I was very excited when my son came home the other day and said, "I've decided what I want to do when I get out of school - I am going to be a building appearance technician!" I was pretty excited about that until I realized that it meant he wanted to be a janitor. After only six years of college! Yes, kids have a way of becoming older. (By the way, kidding about my son, but not about that fancy job title that I saw the other day.)

We're all becoming older. Yesterday I listened to a presentation from a health care professional from Cal bemoaning the aging of workers in that industry, and this commentary often discusses the apparent lack of youths in real estate and mortgage banking. The Census Bureau tells us that there was a small uptick in the nation's median age, from 37.2 years in 2010 to 37.3 in 2011. The 65-and-older population increased from 40.3 million to 41.4 million over the period and included 5.7 million people 85 and older. Likewise, working-age adults (age 18 to 64) saw their numbers rise by about 2 million to 196.3 million in 2011. In contrast, the number of children under 18, 74.0 million in 2011, declined by about 200,000 over the period, largely because of the decline in high school-age children 14 to 17. Maine had a higher median age than any other state (43.2), with Utah having the lowest median age (29.5). Florida had the highest percentage of its population 65 and older (17.6%), followed by Maine (16.3%). Utah had the highest percentage of its total population younger than 5 (9.3%). Among counties, Sumter, FL, was the nation's "oldest," with 45.5% of its population 65 and older, and Geary, KS, was the nation's "youngest" (11.4 percent younger than 5).

The industry is buzzing, of course, over Wells Fargo's decision to exit its wholesale channel. As this commentary mentioned a few days ago, this, along the compliance and regulatory environment we're in now, has the effect of solidifying the position of those larger institutions already in the market. While the government argues against "Too big to fail," isn't that exactly what is happening now? Who is going to start a mortgage brokerage or bank now? Is the first person you hire the VP of production, or an on-staff attorney? There is some chatter out there that the Wells move was done as a protest against the state AG settlement details, and that the courts may feel pressured to change it. I think that is wishful thinking.

On the correspondent side, Wells and other correspondents, can continue to implement hurdles/raise the proverbial bar to the point of excluding a large number of sellers rather than eliminate the correspondent channel entirely. The rumor is out there that Wells correspondent will raise the minimum net worth to $25 million for lenders to sell loans to them. I view this as unlikely, but the traditional "loan officer becomes a loan broker, loan broker becomes a mortgage banker, and so on" model is being ground down.

And let's not forget Freddie Mac and Fannie Mae also looking at counterparty risk, and their "behind the scenes" structuring of sales caps (possibly annual or moving) based on a counterparty's net worth. Even with agency approval, if a mortgage bank's net worth is $5 million, at 40x1 sales to a particular agency caps at $200 million, and I know plenty of mortgage banks with that kind of net worth doing $50 million per month - does that mean by the summer of every year the large aggregators see a big pick-up in business from non-depository mortgage banks? Ah, to be a depository...even smallish well-run banks have assets and net worth north of $100 million - it is easy to see the agencies and aggregators preferring them as counterparties.

"NAMB does recognize and appreciates Wells Fargo's strong support of mortgage brokers in the past and in the future. Wells Fargo is going to continue to do mortgages, only each loan will now go through the correspondent channel and not directly from the broker. 'This should truly give the medium and large wholesalers, especially the regional ones, a chance to expand and grow, doing more business by picking up the volume that were going through Wells Fargo in the first place.'"

Not so fast. The Franklin Americans of the world will take in more broker business and then send it to Wells? It is easy to see how the large banks/servicers/aggregators might limit the type of Correspondent business.

Here is a note I received a while back: "Rob, I know that Chase will not purchase third-party originations. But when do you see large investors cutting back their purchases of '4th party originations'? (Loans that were rejected by a particular investor's retail channel, say Wells or Citi, and then approved by a broker and then brokered to a small regional lender, which then sells it to Wells or Citi through delegated underwriting into the correspondent channel.)"

Put another way, the street definition of "4th party" is when the loan closes in the name of any other entity than who sells it to the end seller/aggregator. So if I fund my loan with ABC Mortgage, and then ABC sells the closed loan to Franklin American, and then Franklin sells it to Citi, and then Citi sells it to The Street... you get the idea. Of course, if the lender, say Provident or Guild or Stearns, is putting the loan into its own portfolio, then this issue is greatly reduced.

The original issue which caused the loan to be rejected in the first place may have been cured, or the initial decline may not have been caused by a risk issue, but instead by a system's issue - there are often differences in underwriting guidelines, approval processes, and prices between retail, wholesale, and correspondent channels at large banks/investors. That being said, I have heard the correspondents of the correspondents who engage in 4th party originations are indeed under scrutiny for process, procedure, and controls - correspondents are scrutinizing their clients to a much greater degree.

Or, put another way, correspondent clients who are doing correspondent business... This is yet another reason why many lenders are going directly to the agencies - but what if/when they're capped based on net worth? Calgon, take me away...

On to something simple like somewhat recent investor/M&A/training/agency updates, providing a flavor for the environment. They just don't stop. As always, it is best to read the actual bulletin.

The Collingwood Group is having its next complimentary conference call with its Risk Management and Compliance Division staff members (FHA and MRB experts). It will address steps that lenders can take to be proactive, manage risk, and avoid FHA and specifically Mortgagee Review Board sanctions. In the third call in the series, Maximizing FHA Claim Filing (Part A and B) will be the topic, focusing on the FHA claims process and pitfalls.

Beginning on July 31st, Wells Fargo Funding will deliver Net Funding notices by encrypted email instead of via fax.  Sellers should ensure that their internal processes support the changes.

In light of the FHFA's rule prohibiting the financing of properties encumbered by a private transfer fee covenant that doesn't directly benefit the relevant property, Wells Funding will only purchase loans with covenants that require payment to mandatory HOAs, nonprofit organizations, and master and sub-associations.

As of July 16th, all loan closed loan packages will be required to include a fully completed Loan Submission Summary.  Loans whose packages do not include the LSS will be suspended.

In response to Fannie's decision to change various construction-to-permanent financing requirements, Wells Funding is updating its Prior Approval construction-to-permanent policy such that only Rate/Term and Cash-out refinances are permitted.  In addition, Wells will require that all construction-to-permanent transactions adhere to the agencies' requirements for LTV ratios.  LTVs for non-conforming loans will continue to be calculated using Wells' methodology, and the Wells Fargo Identity of Interest requirements will still apply to both conforming and non-conforming loans.  These policy changes affect Best Effort Registration, Best Effort Locks, and Mandatory Commitments made on or after June 18, 2012.

Wells' policy on qualifying loans with Mortgage Credit Certificates has been revised as well, with the new policies taking effect on July 16th.  Delegated and Prior Approval loans using eligible LP or DU responses will be subject to Freddie's and Fannie's eligibility requirements, respectively.  Prior Approval Manually Underwritten loans will be qualified by calculating the amount of subsidy established in the MCC on a monthly basis and adding it to the borrower's income.  Regarding documentation, all government and conventional loan packages must include a copy of the MCC, a copy of the W-4 and worksheet, and the MCC worksheet.

The Nevada Hardest Hit Fund was recently allocated $50,000,000 to reduce principal for borrowers refinancing under HARP.  Be aware that DU Refi Plus loans that use Hardest Hit Funds in Nevada or any other state for the purposes of principal reduction are not eligible for purchase by Wells Funding.

Beginning July 1st, Wells will start billing sellers a $25 initial DU case file fee for every file for which Wells Fargo is identified as the sponsoring lender.  The fee will be waived once Wells has purchased the loan.

The state of Virginia has amended its recordation tax requirements for refinance loans.  As of July 1st, the recordation tax levied upon refinance loans will be 18 cents per $100 up to $10 million to the state and six cents per $100 to the city or county on the entire loan amount.  This tax should be disclosed on the GFE.

Citibank Correspondent has updated its credit overlays document from the edition published in May to include LTV and FICO score restrictions on condos in Georgia, a clarification on the maximum CLTV for government loans, and "Properties Listed for Sale" as an overlay for LP.  In addition, the phrasing "Interim Interest" was changed to "Per Diem interest," and a duplicate appraisal topic for government loans was removed.  The Ineligible Originator List, which provides the names of all brokers, correspondents, and other loan originators and parties that are prohibited from playing a role in the origination of any loan submitted to Citi for purchase, has been updated as well.  The newest version of the list is available on the Citi Correspondent site in the elfno section.

Citi reminds clients that verbal verifications of employment must be completed within 10 business days of the closing/note date for conventional loans and 30 calendar days for government loans.  The VVOE documented in the file should contain enough information to re-create the process used to supply the necessary information.  For borrowers with multiple employers or second job income, multiple verifications are required.

In response to rising operational costs, US Bank has revised its commitment fees for Purchase Funded loans.  Commitment fees for FHA Delegated, USDA Delegated, VA Delegated, FHA/VA Sponsorship, conventional loans underwritten by either US Bank or delegated correspondents, and second mortgage loans are all subject to increases ranging from $105 to $305.  The increases will affect relevant loans that fund on or after July 2nd.

Due to the recent fire activity in Colorado, Flagstar is temporarily suspending funding for loans on properties in certain zip codes.  Properties in the Florida zip codes that were hit by Tropical Storm Debby must be re-inspected before Flagstar will issue a "Final Clear to Close" status.  For a full list of all the zip codes affected by these announcements, contact Flagstar Underwriting.

With regards to recent MERS changes, the Originating ORG ID Exception will be used for transactions where the customer has not provided their MERS ID, Flagstar generates the MIN number, and the originator closes in their own name.  This will be protocol until July 5th.  Clients should email brokerdelegatee@flagstar .com with their ORG ID, confirmation, and Lender ID by this date at the latest.

I had a little problem at Wal-Mart yesterday.
Apparently when the cashier said, "Strip down, facing me,"...she was talking about my debit card.