At Happy Hour tonight, besides talking about refis, you can throw this one out: the number of homes worth $1 million has doubled in the last 4 years. Of course 2012 was pretty much the bottom of the real estate market, and it has been the big urban areas like San Francisco and Manhattan that have led the charge higher. Heck, in San Francisco, the median home price is over $800k. (One bedroom apartments in San Francisco rent for $3648 a month.) Seems like a little toppy - but rates are helping...
As servicing values continue to slip, and companies question whether or not they want to own a servicing portfolio and who is a natural buyer of servicing if banks stop, New York imposed new requirements yesterday on mortgage lenders to maintain abandoned houses before foreclosure. Viewed as a blow to servicers, the law signed by Gov. Andrew Cuomo threatens banks with civil penalties up to $500 a day for failing to maintain residential properties once they're aware of vacancies. The new law also establishes an electronic statewide registry of abandoned homes and a state hotline where neighbors can report them, and requires notices to mortgage borrowers emphasizing their right to stay in houses until foreclosure. And a related measure establishes a State of New York Mortgage Agency fund to buy and sell abandoned properties at below-market rates and demolish those beyond repair.
On top of that, the CFPB urged mortgage servicing firms to upgrade their technology to reduce errors and improve efficiency. The CFPB Mortgage Servicing Report is a special edition of its supervisory highlights report focusing exclusively on mortgage servicing. The CFPB found that "some mortgage servicers continue to use failed technology that has already harmed consumers, putting the company in violation of the CFPB's new servicing rules." The report did not break new ground but it did serve as a reminder of the structural importance of mortgage technology firms under the new regulatory regime.
"Mortgage servicers have failed to make significant investments in technology and compliance systems, resulting in substantial harm to consumers," according to the report. It is recent stuff, reflecting a detailed look at supervisory exams of mortgage servicers between January 2014 and April 2016, found that outdated and deficient technology can lead to greater risks for borrowers.
CFPB financial reporter Kate Berry wrote, "The CFPB found that some servicers failed to honor loan modifications after a loan gets transferred. Borrowers also faced substantial delays in receiving permanent modifications because of incompatible systems, the report found.
'Mortgage servicers can't hide behind their bad computer systems or outdated technology,' CFPB Director Richard Cordray said in a press release. 'Mortgage servicers and their service providers must step up and make the investments necessary to do their jobs properly and legally.'
"The CFPB will be conducting targeted reviews this year of mortgage servicers' compliance with fair lending laws. The reviews will include looking at servicers that are creditors, such as those that participate in a credit decision about whether to approve a mortgage loan modification... Mortgage servicing has been a top concern for the CFPB since it first began examining financial institutions, but examiners continue to unearth problems. CFPB examiners found problems with loan modification acknowledgement notices, including notices sent too late, with incorrect information or deceptive statements.
"The report cited at least one servicer that failed to send any loss mitigation acknowledgement notices to borrowers due to a 'processing platform malfunction over a significant period of time.'
'The magnitude and persistence of compliance challenges since 2014, particularly in the areas of loss mitigation and servicing transfers, show that while the servicing market has made investments in compliance, those investments have not been sufficient across the marketplace,' the report stated. The agency also updated its mortgage servicing exam manual, which includes a section on how servicers handle complaints and requests by troubled borrowers."
As servicers wonder if it's worth it, the government continues to collect fines, contributing to its bottom line, the latest to write a big check is Ocwen - "New Co" spelled backwards. Do you think servicing loans is something you'd really want to do? Ocwen Financial Corp. agreed to pony up $30 million to resolve lawsuits that claimed it didn't properly include disclosures for loans it was servicing. (After the announcement the stock rose slightly, but is still down over 80% in the last year.) "The lawsuits, which were brought by Michael Fisher and the U.S. Justice Department, alleged that Ocwen didn't make required disclosures in connection with the Home Affordable Modification Program, a government program introduced after the housing crisis to help struggling homeowners avoid foreclosure."
Speaking of regulators and mortgages, last week the MBA filed a petition for exemption with the Federal Communications Commission (FCC) seeking an exemption for mortgage servicing calls from the prior express consent requirements of the Telephone Consumer Protection Act (TCPA). The MBA is seeking this limited exception in order to continue to encourage proactive communication with mortgage loan borrowers and early engagement with financially struggling homeowners. "Following the financial crisis, many federal regulators - among them the CFPB, FHFA, FHA and Department of Treasury - have mandated protocols for reaching out to borrowers through outbound communications when a homeowner is delinquent. States have enacted similar requirements. These communications can provide the homeowner with critical information about their options to save their home. In today's environment, this often means through outbound calls or text messages to a consumer if the outreach is going to be effective.
"Unfortunately, the TCPA can frustrate these communications by imposing the threat of significant liability for making outbound communications to cell phones. Congress recognized this and passed an amendment to the TCPA late last year exempting calls made to collect a debt owed to or guaranteed by the government from the prior express consent requirements. The FCC has promulgated a proposed rule in response to the amendment. MBA appreciates this exemption and filed our comments on the rule."
This "federal debt" exemption, even if construed as broadly as possible, will not extend to all residential mortgage loans. FHFA recognized that a mortgage servicing exemption is appropriate and necessary to ensure that all borrowers are able to receive communications they need through a method likely to reach them. The FHFA comments on the FCC's rule call for just such an exemption. MBA agrees that these communications are vitally important for both borrowers and their communities. Thus, MBA has submitted a petition for a limited exemption from the prior express consent requirements for mortgage servicing calls."
And, in another PR black eye for the industry, Ben Lane with HousingWire reports that, "According to the FTC, a California-based law firms bilked millions of dollars out of homeowners who were facing foreclosure by telling them that they could join a 'mass joinder' lawsuit against their respective mortgage note holders that could discharge their mortgage entirely, provide monetary relief, or both."
Fannie Mae has made the following updates to the Servicing Guide: Retirement of Delinquency Counseling Requirements for Community Lending Mortgage Loans, Fannie Mae HAMP Modification Termination, Foreclosure Title Costs, Further Reduction of Servicing Requirements for Florida Acquired Properties, Property Insurance Reimbursement Limits, Mortgage Release Policies and Procedures and other Miscellaneous Revisions. Please read the Announcement for details.
Freddie Mac issued a recent servicing bulletin focused on HAMP, lender-placed insurance, and reporting a short sale to the IRS.
In somewhat servicing-related news, Black Knight Financial Services announced that it is continuing its recent expansion efforts with the acquisition of Motivity Solutions, which provides customized mortgage business intelligence analytics to mortgage lenders. The Sherman's Motivity Solutions offerings will be integrated with Black Knight's LoanSphere Product Suite, including the LoanSphere Data Hub, which will provide clients with insights into their origination and servicing operations and portfolios.
With the Brexit vote passing and the United Kingdom voting to leave the European Union, now what? A "leave" vote as led to plummeting stock markets around the world, plunging rates, will prompt Britain to renegotiate its relationship with the EU, and immediately caused the fall of Cameron's government. It puts our Fed on hold about a rate increase and could also lead to an interest rate cut in Europe, a sharp depreciation in the value of the British pound, as we have seen, and some short-term capital outflows out of the U.K. It doesn't matter that yesterday the 10-year note closed .5 lower in price to yield 1.741%, and 5-year T-notes, a better proxy for actual MBS prices, worsened .25.
The other news - U.S. new home sales falling more than expected in May - took second stage. It is generally thought that the housing market remains relatively healthy and continues to recover. Initial jobless claims also beat estimates and remain near historic lows, so that data series is not confirming the deterioration in the labor market at which that the Labor Department's monthly employment reports have been hinting. Lastly the Conference Board's Leading Economic Index fell 0.2% in May, partially reversing April's 0.6% increase.
We've already today's big data, prior to folks wanting to leave early on what could be a week's vacation ahead of the 4th of July. Overnight the results of the British vote showed all the Brexit chatter has come to fruition - but be careful what you wish for. Capital markets' staffs are reminding LOs that a rate lock is a rate lock while at the same time brushing off their renegotiation policies. Not surprisingly, MBS spreads are opening substantially wider with treasury prices soaring. Volatility is also up, and anyone hedging a pipeline is wondering about margin calls from their investment banker counterparties - and they don't renegotiate.
Looking to the very near term, the Fed will provide some moderate support to help offset some of the likely jump in supply as refinancing activity picks up with the 10-year yield down in the low 1.50s. The higher MBS prices will push investors to the sidelines or to take profits, though spread buyers could step in. As noted above the Brexit vote has eliminated a July rate hike by our Fed, and I imagine the Fed reinvestments continuing beyond 2017.
In this country we've had May Durable Goods Orders (-2.2%) and Durable Goods Orders ex-transportation (-.3%). Later is the second-tier number: June Michigan Sentiment. We closed the 10-year Thursday at 1.74% and this morning its at 1.54% with some agency MBS prices better by over a point.
Jobs and Announcements
The Compliance Group, Inc., is continuing to expand its operations, and is seeking Compliance Professionals to join its outstanding Compliance Team. These positions will provide support and guidance to clients, handle compliance projects, review new and existing regulations for impact to lending industry, perform regulatory and state audits, review compliance audit results, conduct onsite client training and consulting and train internal staff, as well as draft and maintain regulatory policies and procedures. At least five years of compliance experience is preferred. Candidates holding a CRCM is a plus! Package includes competitive salary and benefits. Please send resumes to Janet Twombly.
Highlands Residential Mortgage is pleased to announce the expansion of its retail production platform with the addition of two new Regional Offices. The new Midwest Region will be led by Mark Etchison who has joined Highlands as SVP and Midwest Regional Manager. "I joined Highlands because of their unique approach to business, leadership team, industry leading technology and best in class fulfillment for loan officers" said Etchison. The new West Coast Region will be led by Bill Lawton who has joined Highlands as SVP and Western Regional Manager. "Both will begin immediately to bring on branches and recruit high quality producers to add to the Highlands outstanding team. The addition of Mark and Bill will take Highlands to the next level of expansion.Branch Managers and loan originators interested in joining our dynamic and growing organization, please send an updated resume in confidence to EVP/National Production Manager Danny Deaton."
In advertising news, out West Mason-McDuffie Mortgage Corporation has announced that management is honored to have partnered with KNBR sports talk radio veteran Gary Radnich. Radnich hosts the KNBR weekday Gary and Larry sports talk radio show. KNBR radio is the home of the 49ers, Warriors and SF Giants and has one of the strongest signals in the Western United States and beyond. This partnership is Radnich's first commercial endorsement in his 24-year career on KNBR as Radnich recognized MMCD's successful and long-standing reputation as a dependable and successful mortgage corporation since 1887. Radnich does a series of radio endorsements for MMCD that can be heard on the Gary and Larry Show (weekdays 10am-1pm on KNBR), covering MMCD's proven customer service track record and promoting the recent company advancements in social media, marketing and recruiting.
Congratulations to Brad Goedken who was recently brought on by Ditech Financial LLC as Chief Information Officer for Originations, Capital Markets and Corporate Systems responsible for overseeing the company's technology agenda and planned upgrades.
And to Houston's InterLinc Mortgage Services, LLC who announced that Mike Laka is the company's newest Vice President of Business Development to lead, source, screen and manage talent acquisition processes for InterLinc's operational, sales and management positions, as well as work with the executive team to grow strategic initiatives.