A biologist, a chemist, and a statistician are out hunting. The biologist shoots at a deer and misses 5 feet to the left, the chemist takes a shot and misses 5 feet to the right, the statistician yells, "We got 'em!" Just think of all the statistics, produced by the Federal government that we are not "enjoying" during the partial shutdown - like the CPI today. The industry will be keenly aware of the release dates once things are up and going. The lack of statistics, however, has not kept the bond or stock markets from trading, or lenders hiring.
Talk has moved away from serious Congressional-driven Agency reform (look for something in 2015, after the election), away from QM & QRM, and into QM versus non-QM. Despite, or maybe because of, the QM box much of the industry is being forced into, entrepreneurs are coming up with new ideas. The latest example comes from John Frangoulis with the Homeowner Preservation Center in California, whose goal is to create a mortgage fund to buy nonperforming notes and mostly restructure those notes and keep people in their homes.
"We also have a unique program under the 'Shared Appreciation Contract' that is a win-win situation for both homeowner and investor. We have developed a special financial performance analysis program that helps us evaluate and compare different assumptions on a given loan portfolio as well as analyze and compare different nonperforming loan portfolios...HOPC will provide a loan modification that lowers the loan balance with principal reduction that is forgiven. For those that do not qualify for a standard loan modification a Shared Appreciation Contract (SAC) is offered. The SAC provides additional principal reduction that is deferred in exchange for a participation in the future housing appreciation. Alternatively, HOPC offers a Shared Equity Sales Agreement for owners that do not qualify for modification and is designed to share the home sale profits between investor and homeowner." For more information, or to see a webinar on the subject, write to John at firstname.lastname@example.org.
A while back NAIHP sent out a note to its members saying, "Why the PATH Act, HR 1077 and S.949 will NOT stop QM. Many of you have been asked to strongly support these bills. All contain language that would correct some of the disparities contained in the Qualified Mortgage (QM) Rule. Specifically, the inclusion of lender paid compensation and affiliate fees in the 3% cap. Unfortunately, none of these bills are likely to pass! HR 1077 currently has 64 co-sponsors and bipartisan support. However, its sister bill in the Senate (S.949) has only 1 co-sponsor. In addition, Senator Elizabeth Warren, a Member of the Senate Banking Committee, has come out in strong opposition to S.949. Even if HR 1077 were to somehow pass the House, S.949 has no chance of passing the Senate. The same would apply to HR 2767, also known as The PATH Act. The January implementation of the QM Rule is 3 short months away. The only hope we have of stopping the implementation, is legal action. NAIHP's legal team is preparing an action against the CFPB. The success of this suit depends on the support of industry and others. The lawsuit will be expensive, which is why we urge you to contribute generously." Here is the group's site.
Speaking of lawsuits, In another installment of "I knew I should have become a lawyer" news, the National Credit Union Administration recently announced that it filed lawsuits against nine financial institutions on behalf of five insolvent credit unions for alleged violations of federal and state securities laws in the sale of $2.4 billion in mortgage-backed securities. The complaint(s), which the NCUA filed in the U.S. District Court for the District of Kansas, claim that the securitizer made "numerous misrepresentations and omissions in the offering documents regarding adherence to the originators' underwriting guidelines, which concealed the true risk associated with the securities and routinely overvalued them"......I'm sorry, I just experienced a little déjà vu. The NCUA claims that when the allegedly risky securities lost value, the credit unions were forced into conservatorship and liquidated as a result of the losses sustained. The NCUA has filed numerous similar suits, and it has previously settled similar claims for more than $335 million with four financial institutions. The official press release can be found here.
And the fast path to legal notoriety in New York appears to mandate at least a handful of lawsuits against financial institutions. Rudy Giuliani and Eliot Spitzer have both waged litigious wars against the banks, and on October 2, New York Attorney General Eric Schneiderman announced actions to address alleged failures by two servicers to comply with a certain servicing standards established by the National Mortgage Servicing Settlement. Earlier in the summer, the Attorney General threatened to sue both servicers based on borrower complaints that they were not fulfilling their settlement obligations. Hey look, there's even a video.
Turning to the agencies, Freddie and Fannie both published industry wide letters to provide additional information regarding the agencies new purchase eligibility requirements based on the CFPB's final ability-to-repay/qualified mortgage (ATR/QM) rule. Buckley Sandler write, "The letters inform sellers that, during an initial transitional period, the enterprises will not make any changes to their quality control processes and will not, except under certain circumstances, issue any repurchase requests related to the new points and fees eligibility requirements." Both letters remind sellers that they must comply with all applicable laws regarding points and fees, including state laws and regulations that may be more restrictive than the CFPB ATR/QM rule, and withdraws prior guidance regarding excessive points and fees. Fannie Mae issued 2013-07, and Freddie Mac issued a bulletin. (Yes, F&F are still separate, and will be for quite some time.)
HUD recently issued three Mortgagee Letters. In 2013-34 HUD announced the indefinite delay of pre-foreclosure sale (PFS) requirements for FHA mortgagees, which were announced in July. Mortgagee Letter 2013-35 announces that, effective March 31, 2014, HUD will consolidate the identification numbers it issues to FHA lenders under Title I and II. Finally, 2013-36 updates guidance regarding 203(k) insured mortgages in the Hurricane Sandy disaster area. See them all here.
Hey, you know what we're not seeing much of lately? Bank closings! More than 1,000 banks closed in 1930 as a result of the Depression, 3 years before the FDIC was created. Just 22 US banks have been taken over by the FDIC in 2013 through 9/30/13. But the Financial Crimes Enforcement Network (FinCEN) is going strong, and it recently released a ten-page report titled "Mortgage Loan Fraud Update." CY 2012 was the first year since FinCEN began reporting mortgage fraud SAR statistics that the number of MLF reports fell. California was the number one ranked state for Mortgage Loan Fraud (MLF) subjects per capita and in total MLF SAR volume for CY 2012. California was followed in the per capita rankings by Nevada, Florida, Arizona, and Washington, D.C. (Complete report).
Let's check on some investor & personnel changes and bank M&A over the last few weeks.
Per the updated Agency guidelines, Citi is no longer requiring Gifts of Equity to be addressed on the sales contract and has updated its definition of Illegal and Non-Conforming Use properties.
Citi has added new criteria for underwriters to use when distinguishing between a second home and investment property, clarifying that 2-4 unit properties are not eligible as a second home apart from DU Refi Plus and that the property must be occupied by the borrower for some portion of the year. The sales contract or appraisal should not indicate any timeshare or other rental agreements requiring the property to be rented, and if a management company is employed to assist in renting the unit, the borrower may not hand over complete control of the property. In cases where the borrower is purchasing or refinancing the property to be occupied by someone other than themselves, it will automatically be underwritten as an investment property.
Arvest Bank ($14.1B, AR) will buy National Bank of Arkansas ($187mm, AR) for an undisclosed sum. First National Bank of the Gulf Coast ($668mm, FL) will buy Shamrock Bank of Florida ($102mm, FL) for an undisclosed sum. Georgia Commerce Bancshares, Inc., the holding company of Georgia Commerce Bank, and Brookhaven Bank jointly announced the signing of a definitive merger agreement that will create a nearly $1 billion in assets banking franchise. The merger will expand Georgia Commerce Bank's footprint to nine branches across metro Atlanta. Brookhaven Bank has two branches located in North DeKalb County,
GFI Mortgage Bankers announced the hiring of Jordy Castillo as the company's Director of National Sales. In his new role, Mr. Castillo will oversee the day-to-day operations of the sales department, while maintaining focus on the company's strategic goals. Mr. Castillo will be based at the company's headquarters at 50 Broadway in downtown Manhattan.
Also, BOK Financial Mortgage is expanding its Correspondent Mortgage Services reach into the Northeast with the addition of Angelo Zakis as Regional Sales Manager. Zakis comes to BOK Financial Mortgage from Amerisave Mortgage Corporation where he served as regional sales manager with experience in third party origination, institutional and mini-correspondent lending.
Stearns Lending announced a new chief in the tribe, with Kathleen L. Vaughan brought on to run its wholesale channel. Congrats!
Plaza is pleased to announce that, effective immediately, we will accept mortgage insurance from United Guaranty on DU Refi Plus and Freddie Mac Relief Refinance transactions. Plaza Program Summaries have been updated to reflect this change. Please note that, at this time, Plaza will only accept United Guaranty Mortgage Insurance on HARP transactions.
You gotta love those folks in Washington DC. (Where is the sarcasm font?) We all need to remember: no one goes to Washington wanting to do a poor job, right? While they are doing their non-poor jobs the markets are suffering, as are the holders of U.S. debt overseas. China, with $1.28 trillion of US Treasury holdings (bills, notes and bonds) and Japan, with $1.14 trillion, are the top 2 foreign holders of American treasury debt as of 7/31/13. Mortgage lenders report continued lower MBS sales volumes, suggesting locks are down, but the Fed continues to buy the stuff. By the time folks headed to Happy Hour Tuesday, the 10-yr was at 2.72% and agency MBS prices were worse about .125-.250.
Today is a new & exciting day, right?! We have only one report delayed, the Consumer Price Index. The Mortgage Bankers Association report on mortgage application activity for the week ending October 11 at 7AM, 1AM Hawaii time. (Apps rose for the second week in a row to +0.3% vs. +1.3% from the week prior: refis were up +3.3% , purchases were -4.8%.) At 4AM in Hawaii we'll see October homebuilder sentiment, and then later the Fed will release its Beige Book on economic anecdotes across the 12 Districts in preparation for the October 29-30 FOMC meeting. In the early going rates are virtually unchanged from Tuesday's closing levels.
From Washington the Borowitz Reports reports, "As the partial government shutdown grinds on, Americans remain deeply divided over what kind of wild animal they would most like to see Congress mauled by, according to a new poll released today.
"While a majority of Americans say they would enjoy seeing Congress torn limb from limb by a ferocious bear, there is disagreement over which species of bear would be best suited for that assignment.
"When asked, 'What kind of bear would do the best job of savaging Congress with its fearsome paws?,' Americans gave grizzly bears the highest job-approval rating, followed by polar bears, and by black bears in a distant third.
"But the poll showed that there was also strong support for the idea of Congress being set upon by a pack of rapacious animals, with rabid hyenas the first choice of many respondents, followed by feral dogs and cats.
"While insatiable, bloodthirsty mammals were most often cited as the animals Americans would like to see eviscerate Congress, there was significant support for another scenario, involving Congress being consumed by a swarm of predatory insects.
"Fifteen per cent of those surveyed 'strongly agreed' with the statement, 'Being torn limb from limb by a grizzly bear or devoured by a pack of rabid hyenas is too good for these people. They should be eaten, very slowly, by a colony of hungry fire ants. Yes, that's it-fire ants. That would be amazing.'"