A Pew survey finds the typical middle class family could only replace 21 days of income with readily accessible funds. What is even scarier perhaps is that the same survey found that even if these families liquidated all of their retirement savings and investments they could only replace 119 days of income. Nothing underwriters don't see all the time, right?

Turning to loan programs, regarding VA loans there seems to be confusion among lenders, and the government, about what costs are included in the recoupment cost. Most think that all costs paid by the veteran should include closing costs, funding fee, pre-paids and any cost paid outside of closing. They just want to make sure they are closing these VA IRRRLs correctly. The VA Ohio's office official stance is, "VA requires that you include ALL costs in the recoupment calculation for an IRRRL. That includes all closing costs paid inside and outside closing, pre-paids and the funding fee. This guidance was recently changed to this position by our Washington policy office. Previously, Bill White in Washington agreed to allow lenders to remove pre-paids.  His replacement took the VA Lenders Handbook guidance literally, and it does state 'ALL closing costs.'" This certainly ties in with the CFPB and Safe Harbor.

But John Smit, SVP of Government Lending for Union Savings Bank and with over 30 years of VA loan experience, counters, "First - pre-paid items are not costs of the loan. All pre-paids are taken and put into an escrow account. If the loan is paid off immediately, those funds are returned to the Veteran. So if the funds are not spent and returned to the borrower, you cannot define them as a cost. Second, if you only look at the amount of the prepaid items being collected on the HUD-1 you are missing half the picture. The Veteran is also going to receive a refund of the pre-paids he has in escrow with his current lender. So if you insist on counting the prepaid items you should also allow the amount currently held in escrow by the Veteran's current mortgage lender to be counted as a credit to those costs. Third - and maybe most importantly - the amount collected for pre-paids changes each month depending on when the property taxes and Homeowners Insurance policy comes due. Therefore a loan can qualify one month of the year and be not qualified for the exact same loan in another month. We have a loan trying to close this week in which the tax bill is due later this month. Because of that we have to collect 8 months of taxes (taxes being due twice a year). With that amount included in the recoupment calculation he does not meet the 36 month repayment threshold. If he were to close next month, after the bill is paid, we have to collect only 2 months.  He then does meet the 36 the threshold. The problem is the rate lock expires in the meantime so he can't just arbitrarily wait to close. So, a loan that cannot be done today can be done under the exact same terms a month or so from now.  This seems to me to be discrimination based on the month Veteran wants to close. I know cannot be the VA's intent!"

John's note to the VA closed with, "I truly believe that VA has its Veteran's best interests at heart. That is why I believe this policy must be revisited and re-evaluated. I also believe that the guidelines must protect Veterans from predatory lenders trying to take advantage of them. A recoupment calculation absolutely makes sense and should be in force as long as it takes into account the real costs the Veteran is incurring in refinancing their VA loan. The unintended consequences, however, of the way the costs are defined in the current policy are hurting our nation's Veterans rather than helping them. I hope this can be resolved soon."

I was fortunate enough to receive another report from Las Vegas on the Asset Backed Security conference (day 3) from Eileen O'Grady. "I started early, hearing about "inside political campaigning" from a disheveled Mary Matalin who spoke in what can only be described as a stream of consciousness. 'I yell at James (Carville) all the time because we disagree, but he can't hear me, because he's deaf.' 'I think Elizabeth Warren is gaining momentum over Hillary Clinton because she's speaking to your 'top five' issue of financial reform (which I really don't understand despite my bravado), and Hillary is cobbled by a lost campaign to Obama in 2008, and a book tour that is nothing short of disastrous.' 'Millennials are finding change very easy to conduct, and will rule our lives in the next ten to fifteen years.' I'm paraphrasing a bit here, Rob, but her points were clear and strong of conviction.  But please don't forget what my mom said:  'There are three versions of a story: yours, hers, and the truth.' My nostalgic favorite from Mary was her pronouncement of a name that, since the George H W Bush campaign, I have only associated with the spelling of the word "potatoes". Dan Quayle, 44th VP of the US.  I think Dan is going to be on the next episode of 'Dancing with the Stars,' shamed into doing so by Tom DeLay, despite Dan's flare ups of phlebitis. I still wish Mary and Barney Frank could have been in the same room at the same time.

"The day ended with a warm, philosophical chat with Sekiko Sakai from Andrew Davidson & Co., talking about RMBS 3.0 over a flatbread Margherita pizza and some Mojitos.  We agreed to talk again two years from now to see the extent to which the RMBS marketplace is ready to fill in for Fan/Fred wherever their FHFA-directed footprint is shrunk.   In the meantime, watch RMBS 3.0 for interim developments, and study AB II for the next big thing after the Integrated Disclosure Reg."

Eileen's report went on. "What was impressive today was the content of the sessions, of which I wish I could have enjoyed more.  Because today was 'meetings over sessions day,' where I was booked to meet with a series of key players, like Michele Olds from NationStar, John Burchett of Ferncliff Investments LLC and my old boss from Citimae in the 1700's, and Evan Christensen of Beneficial Life.  (Evan and I missed each other in our follow up meeting, but will talk by phone in the next week or two.  We bonded over a conviction that 'all data = good data' and that people don't need to be afraid of it; it's a millennial thing.) 

"This gave me first-hand knowledge of not what's emerging, but of what's on the daily to-do list for practitioners - Investors, Issuers and everyone in between - who have limited bandwidth within which they must manage to fit serious change with limited certainty in the post-crisis MBS marketplace.  The crisis doesn't seem to want to be buried and forgotten just yet.  And it is a demanding task master.

"The big 'wow' statement of the day for me was that, as the SEC regulation, AB II, roles towards its implementation in November of 2016, no one (correct, No.One.) from the RMBS (mortgage) market is in the SEC-sponsored Pilot Program.  That speaks volumes about the dearth of publicly-registered private MBS deals, how long it will take, and how hard it will be to bring back, the private label mortgage backed securities market.  But SFIG is on it, folks." Thanks Eileen!

Keeping on with the markets, there isn't much to report from Wednesday (rates pretty much stayed put on no news) so I won't waste your time. As a proxy for the entire market the 10-yr. ended at trading at a yield of 1.99% and this morning is at 2.04% with agency MBS prices worse about .125. We will have Retail Sales at 7:30AM CST and a $16 billion 30-yr bond auction.

 

Jobs and Announcements

But lenders & vendors are trying to help folks' incomes! Franklin American Mortgage, the nation's sixth largest wholesale lender, is seeking experienced AEs for several US cities. Franklin American Mortgage Wholesale Lending is seeking highly-motivated, experienced sales professionals to serve as account executives in the following cities: Denver/Colorado Springs, Phoenix, Dallas/Fort Worth, and Houston. Responsibilities include: developing prospective accounts, maintaining loan production from active accounts, and educating both prospective and active accounts about product changes and updates. For more information on these positions and to apply online, please visit FAMC or e-mail Jennifer Rader for more information. Franklin American Mortgage is FHA Direct Endorsed (DE), VA Automatic and LAPP Approved, FNMA/FHLMC and GNMA approved seller servicer.

Mortgage Search and Acquisition (MSA) is looking for candidates to fill the role of VP of Underwriting for a bank based mortgage lender in the Midwest. Qualified candidates should have a minimum of 10 years' experience in Operations, with a current role focused on leading an underwriting department, ideally for a bank based mortgage entity. A Bachelor's degree and track record of success in the industry is important. "The company is a financially solid depository with annual residential closings in the $1B range. Candidates must be willing to relocate, with relo assistance from the lender. This is an opportunity to run a fast paced Underwriting department for a growing firm providing an aggressive comp plan and strong growth potential for the right candidate." Qualified candidates should send their resume in confidence to Tami Coffey. 

One the personnel side, Homeward Residential announced its newest addition to Homeward's growing team, Tim King, Area Sales Manager for the Wholesale and Emerging Banker division covering the West Coast and Northwest regions. Tim brings with him a 15 year successful track record as a Regional Manager and AE. Homeward Residential is a FNMA, GNMA and Freddie Mac seller/servicer approved and licensed to do business in 48 states. "We are currently expanding in Tim's West Coast and Northwest Regions as well as across our national landscape and seeking experienced AEs with a proven track record of success who want to take this exciting ride with us as we grow our footprint!" Contact Dena Linzay to discuss opportunities with Homeward.

And Houston's Envoy Mortgage, a full-service mortgage banking firm that originates loans in 48 states, announced the hiring of two industry veterans, Kenneth Panosian and Andrew Pettola, for the positions of Regional Vice President. Over the Great Lakes Region, 20-year expert in driving sales and developing business for several large corporations, Kenneth Panosian, is directly responsible for management and production for Envoy's growing retail branch network in Minnesota, Michigan, Iowa, Illinois, Indiana, Wisconsin and Ohio. And with over 24 years in the mortgage industry including experience leading retail production and billion dollar wholesale platforms, Andrew Pettola will be directly over the Northeast Region which includes New York, Connecticut, Rhode Island, Massachusetts, Vermont, New Hampshire and Maine. "We are thrilled to have professionals of this caliber join our growing team," said Envoy EVP of Retail Production Mike Reddington. "Ken and Andy both have outstanding backgrounds and proven track records of performance. With Envoy's marketing, technology, and culture of closing 'On time, every time.' we certainly look forward to combining these great people with a great platform."

On the product side of things, Advantage Credit, Inc. a leading provider of client retention tools is offering an interesting niche product to lenders that provide an effective last line of defense against EPO penalties. With the lowering of the FHA MIP, many lenders are worried about this. Monitoring Advantage, a service of Advantage Credit, Inc., is a compliant, full service monitoring service that has the power to greatly mitigate EPO cost and increase income for lenders and originators.  It also improves your client retention rate by monitoring your past mortgage borrowers and identifying when they make a mortgage inquiry with another lender.  This gives you the opportunity to make contact with the borrower and retain them as a client. A great complement to a lender's CRM system, Monitoring Advantage can also be delivered outside of a CRM environment.  The service provides the most timely, actionable information for lenders to ensure high client retention rates and a very compelling ROI.   Contact jess@advcredit. com to learn more.

And for every seller there's a buyer at some price, right? When news broke yesterday that Cherry Hill Mortgage Investment (CHMI) is set to acquire Aurora Financial Group for $4 million, plus the assumption of $3 million in liabilities, it certainly turned heads. The acquisition will be conducted through Cherry Hill's taxable real estate investment trust, CHMI Solutions and is hoped to be wrapped up by May. Cherry Hill will acquire Aurora's $700 million (UPB) portfolio of mortgage servicing rights, and the rights to service agency loans. The two companies said that they plan to immediately begin seeking approval for the change in control from Fannie Mae, Freddie Mac and Ginnie Mae. The companies added that their expectation is that their proactivity in reaching out to Fannie and Freddie will "significantly accelerate" the approval process.