Wanna little scoop from this conference in Chicago? Try this one: Wells
Fargo has added operational capacity to its current
operations centers to handle its correspondent business and cut turn times. More
than three hundred peopled are in the process of being added to 2 of its 4 existing
operations centers. So much for those nearly daily rumors I am asked to address
about Wells shutting down correspondent. Wells even adjusted some of its prices
to some clients to help "pump up the volume." Chatter is focused
on quality control and its costs, building capacity with all the cash that is
out there, quality control, compliance, QM, Basel III, and investor gossip. Oh,
and quality control and compliance.
Speaking of adding capacity, Parkside Lending, LLC, announced the
opening of a new Southern California Operations Center, and is currently
seeking to hire Conventional Sr. Underwriters, Jr. Underwriters, QC
Staff, and Broker Service Representatives for its Laguna Hills
Operations Center. Parkside Lending, a wholesale lender founded in 2004,
is a FNMA direct lender/servicer based in San Francisco. Parkside focuses
primarily on A-paper, conforming and non- conforming conventional loans, "offers
exceptional customer service and leading edge technology." Interested
individuals can contact Parkside Lending at www.parksidelending .com or contact
Debbie DeFlores directly at debbied@parksidelending .com.
about this interesting note from a correspondent AE at a large aggregator,
showing some competitive, hard-knocks capitalism? "Rob,
that was great news for us when Fannie sent the cap letters to many of its
clients. When the lenders run up against their counterparty limits, they'll
come right back to us, adding to our servicing, boosting our profits, and
having to take whatever margins we offer. And by the way, we're all waiting for
Freddie's letter - what do you hear on that?" (Answer - not much, although
my opinion is that either it will come soon or that the FHFA is using this to
establish more parity between the two.)
a note I received recently from a mortgage originator in San Francisco on the
gfee increases. "My opinion is that we should end FNMA and
FHLMC and the government guarantee of mortgage debt. As you know, I have
been pointing out for years that too little attention is paid to the fact that
the mortgage mess was created in part and the demise of the GSE was almost
entirely due to the National Homeownership strategy demanding that the GSE's
buy bad loans. Taxpayers are paying the bill for the expensive meal which
politicians thought served their purpose. The increase in gfee is moving
conforming loans toward where they would be if there was no government
guarantee. I believe that is the idea behind this - slowly move up
conforming rate/price to eliminate the decrease in rate that goes with taxpayer
guarantee. We should preserve several things which FNMA has: their
underwriting guidelines as a basis for defining a "qualified residential
mortgage" and their DU/DO technology. Wall Street can do the rest.
When there was a healthy jumbo market jumbo mortgages were within 0.5% of
And this observation: "The CFPB wants originators to charge a flat fee for
all mortgage originations, but it allows Fannie/Freddie to charge variable fees
to lenders who then pass along that fee to borrowers via originators. Meanwhile
the lenders charge varying rates to borrowers via originators on MBS that they
hedge with slower price declines when MBS prices jump and faster price
increases with MBS prices fall. So in the end the borrower and the
originator pay the price for the regulators' decisions. But as long as
the consumer is protected....!"
Occasionally folks want to see a list of acronyms used by broker dealers,
Realtors, and mortgage bankers. There are too many! And similar to how no one
fully understands the tax system, no one is sure exactly how many financial
regulatory entities are out there. The Securities and Exchange Commission
(SEC), Commodity Futures Trading Commission (CFTC), the Office of the
Comptroller of the Currency, the Federal Deposit Insurance Corporation (FDIC),
and the Department of Justice (DoJ) are probably the best known, but there is a
plethora more. The Fed, for one, has been granted additional powers and
responsibilities under Dodd-Frank, including an obligation to pour money into
the CFPB. Consider as well that most entities have sub-departments that
act independently of each other - a bank recently found itself being
investigated by three of the SEC's twelve separate offices. Throw in
the parallel departments in state governments, and it becomes clear that
financial institutions face something of a legal minefield. For lawyers,
it's something of a golden age. Here is more, courtesy of The Economist.
here's some commentary on recent broker-dealer activity from Mike Ehrlich with
Thomson Reuters. "Many of my clients/prospects routinely ask me to
recommend broker-dealers for their TBA ("To Be Announced") hedges. I usually
don't like to make any connections unless I know a good deal about the bank
(what their capital situation looks like, how much they are doing in
origination, percentage of refi business versus purchase, and so on). I also
seek to build out relationships with the broker dealers and learn about what
types of mortgage banks they are willing to accept as counterparties, i.e., capital
requirements, whether they are approved to do AOTs, origination volume of bank
they seek to trade with, margin requirements and thresholds....and then the
subjective things such as customer loyalty/relationships."
Mike continued, "Many of my clients use a third party for their hedging
and may take their guidance as to whom they should trade with, but lots of
politics come into play here. Some of the broker dealers also prefer not to do
business with some of the hedging firms that will call 5, 6, or even 7 broker
dealers in search of the best price. My clients like to have the ability to see
where Tradeweb was quoting a security price at any point during the day so they
can match their trade ticket time against the time-stamp for all historical TBA
quotes on my platform. This allows them to see how much of a spread their
regional broker dealers are pricing them versus the Tradeweb price around the
time of their trade."
Lastly, "One common theme is the desire of my clients to trade with a large
regional bank/broker-dealer or a primary dealer. Many will not have that
opportunity, as they will never make it past the credit departments "litmus
test." Broker dealers such as Bank of NY and Daiwa seem more willing to
take on clients with capital as low as $5-10 million than someone like RBC
which requires $100m in capital. What questions should I be asking to the BDs I
meet with? What should I ask my clients about their existing relationships?
What role does the TradeWeb electronic execution system play in all of this as
only mortgage banks with multiple primary dealer relationships can benefit from
this trading platform (in terms of electronic execution)?" (If you'd like to
ask Mike more about TBA limits, broker dealer information, or the markets,
contact him at email@example.com.)
Time for a little investor, lender, and training news, although not
necessarily from here in Chicago! As always, for full details read the
bulletin, but these will give you a taste of things.
Pinnacle Mortgage has updated clarified its trust fund disbursement
policy for conforming loans as well as manual underwriting and appraisal order
date policies for FHA loans. Guidelines on thermal certification and continuity
of obligation for USDA loans, disaster area inspections and income and asset documentation
for Enhanced DU Refi Plus loans, and fund sources for Homepath loans have also
been updated. Pinnacle has updated the Underwriting Guideline Matrix for
second home and investment properties and no longer allows property sale
commission as a source of funds for Pinnacle Plus loans.
For Tier 3, 6, and 7 Conventional loans, PHH Mortgage updated its underwriting
policies on cash-out refinancing, various sources of income, and HUD area
median family income limitations. Changes have also been made to
Conventional Conforming P&I LIBOR ARM, Conventional Conforming Plus ARM,
MyCommunityMortgage, HomePossible, and Conventional Conforming Plus fixed-rate
products in anticipation of the integration of DU Version 9.0 on October 20th.
San Francisco-based Parkside Funding has just rolled out Park Xpress,
which allows clients to submit certain refinance loans to an "Xpress Lane" for
accelerated underwriting. In order to qualify, refinances must be
Conforming single property owned Wage-Earner transactions that have received an
Approve/Eligible from DU (LP or manually underwritten loans will not be
Following Freddie's announcement that it will now allow debt ratios over 50 on
HARP loans, United Mortgage introduced a new HARP 2.0 product that permits
LTVs over 105%, unlimited CLTVs, and EA-1, -2, and -3 DU/LP findings.
As part of Fannie's Loan Delivery October 2012 Release, which was implemented
on the first of the month, several system updates will go into effect on
November 26th. Fannie is holding webinars on October 18th and 30th that
will explain the upcoming changes, the registration info for which can be found here.
The FHA is hosting a webinar on HUD's REO disposition program with a
special focus on underwriting and appraisal requirements. Suitable for a
wide variety of real estate professionals, the training will discuss borrower
incentives, repair escrows, and the Good Neighbor Next Door program. Register
The USDA has announced that FY2013 funds are now available for both
purchase and refinance transactions.
As a reminder, while the VA maximum entitlement is $104,250 in the majority of
counties, properties in high-cost areas may be eligible for bonus
entitlement. Veterans with full entitlement living in high-cost areas are
eligible for entitlement equal to 25% of the county maximum; however, the VA entitlement
for any given loan must be manually confirmed, as previous use, multiple
veterans, and the property's location can all affect the amount. Note as
well that VA loans may exceed the published county maximum provided that the
sum of the down payment/equity entitlement is at least 25% of the sales price
or appraised value.
Flagstar has updated
its Loan Originator Compensation policy to state that borrower-paid
compensation is not allowed to exceed the Flagstar-paid total compensation
amount. Flagstar-paid compensation schedules have been limited to a
maximum of 325 bps plus an optional flat fee, and clients are permitted to
determine their percentage of the loan amount in bps within this
framework. Clients who currently have a compensation schedule that
exceeds the 325 bps maximum must enter a new one into the system and should be
aware that they may be required to provide a written explanation and/or
documentation that supports their stated flat fee amount. All
compensation schedules should account for Flagstar's high-cost, federal, state,
local, and fair lending tolerances.
Things seem to be pretty quiet in the market place. The 10-yr closed at
1.80%, and in residential MBS-land capital markets & secondary folks could
well be accused of being on holiday with the MBA conference their focal point
out of Chicago this week and originator selling well under its normal pace at
roughly $1 billion all day. With no real news, I won't waste your time talking
about the markets - but today could be another quiet day.
A nice, calm and respectable lady went into the pharmacy, walked up to the
pharmacist, looked straight into his eyes, and said, "I would like to buy
The pharmacist asked, "Why in the world do you need cyanide?"
The lady replied, "I need it to poison my husband."
The pharmacist's eyes got big and he explained, "Lord have
mercy! I can't give you cyanide to kill your husband, that's against
the law? I'll lose my license! They'll throw both of us in
jail! All kinds of bad things will happen. Absolutely not!
You CANNOT have any cyanide!"
The lady reached into her purse and pulled out a picture of her husband in bed
with the pharmacist's wife.
The pharmacist looked at the picture and replied, "You didn't tell me you
had a prescription."