"Rob, do you know where I can find a list of the largest credit unions?" Yes I do: credit union ranking. Credit unions in the United States serve 100 million "members" and are not-for-profit, cooperative, tax-exempt organizations - the tax exempt status particularly riling bankers and mortgage bankers. Interestingly enough and to put things in comparison, total combined credit union assets in the U.S. reached $1 trillion about three years ago - still well below the asset size of Chase, Citi, Bank of America, or Wells Fargo alone.
Residential lending industry observers are keenly attentive to volume projections. Using rough numbers, in 2013 we did about $1.8 trillion, 2014 was about $1.1 trillion, and this year the MBA thinks we'll do about $1.2 trillion. This continued refi wave caught most by surprise, but from where was the expected 2014-to-2015 expected growth going to come? I received a note from fabled economist Mike Fratantoni with some Census Bureau information. "Since the recession, new household formation has typically lagged growth in population. As of December 2014, however, the year-over-year increase in households exceeded 1.7 percent relative to a population growth rate of 0.74 percent - much in the 4th quarter. According to the Census, there were 366,000 new owner-occupier households and an astounding 917,000 additional renter households in the U.S. in the fourth quarter of 2014. In total for 2014, the number of renter households grew by over 2 million. Despite fourth quarter growth, there was an overall decrease of 354,000 owner-occupier households for the year, resulting in net growth of 1.66 million total new households. It turns out that this year about 500,000 households that lost their homes to foreclosure or a short sale back in 2007 will, if they've maintained their credit, be able to again qualify for a loan. In all, over seven million such households will be added back to the pool of potential home buyers between now and 2022, with more than a million households being added in years 2016 through 2019.
One thing that might help volumes, and rankle opponents, is a new loan modification plan. Mel Watt is considering principal mods for underwater borrowers with loans held by FHFA. However, any plan will be "narrow" and will have to be done without incurring costs to the taxpayer. Interestingly, by cutting MI premium and G-fees, he is effectively increasing costs to taxpayers by increasing the chance they have to bail out the fund. Given that house prices have appreciated and seem headed that way, time is our friend. Watt told reporters that he is studying a way to provide principal reduction to a narrow group of homeowners who are underwater on their mortgages without increasing costs for U.S. taxpayers. Principal reduction has been a principle tool used by other lenders when modifying mortgages but is not allowed on those in the portfolio of the two government sponsored enterprises (GSEs). Note that Mel says mass principal forgiveness would cost the government billions. It is no surprise to anyone in the industry that the Congressional Budget Office disagrees that a mass principal forgiveness program would cost anything, as noted in this paper from nearly two years ago.
Mortgage News Daily reminds us that, "Even though his predecessor as head of the Federal Housing Finance Agency (FHFA) was adamant in his refusal to consider it, Melvin L. Watt seems receptive to allowing Freddie Mac and Fannie Mae some leeway to reduce the principal balance of their troubled loans." This move would be backed by Democratic lawmakers and housing activists. In Q3 of 2014, 1 in 10 homeowners with a mortgage were underwater, about 5.1 million people, a number that has been slowly declining as the housing industry has been recovering. Director Watt stated that Congress could pass a tax break law if they wanted to assist underwater borrowers. In November, FHFA did allow borrowers who previously foreclosed to repurchase their homes at market value. He also stated that he does not have plans to extend the terms of HARP as the program is set to expire at the end of this year.
While we're on the Agencies...
As a reminder Fannie Mae implemented updates to Desktop Underwriter for government loans in support of the 2015 VA loan limits. Review the DU for Government Loans January 2015 Release Notes for additional information.
Are you getting ready to start using Fannie Mae's Collateral Underwriter (CU)? To help you get started, refer to the latest CU CheckPoint, updated. The updates provide key information to help lenders prepare for the Jan. 26, 2015 Uniform Collateral Data Portal (UCDP) release that will include CU feedback upon submission of appraisals to Fannie Mae. View webinar dates and register and visit the CU web page for additional resources and information, including eLearning courses available at your convenience 24/7.
(CU prompted one East Coast broker to observe, "CU flags overvaluation only, but I love how they try and smooth it over by saying it considers both under and over-valuation. They know that flagging only overvaluation results in a push to have lenders/underwriters pressure appraisers to lower their values and be more conservative thus violating their own appraiser independence guidelines not to mention federal law.")
In late December Fannie Mae also updated its Foreclosure Bidding Instructions and Third Party Sales as noted in its Lender Letter. The servicer is encouraged to implement these requirements now but must implement these policy changes no later than March 1 for all mortgage loans with a foreclosure sale to occur on or after April 15. Submissions received prior to Feb. 1 will be denied and may be resubmitted on or after Feb. 1.
Fannie Mae UCDP Updates and Collateral Underwriter Are Here. These updates include the addition of an appraisal risk score, flags, and new messages from Fannie Mae's new appraisal risk assessment application, Collateral UnderwriterTM (CUTM). In addition, the severity level for 21 Fannie Mae proprietary appraisal messages that relate to eligibility violations changed from a warning to a hard stop, requiring lender action to obtain a "Successful" submission status. Review the UCDP Release Notification for details.
Are you ready to take your appraisal review to the next level with CU? To help you get started, visit the CU web page for additional resources and information, including FAQs and eLearning courses available at your convenience 24/7. Providing key information about CU implementation, read the information on the CU CheckPoint.
Not to be outdone, Freddie Mac has loans for your borrower with "No Yard Work Required". Specifically, mortgage products you need to meet the needs of condominium buyers, including: The New 3% Down Payment Mortgage. Its new Home Possible Advantage mortgage offers a maximum loan-to-value (LTV) ratio of 97 percent and total LTV ratio of 105 percent. This new responsible mortgage option will be available in March and provides you with an additional option to reach qualified low- and moderate-income borrowers. Resources below will help identify additional opportunities in its condo offering for you and your borrowers.
And for condominiums...
Mac's Loan Coverage Advisor is now available. This free application
calculates, tracks, and publishes the representation and warranty relief
status for every loan sold to Freddie Mac based on the selling
representation and warranty framework requirements. If you already have
your login details, log on to Loan Coverage Advisor. You can also access Loan Coverage Advisor from our Selling and Servicing Web. If you haven't already done so, sign up. It helps lenders track their loans as they move toward obtaining representation and warranties relief
under the revised Representation and Warranty Framework. This tool will
allow you to track events throughout the life of the loan, including
those that impact eligibility for the sunset relief. Similarly, Fannie
Mae will be providing sellers with reports - in conjunction with their
quality control feedback reports - to help sellers monitor the relief
status of their loans.
As a reminder, loans are eligible for relief if they 1) have no more than two 30-day delinquencies and zero 60-day delinquencies in the first 36 months after acquisition, and are current as of the 36th month after acquisition; or 2) satisfactorily complete a quality control review. Loans that receive relief under the Framework remain subject to the life of loan exclusions, which were revised in November 2014 to provide more clarity and transparency in enforcement of the life of loan exclusions (see Freddie Mac's Bulletin and Fannie Mae's Announcement).
Are you using Freddie Mac's Quality Control Information Manager (QCIM) to help manage your Quality Control (QC) performing and non-performing loan requests? If not, look into this secure, web-based system. You'll know exactly where a loan is in the review and remedy process, as well as the disposition of the loan file review. QCIM also makes communication easier - it allows both Freddie and he lender to easily exchange information online on remedies, loan quality trend analysis, and underwriting deficiencies. For detail, visit Freddie's QCIM webpage.
Yesterday we had a spate of news - but it is hard to be excited about these measures when the world is focused on oil and economic unrest in Europe. Initial jobless claims increased by 11,000 and the four-week moving average for claims fell by 6,500 to 292,750 last week. Nonfarm business sector labor productivity decreased at a 1.8% rate during 4Q 2014. The goods and services Trade Deficit was $46.6 billion in December. Regardless, agency MBS remained decently supported: using all that money from early payoffs the Fed came in for nearly $2 billion in 30yr conventional 3s and 3.5s.
This morning we've seen January's Non-farm Payrolls. Expected lower from the last print (+329k), it was actually +257k, the rate was 5.7%, hourly earnings +.5% (a big jump!). There were significant revisions to the last two months of +147k. While the unemployment rate has fallen dramatically from 10% in autumn 2009 to 5.7% today, the number of persons employed is barely 2 million higher than it was before the Great Recession began in January 2008. Why? The labor force participation rate has plummeted to 64%. Come on Millennials! As a proxy, the 10-yr closed at a yield of 1.82%, began the day at 1.80%, but after the employment data it shot up to 1.88% with agency MBS prices worse .250-.375.
Jobs and Announcements
Mortgage Solutions Financial continues to look for wholesale & correspondent AEs as it "builds a team of elite account executives across the country. Amazing concept - it seems that product, price and service make for a pretty great production environment. And MSF continues to expand their agri-loan product; and is now offering a path for no-recourse on loan originations. If you're anywhere in California or Texas, the East, or the Upper Midwest - and want to build a true relationship-driven business that is consistent and reliable - you need to contact Greg Grandchamp at MSF and at least hear what he has to say." You can check them out at MSF Wholesale/Correspondent.
On the recruiting services side, Network Recruiters is "connecting today's best mortgage talent with the industry's premiere mortgage banking platforms and promoting & partnering with mortgage professionals nationwide. Our goal is to deliver opportunities that allow our candidates and our clients to achieve superior financial results. Network Recruiters is a mortgage only recruiting firm built to assist retail and wholesale mortgage professionals. Our retail clients include loan officers, branch managers, sales managers and senior managers. Our wholesale clients include AE's, area managers, regional managers and senior managers. We provide our clients with valuable market intel, schedule interviews for you to speak with hiring managers and to ask meaningful questions regarding service levels, products & street level pricing. This process helps our candidates understand what makes each company different." Contact Steve Samuelson, EVP - Mortgage Recruiter - for more information about Network's services.
Although the game remains the same, the players are changing uniforms. Universal American Mortgage Company (UAMC), the mortgage banking subsidiary of Lennar Corporation, one of the nation's largest homebuilders and a member of the Fortune 500, announced that it has rebranded Pinnacle Mortgage Group to Eagle Home Mortgage. In April of last year UAMC acquired certain assets of Pinnacle Mortgage, Inc., a Colorado-based mortgage company founded in 1995 with retail locations in Colorado and Southern California. These offices will carry the name Eagle Home Mortgage which is UAMC's retail mortgage operation now with 110 offices in 26 states nationwide. UAMC primarily provides financing solutions for home buyers purchasing homes built by Lennar Corporation. Eagle Home Mortgage is a traditional retail mortgage operation serving new and resale home buyers.