Here in New York the airplanes will be filled with capital markets staff and CEOs heading home from the MBA’s conference. More observations tomorrow... But generally speaking, if I had to sum things up, I’d say that versus last year’s event where TRID was a major topic, this year’s conference was back to business as usual: scratching out every basis point out of execution and trying to figure out the best way to sell or hold loans in a stagnant rate environment.
FHA & VA news? You bet there is. The New York Times reports that, "Life may soon get tougher for private buyers of distressed mortgages from the federal government. (HUD) said that it would announce a new set of rules governing the sale of mortgages formerly guaranteed by the government. The new rules would come after months of criticism from housing advocates that the loan sale program, which began in 2010, has benefited private equity firms and hedge funds at the expense of strapped borrowers...One of the expected changes will probably affect the kind of mortgage modifications private buyers can give to distressed borrowers, many of whom have not made mortgage payments in two years.
HUD has another sale of delinquent loans slated for today that will not be impacted by any of this. (The loans being sold by the agency in that auction are ones deemed "extremely delinquent," or those whose borrowers have not made payments for 48 months.)
"This month, the National Consumer Law Center issued a report analyzing the loan sale program and specifically criticized private buyers for interest-only modifications that did not reduce the overall amount of debt a homeowner owed and reverted back to the original loan terms after a five-year period. 'There is no evidence from the sales over the past four years that the speculative investors gave homeowners loan modifications that reduced the principal of the loans at any significant rate or that sustainable modifications were provided in substantial numbers.'
"To date, HUD has auctioned off just over 105,000 mortgages to more than a dozen private buyers who have bought the loans at a sharp discount to their face value. Two of the largest buyers of distressed mortgages have been Lone Star Funds, a private equity firm based in Dallas, and Bayview Asset Management, a firm affiliated with the Blackstone Group, one of the world's largest private equity firms. Up until now, HUD officials have generally supported the loan sale program as being the last best chance to keep delinquent borrowers in their homes. The loans sold by the government are ones that were originally written by large banks with insurance guarantees by the federal government.
"The loans sale has been successful in reducing the cost to the government of guaranteeing those mortgages against a default because once the loans are sold, they are no longer insured by the Federal Housing Administration's mortgage insurance fund."
But "Dozens of public officials, including members of Congress, have written to HUD officials, criticizing the program for leading to increased foreclosures and profit for private equity. Two of the more outspoken legislative critics have been Senator Elizabeth Warren, the Massachusetts Democrat, who is known for her support of liberal causes, and Representative Michael E. Capuano, a Massachusetts Democrat and former mayor of Somerville, Mass."
VA's newsflash contains information on the following: Foreclosures on Mobile Homes, Extension of serivcemembers' Civil Relief Act (SCRA), Illinois Consent Judgments, Servicer Transfer Events, Liquidation Appraisal Fees, Bulk Upload Template, VALERI Password Reset Requests, Improper Transfer of Custody or Invalid Sales Results, and Development Updates. Click the link to view Servicer Newsflash May 11, 2016.Final.pdf
FHA published Mortgagee Letter 2016-07: Expanded Permissive Loss Mitigation for Home Equity Conversion Mortgages (HECMs) and Mortgagee's Optional Extension to Submitting a Due and Payable Request. The ML provides mortgagees with an optional extension when submitting a due and payable request where borrowers are behind on the payment of their property taxes and/or hazard insurance premium by less than $2,000. IN addition, FHA published its quarterly Lender Insight newsletter. Issue #11 includes information on: annual recertification's, voluntary withdrawals, quarterly loan review update, test cases and more.
First Community Mortgage has posted information regarding FHA student loan payment calculations. In addition, updates have been made to its FHA Streamline Refi guidelines. Click here to view the applicable bulletin.
Ditech customers should note, FHA underwriting guidelines have been clarified or updated related to the following topics: Net Tangible Benefit, Housing Payment History for Streamline Refinances, Tax Abatements.
And Ditech posted the following clarification with regard to payment increases on VA Interest Rate Reduction Refinance Loans. If the monthly payment (PITI) increases by 20% or more, the following is required: The veteran must be credit qualified to determine that they can support the proposed payment and other recurring monthly obligations. A Lender Certification on the lender's letterhead as shown below must be provided. The certification must be signed and dated by the underwriter. I hereby certify that the borrower(s) qualify for the new payment (PITI) which exceeds the previous payment by at least 20%. Refer to the VA Refinance Product Summary for specific requirements for credit qualifying IRRRL transactions.
With all the capital markets folks here in Manhattan for the MBA Secondary Marketing Conference, what's going on with the MBS market? Not much. Tuesday MBS prices improved slightly relative to Treasury prices as the bond market reconsidered the odds of a potential June rate hike as a couple Fed Governors (Kaplan and Williams) predicted more hikes than the market is. Myself, I just don't see it - and I think the odds of a June short-term rate increase are less than 5%. A few Governors have been noting that the conditions are there for at least two to three rate hikes in 2016.
Yesterday's market was particularly interesting, proving once again that a) sometimes markets aren't logical, and b) why I will never be a day trader. Treasuries did well despite the headline CPI, housing starts, and industrial production for April all beating estimates! This improving data comes on the back of better-than-expected April retail sales, released on Friday.
Of interest to those watching the agency MBS markets was some news out of the NY Fed (the same one that is charged with buying agency MBS using the proceeds of early payoffs/refinances every day). The New York Fed released a statement announcing that two small value exercises (sales) would be conducted in MBS. The operations will occur on May 25 and June 1 (consecutive Wednesdays) between 2:00 and 2:30pm. The two operations will not exceed $150 million in current face. The first operation will sell up to $30mn each of four FNMA pools while the second operation contains two baskets of GNMA pools totaling $29.7 billion.
There isn't much news today to move rates - maybe the Japanese GDP figures? We had the MBA's poll of application data from last week. Total mortgage application volume fell 1.6 percent last week from the previous week on a seasonally adjusted basis, but volume was 18.4 percent higher than the same week one year ago. Purchase apps fell 6 percent last week but is still nearly 12 percent higher than one year ago. Refi apps rose 1 percent from the previous week, seasonally adjusted, and are 24 percent higher than one year ago. In the afternoon analysts will pour over the minutes from the April 26 to 27 FOMC meeting.
For those quantitatively inclined we closed Tuesday with the 10-year at 1.76% and in the very early going today it's at 1.78% with agency MBS prices worse a smidge.
Jobs and Announcements
In job news, Freedom Mortgage is expanding nationwide but is particularly interested in expanding its wholesale sales coverage by hiring seasoned and successful Account Executives in the Midwest Division with particular focus on Missouri and Austin, TX. "Freedom is a leader in FHA, VA and conventional lending and its incredible growth has been driven by expanding loan products, expanding the credit box, reduction of underwriting overlays on FHA and VA S/L refinance programs as well as a keen focus on the Purchase Market. If you are interested in joining the Freedom team, please contact Don DiLucchio. If you are interested in Account Executive opportunities in other parts of the country, please contact Keith Bilodeau.
In the greater NYC area, the mortgage origination division of a major nationwide banking institution is looking for an experienced System Administrator to manage its Ellie Mae Encompass LOS and related applications. The successful candidate will play a key role in helping the Company's mortgage IT and Operations support team create a '5-star' customer experience for its large and demanding client base. Proven ability in translating mortgage banking business needs into enhanced Encompass functionality and managing system changes with discipline are essential requirements. Being a proactive communicator and collaborator with sales and fulfillment teams, internal business analysts, developers, and QA teammates, are critically important to the mission, as is the ability to maintain effective relationships with key 3rd party service providers and Ellie Mae's professional services group. You will become central to a core team that will make all the difference in helping the Company achieve its aggressive goals. Interested candidates should send their resume to me; please specify opportunity and excuse any delays in response due to travel.
"it is next to impossible to find a good deal on a Full Eagle today, because owners tend to over-value them, while buyers tend to under appreciate the time, test cases and approval process to secure the Full Eagle / HUD Designation", says Dr. Rick Roque (413.297.6895), "Sometimes, depending upon the state, it is easier to buy a small full eagle platform in order to secure the state license, than it is to apply for a state license and wait - California and New York are two states that come to mind!". Dr. Roque makes a very good point given the wait times in these states that can exceed 9-16 months in order to get a company licensed.
For lenders who are interesting in buying a completely clean, FULL EAGLE/HUD Designation that is for sale for approx. $350K, let me know. It has a small staff maintaining the license in CALIFORNIA that is looking to be sold asap - the entity is a wholly owned subsidiary and due to a change in strategy is no longer needed. If you are looking for immediately licensing in California and a Full Eagle, principals and agents are encouraged to confidentially respond: Rob Chrisman.
On the flip side of all this, HSBC Holdings is cutting more than 800 IT jobs in the UK, where the bank aims to eliminate 8,000 jobs before 2018 to shrink its global workforce by 50,000.