The whole residential lending industry is abuzz about the article on housing in the Economist. "A decade on, the presumption is that the mortgage-debt monster has been tamed. In fact, vast, nationalized, unprofitable and undercapitalized, it remains a menace to the world's biggest economy...But until America's mortgage monster is brought to heel, the task of making finance safer will remain only half-done." What could be worse? Let's ask Olympic swimmer Ryan Lochte, who lost every one of his sponsors yesterday.
Before I go any further, there is a correction to yesterday's commentary regarding the due date for bids on servicing that MIAC is selling. (...MIAC's $1.5 billion FNMA and FHLMC mortgage servicing portfolio with an optional co-issue opportunity totaling $50 to $100 million per month. The portfolio is being offered by a mortgage company that originates loans with a national geographic concentration...) Bids are due on August 24th, not the 28th as listed.
And I apologize for not including a huge servicing trade. Incenter Mortgage Advisors, LLC ("IMA"), marketed a $8.877 Billion Ginnie Mae Bulk MSR offering. "Quality characteristics of the entire $8.877 Billion portfolio includes: 4.227% WAC provides significant refi opportunity, 5.90% 30/60/90 day delinquency, 60 months of seasoning, 1.07% Estimated Average Escrow as % of Principal, and a 716 Wtd Avg FICO.
Switching to legal chatter, of course anyone can sue anyone at any time for anything. The industry is waiting for a ruling on the CFPB/PHH case - and with it some kind of guidance on MSAs which, at this point, are not "against the law." The DOJ/Quicken case will probably grind on for years, as will the DOJ/Guild case, which is less far along as the Quicken Loans case.
Yesterday in New York a U.S. appeals court refused to reconsider its decision to overturn a $1.27 billion penalty against Bank of America Corp. and a jury verdict finding it liable for mortgage fraud leading up to the 2008 financial crisis. The 2nd U.S. Circuit Court of Appeals rejected a petition by Manhattan U.S. Attorney Preet Bharara's office to have a three-judge panel rehear the case and give the government at least an opportunity to seek a new trial.
And Reuters reported that, in what amounts to a slap on the wrist, former Fannie CEO Daniel Mudd settled with the SEC for $100,000. (No, there are no more zeroes after that.) Begun in 2011, it was one of biggest cases tied to the 2008 financial crisis. The SEC accused Mudd of misleading investors about Fannie Mae's exposure to risky mortgages before the crisis. He was the last of six executives at Freddie & Fannie to reach a settlement. "Like Mudd, the other five defendants reached relatively small settlements, none exceeding $250,000, despite facing SEC suits in what were among its biggest cases to arise from the financial crisis and mortgage meltdown. Mudd had continued to litigate alone and was to face trial in November. He did not admit wrongdoing in settling."
The Reuters articled noted that, "The SEC said Fannie Mae concealed exposure to more than $100 billion of subprime loans and $341 billion of Alt-A loans. Mudd denied wrongdoing and contended the regulator lacked hard evidence to back its claims."
And JPMorgan Chase & Co. announced it had settled litigation with the FDIC and Deutsche Bank AG stemming from its purchase of Washington Mutual Inc.'s banking operations during the financial crisis. "In a regulatory filing, JPMorgan said it will be paid $645 million in cash from the estate of Washington Mutual Bank, for which the FDIC acts as receiver, and release its claims against the estate. JPMorgan also said Deutsche Bank, the trustee overseeing billions of dollars of Washington Mutual residential mortgage-backed securities, will have a claim against the estate."
And don't forget that back in June Ocwen Financial Corp. subsidiaries agreed to pay $30 million to end a pair of False Claims Act suits accusing it of providing false information to a federal loan program. "Whistleblowers" Michael J. Fisher and Brian Bullock and Ocwen Loan Servicing LLC reached a preliminary settlement which also ended a pending whistleblower case against Ocwen subsidiary Homeward Residential Inc. The whistleblowers had claimed the Ocwen companies had failed to comply with certification requirements under the U.S. Department of Treasury's Home Affordable Modification Program, while the companies' executives allegedly netted more than $2 billion in incentive payments. Ocwen paid $15 million to the DOJ, along with $15 million in attorneys' fees. The whistleblowers will get a share of the government's recovery. $15 million in attorneys' fees!?
But the latest lender-related case to grab the headlines concerns MFY Legal Services, a nonprofit representing low-income New Yorkers, filing a lawsuit against the federal department of housing and urban development (HUD) and private fund manager Lone Star Funds (owner of Caliber Home Loans), alleging racial bias in their handling of foreclosures. Did HUD practice of selling delinquent mortgages to private investors disproportionately hurts black homeowners? The legal system will tell us. "Between 2012 and 2014, the Federal Housing Agency sold roughly 1,100 delinquent, federally insured mortgages on New York City homes to private investors. The sales were part of an effort to relieve financial pressure on a federal fund used to insure mortgages. The lawsuit alleges that borrowers whose mortgages were sold to private investors face a higher risk of foreclosure, in part through loan modifications. According to the lawsuit, 61 percent of the sold mortgages were in predominantly black neighborhoods like Canarsie and parts of Southern Queens..."
Let's take a slight detour, although not really a detour. About 50 years ago, a group of female activists created NOW, the National Organization for Women. At the time, some of their concerns were the Equal Employment Opportunity Commission's refusal to outlaw job ads with phrases like "Help Wanted Male" and "Help Wanted Female," or job postings asking for a "well-groomed gal."
There are plenty of females in banking and in lending, and women's rights have clearly come a long, long way in those 50 years. But there's plenty of work to be done - especially for women who are small business owners today. Consider a recent survey by the American Express OPEN Small Business Monitor that found female small business owners still earn less than their male counterparts. The survey found that 57% of male small business owners are likely to pay themselves a salary vs. only 43% of women small business owners.
What's more, the survey found male small business owners paid themselves $17,470 more per year than their female counterparts. Taking a look at salaries overall, the survey finds that small business owners overall that are earning a wage, are paying themselves more - $76,010 a year. That is an increase of $2,310 from the prior year or about 3% higher.
As for hiring intentions, the survey found 39% of small business owners said they plan to hire this year, an uptick over the 34% who said they planned to hire the year prior. The biggest problem here though is that small business owners said finding the right job prospects is their #1 challenge to growth (at 19%). As lenders and community bankers know, small business owners are generally an optimistic bunch. Here the survey found that 84% of small business owners identified themselves as being optimists, and of seeing "the glass as half full." But that's not to say owners are without worries. About 53% worry about whether they can save enough for their own retirement.
Training and Events:
The Chicago Mortgage Leadership Roundtable will bring together prominent housing industry experts on September 15, 2016, to discuss the direction of the mortgage industry. The event is being hosted byNational Mortgage Insurance Corporation (National MI), a California-based private mortgage insurer, and ISGN, a leading provider of award-winning technology solutions to the mortgage industry. To register for the roundtable, contact Tracy Berry.
FHA will offer free classroom training on basic FHA loss mitigation in Greensboro, N.C., Wednesday, August, 24th.
By now, many lenders have heard how millennial borrowers are different, and why lenders need a plan to serve these consumers. October Research is providing a webinar that goes a step further by examining the practical compliance implications involved in that planning. This 75-minute webinar, hosted by Dodd Frank Update, offer solutions on how lenders can balance the communication and service needs of creditworthy millennial borrowers with the regulatory demands of compliance, fair lending and consumer protection. Register now for this August 31st webinar called "Millennials: Balancing Service and Compliance."
Speaking of learnin', as economists, academics, government officials, and the press head to Wyoming, fresh ideas on how to fight future downturns in low interest rate conditions likely on the agenda in Jackson Hole. The Bank of England may soon join the ranks of central banks experimenting with something previously unseen in history there: negative interest rates. And that's despite a record that is decidedly mixed to date, with little evidence of sound economic recovery and growing worries over what happens to investors and businesses when rates return to positive ground.
Here in the U.S. rates continued to dog-paddle - fine for capital markets folks who aren't big fans of volatility. Yesterday we had a little rally in agency MBS prices and other fixed-income securities, if for no other reason than rates were tired of sliding higher. Corporate bond spreads traded to their narrowest levels for the year as record highs for U.S. equities and record lows for U.S. Treasury yields have driven investors to seek more yield. We closed the 10-year at 1.54% with both agency MBS prices and the 5-year T-Note improving .125.
The only semi-market moving news today comes out a 9AM Central Time with July's New Home Sales. Three hours later the Treasury will peddle $26 billion in 2-year notes. We're sitting at 1.55% on the 10-year and nearly unchanged on agency MBS prices - the dog days of summer.
Jobs and Announcements
In job news a growing and dynamic multi-state lending company headquartered in the Northwest seeks a qualified Chief Operations Officer to join its Executive Management Team. Will direct, plan and organize all activities of loan operations, to include underwriting, closing, shipping, funding and post-closing to ensure effective, efficient and risk neutral loan services to branch offices. An ideal candidate will be knowledgeable of the entire mortgage loan process including FHA, VA and RD requirements. Strong underwriting knowledge is a must and DE preferred. The company offers outstanding benefits and an informal team-oriented work environment. Inquiries & resumes can be sent to me at firstname.lastname@example.org; please specify opportunity.
And in the "new products" category for brokers, American Advisors Group launches its AAG Advantage Jumbo Reverse Mortgage loan to wholesale partners in select states, for properties up to $6 million. "This unique reverse mortgage loan can be used for some Non-FHA approved properties such as Non-FHA approved condos, opening up more options for brokers and borrowers. The AAG Advantage is a lump sum fixed product with full draw available at closing and no restrictions on first-year proceeds. If you are already a licensed mortgage broker, there is typically no additional licensing needed, move forward with reverse and become a partner in as little as 30 days."
STRATMOR's new monthly Insights Report is proving to be a must read for virtually all mortgage professionals. Each month's Report is filled with data and charts derived from STRATMOR's proprietary mortgage industry research and consulting practices that provide lenders with valuable information to help benchmark their performance and run their business better. This month's STRATMOR Insights features commentary from Senior Partner and head of the firm's Mergers and Acquisitions (M&A) practice, Jeff Babcock, that looks at the importance of "character" in M&A activity, and includes five crucial behaviors that support successful acquisitions and five negative behaviors that could scuttle deals. In addition, the August Insights Report presents data related to underwriter and other back office personnel compensationand the impact on borrower satisfaction when the loan originator attends the closing. Click here to download the August 2016 issue of STRATMOR Insights. To sign up to receive the report each month, please click here.