Remember that scene in Apollo 13 when it dawns on the astronauts that NASA doesn't know how to get them back? Regarding our economy, one can imagine that Geithner and Bernanke are Houston. And overseas, if the markets expect that nothing will come out of the European summit, then nothing will happen when nothing comes out of the European summit, right? Possibly... but in the interim here's a humorous look translating what Ben Bernanke said at his last press conference.
Yes, the CFPB is very interested in reverse mortgages, and visa versa. In response, "The Members of the Reverse Mortgage Lenders Association commend the CFPB for working diligently and delivering their study on the reverse mortgage industry ahead of schedule. The report raises valid questions and we look forward to a continuing dialogue to collaborate to find answers. 'All of us want seniors and their children to have a better and more in-depth understanding of reverse mortgages. That is the intent of our Borrow with Confidence consumer education outreach, a comprehensive effort to provide tools that will create the utmost transparency and clear understanding of the reverse mortgage process.'"
Yes, we live in a world where monitoring our own risk is not enough - we must monitor the risk of the people and businesses with which we do business. Putting aside thoughts of George Orwell's Big Brother in "1984", it is on many minds, and will certainly increase the daily costs of doing business, and thus eventually increase the cost to borrowers and customers. Hopefully there is a long-term benefit. Let's start with a technical mention of it in the securities market.
Under the new vendor management policies, the CFPB requires that financial institutions under Bureau supervision will be held responsible for the actions of the companies with which they contract. The Bureau will hold all appropriate companies accountable when legal violations occur. Where do we draw the line?
A veteran MBS salesman wrote, regarding counterparty risk in hedging, "The days of getting triple AAA execution are numbered. There's something called "skin in the game", without it some are more likely to take undue capital risk. You do not need to look even further back than MF Global to realize on a grand scale it can be a death sentence for some companies. Many times, I am asked for our capital requirements. I always say as much as possible and at least $10 million, and now that appears to be too little. The only way to prove that you are in it for the long haul is by putting your profits back into the company. In addition, margin is there for a reason, to protect both the dealer and mortgage banker. As the agencies shy away from risk, it will only put more pressure on the dealers to make up the difference. My word of advice is to deal with dealers who have balance sheet and longevity in the business - and yes even those who have margin requirements. I imagine if you are the one company dealers are not calling for margin, then there are probably another 25 mortgage bankers also not being called for margin. Do you know everything there is to know about those other 25 mortgage bankers? If you don't, which I am sure of, then their risk is your risk, right?"
And this note from Frank Fiore (Matchbox LLC) from this week's comment about Fannie, capping sales, and counterparty risk: "Interesting note about Fannie's potential requirements. Many clients that we are working with are in the $3MM-$4MM net worth range which is good for Fannie now but I think will be increasing in the future - either formally or informally by applications not getting approved. While this is ok for now, many firms are lacking the plan for increasing their net worth once they receive agency approval. These approvals are supposed to be providing a tangible benefit that should equate to net worth growth once received and in the coming years. If clients are just bordering the net worth requirements with no plan to increase, this will affect their application review."
Today is a free call on it at 11AM PST. "You are invited to participate in the next conference call of the California Mortgage Bankers Association's Mortgage Quality and Compliance Committee (MQAC)! Topic - New CFPB Vendor Management Policies." The speaker is Michael Pfeifer of Pfeifer & DeLaMora, LLP. To join the teleconference portion, dial 1-800-351-6802, passcode of 25924. ("When dialing in, you will reach a live operator and you'll need to provide this passcode verbally. Please be aware that each of your lines is in a Listen Only Mode. At the conclusion of the presentation, we will open the floor for questions. Questions should be directed to Dustin Hobbs with the CMBA at firstname.lastname@example.org.)
And the commentary had some news about FHA Streamlines, and The False Claims Act. Owen Taylor noted, "The FHA's final rule on indemnification took effect on February 24, 2012. In short, if fraud or unacceptable underwriting practices are detected, HUD will have the authority to force lenders to reimburse FHA for insurance claims paid on mortgages that do not meet the agency's guidelines. The specific instances of failing to comply with FHA requirements, which can result in a demand for indemnification, are a failure to: Verify or analyze creditworthiness, income and/or employment of the mortgagor; Verify the source of assets used for a down payment and/or closing costs; Address property deficiencies identified in the appraisal, which could affect the health and safety of the occupants or the structural integrity of the building, and certify that the appraisal was done in compliance with FHA appraisal requirements. HUD may seek indemnification whether or not the violation caused the mortgage default. Good or bad, debate still swirls around this ruling and it will for years to come. Regardless, vendor misrepresentation knowingly, unknowingly or ignorantly has been frowned upon by the Federal Government since at least 1863. (Thank you Owen, president of DHA Financial, Inc.)
Here are some somewhat recent investor updates, providing a flavor
for the environment. They just don't stop. As always, it is best to read the
The fires in Colorado have, or will soon, result in lenders instituting disaster plans on loan review. My wife lived in Colorado Springs before moving home to California, and she has been keeping a keen internet eye on the horrific fire there. Aside from Waldo Canyon being one of her favorite mountain bike rides, anytime 32,000 people are evacuated, it's a blow to the economy and to the community. If you're interested, through modern technology you can follow along with the Waldo Canyon firefighters on the internet stream of their radios. I'm sure when this is all over she will find interest in cooking me dinner again...
Wholesale clarifies that the Return Transcript (Box 6A), Record of Account (Box
6C), and Box 8 of Form W-2, Form 1099 series, or Form 1098 series must all be
checked and/or completed for all loans. If these fields aren't completed,
the loan will remain in the receiving department until a fully filled-out form
A new Wells Wholesale policy on lock timelines requires a minimum of seven calendar days to C20 a Purchase transaction or NON-rescission impacted refinance (second home or investment). Eight calendar days are required to C20 a rescission impacted refinance transaction
Citibank Correspondent has issued guidance on best practices for final HUD-1s. Clients should ensure that they have confirmed that the HUD-1 has the latest settlement date, the payoff mortgage is listed in the 100 section, and that Box H includes both the Settlement Agent's name and address. For non-escrow states, the final HUD-1 should include the signatures of all borrowers and sellers, where applicable. For escrow states, the estimated closing statement should be signed by the borrower and seller, while the final HUD-1 settlement or escrow/final closing statement signed by the escrow officer is required within three business days of the closed package's receipt.
Fifth Third has clarified its policy on the 2055 exterior-only inspection for the sale or conversion of primary residences. The inspection is only necessary to document the LTV/CLTV/HCLTV as 70% or less for the current primary residence only in cases where the required reserves have been reduced to two months PITI for each property or rental income has been used to qualify the borrower for the previously occupied property.
Just as a reminder, Fifth Third requires a fully executed 1003 form, reconciled AUS findings with their associated tri-merged credit report, LTV and CLTV calculations, fully completed purchase contract, assets documented as per the AUS findings, income documentation as dictated by the loan program, income calculations shown on either the 1008 or income calculation worksheet, and the name and contact information for the underwriter as part of all submissions.
Yesterday we learned that the MBA mortgage applications index dropped -7.1% with the refi portion of the index down -8.3% for the week ending June 22nd. The Government Refi Index is also down -23.5% compared to last week's incredible increase of +120%. Last week's surge in government refis seemed to have stemmed from FHA's program to grandfather MIPs (annual and upfront mortgage insurance premiums) for the pre-June 2009 borrowers which went into effect June 11th.
I don't know why it seems like a Friday to me, but yesterday (Wednesday) was another day of not-much volatility. By the close 30-year FNMA prices were marked higher/better by .125 - not enough for rate sheet changes - and the 10-yr closed at 1.62%. There wasn't much news, although there continue to be good signs out of the housing market as Pending Home Sales rose a larger than expected 5.9% to 101.1 in May and is up 13.3% year over year. In fact, the latest reports on home prices (S&P, FHFA), New and Existing Home Sales, Housing Starts and the NAHB HMI all contained some positive signs regarding the state of the housing market as well.
For today's delights we've had a quiet overnight session in Europe, and then the final Q1 GDP reading (predicted unchanged at +1.9%, which is where it came in - it's old news anyway) and Initial Jobless Claims (coming in at 386k from last week's revised 392k). Later we have a $29 billion 7-yr note auction. The markets will also be tuned into any information from Europe as a two-day summit gets underway to discuss the crisis - I remain skeptical. Possibly providing excitement as well could be the Supreme Court's decision on the health reform legislation.
No one is getting any younger... (Part 2 of 2)
An elderly woman decided to prepare her will and told her preacher she had two final requests. First, she wanted to be cremated, and second, she wanted her ashes scattered over Wal-Mart.
"Wal-Mart?" the preacher exclaimed. "Why Wal-Mart?"
"Then I'll be sure my daughters visit me twice a week."
My memory's not as sharp as it used to be.
Also, my memory's not as sharp as it used to be.
Know how to prevent sagging? Just eat till the wrinkles fill out.
It's scary when you start making the same noises as your coffee maker.
These days about half the stuff in my shopping cart says, "For fast relief."
THE SENILITY PRAYER: Grant me the senility to forget the people I never liked anyway, the good fortune to run into the ones I do, and the eyesight to tell the difference.