Sometimes you think things are one way, and they turn out to be different. Just ask Maria Shriver, who found out about Arnold Schwarzenegger and a longtime female member of their household staff had a child together more than a decade ago.
The compensation issue involving Quicken Loans is in the news again as "the U.S. Supreme Court asked the Obama administration for its views Monday on a case that examines when mortgage lenders can be sued for charging fees to borrowers when the lender offers no service in return." The case centers on a group of lawsuits from Louisiana (the Freeman, Bennett and Smith families) alleging Quicken Loans Inc. charged loan-discount fees to borrowers but did not provide them with reduced interest rates on their loans. HUD has already issued relevant regulations and policy guidance that appears to support the plaintiffs' contention that "Section 8(b) forbids the paying or accepting of any portion or percentage of a settlement service - including up to 100% - that is unearned, whether the entire charge is divided or split among more than one person or entity." But does this apply to all transactions involving one or more parties, or is it limited to cases with third-parties and fee-splitting situations? Quicken
What does the House Speaker think about "fixing" the housing industry? "...Government programs aimed at preventing mortgage foreclosures have failed, adding that the only real solution is to wait until we get our economy moving again." HouseSpeaker
Realtors listen up! In a sign of the times, Freddie Mac's real estate sales unit HomeSteps is launching a nationwide sales promotion for its inventory of foreclosed homes. Operators standing by! "The HomeSteps Summer Sales Promotion is offering up to 3.5% buyer's closing cost and a $1,200 selling agent bonus for initial offers received until July 31 and escrows are closed on or before September 30. This offer is valid only on HomeSteps homes sold to owner-occupant buyers." There is a potential two-year Home Protect limited home warranty, along with discounts on appliance purchases. Check out SmartBuy or HomeSteps.
There are companies that still like "the mortgage space." Nationstar Mortgage Holdings, a unit of Fortress Investment Group, said it intends to raise as much as $400 million in an initial public offering. Nationstar's servicing portfolio doubled in 2010 to $64 billion, giving it a ranking of #17. You may recall the name of Fortress's CEO: Daniel Mudd. He held the same position at Fannie Mae from 2005 to 2008, when it was brought under U.S. government conservatorship as mortgage defaults soared. Fortress has roughly $43 billion of assets under management.
JPMorgan Chase is the lead underwriter on the latest commercial mortgage offering: $2.9 billion of CMBS's backed by debt tied to skyscrapers, offices and shopping centers. The details aren't public yet, but supposedly consist of 42 loans on 84 properties. Wells Fargo and Royal Bank of Scotland are also selling $1.45 billion of bonds linked to office, mall and hotel loans. Folks must like those yields, as 2011's commercial pace is already way ahead of 2010's: $8.6 billion so far versus $11.5 billion in all of 2010. Commercial
In a story from the Financial Times, "New York's attorney-general has opened an investigation into the way mortgages are securitized and sold to investors, and has requested meetings with at least three US banks to discuss the industry's practices." Bank of America, Goldman Sachs and Morgan Stanley were mentioned in the article. This inquisition appears to focus on how past non-agency residential mortgage-backed securities received AAA-ratings even though they were backed by high risk loans.
Reuters reports that seven new measures have been added to the eight bills already approved by the U.S. House of Representatives' panel that oversees Fannie & Freddie. It is doubtful that any will sail through, but is more indicative of the confusion surrounding the mortgage industry that seems to be prevalent in Congress (editor's opinion.) Anything approved by the panel goes to the House Financial Services Committee, and then the full House, and then the Senate, and then to the president. The fifteen bills include preventing a dividend payment increase, require F&F to disclose certain information in response to requests from the media and the public under the Freedom of Information Act, dispose of non-critical assets such as patents and data, cap the dollar amount of government support, prevent the future creation of agencies like F&F, stop the legal burden from falling on the taxpayer, eliminate the Affordable Housing Trust Fund, pay the employees of F&F on a government worker pay scale, raise the guarantee fees, speed up the reduction in F&F's portfolio (now at $1.5 trillion), increase the oversight power of FHFA, require F&F to abide by risk retention rules, prohibit debt issuance by F&F, curtail any new business activity for F&F (taking the decision out of the hands of FHFA), abolish affordable housing goals of F&F.
(Take note, however, that HR 1859, introduced to eliminate Freddie Mac and Fannie Mae while still keeping a government presence in the housing finance marketplace by using 5 or more private institutions, would extend current loan limits until Fannie and Freddie are no longer in conservatorship. The proposed bill states that FHFA has six months to provide a transition plan to wind down the GSE's and must determine within one year after five associations have been chartered whether the GSEs can be safely placed into receivership.) FULL STORY
In spite of the potential mentioned above for loan limits being extended, investors have be wondering, "Is every well-underwritten agency high balance loan going to be on my books forever, mostly 'un-refinance able,' so why not pay up for them now?"
Bank of America rolled out several price changes that will filter down to originators. Starting yesterday, the "Agency Price Guide for Conventional and Government loans is updated to reflect the following changes: Conforming - the adjustment for Conforming 30 year fixed rate High Balance loans is decreased from 0.95% to 0.625%. The adjustment for Conforming 15 year fixed rate High Balance loans is decreased from 0.95% to 0.25%. The adjustment for Conforming Adjustable Rate Mortgage (ARM) High Balance loans is decreased from 1.25% to 1.00%. (The changes do not apply to DU Refi Plus loans.) Government - The adjustment for Government 30 year fixed rate High Balance loans is decreased from 0.90% to 0.625%. The adjustment for Government 15 year fixed rate High Balance loans is decreased from 0.90% to 0.25%. The adjustment for Government Adjustable Rate Mortgage (ARM) High Balance loans is decreased from 0.90% to 0.75%."
GMAC made some changes to its price adjustments starting last week. GMAC made changes to its Jumbo Fixed and ARM LLPA's and Maximum price: "2 Unit adjustment for LTV <=70 is changing from -.500 to -.250, Site Condo Adjustment for LTV <=70 is changing from -.500 to -.250, Max price for loan amounts >1 Million and <=1.5 Million is changing from 101.625 to 101.750, and Max price for loan amounts >1.5 Million is changing from 101.375 to 101.500." The investor updated its "Comprehensive Risk Assessment Worksheet for Manual Underwriting" - clients are best advised to look at the actual bulletin. Lastly, "GMACB is establishing a $2000 limit on the amount of principal curtailment allowed on FHA, VA & USDA loan transactions. This curtailment limit applies to Purchase and Refinance government loans purchased by GMACB."
Chase reminded its correspondent clients that Dodd-Frank clarifies state preemption standards for national banks and requires national banks (and other federally regulated institutions) to comply with state consumer financial laws that are no longer preempted by federal law; as of the Designated Transfer Date (DTD) of July 21, 2011.
SunTrust Mortgage reminded its correspondent lenders that "the maximum loan-to-value (LTV), the total loan-to-value (TLTV), and the high total loan-to-value (HTLTV) for Arizona (AZ), Florida (FL), Michigan (MI), New Jersey (NJ), and Nevada (NV) is 90% on DU Refi Plus transactions."
Bank of America sent the word out to
its correspondents that "For California only, Correspondent Lending will
purchase loans with LTVs less than 90% which do not have escrow/impound
accounts." In addition, due to guidance from FHFA/Fannie/Freddie on the
Uniform Mortgage Data Program (UMDP), BofA told its clients that the following
report forms will require UAD terminology as of September 1, 2011: Uniform
Residential Appraisal Report (Form 1004/70), Individual Condominium Unit
Appraisal Report (Form 1073/465), Exterior-Only Inspection Individual
Condominium Unit Appraisal Report (Form 1075/466), and Exterior-Only Inspection
Residential Appraisal Report (Form 2055/2055). Both Fannie Mae and Freddie Mac
have indicated that appraisers may use UAD terminology on existing appraisal
forms prior to September 1, 2011 provided the appraisal (or addendum) contains
clear definitions/explanations of the new UAD terminology."
For the bond market, we saw a bit of an improvement yesterday. Rate-sheet MBS prices ended the day better by about .125 and the 10-yr closed around 3.15%. There was no startling news, but instead a combination of weak economic data (Empire State), continued European debt worries, and "hedge unwinds" related to some corporate pricings. Mortgage banker selling remained in the $1+ billion area.
Two women were sitting quietly together, minding their own business.
(Yes, that's it for today.)