Some recent mortgage fraud figures have been released and the winner is.... South Florida!

"South Florida's mortgage market had the nation's highest number of suspicious activity reports in the third quarter of 2010, according to the Financial Crimes Enforcement Network's third-quarter mortgage fraud report released Thursday."  FULL STORY

 Kinecta Federal Credit Union has been expanding its broker business in the Western US, and is looking for seasoned Wholesale AE's in the San Jose, Sacramento, Washington, and Arizona markets.  Kinecta has over $3.5 billion in assets and is serving over 220,000 member-owners across the country. According to the release, "Kinecta offers a competitive compensation and benefits package in addition to a dynamic culture - AE's will develop and maintain relationships with wholesale and correspondent mortgage loan brokers to gain loan business." If you are interested or know someone who might be, send a resume to Erika Schlarmann at

Every loan agent now has files on their desks, if they didn't already, of borrowers where the increase in rates has stopped the refinance option. From their point of view, it is not a good thing, but an investor's point of view is different - existing loans will stick around longer. Late last week prepayment speeds came out, showing a slow-down for various coupons and "vintages." Broadly speaking, the supply of conventional 30-yr MBS contracted for the 11th consecutive month (-$13.1 billion) but the 30-yr GNMA supply continues to increase and now stands at 24% of the agency market per Sterne Agee.

Barclays Capital's latest report suggested that the latest prepayment report "marks the end of the 2010 refinancing 'wavelet'."  "The slowdown in overall speeds suggests that there is not much backlog left in the origination pipeline, and, therefore, there should be a sharp slowdown in speeds next month." Barclays attributes the differences in prepayment speeds to HARP (as a streamlined refinance process), coupon, origination year (2002 faster than 2003, which are faster than 2004 & 2005, for example), current interest rates (which will impact lower rates since they never really picked up when rates were low), recent loan level price adjustment changes by Fannie & Freddie, FHA's change in mortgage insurance costs, and continued tighter underwriting.

Of particular interest is Barclay's opinion that "although Bank of America had made a deal with Freddie to cover all its current and future put-back liability on its legacy Countrywide loans (pre-2009 origination) with a lump sum payment, and other originators may follow suit, we do not expect such actions to lead to any easing in underwriting. These agreements only cover reps and warranties on existing loans, not on new loans resulting from refinances. Consequently, they would actually discourage lenders from refinancing existing loans that are already covered by these settlements."

According to a story in Reverse Mortgage Daily, reverse mortgage volume fell 35% during 2010, with 72,748 units being endorsed in 2010. Even in December the number of HECM endorsements fell slightly to 6,554 units during December, down 0.1% according to data from Reverse Market Insight. "Lower home values have played a role in the drop in endorsements, but the number of lenders originating reverse mortgages fell 28.9% during the year," said RMI.  In December, the number of active lenders fell to 560, down 47% from last year and the lowest since September 2006 although the number of units per lender rose to 11.7 in December, the highest since July 2007 according to RMI.

With all the confusion over originator compensation, I've heard, "I am not surprised that the government thinks its ok for originators to be paid by the borrower as long as they don't get compensated by the borrower." So wrote Derek B. with Pugdog Marketing in Oregon.

Not only is compensation a continuing worry, but we also have the risk retention issue mixed with servicing reform. The MBA recently sent a letter to federal regulators, expressing "deep concern" regarding recent letters calling on regulators to create national residential mortgage servicing standards as part of a fast-track risk retention rulemaking under the Dodd-Frank Act. "These (two) issues deserve the careful consideration and debate that can only be achieved if they are addressed separately, especially given the approaching deadline for Section 941 rules." Section 941 creates a congressionally mandated deadline of April 17 for new risk retention rules. MBA said risk retention is "challenging enough" in its own right and that it would be a mistake to add a second highly complex topic into the same policymaking process. (The MBA will also be holding its "Council on Residential Mortgage Servicing for the 21st Century" summit next week in Washington "to facilitate dialogue on ways to ensure alignment of servicing practices with investor and borrower interests and to improve residential mortgage servicing going forward, including discussion of national servicing standards.")

Along those lines, an MI executive wrote to me saying, "We are awaiting the pending outcome of the QRM definition (we're looking for a level playing field with the FHA) and whether the GSEs continue with their loan level pricing increases in the spring which would make conventional financing unattractive relative to the FHA. If one or both move in the direction of the MI's it would accelerate the road to recovery. If neither does, it will be the same grind-it-out battle it has been for 4 years." It is an interesting take on the issue.

This announcement from an AE with Bank of Internet sounds like "the old days"! "No Job, No Income, No Problem! We qualify a 5% amortized annual rate of financial asset depletion as qualifying income. In a nut shell, the older you are and more you have, the better. Mix and match with all our other incredible accommodations..." One capital markets executive suggested, "Seriously, isn't there a regulator out there looking for this, just waiting to shut down banks? No job? Uh, just leave that blank. No income? Uh, don't worry about filling that part of the 1003 out. You are 70 years old? Perfect!  Here is a loan you can't afford." Another thought, "Dodd-Frank states that the lender must prove that the borrowers can re-pay the loan, and I believe it even states that the lender must show that the borrower has the income to re-pay it, and not just the assets. It will be interesting to see what warehouse banks think of claims like this." (Editor's note: these are independent editorial comments, given an individual AE's marketing piece, which may or may not reflect company policy.)

Moving on, at least mortgage apps for last week showed some improvement: they increased for the 2nd straight week. The MBA numbers, which poll about half the retail channel, were up 2.2%, with refi's up almost 5%. Purchase applications fell almost 4%, and have fallen in four of the past five weeks.

But rates are not helping things. Yesterday, although MBS prices started off ok, traders reported that "once the buying subsided mortgages started to leak wider on continued hedge fund and money manager basis selling in addition to outright selling from the originator community." MBS trading volume was close to normal, although prices finished Tuesday with a whimper, down (worse) by .5-.75 in price, depending on rate.  

Overall U.S. treasuries declined for a second day as Japanese officials said the nation may extend purchases of bonds sold by the European fund set up to fight the sovereign-debt crisis, easing demand for the safest assets. Here in this country, the $32 billion 3-year auction went fairly well, but today we have the $21 billion 10-year note sale and tomorrow $13 billion of 30-year bonds. We did have some pricing information this morning, with December's import prices increasing 1.1%, less than the +1.5% we saw in November, and export pricing rose .7%. Ahead of today's auction we have the 10-yr yield sitting at 3.40% and MBS prices are worse by about .250.

Southern Ingenuity  

One morning three South Tennessee good old boys and three Yankees were in a ticket line at the Nashville train station heading to Knoxville for a big football game.

The 3 Northerners each bought a ticket and watched as the 3 Southerners bought just one ticket among them.

"How are the 3 of you going to travel on one 1 ticket?" asked one of the Yankees.

"Watch and learn" answered one of the boys from the South.

When the 6 travelers boarded the train, the 3 Yankees sat down, but the 3 Southerners crammed into a bathroom together and closed the door.

Shortly after the train departed, the conductor came around to collect tickets.

He knocked on the bathroom door and said, "Tickets please." the door opened just a crack and a single arm emerged with a ticket in hand. The Conductor took it and moved on.

The Yankees saw this happen and agreed it was quite a clever idea. Indeed, so clever that they decided to do the same thing on the return trip and save some money.

That evening after the game when they got to the Knoxville train station, they bought a single ticket for the return trip while to their astonishment the 3 Southerners didn't buy even 1 ticket.

"How are you going to travel without a ticket?" asked one of the perplexed Yankees.

"Watch and learn", answered one of the Southern boys.

When they boarded the train the 3 Northerners crammed themselves into a bathroom and the 3 Southerners crammed themselves into the other bathroom across from it.

Shortly after the train began to move, one of the Southerners left their bathroom and walked quietly over to the Yankee's bathroom. He knocked on the door and said "ticket please".

There's just no way on God's green earth to explain how the Yankees won the war...