Detroit...near bankruptcy? But many areas are doing well. As housing in established urban neighborhoods becomes ever rarer and more expensive, buyers continue to "bet" on areas that may be up and coming, hoping for a happy ending. There is more space for the dollar in resurging neighborhoods according to this article. Housing in these neighborhoods, where the upper middle class moved to get out of the hustle and bustle of midtown, can be architecturally exceptional. The golden rule with real estate is resale, and renovations and neighborhood gentrification go a long way towards that.

And this might be of interest to those who "enjoy" watching politics and housing mesh...or not. N.J. Gov. Chris Christie has conditionally vetoed legislation that was designed to transform foreclosed properties into affordable housing. Christie rejected a bill, S1415 and A2014, that sought to establish the New Jersey Residential Foreclosure Transformation Act through which New Jersey municipalities would have 45 days to decide whether to buy foreclosed vacant houses. More

On to some jobs for those looking. Gold Star Mortgage Financial Group is searching for highly experienced retail mortgage branches focused on purchase business to join their branch affiliate network. They are also seeking to fill DE Underwriter positions in their newly opened Regional Operations Center in Cleveland, OH. Based in Ann Arbor, MI and founded in 1999, Gold Star has become one of the fastest growing mortgage companies and top 50 lenders in the nation. They are currently licensed to do business in more than 20 states. Please submit resumes and inquiries to Shawn Sirko at ssirko@goldstarfinancial .com. To learn more about Gold Star Mortgage Financial Group visit for more information on branch opportunities.

And Stonegate Mortgage Corporation, one of the nation's largest independently-owned mortgage lenders and servicers, will be attending the IMBA Job Fair on Wednesday, February 6 from 3-7PM CST at the Holiday Inn Willowbrook, Rt. 83 & I-55 - Willowbrook, IL. Stonegate will be interviewing for underwriters, closers, operations, risk & compliance, and sales positions. Private interviews can be scheduled for February 7 - please inquire with Missy Dewey mdewey@stonegatemtg .com. For more info on the job fair, go here.

If you want to raise an eyebrow or two, click on the APR on these loans, offered not by the tribes listed, but by an individual who is a member of the tribes. Here you go. And we wonder why the public's confidence in lenders has a long way to go...

Speaking of borrowers paying more, the cost of an FHA loan to the borrower is going up.  On top of that, the FHA's Home Equity Conversion Mortgage reverse mortgage program (HECMs) is changing in an effort to limit risk to the agency's finances. Among the changes comes the consolidation of its Standard Fixed-Rate Home Equity Conversion Mortgage (HECM) and Saver Fixed Rate HECM pricing options, effective for case numbers assigned on or after April 1 for loans closed on or before 7/1. The new program requirements will be made in an effort shift the large majority of fixed rate reverse mortgage loans taken under the Standard program, which has caused stress to the FHA's mortgage insurance fund, the agency said. Here are the details.

Turning our eye to commercial real estate, Tom Sackmann, SVP of Credit Quality with Banner Bank (WA), writes, "The regulatory use of the term "CRE" is one of the most overly general and unhelpful language uses I've come across.  Sometimes it is meant to mean true commercial real estate (i.e. an office building, a retail center of some type) while sometimes it is used to denote just about any type of lending secured by real estate not made to a residential owner-occupant, and all points in between.  For that reason, I'm never sure what to think of articles referring to failures or losses due to "commercial real estate."  Did the bank get out over its skis on A&D loans, various forms of construction loans, or did it close one too many shopping center refinances? It reminds me of the press referring to 'banks' in articles without differentiating between Goldman and First Community Bank of 'Smallville'."

Recent discussion around the future of monetary policy is again stoking fears of rising inflation. Sorry about perpetuating what Tom mentioned above, but the old question of whether commercial real estate is an effective hedge has resurfaced. Historically, commercial real estate has been a solid hedge with returns far outpacing inflation. In a recent article by Wells Fargo's economic team, they concluded the recent downturn severely reduced returns on commercial real estate and did not provide much protection against even a modest inflation rate. Since early 2010, returns have rebounded sharply and again are outpacing inflation. However, with the pace of returns beginning to slow, investors are wondering if the gains will hold and if commercial real estate will remain an effective inflation hedge. Income returns, which include net operating income, should continue to improve across property sectors, as constrained supply drives vacancy rates lower and rents higher for most property types. Capital returns, however, have been moderating along with sluggish economic growth, which suggests total returns could be heavily weighted toward operating fundamentals in the coming year. Even with modestly improving property values, fundamentals suggest solid positive real returns. While commercial real estate has historically been an effective hedge, it is important to note that all markets are not created equal, as factors such as lease structure and market fundamentals also play a role. Markets that do not typically allow rent escalations or
expense reimbursement revenue may not be an effective inflation hedge. Moreover, markets with high vacancy rates could give tenants the leverage
in negotiations, which would limit a landlord's ability to raise rents.

And on the 3% cap on what the borrower pays, Ted R. writes, "One thing I find interesting is the huge disparity in title costs from state to state. In Illinois and Missouri, I can do a $250K loan for around $500 in title costs.  The same loan in attorney states (OK, TN) can easily run 3x the cost. There is certainly NOT a level playing field between all states when it comes to title costs!" So should the CFPB regulate closing costs if it is going to regulate the maximum that the borrower pays?

I received this note from John Socknat with Ballard Spahr: "Rob, your readers should know that the CFPB issued a bulletin in April 2012 that expressly states that transitional licensing (where an MLO is already licensed in one state) is permissible. Here is the link.  The CFPB did state that transitional licensing is not consistent with the SAFE Act when it involves a Registered MLO. Ballard Spahr worked closely with the MBA (as did others in the industry) in connection with its efforts to get the CFPB to acknowledge that transitional licensing is permissible under the SAFE Act.  While the CFPB stopped short of the ask, which was to confirm that transitional licensing is permissible for both licensed MLOs and Registered MLOs, the bulletin was a critical first step as a number of states had indicated that absent guidance from the CFPB they would not be willing to permit transitional licensing. We are hopeful that additional states will follow Ohio's lead." Thanks!

As a clarification to the status of salaried LO's in calculating the 3% cap, Brad Hargrave, with Medlin & Hargrave, writes, "Loan originator compensation is included in the calculation of points and fees under the ATR/QM Rule.  Specifically, the Rule states that, included in the calculation of points and fees is "all compensation paid directly or indirectly by a consumer or creditor to a loan originator that can be attributed to the transaction at the time the interest rate is set."   A base salary, however, is not compensation that can be attributed to the transaction at issue, and thus is not included for purposes of calculating the 3% cap on points and fees for a qualified mortgage." (If you have further questions/comments, and would like to enlist the help of Medlin & Hargrave, write to Brad at bhargrave@mhlawcorp .com.)

Concerning comp, I received this note from an industry vet with a libertarian bent. "Is anyone really so illiterate they don't understand how to cover pricing? You simply make less yourself. This whole comp thing has been a real eye opener for me.  When I was a mortgage banker, large company or small, the company set the pricing. Yes, there was a time when YSP was not available to the LO. The lender charged an origination fee, and an interest rate - end of story. When YSP was available to the LO in the 90s, I always worked with what I had to provide the best structure for the client - no real right or wrong, just want works best for the client. As a broker I really had the ability to work some great deals. I always made my origination fee match the YSP, and never charged more than 1.5. Often, I would lower my origination by .125 or so to match the YSP if the market had changed.  If you think you should make 2.5 on each loan, then you will have a problem with the 3.0 cap. The reality is that there are still many in this business that think they are worth much more than they are. It will be interesting to see what happens with the wholesale lenders that set the lender paid comp. With 2 lenders, we are forced to take more than we wanted, due to disparate discrimination. I don't do business with them any longer. The government should have reasonable, enforceable rules, and stop trying to micro manage any business."

And another: "Regarding MLO comp, I have often wondered why real estate agents can be paid as an independent contractor (1099) and MLOs can't. They're both 100% commissioned salesmen.  I've always assumed that it had something to do with the fact that the Realtors' PAC had more influence with the politicians than the MBA's does."

For a market update, yesterday we had some intra-day volatility after ADP showed private employment was stronger than expected, but the first look at the 4th quarter GDP number showed a drop. Rates improved slightly, due to the surprise slow down, until analysts dug into the number and came up with a rationale: the general feeling is that Q4 GDP was not a true reading of the strength of the economy. External factors such as Hurricane Sandy had a negative effect and going forward GDP should bounce back. But we weren't done. In the late morning PST, afternoon EST, the Fed reiterated that it will follow a "balanced approach" in promoting price stability and full employment goals when they are at odds. The Fed will maintain its asset buying of $85 billion per month to hold interest rates near zero until unemployment falls to at least 6.5%.

This wasn't a surprise, but the market felt better hearing it again. (Maybe like telling your spouse you love them?)  So the Federal Reserve will keep purchasing securities at the rate of $85 billion a month as the economy paused because of temporary forces including bad weather. "Although strains in global financial markets have eased somewhat, the committee continues to see downside risks to the economic outlook," the FOMC said. The purchases will remain divided between $40 billion a month of mortgage-backed securities and $45 billion a month of Treasury securities. The central bank also will continue reinvesting any Treasury securities that mature and will reinvest its portfolio of maturing housing debt into agency mortgage-backed securities.

Price-wise, the 10-year note yield hit an intraday high of 2.03%, and Fannie 3.0's (containing most production of 30-yr mortgages) dipped below a price of 103 (3 point premium) for the first time since August. But by the end of the day prices rebounded slightly, and they closed at about 103.125 and the 10-yr T-noted closed at a yield of 2.01%. We were reminded that what the Fed giveth the Fed can taketh away, and that agency home loan rates are being held artificially low through the Fed's MBS purchases.

Today we have another covey of economic news: ECI (Q4, expected +.5%), Initial Claims (1/26, expected at 351k), and Personal Income & Consumption (Dec - expected +.8% and +.3%). It turns out that Jobless Claims were at 368k, up 38k, and Consumer Consumption was +.2%. Personal Income was +2.6% (attributed to bonuses) Later we'll have the Chicago PMI (Jan, expected slightly higher). In the late going the 10-yr is at 1.98% and agency MBS prices are better.

Some ads are downright good.