Fun with numbers: Freddie Mac's mortgage delinquencies on single-family homes declined in March from both month- and year-earlier levels. March's delinquencies on single-family residences fell to 3.63% from 3.78% in February, according to Freddie's report, and were lower than the 4.13% rate reported for the year-earlier month. The rate has now decreased in four consecutive months. Before a two-month period of increases last year, the rate had fallen sequentially for three years. Its mortgage portfolio now stands at $2.14 trillion with single-family refinance-loan purchase volume of $19.4 billion in March, reflecting 72% of total mortgage purchases and issuances. A month earlier, volume was $31.4 billion.

The hiring continues, paragraphs below in production but this time on the risk management side of things. Compass Analytics, a leading provider of pipeline and servicing rights valuation and hedging analytics and solutions, is seeking a seasoned account/hedge manager with at least five years of hedging and secondary marketing experience for Compass' Washington DC office (in Potomac, MD). If a reader is interested, or knows someone who is interested, they should submit cover letters and resumes to Lucy Poole at And you may want to visit with them in New York in a few days.

And there are production jobs out there in the wholesale channel calling on brokers. Nationstar Mortgage is looking for wholesale AE's in Northern California, Oregon, Washington, and Idaho. You can view their website at Nationstar. The company is owned by Fortress Investment Group and servicing $65 billion, and lends in 48 states. AE's can contact Tim McAvenia at

In the retail arena, mortgage banker iServe Residential Lending is continuing to expand its national branching platform which is now in 18 states. The company is a direct lender providing loan servicing, mortgage origination, and real estate under one roof.  iServe is expanding its network of retail branches, and is looking for LO's AND branches in order to establish a "local branch presence, leveraging established mortgage broker and loan officer relationships." LO's and/or branch owners can visit iServeResidential. For more information on the Western US, contact Allen Friedman at, and in the Eastern US contact Ken Michael at
In Ohio, Chase announced that it will add between 500 and 1,000 mortgage-servicing jobs to its Central Ohio workforce when it moves into new office space in Gahanna later this year. Chase already is the region's largest private employer with 17,000 Columbus area workers.

Don't be the last on your block to buy troubled loans from Flagstar. Flagstar Bancorp reported that it lost less money ($32 million) in the first quarter than it did in 2010's 1st quarter ($82 million).  In the first quarter of 2010, Flagstar unloaded $80 million in nonperforming mortgages, taking the total down to $547 million at the end of the quarter, certainly better than the $1.3 billion reported the same time last year. (In November alone Flag sold over $400 million of nonperforming loans.) Flagstar decreased the amount loan-loss provisions in the first quarter to $271 million from $538 million one year ago and $274 million in the previous quarter. But income from the mortgage origination department remains down. Gains on loan sales totaled $50.2 million in the first quarter, down from $76.9 million a year ago and $52.6 million in the previous quarter - probably due to the decrease in interest rate lock commitments, lower originations, and lower margins.

Not a day goes by when someone doesn't walk up to me on the street and either tell me to put my clothes on, or ask, "What is hedge cost?" It is not an easy question to answer in practice, but in theory it is pretty straightforward. Companies that only sell loans on a best-efforts basis (where they will make the best effort to fund that loan, and then it must be delivered to the investor) are not really dealing directly with the hedge cost - the investor is. (But don't worry - the investor passes their hedge costs on to the lender.) By choosing to sell loans on a mandatory basis (the investor expects that loan, or a similar loan, and the lender is on the hook for it even if it doesn't close) and therefore holding locks until they fund and are eligible for sale, lenders expose themselves to both interest rate and fallout risks. The interest rate risk (rates go up, and you've guaranteed the borrower a lower rate) can be hedged, primarily with mortgage-backed securities. But the very act of buying and selling these MBS's adds to hedge cost. But wait - there's more! There are several other factors that can contribute to increased hedge cost, including mismanaged and inaccurate loan and hedge data, inaccurate pullthrough modeling, bad or out of date pipeline assumptions, and various other operational issues that are not the fault of the old geezer running Secondary Marketing.

It helps to know what one's margins are on your rate sheet. No LO expects their company to not price a profit into the rate sheet prices, but it is important for the calculation of hedge cost to know exactly what this profit margin is. Pricing a loan to an investor's mandatory price and delivering it via best efforts, or visa versa, creates a pricing mismatch that is not in the "cost of hedge" category since the price spread between best efforts and mandatory is either added in or subtracted. (And this price spread varies by day, by investor, etc.) Companies know hedging costs will increase and/or secondary marketing margins will decline if loan-level data is incorrect, if loans are extended at no cost, if a loan is underwritten to one investor but then it is forced to be sold to another investor due to an underwriting oversight, locks are not entered into the tracking system, estimating pull through incorrectly, and so on.

What have some of the investors and originators been up to lately?

Chase Correspondent updated its non-agency distressed market counties. Bank of America told its correspondents to switch to using its "Disaster Area Policy" for Atoka County Oklahoma, and for 18 counties in North Carolina. (We all wish the residents, and those in Alabama, the best.)

Wells Fargo's wholesale channel has been busy in recent weeks - and (editor's opinion) don't ask me how brokers can keep up with this. Wells has sent out updates on, "Appraisal Disclosure Changes for USDA Rural Development, FHA and Conventional Loans, Appraisal Orders for USDA Rural Development Loans, Requirements to Use Job Loss Insurance, an expansion of its non-conforming Debt-to-Income Ratio to 40%, an enhancement for Owner Concentration Increases for 2-Unit Condominium Projects, LTV Increases to 95% in Florida and Nevada, 3-4 unit Condominium Commercial Space Allowed to 35% in New Jersey, Compensation and Anti-Steering: Reminder - New MBFD Process and Tools & appraisal fees, an updated conventional Borrower Appraisal Disclosure Form, a WFHM/WFHE Market Classification List Update, changes to Property Insurance Loss Payee Clause, a reminder of Hazard and Flood Conditions, a reminder of the FHA MIP changes and that FHA Loans with Case Numbers Assigned on or After April 18 are not allowed with Amortization Terms of 15-years or Fewer and LTV Equal to or Less Than 78%, seven FHA Refinance Credit Policy Changes (effective on the 18th), a note that Arkansas Amends Usury Limitations, a 3-Day Rate Lock Extension Added, notes on how to use the Pricing Calculator to Determine Compensation, Appraisal Order Functionality Change on RESDirect, on how a Workaround is Required for Accurate Annual MIP Calculations on the Broker's First Website, HVE Expiration Date for the Freddie Mac Relief Refinance Mortgage Program, New Rules for Same-Lender Refinance Recording Tax Exemption in Fairfax County, VA, a note about Fee Validation in Blocks 3-7 and Block 8 of the GFE on Lender-Paid Transactions and a Change in Compensation Calculation for Government Loans, a reminder that Appraisal and Credit Report Invoices Required for VA Loans, Best Practices to Avoid Loan Delays, and Clarification for Properties with an Unexpired Right of Redemption. Holy smokes!

Real Estate Mortgage Network (REMN), a national mortgage lender, announced the opening of an office near San Diego, CA.

Gateway Funding (PA) rolled out a free Home Warranty & Job Loss Protection plan on select purchases. The home warranty lasts for one year, and the job loss protection plan makes the borrower's mortgage payment for three months following a 30-day period after a job loss.

CitiMortgage reminded its correspondent clients that it performs post-purchase due diligence on a sample of loans. "Among other check-points, this process identifies defects or instances of non-compliance with investor policies, procedures, and quality expectations, and regulatory requirements.  Our post-purchase audit process includes compliance with RESPA and TILA disclosure requirements." Citi's bulletin goes on to provide its clients with a checklist and list of tools to help them comply with RESPA and TILA disclosure requirements.

Stearns Lending told brokers, "You are now eligible to select a flat fee option in addition to a percentage of the loan amount for your Lender Compensation.  You have a choice of zero (no flat fee), $350, $500 or $750 or $950.  The maximum income on each transaction is 4% of the loan amount which must include the flat fee." Stearns Lending also stated that it has been notified by its investors that "we must limit our Broker Compensation Plans to one compensation rate (percentage) for all programs to our brokers. This change is effective with new locked loans and/or submitted loans starting May 7."

GMAC released a set of additional guidance guidelines to its correspondents to determine second home eligibility, including items such as "Often located in a vacation/resort area, the property must be suitable for year-round occupancy, the subject property should not be located in the same market area as the borrower's primary residence" and so on. GMAC also adjusted their policies on deferred student loan and timeshare debt payment underwriting.

Direct Mortgage is now allowing cash-out to 80% LTV on Super-Conforming Fixed with an LP approval. A 720 FICO, with compensating factors, is required.

Affiliated sent out a series of revisions to checklists, programs, underwriting checklists, appraiser and settlement agent lists.

Pinnacle Capital Mortgage has updated its underwriting guidelines including such areas as 2055 & 2075 appraisals are now eligible per DU findings for conforming loans, for enhanced DU Refi Plus loans allowing 2nd homes and NOO to 125%, no limit on the number of financed properties the borrower may own, regardless of occupancy, etc., Standard DU Refi Plus, HomePath, and jumbo changes (Second Homes are now available, one full appraisal required on loan amounts <=$1mil).

It was another low-volatility day in the markets Wednesday, although 10-yr Treasury notes dropped by about .375 to a yield of 3.37%. Agency MBS prices were worse by about .125. As most expected, the Federal Open Market Committee's statement was uneventful, as was the press conference afterward. "Information received since the Federal Open Market Committee met in March indicates that the economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually." This is not "stop the presses!" news. The Fed will complete its $600 billion in Treasury purchases as scheduled at the end of June. Most economists are not expecting the Fed to increase overnight rates until the end of 2011 at the earliest. Finally, the statement did make its obligatory comment on housing saying "the housing sector continues to be depressed."

Off to New York for the MBA secondary conference!


Gallagher opened the morning newspaper and was dumbfounded to read in the obituary column that he had died.

He quickly phoned his best friend, Finney.

"Did you see the paper?" asked Gallagher. "They say I died!!"

Finney relied "Yes I saw it. Where are ye callin' from?"