Freddie Mac's Rate Survey; FRBNY Suing BofA; Loan Buybacks; NMLS & Credit Reports; FHA Training; Wells Fargo Earnings
Pity the poor mortgage originator, who probably forgets their anniversary date with their spouse, but somehow has probably stored in their brains what all these abbreviations stand for: CFPB, FNMA, FHLMC, FHA, VA, USDA, RHS, GNMA, MBS, DU, LP, HUD, TARP, LQI, HARP, HAMP, LO, LTV, CLTV, PMI, MIP, LPMI, DTI RESPA, NAMB, GFE, TIL, APR, ARM, LIBOR, COFI, MTA, HELOC, COE, FRM, HECM, MBA, MLS, PUD, PITI, IO, REIT, REO, CBWR, NINA, YSP, SRP, OO, NOO, PPP, HMDA, VOE, VOD, VOM, FHFA, etc., etc. Not to mention all the abbreviations that are particular to the appraisal and Realtor businesses! (And please don't send more.)
Will PIMCO and/or the New York Fed sue Bank of America over "bad" mortgage-backed securities? The Federal Reserve Bank of New York has joined forces with BlackRock, Pacific Investment Management and other major bond investors in trying to force Bank of America to repurchase mortgages that were packaged into securities. Bank of America defended its position. "We're not responsible for the poor performance of loans as a result of a bad economy," the bank said in a statement. The New York Fed, in affect a bank regulator, would like BofA to buy back a large chunk of mortgages: FULL STORY
This certainly adds to the uncertainty in the mortgage marketplace, help keep mortgage-related stocks down, and make lenders continue to believe that holding on to cash (rather than lend it out) makes sense. The Federal government can ease all it wants, but until large lenders and investors feel comfortable enough to come out of their shells, the housing market may not rally to any great extent. It also illustrates conflicting policy priorities, because it could put the Fed at odds with a bank the Treasury Department has been helping through the financial crisis over the past two years.
Buybacks, and prosecuting & defending them, continue to be a fact of
life for mortgage banks. From the lender's point of view, buybacks can be resisted successfully.
Don't ignore the request - companies should devote resources to
measure, mitigate and control the exposure, respond to letters quickly
and let the investor know that you're working on the issue. After a few
of them, lenders typically establish procedures to handle the claims
with one person as a "point person" for smaller lenders. This employee
usually deals with the initial review and is in contact with the
investor. Some smaller lenders go around the investor and try to discuss
with the agency, with mixed results. Regardless, be sure to request all
pertinent servicing records and pay history, along with any additional
supporting documentation. Investigate!
What is a derivative? A derivative is a financial instrument that has a value determined by the price of something else. They are not "bad" things, and in fact in many cases promote liquidity as the value linked to the expected future price movements of the asset to which it is linked. There are many kinds of derivatives, with the most notable being swaps, futures, and options. Over-the-counter derivatives are important risk-management tools for companies worldwide. Companies use OTC derivatives to manage exposure to interest rates, currency-exchange rates, commodity prices and other risks inherent in their business.
Because commercial and industrial companies use derivatives in this manner, they can devote time and attention to what they do best: producing and providing medical equipment, clothing, floor covering, mortgages, and other goods and services. For mortgage bankers and other financial firms, they can use credit default swaps to manage their exposure to credit risk in an efficient and cost-effective manner, which makes loans more available and less expensive to businesses and consumers. Because credit default swaps played a role in problems encountered by a small number of insurers, including AIG, policymakers at the federal and state levels are considering steps that can be taken to reduce the risk of similar problems arising in the future. And if it helps mortgage bankers, let's do it!
Sarcastically he said, "Every broker out there loves the Freddie Mac (and others) rate survey." Lately, of course, Freddie's rate survey has showed very low rates and then every borrower wants that rate! It's been in the news a lot lately since it keeps breaking the old record every week. What the newspapers don't say is what makes up the 0.8% in points and fees. Which fees - a $585 fee for administration and underwriting? Or are they including credit, appraisal, flood, tax, etc.? Are they also including ALTA policy? Or on a purchase, are they including the owner's policy? Freddie's data notes that "Freddie Mac's Primary Mortgage Market Survey (PMMS) is for informational purposes only and Freddie Mac is not responsible for business decisions made based on the reported results of the PMMS. In general, the data presented were calculated from information collected Monday through Wednesday of the same week that the PMMS is released and may not reflect mortgage rates, fees or points currently available from any lender. Freddie Mac may change the methodology used to conduct the PMMS at any time and without notice." Freddie's "Commitment Rate" is the interest rate a lender "would charge to lend mortgage money to a qualified borrower exclusive of the fees and points required by the lender. This commitment rate applies only to conventional financing on conforming mortgages with loan-to-value rates of 80 percent or less." A Freddie rep wrote to me and stated, "They are origination and discount fees. Origination Fees and Discount Points are the total charged by the lender at settlement."
"After carefully reviewing the circumstances surrounding the recent downgrade in State Farm Florida Insurance Company's A.M. Best rating, (Freddie Mac) will continue to accept property insurance coverage by State Farm Florida Insurance Company."
There are now many fewer loan originators than there were a year or two ago. And those remaining spend a good amount of time making sure that their licenses are up to date. On November 1 NMLS will allow MLOs to log into NMLS and authorize TransUnion to send a credit report (electronically, within NMLS) to their regulator(s). "MLOs will have to answer 3-4 questions about themselves in order to verify their identity with TransUnion before the credit report is generated. While a company may pay for the credit report through NMLS, only the MLO will be able to complete the identity verification process." NMLS SITE
Both Morgan Stanley and Wells Fargo issued their 3rd quarter earnings this morning. Both stocks are down on the news, although the numbers generally came in close to expectations. For Wells, non-performing loans were up modestly. WF had record earnings, and said it has no plans on freezing their foreclosure process. Morgan Stanley announced that it will spin off its $7 billion hedge fund business that it purchased in 2006.
The FHA does things other than make sure its insurance fund is adequate. FHA offers training around the nation. On 10/26 the FHA is offering a "REO Webinar". "Learn about homebuyer's & property eligibility criteria, recent updates, sales contract requirements, HUD's special discount sales programs & how to calculate the maximum mortgage amounts. This FREE training course is for underwriters, originators, real estate agents, & other industry partners. READ MORE
A few weeks back CitiMortgage issued another of their "Best Practices" series, this time for subordinate financing. It is chock-full of suggestions that include required data fields when submitting a loan to LP that has a HELOC as subordinate financing, reminding clients that DU calculates LTV, CLTV & HCLTV based upon the inputs the user makes, etc. Pretty helpful stuff.
Last week's mortgage application index (with numbers from the week before) had a nice boost, but this morning's MBA announcement showed that last week's applications dropped 10.5%. The decline was the largest in four months, with refi's down about 11% and purchases down about 7%. As folks in the business know, despite low rates or quantitative easing by the Fed, unless a borrower has the equity or qualifies using current guidelines it doesn't matter what rates are.
Yesterday in the markets rates improved but despite favorable earnings reports (BofA and Goldman) and stronger than expected Housing Starts, stocks sold off throughout the day with acceleration as the afternoon moved on news that PIMCO, BlackRock, the New York Federal Reserve Bank, and others were suing BofA to take back millions in RMBS related to misrepresentations (see above). The 10-year note, which at one point was down (worse) by about .625 in price, ended better by .125 at 2.48%. Mortgage-backed securities improved roughly .250 in price, and most investors had one or more price improvements but Tuesday was the 2nd day of light supply - where are those locks? Besides the MBA application numbers, we have the Fed's Beige Book later this morning, so it is pretty quiet out there. The 10-yr is sitting around 2.51% and mortgages are worse between .125-.250, giving back some of yesterday's gains.
I recently saw this headline: "Las Vegas Churches accept gambling chips".
This may come as a surprise to those of you not living in Las Vegas, but there are more Catholic churches than casinos. Not surprisingly, some worshippers at Sunday services will give casino chips rather than cash when the basket is passed.
Since they receive chips from many different casinos, the churches have devised a method to collect the offerings. The churches send all their collected chips to a nearby Franciscan monastery for sorting and then the chips are taken to the casinos of origin and cashed in.
This is all done by chip monks.