It is fun to see that U.S. homebuilder confidence rose to a seven-month high, primarily driven by lower mortgage rates and an improving jobs market which have pushed buyers into the housing market. But as we all know, last week we lost another correspondent lender. And now a lawsuit has come to light where Affiliated Mortgage is suing Envoy Mortgage in Louisiana.
Given the amount of change facing our industry, open dialogue amongst industry peers is more important than ever before. The MBA is focused on giving its community lender members the ability to discuss their unique opportunities and challenges. To that end, the MBA now has two members-only networking groups - the brand-new Community Bank and Credit Union (CBCU) Network, which is open to all MBA member banks and credit unions with 10 billion or less in assets, and its popular network for Independent Mortgage Banks. Both groups meet regularly via phone and in person, and serve as forums to share information, as well as pool knowledge and resources. MBA hosted the first of many member-led CBCU Network calls on August 12, receiving rave reviews and a high level of participation. Contact MBA's Tricia Migliazzo or Tamara King to learn about either of these groups, and about special first-year member benefits.
Speaking of the MBA, I learned a new term (for me) yesterday: "backwardly compatible." My guess is that many failed personal relationships could use that term, but in this case it applies to the latest update on MISMO (Mortgage Industry Standards Maintenance Organization). Most IT and Ops folks already follow developments on its website.
There is a lot going on with the Agencies! Yes, the FHFA has requested input on its proposal for a single security structure for agency MBS (and you should comment!). Fannie Mae and Freddie Mac also recently reported 2Q14 earnings. Earnings declined at both companies driven primarily by lower litigation and other one-time gains. Fannie Mae reported $3.7 billion of operating profit before the payment of preferred stock dividends, while Freddie Mac reported $1.4 billion of operating profit before preferred dividends. Fannie was helped by the release of some reserves, and Freddie earned some coin on derivative gains. Fannie's serious delinquency rate decreased to 2.05% from 2.19% in 1Q. Fannie's loss reserve of $42.1 billion (from $45.3 billion) declined to 1.32% of the guaranty portfolio vs. 1.41% in the prior quarter, and its single-family loss severity rate was 18.89% (although this excludes REO disposition costs), down from 20.31% for the full-year 2013. The company took a reserve release of $1.6 billion vs a release of $774 million last quarter. Charge-offs were up to $1.9 billion from $1.6 billion in 1Q.
Freddie Mac's credit also continued to improve. The serious delinquency rate fell to 2.07% from 2.20%. Freddie Mac's loss reserve fell to $22.8 billion from $24.1 billion, or 1.3% of loans, down from 1.4%. Total non-performing assets fell to $122.6 billion from $124.8 billion in 1Q. The reserve equated to 18.6% of non-performing loans. The company's single-family loss severity rate for 2Q was 33.4%, down from 35.6% (unlike for Fannie Mae, this includes most REO disposition costs). The company took a release of $618 million, down from a provision of $85 million in the prior quarter. Charge-offs were down to $1.22 billion from $1.46 billion.
If you'd like some input on the direction of Freddie and Fannie, their conservator (the Federal Housing Finance Agency) is requesting input by Sept. 15 on the plan for fiscal years 2015-2019. As it stands, the Plan lists three strategic goals: ensure safe and sound regulated entities; ensure liquidity, stability and access in housing finance; manage the enterprises' ongoing conservatorships.
There continues to be a lot of talk among LOs about the short sale changes that came out in June. Just to remind folks, this information is from a FNMA bulletin dated June 17, 2014. Background info, right now if a borrower had a short sale 2 years ago and has 20% to put down, FNMA will let them back in the game. If the borrower has less than 20% to put down they have to stay on the bench for four years. Effective August 16th FNMA is changing their policy; "A new policy will apply to mortgage accounts that have been subject to a charge-off that will require a four-year waiting period after the charge-off occurred before the borrower is eligible for a new loan that would be salable to Fannie Mae." Furthermore, if the charge off is due to extenuating circumstances, then FNMA would be OK with a two year wait. We hope that FNMA publishes a precise definition of "Extenuating Circumstances " we don't think that any lender is going to risk having an un-saleable loan on their hands, therefore we do not think that anyone that has a short sale is going to be OK with less than a four year wait.
Quick note to remind people that on July 29th Fannie Mae issued SEL-2014-10, "Selling Guide" updates. The update included changes to the following: Significant Derogatory Credit Events, Property Insurance Requirements, Lender Quality Control Policy Updates and Clarifications, Notification Requirements for Misrepresentation or Breach of Selling Warranty and Fraud, MBS Buyup and Buydown Ratio Grids, Incorporation of Announcement SEL-2014-08, Fannie Mae Announces Approved Mortgage Insurance Forms, Incorporation of Announcement SEL-2014-09, Anti-Money Laundering Requirements, Special Feature Codes, and Miscellaneous Selling Guide Update.
Fannie Mae posted Initial Results from the Mortgage Lender Sentiment Survey. Inaugural results of the survey show significant improvement from Q1 to Q2 2014 in lenders' near-term profit margin expectations, with fewer lenders in Q2 reporting that they expect their profit margin over the next three months to decrease More Results.
Fannie Mae recently published updated lender resources for mortgage products to finance home construction, renovation, and energy-efficient improvements. The materials construction-renovation-energy of updated resources include: a HomeStyle Renovation (HSR) on-demand recorded training tutorial that provides detailed loan origination, delivery, and servicing information; a HomeStyle Renovation Fact Sheet; a HomeStyle Renovation Product Matrix; a Construction-to-Permanent Product Matrix; and an Energy Improvement Feature Fact Sheet. Additionally, Fannie's announcement covers information pertinent to Adverse Action Notices, Allowable Foreclosure Attorney Fees, Evaluation Model Clauses, and the Master Custodial Agreement reminding servicers of the requirements.
Lastly, this last weekend Fannie rolled out DU 9.1. Included are changes to foreclosure message updates, deed-in-lieu of foreclosure and pre-foreclosure sale message updates, charge-off policy message addition, 2014 Area Median Income limits, Special Feature Code retirement, and updates to align with the Selling Guide.
Freddie Mac Reps and Warrants Updates reminds lenders that have mortgages that obtained selling representation and warranty relief between February and July 2014, your organization will receive a Selling Representation and Warranty Relief Date Report by mid-September. Also, Freddie Mac has terminated its relationships with the following law firms providing default-related legal services (DRLS) for Freddie Mac Default Legal Matters. Connolly, Geaney, Ablitt & Willard, P.C., in the following states: Massachusetts, New Hampshire, Rhode Island, Florida and Puerto Rico. The Castle Law Group, LLC, in the following states: Utah, New Mexico, Nevada, Arizona and Wyoming. Visit default legal services for detailed information for Servicers, law firms, and Legacy Matters. Bulletin 2014-15 covers a great deal of information including: Mortgages insured by Arch Mortgage Insurance Company, Suspicious Activity and anti-money laundering (AML) noncompliance reporting, Updates to counterparty eligibility, Updates to flood insurance requirements, Updates related to ULDD, Certificate of incumbency forms, and Requirement updates for manufactured homes.
Four draft appraiser-specific policy documents that will be part of the Federal Housing Administration's (FHA) Single Family Housing Policy Handbook (SF Handbook) were posted today for stakeholder review and feedback. An extension from July 29 to August 15, 2014 has been granted to allow stakeholders additional time to provide voluntary feedback on the draft Doing Business with FHA-FHA Lenders and Mortgagees and Quality Control Posted for Feedback. HECM New Principal Limit Factors Use and Other HECM Reminders 2014-12, regarding Principal Limit Factors (PLFs) and Mortgagee Letter 2014-07, regarding Due and Payable policies for an eligible Non-Borrowing Spouse are effective for FHA Case Numbers assigned on or after August 4, 2014 Mortgagee Letters.
On August 19, 2014, FHA will host a webinar FHA QC Update: Loan Review Findings and Trends. Topics will include: FHA trending resources, a one-year look back at FHA's quarterly loan review findings report, trends over time, lessons learned, and future mitigation. August 27th in New York, FHA is offering Underwriting Training that covers the underwriting of loans proposed for Federal Housing Administration (FHA) mortgage insurance. The training is for underwriters that are currently employed, or wish to be employed, by FHA-approved lenders.
Sometimes government agencies get it right. The National Association of Realtors commended Congress for their timely implementation of the Homeowners Flood Insurance Affordability Act which relieved property owners of costly premium hikes and stabilized housing markets where flood insurance is required for a mortgage. Within a month of the legislation's implementation, FEMA issued rate-relief guidelines to insurers so that homebuyers would not have to pay more than current owners would at the time of their next flood insurance policy renewal. The relief also applies to current homeowners who bought a new policy or let one lapse, not just to owners who bought property after the Biggert-Waters Flood Insurance Reform Act went into effect last year. Testifying in front of Congress last week, NAR Flood Insurance Task Force Chair Donna Smith said, "The progress so far has been encouraging, but there is still more work to be done. FEMA still needs to set up an Office of the Advocate called for by the Biggert-Waters Act to provide property buyers with the timely help they need to address problems with flood insurance and other rate issues that they face. It is also critical that FEMA and the NFIP ensure the long-term accuracy of flood rates and maps. Homeowners need an independent government advocate who has experience and access to the necessary information to fully investigate and resolve suspect rate quotes."
The bond market sold off a little bit Monday - but no big deal, right? Rates are still great. Besides - folks rooting for lower rates should ask themselves: why? If rates go much lower, it is because our economy is doing pretty poorly - and who wants that? Certainly not a borrower with a rate lock, or a secondary marketing department with a locked pipeline. So we had a break yesterday, and agency MBS prices worsened about .125-.250 and the 10-yr closed at 2.39%.
For chills and thrills today we have the July Consumer Price indices (projected mixed on headline and core, they came in at +.1% and +.1%), as well as July Housing Starts (+15.7%) and Building Permits (slightly higher as well). We have the 10-yr at 2.38% and agency MBS prices better by a shade.
REMN Wholesale's focus on renovation lending continues to pay off and the company is looking to grow its team of account executives to keep up with demand. "A true national lender with an expertise in all facets of the renovation mortgage process, REMN is quickly becoming the go to choice for anyone needing a trusted partner committed to customer service. In addition to its leadership in renovation landing, REMN Wholesale is also offering a .50 percent pricing incentive for high balance FHA and VA loans in August. Interested in joining the REMN team? REMN is currently recruiting established account executives in all markets. If you believe in REMN's overarching commitment to customer service and see the potential renovation lending has in markets across the country," send your resume to aerecruiting@REMN.com. More information on REMN Wholesale.
Recruiting Challenges? Looking for more qualified Loan Officers? Knowing how to "Find the hidden mortgage talent" is crucial to building a list of experienced producers. "Register for this week's Mortgage Recruiting Workshop, hosted by EMAC Recruiting Academy as they train Hiring Managers on how to develop a list of hundreds of names and contact information with a couple of clicks on the keyboard. Imagine having hundreds of names and numbers in your database, plus a messaging system that attracted talent to your brand. Join EMAC on its next Headhunters Search Methodologies workshop starting tomorrow Wednesday, August 20th at 3PM EST. Instructor Jim McGrath guides will show you how to source like a professional with new state of the art Web Scraping tools that gather names and contact information from any website.