We can bicker over underwriting guidelines, disclosure documents, or turn times, but the flooding and tornado disasters that have befallen many states take precedence. Our thoughts go out to those affected by natural events. The events that have unfolded there are certainly more important than the rumors surrounding Sarah Palin's possible purchase of a $1.7 million, 8,000 square foot home in Scottsdale, Arizona. SISA deal?
"I am the owner of a mid-sized mortgage
bank, and have been for many, many years. I am trying to figure out if it is
only the productivity of my staff that is going down the drain, or if all
companies are seeing this. Suddenly, it seems, underwriters are lucky if
they do 3 loans in a day. And underwriters aren't cheap. My LO's numbers are
down to the point where I am wondering about this whole minimum wage thing I
put in place for them. We always thought of ourselves as a "high
touch" company with the borrower - now we may-as-well be Super Glued to
them. Our cost to produce a loan is way out of whack - there is no way the
borrower is better off. And comparing any metrics with last year's makes little
sense - are you hearing this from other companies?"
As a matter of fact, I am indeed hearing that. Folks in the trenches talk about DU & LP loan files that are more than 2 inches thick, and non-agency loan files are twice that, filled with documentation in an effort to make sure that all investor requirements are met. Many mortgage banks had a very productive 2010 but saw underwriting and funding productivity per person deteriorate, though profits were good so they didn't notice it as much. On the production side, in some cases LO's who blamed the slow business earlier this year on the comp issue have learned that the blame doesn't rest with the comp issue. Rates stayed relatively, surprisingly, low, especially when compared to what "experts" thought rates would happen. But as documentation requirements have increased over the last several months, the importance of underwriting and compliance has increased dramatically. And when combined with the changes in underwriting guidelines, yes, every mortgage company is grappling with the same issues.
Along those lines, I received this note. "So who is doing FHA loans below 620? We are getting a lot of pressure from our sales force to do this business and they say many lenders are doing it. However, finding an investor who will buy them has been difficult. Perhaps these are only lenders selling directly to HUD? (Editor's note: HUD doesn't buy loans directly. The loans go into Ginnie securities.) It seems that our sales force would be happy to have no minimum FICO, have the taxpayer bear the default burden, and pretend the credit crisis never happened. Although HUD allows low FICO loans, investors have overlays to protect themselves, and buyers who claim to buy loans with low FICO's often have other, more stringent overlay requirements. You may want to remind readers of this."
Last week NAR's president said the lending community needs to return to sensible standards. "We want to ensure that qualified buyers will be able to own their property on a sustained basis from a sound credit evaluation, but banks needn't be so stingy as to only lend to those with the highest credit scores," he said. "Very high shares of cash purchases, and high credit score requirements, have led to historically low default rates among home buyers over the past two years. This trend implies a gulf is opening between those who can and cannot have access to the American dream of home ownership," he said. "At the same time, existing guidelines from Freddie Mac and Fannie Mae must be fully implemented so all appraisals are done by valuators with local expertise." The NAR president added that proposals and regulations are being considered in Washington that could further constrain the housing market. "One of the most damaging proposals would effectively raise down payment requirements to 20 percent, which would slam the brakes on the housing market," he said. "What we need to do is simply return to the sound standards that were in place before the introduction of risky mortgage products." NAR consumer survey data shows 56 percent of entry level buyers in the past year financed with an FHA loan. FULL STORY
Realtors and mortgage bankers don't always see eye-to-eye, but when livelihoods are at stake, some differences tend to be ironed out. Where does the California Association of Realtors stand on the future of Fannie & Freddie, and moving back to a purely private market? CARonLendingObjectives
Here is some company news of note. Springleaf, an offshoot of American General Finance, is planning to raise $500 million for nonconforming/non-agency loan financing. It is hard to tell if this means jumbo, or subprime. Either way, in the "old days" companies like Beneficial, Household Finance, and Aames knew how to run their subprime businesses, from processing to servicing. In the early 2000's that changed as other companies moved down the credit curve and bought loans they shouldn't have, for a variety of reasons, and for several years now the industry has waited for a "mainstream" outlet for those loans. I don't know if this is it, but the lender/investor has filed a registration statement with the SEC to raise $500 million in order to originate and buy nonconforming mortgages and "consumer loans" through its 1,100 branches.
Similar to the way PennyMac is derived
from old Countrywide management, Springleaf is brought to us by American
General, an AIG company, with AIG owning a 20% stake and the other 80% by FCFI
Acquisition LLC, a private equity fund. FCFI is, in turn, managed by an
affiliate of Fortress, run by Daniel Mudd, the former CEO of Fannie Mae.
Fortress also owns Nationstar, which is not only expanding but also
trying to go public with its $65 billion of specialty servicing. Nationstar
hopes to raise as much as $400 million in an initial public offering, according
to a regulatory filing. It did nearly $3 billion of production last year, and
it is one of the five largest non-bank mortgage servicers in the U.S.,
servicing almost 400,000 loans. Along with that comes running businesses like
REO management and recovery of charged-off mortgage deficiencies, and it owns a
portion of National Real Estate Information Services, which provides
settlement and valuation services.
Any time Google discusses doing anything focusing on searching for mortgages, it is good for us to know about. Google has built on its providing mortgage rate searches by launching a one-stop tool for consumers, allowing them to compare loans and other banking products. FinancialComparisonTool. You can also go directly to the site, and then we can debate privacy rights versus convenience when Google knows where you are and what the best mortgage rates are in your area: GoogleAdvisor. How much will lenders eventually pay Google to be included?
In the commercial side of things, CoStar Group offered 3.75 million common shares of the company's stock to fund taking over LoopNet, an online listing space for commercial real estate properties. Washington, D.C.-based CoStar currently operates a database of commercial real estate research and analytics, which includes occupied CRE properties.
Carrington Mortgage Services, one of the largest servicers of subprime home loans, on Monday said it has avoided penalties as it put an end to a lawsuit filed by the state of Ohio nearly two years ago. CarringtonSettlement.
Don't forget that next Monday is a Federal holiday, with its impact on rescission periods. And watch for markets and lock desks closing early on Friday. FAMC, for example, sent out a notice to its clients reminding them of the adjusted schedule on Friday and the closure on Monday.
Franklin American Mortgage improved pricing on its conventional conforming 5/1 product although NY properties are not eligible. (FAMC also hopes to roll out a high balance conforming 5/1 soon.) Franklin also reduced the minimum required FICO from 680 to 660 for 95% purchase and R/T refinances for all conventional conforming products. Lastly, the investor reminded clients that "FHA approved lenders that have not obtained their unconditional DE authority by 6/30/2011 will lose their ability to pull case numbers for non-test cases on 7/1/2011."
MSI alerted sellers about a "clarification for "ending" dates for High Balance, implementation of DU Refi Plus for High Balance loans, an increase in the MSI price cap for all products, clarification for Attached PUDs and implementation of a new MSI Attached PUD Certification form, reminder of the deadline for the NMLS Registry for Federally Regulated originators, a link for a RESPA Update to remind Sellers, clarification for Rental Income for HomePath mortgages, and a discussion of the actions accepted by MSI for curing material errors in TILs.
Turning to the markets, yesterday started off with much lower rates, but as the day wore on the market sold off and the 10-yr only ended the day better by about .125 at a yield of 3.13%. MBS prices started off better by .250, but worsened to "only" unchanged resulting in some intra-day price changes. The worry du jour was European debt, including the stability of Italy, Spain, and now Belgium. Traders reported that mortgage banker selling held to the lower end of its $1 to $1.5 billion range.
There was a knock on the door yesterday.
I opened it to find a young man wearing a tie standing there.
He said, "Hello, I'm a Jehovah's Witness."
I said, "Come in and sit down."
I offered him tea or coffee and asked, "What do you want to talk about?"
He said, "Beats the ---- out of me; I've never gotten this far
If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com . The current blog is new, and takes a look at the QRM proposal's impact on our industry. If you have both the time and inclination make a comment on what I have written, or on other comments so that folks can learn what's going on out there from the other readers.