itself $19.3 million poorer, and the Civil Penalty Fund increased by that amount.
or at least its accountants, can still learn a thing or two about doing
business. Ocwen ("New Company" spelled backwards) filed a form NT-10Q, delaying the filing of its 10Q.
The company noted that this was driven by a decision by the company's
accountants to change the way the company accounts for its HLSS funding
liabilities. It is probably not a big deal, but historically HLSS had
not marked its MSR (mortgage servicing rights), and Ocwen had not marked
the corresponding liability to market if the valuation came in with 5%
of carrying value. The new accounting convention would require a mark
regardless of the difference. The current 2nd
quarter numbers already reflect the new accounting rule, and the
changes to prior quarters will move numbers between quarters but the
changes will offset each other.
In case you missed it last week, GNMA is the latest mortgage agency to say it is becoming heavily reliant on nonbank mortgage companies to service its loans.
The problem is that nonbanks carry lower capital levels than banks and
may not be able to survive in stressful times. The change is due to new
bank regulations that increase capital requirements, so banks are
selling servicing rights and cutting back sharply in this area. At this
point, GNMA reports nonbanks service 35% of their loans in June vs. 22% 3
In other agency news, Fannie and Freddie, or at least their investors, received some negative comments in the Wall Street Journal.
Earnings in Q2 would barely have covered 10% dividends paid on the
Treasury's preferred stock balances, and the Q2 income levels are close
to normal levels for both firms (the '13 profits were inflated by
one-time tax benefits and regulatory settlements). Therefore there is
likely going to be little left over for common shareholders going
FHFA released a "Request for Input" on a proposed structure for a Single Security. The link to the FHFA website is here.
(Read more: Fannie and Freddie Another Step Closer to Sharing Single Mortgage-Backed Security)
As if the first time homebuyer didn't have enough issues with student loan debt and tight credit, they face another challenge: limited inventory at the low end of the price range.
The number of US homes for sale in the bottom third of the market -
below $198,000 - fell 17% in June compared to a year earlier, according
to Redfin. The supply rose 3% in the middle market and 15% in the top
third. Blame professional investors who are snapping up low-priced
properties to turn into rentals. Prices are rising too, with the low end
jumping 15%, the middle increasing 13% and the top end increasing 9%.
Remember in the old days when rating agencies like Moody's would say that everything is great
with securities backed by mortgages? "The proof of the effectiveness of
Thornburg's due diligence process is in the performance of its
portfolio. Since the inception of its lending program four years ago,
the firm has funded over $4.0 billion in mortgage loans. Over that
period, Thornburg has incurred losses on three loans totaling $174,000."
Thornburg offered some great products, which did perform, one of which
being a program where it lent money on assets, and the mortgage could be
transferred to different properties as the borrower moved. Given the
propensity of the Millennials to want to stay mobile, wouldn't that kind
of thing be great? Of course, that is assuming the 20-something has
hear a lot about student loans these days. How the "bubble" is about to
burst in similar ways to the housing collapse in '07, how debt is
carried into adulthood, how the impending doom and gloom could drag the
United States into another economic downturn. Not likely, but we hear
it. I'll go on record as saying I've always liked contrarians
regardless of the debate or argument...most of the time their reasoning
is sound, and it's just nice to play the "Don't Pass" side of the craps
table every now and then, right? As Ballard Spahr points out, The
Vangaurd Group's paper on student debt disagrees with the general
arguments being given regarding the potential severity. "A new report
from The Vanguard Group disagrees with those who seek to draw
comparisons between the current level of student debt and the level of
mortgage debt that led to the housing crisis. Titled "No bubble to burst: U.S. student debt is not housing," the report found that student debt growth is too small to repeat the housing crisis of 2007-2009." According
to VG's paper, student debt in 2014 represents 7% of GDP whereas
mortgage debt peaked to 62% of GDP in 2007. It also found that student
loan asset-backed securities in 2014 represent less than 2.5% of total
mortgage-backed securities in 2007.
story that easily fell through the cracks recently, but an important
one regardless, is that 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 non-bank third-party provider of financial aid refund
disbursement services. Buckley Sandler writes, "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." Both agencies allege that the vendor misled students about the product, including: (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. In the end regulators ordered the bank to pay a total of $4.1 million in civil money penalties.
keep playing catch up on relatively recent investor changes. In the
scramble to grab diminishing market share from other lenders, and
knowing that the anti-risk pendulum has swung too far, the changes just
an effort to make up for lost volume, many investors have reduced or
eliminated credit overlays to agency guidelines. But are they pricing
in the incremental risk or cost of servicing these lower credit score
loans? Only time will tell. First Mortgage Corporation
(Ontario, California) is one investor with nearly 40 years of
experience originating and purchasing the most challenging FHA & VA
loans and a proven servicing track record. Consider the top 20 FHA
servicers with a weighted avg. seriously delinquent rate of 7.37% vs.
FMC's 3.12%. If you're going to lower the credit bar, make sure the
servicer of the loan is up to the challenge. Need more information
about FMC's Correspondent program, contact correspondent@firstmortgage. com .
came out with VA guidelines that have been enhanced to allow 100% LTV
on Cash-Out Transactions. "The following are the updates to VA Cash-Out
enhancement and a clarification for COE policy for surviving spouses:
Cash-Out: LTV has increased to 100%, Minimum credit score is 640,
Conforming Loan Limits, Maximum Cash-out $100,000 for all LTVs.
Certificate of Eligibility: Clarification for Surviving spouse of
Veteran has been made to state the COE must be in the surviving spouse's
name and social security number.
For lock desk hours, Affiliated Mortgage Company updated its website, loans can be locked until 7:45pm Central Time. Contact your area representative with any questions. And Cole Taylor
is accepting rate locks on Sundays until 11:59 p.m. Eastern time. Just
as loans locked on a Saturday, Sunday locks will be treated as if
received on Friday.
360 Mortgage is offering an end of summer purchase pricing special. From now until Friday the 22nd
of August any locked 30 year fixed FHA, VA or USDA purchase will
receive a 100bps price improvement. This special is live and available
immediately in our loan locking/pricing engine. Stay tuned for an
improved pricing model at the end of August!
JMAC Lending, a wholesale and correspondent lender, announced it launched a non-delegated correspondent program
focused on "serving lenders who currently have the resources to fund
their own loans but prefer the security of having those loans
underwritten by the purchasing investor before the loan closes. The
lender originates closes and funds in their own name while JMAC Lending
performs the underwriting, purchase review and loan purchasing
activities, the statement explained." JMAC helps create
warehouse-lending relationships, and for the JMAC Direct programs, all
refinancing will be referred back to the lender and no cross-selling
Angel Oak Wholesale, for one, offers Jumbo Loans Products with scores down to 500.
Ranieri's Shellpoint Partner's New Penn Financial LLC (did you follow
that double possessive?) introduced Home Buyer Power to its wholesale
clients. It is a non-QM loan product.
"Home Buyer Power creates mortgage lending opportunities for customers
with strong credit who fall outside the very specific criteria required
for QM loans," said Brian Simon of New Penn Financial. "These are solid
buyers with strong income who may have a high debt-to-income ratio."
Buyers will need to provide full income documentation, demonstrate
strong credit scores, and meet additional guidelines that indicate their
ability to repay. The product features an interest-only option, and
buyers with debt-to-income ratios as high as 55 percent at 80 percent
loan-to-value may qualify for loans. Eligible property types include
primary residences, second homes, and both warrantable and
Turning to the markets, there still isn't much going on.
The Fed and other investors continue to buy, originators continue to
sell, and life goes on as August passes. Investors seem content to have
the yield on the 10-yr sitting in the low-to-mid 2.40% area (we're at
2.46% this morning). Although the news from the Ukraine and Israel has
settled down, overnight we had news that Japan and China's economies are
slowing, which in theory would help worldwide interest rates. But they
haven't done much. Today we had the MBA's application numbers (-2.7%)
and July Retail Sales (unchanged). Later we'll have a $24 billion 10-yr
T-note auction by the Treasury Department. The 10-yr is at 2.45% and agency MBS prices a shade better.
In better news, Comerica
Bank, a leading financial institution and dedicated residential
warehouse lender for the last 50 years, is looking to fill a Mortgage
Warehouse Relationship Manager
opportunity in its Los Angeles office. It is anticipated that the
successful candidate will manage an existing portfolio and have the
opportunity to generate new business for the Bank. For further info,
please confidentially contact Emily Davis or visit Comerica.
Also on the recruiting side, "Employee Retention"
has become a major focus! Training internal talent ensures your
employee's career prospers and that you keep the competition out.
Register for the 60 Day Recruiting Workshop, hosted by EMAC Recruiting Academy
as they train Hiring Managers on how to implement innovative Talent
Management strategies to attract and retain talent. "Join us on our next Advanced Talent Management workshop starting TODAY - Wednesday, August 13th
at 3PM EST. Learn new approaches to next generation recruiting and
retention best practices that are designed to attract, develop and
retain talent. Instructor Jim McGrath guides Hiring Managers on how to
develop an ongoing system to recruiting and retaining talent. In this
workshop you learn how to develop your professional skills and
techniques to motivate your team to stay engaged and take their career
to the next level."