I'll be standing in line Saturday in Austin, TX to enter the UT football game. For something non-mortgage related, but interesting from a human nature perspective, no one likes standing in lines. But there are experts on them, and the psychology of standing there.
I have been contacted by a metropolitan bank, wishing to remain confidential, looking for a mortgage originator with the ability to do private label loan originations, and preferably servicing too, on its behalf. The anticipated volume is $150-200 million per year, and very high standards of policies and procedures are expected. Leads are 100% retail and generated through bank branches and banking relationships. If you are the CEO of a company who is interested in offering these services, please email me at rchrisman@robchrisman .com.
On the job front, American Capital Corporation is searching for Sales Managers and LO's in California, Oregon, Colorado, Washington and Hawaii. They are also looking for Underwriters in Northern and Southern California. ACC has been around since 1994 and is a well-capitalized privately held mortgage banker doing over $1 billion annually, offering a "full product mix." The company already does both retail and TPO originations (wholesale is the ACBN channel) in California, New Mexico, Colorado, Hawaii and Oregon, and will be soon expanding into Idaho, Tennessee, Utah, and Montana. The company has some other good bells & whistles: e-mail Allen Cravello at acravello@amcapmortgage .com for more information or to send a resume.
Why are investors snapping up bonds backed by subprime mortgages? After all, not that credit rating agency' moves carry the same weight they used to, but S&P downgraded 187 AAA jumbo RMBS classes, noting higher re-defaults on previously cured loans and longer timelines required to liquidate nonperforming mortgages. These are pre-crisis jumbo residential mortgage-backed securities previously rated AAA. "The downgrades were primarily driven by increased losses due to an increase in our default and loss multiples at higher rating levels," S&P said, and found higher re-defaults on previously cured loans and longer timelines required to liquidate nonperforming mortgages. Some of those subprime securities are well priced!
But property values are not falling precipitously, so the collateral is safer. In fact, CoreLogic reported another strong month-over-month U.S. home price appreciation of over 16% (non-seasonally adjusted annualized rate) for July 2012. And of course the Case-Shiller Index, with its two-month lag, is showing improvement. CoreLogic points out that "Non-distressed home prices grew at a pace of 22.9% annualized. The YOY price growth through July was 3.8%, the biggest increase since August 2006. Year to date, CoreLogic shows home prices are up 8.1% through July, or 14.3% on an annualized basis."
Realtors and analysts know that, especially in the Western U.S., two major factors driving the strength in home price indices have been the drop in inventories and the decline in the share of distressed sales share relative to expectations. Moreover, the increased use of short sales over REO sales as the form distressed sale is providing further support to home prices. Have prices bottomed? Perhaps, but enough smart folks think they have, and this has helped alleviate fears of further "collateral damage" in subprime securities, and is thus helping demand.
How about home ownership in general - is it now in "stronger hands"? The real homeownership rate, defined as the percentage of households who own a home and are not 90 days or more delinquent on their mortgage, has fallen to 62.1%, the lowest level in nearly 50 years. (The Census Bureau's 65.5% homeownership rate overstates the real level of homeownership in the country since it counts all 3.8 million homeowners who are 90-plus days delinquent on their mortgage as homeowners.) Historically, the spread between the published and real homeownership rates has been slightly below 1%, even in a strong economic environment there is always some level of delinquency. But as we all know, the spread has widened from 1% to 3% due to the economic downturn, and understaffing at the banks who cannot deal with the huge inventory of delinquent mortgages and the complications of loan modification or foreclosure with so many parties involved. We also have lenders treading very cautiously, fearing fees, sanctions and even jail time (in Nevada) for not properly documenting the foreclosure process, and still some confusion from dealing with many Federal government attempts to intervene in the process like HARP and HAMP.
But a recent survey of 20,000 consumers conducted by John Burns Real Estate Consulting, and many surveys by others, confirms that the American dream of homeownership is still strong. And, believe it or not, time goes fast, so in states where the foreclosure process has moved more smoothly than others (such as Arizona and Texas), foreclosed homeowners are returning as homebuyers after the three-year waiting period required by most mortgage programs.
Remember that the application of Basel to banks will significantly increase the risk weighting for mortgages designed for first time homebuyers - that won't help. Declining home ownership can constrain economic growth and mortgage lending, including declines in some home equity portfolios. On the positive side, it should create long-term growth opportunities in apartment, credit card, and auto lending - but not many of those folks read this commentary.
What about young folks - where are graduates taking their underwater basket-weaving degrees? Though they're in deeper debt than ever before, new college graduates still need to live somewhere. Conventional wisdom holds that these bright young minds flock to centers of influence like New York, Boston, and San Francisco, all known for being "cool" cities with high concentrations of "smart" people. Census data from 2000-2010 suggests otherwise, however: Las Vegas, of all places, recorded growth of 122,304 recent graduates, which represents a staggering 78.4% increase. Rounding out the top five metropolitan areas playing host to new graduates were Riverside-San Bernardino, CA; Raleigh-Durham, NC; Austin, TX; and Charlotte, NC-hardly perceived to be hotbeds of commerce and culture. In contrast, New York ranked 38th in terms of new graduate growth, while San Francisco ranked 48th, just above Detroit.
It's no secret that it can be cripplingly expensive to live in one of US's major urban centers, especially for recent graduates in a weakened economy. This demographic is more likely to settle down in places they can actually afford to live, and companies looking for skilled labor are realizing that their recruiting options are no longer limited to the primary coastal cities and Chicago. As an added bonus, it's cheaper for companies to operate in second- or third-tier cities with less expensive commercial real estate. As recent graduates' and companies' presence in these cities grows, they tend to develop culturally, making them more enticing places to live and further fuelling growth.
From a regional perspective, the Sun Belt cities have experienced the greatest development, with metropolitan areas like San Antonio, Orlando, Nashville, and Phoenix all recording recent grad-growth of over 40%. Rust Belt cities like Cleveland, Buffalo, and Detroit, despite the attraction of low living costs, all recorded growth of 20% and under, nearly 10% below the national average. New graduates, it would appear, are as averse to northern winters as the rest of the aging population.
about some recent Fannie Mae and Fannie-related updates?
Fannie Mae announced a week or so ago that 22 of its servicers had produced results in its Servicer Total Achievement and Rewards (STAR) Program for the first half of 2012 that put them at or above the median levels for others in their peer group. STAR was created in 2011 to establish servicing standards and recognize Fannie Mae servicers in their overall performance, customer service, and foreclosure prevention efforts. The program measures servicers across key operational and performance areas relative to their peers and acknowledges their achievement through star designations. Servicers are divided into three peer group based on the size of their servicing portfolio and their performance is measured against other servicers in their peer group. Nineteen servicers achieved Three Star status for their performance in 2011. In announcing the results Fannie Mae made special mention of Fifth Third Bank's performance which came closest of the servicers enrolled in the program to reaching the fourth star for its 2011 performance.
Wendy Barnett with DataQuick reports that, "Fannie Mae has no bulletin to be found, but has been notifying clients in person and by phone that Custom DU (CDU) will no longer accept new submissions after September 30, 2012 and resubmissions after December 31, 2012. This was a tool that used the DU engine to also provide decisioning on non-Fannie Mae loans. DataQuick has been providing a solution for several lenders, with our Mindbox - Art Enterprise component framework for Pre-Qualification, Product, Pricing and Automated Underwriting. Your readers can contact me at wbarnett@dataquick .com.
Fannie Mae plans to provide propriety feedback on appraisals submitted to the Uniform Collateral Data Portal that will address the quality of the data within the appraisal as per Fannie policy and delivery requirements. The feedback will be available in the form of opt-in monthly reports beginning in October 2012 and via the UCDP as of January 2013.
Fannie has revised its policies on regarding the transfer of document custody such that both the current and new document custodians must provide at least 30 days' written notice in cases where the servicer remains the same. Fitch, Inc. has been removed from the list of financial rating firms that may be used to satisfy the document custodian's eligibility requirements; clients should use either IDC Financial Publishing or Kroll, the latter of which was previously known as LACE.
Fannie Mae has relaxed its guidelines on custodial accounts such that servicers are no longer required to provide the GSE with notification of a depository's ineligible status, ask for approval to hold custodial funds in a depository that was previously ineligible, or request the implementation of a different remedy for a depository that is currently ineligible. Under the previous policy, servicers were permitted to commingle T&I escrow funds with all remittance types in the same custodial accounts, but the updated policy allows servicers to maintain multiple T&I custodial accounts for the purposes of depositing hazard insurance loss drafts, partial payments, and/or unapplied funds. Servicers should identify whether the custodial account is a replacement for an existing account using the P&I and T&I Letter of Authorization forms (Fannie Form 1013 and 1014), which have been updated accordingly and can be found on www.efanniemae.com.
Fannie is set to release DU Version 9.0 over the weekend of October 20th. As there is a mix of changes that can be viewed as a negative or positive, but overall they say approvals will be consistent with Version 8.3. Some of the highlights are reportedly "Limited Review for Condominiums is going to be maxed at 80% (currently at 90%), Retirement of Expanded Approvals (with the exception of DU Refi Plus), Maximum LTV/CLTV for ARM Purchases and Rate/Term will be reduced for 97% to 90%, All other ARM programs will receive a 10% reduction in the maximum LTV/CLTV, Two-Unit Purchases INCREASED from 80 to 85%LTV, and Self Employed Borrowers will be required to produce TWO years of 1040's (currently allows for 1 year). Put another way, Fannie Mae tightened some underwriting standards based on performance data. In addition, the agency will end its flexible FannieNeighbors program supporting underserved areas.
Fannie will be hosting a webinar on Version 9.0 of Desktop Underwriter that will cover the updates to the system's credit risk assessment and eligibility requirements on October 20th. Interested parties can register here.
Wednesday was a ho-hum day, which is fine. Investors are keenly
interested in the fact that residential MBS trading volumes are sliding lower,
as echoed by the MBA application figures. Perhaps refi's are indeed slowing
down, and not being replaced with purchases? U.S. markets seemed to fret more
about today's ECB monetary policy decision. The U.S. 10-yr closed at 1.60%.
It's a whole new ballgame today, however. We've had the ECB announcement, and the ADP numbers (+201k - stronger than expected) which are usually of questionable validity for tomorrow's official payroll numbers. (NFP is projected at +125k with the unemployment rate unchanged at 8.3%.) We've also had Initial Claims (377k down to 365k, lower than expected), while 10AM EST offers up Non-Manufacturing ISM for August, projected little changed at 52.5 versus 52.6, and the Treasury's announcement at 11AM EST of next week's auctions of 3's, 10's, and 30's. In the early going rates are higher with the 10-yr at 1.65% and MBS prices worse .125-.250.
The following list of phrases and their definitions might help you understand the mysterious languages of science and medicine. These special phrases are also applicable to anyone working on a Ph.D. dissertation or academic paper anywhere. (Part 1 of 3)
"It has long been known" = I didn't look up the original reference.
"A definite trend is evident" = These data are practically meaningless.
"While it has not been possible to provide definite answers to the questions" = An unsuccessful experiment, but I still hope to get it published.
"Three of the samples were chosen for detailed study" = The other results didn't make any sense.
"Typical results are shown" = This is the prettiest graph.
"These results will be in a subsequent report" = I might get around to this sometime, if pushed/funded.
"In my experience" = once.
"In case after case" = twice.