Even dumpsters can be turned into homes - but what about the comps? Is There Room For The Rat?
Rates are great, but no experienced loan originator, of sound mind and body, believes that a mortgage company should not make a profit on a loan. But in order to cover the extreme volatility in the last month, profit margins per loan have grown, and thus, as I am often asked, movements in the MBS market are not directly transferred to changes in rate sheet pricing. In addition, besides the volatility increasing the hedge cost, given how the cost of originating each loan has increased due to underwriting, regulatory, and compliance issues, margins have indeed gone up. Good Rates But
If you're a senior, and you read USA Today, what was your takeaway on reverse mortgages? What The Public Reads
If you're wondering about the latest on Mike Perry and Indymac (aka IndyMac), see Indy.
There are a couple big conferences coming up. In New England, the 24th annual New England Mortgage Banking Conference (NEMBC) is next week in Newport, Rhode Island. "Thriving in a Challenging in Market" is the theme ("Together we will navigate through the maze of industry challenges while identifying areas of opportunity. Learn more about the top regulatory issues facing our industry today such as Dodd-Frank, MLO Compensation and the Consumer Finance Protection Bureau and regulatory issues.") For more information contact Melody Bohl, Conference Director, at Melody@MelodyBohl.com or go to http://www.nembc.net/. Another is the Mortgage Bankers Association of the Carolinas 56th annual convention titled, "News You Can Use", in two weeks in Myrtle Beach, South Carolina. Contact Rhonda Marcum at email@example.com for more information. Details are available at www.mbac.org at "Upcoming Events". And the MBA is having its annual conference, of course, in Chicago in early October.
Basel III is back in the front page financial news. JPMorgan Chase's Jamie Dimon called the Basel III capital rules "blatantly anti-American." "He was referring to new capital requirements that call for banks to hold core tier one capital that equals 7% of risk-weighted assets. That number climbs to 9.5% for systemically important financial institutions like JPMorgan Chase, Citigroup and Bank of America." For a complete write up visit Forbes Chase Basel.
Many in the industry are waiting and watching for news on Bank of America's correspondent channel. There are the usual rumors about a buyer (Nationstar, Fortress Investment Group, HSBC, a REIT to be named later, etc.) but in the meantime a regional BofA rep sent a note out to clients addressing some key issues.....
"1. BAC's announcement to sell the Correspondent channel
is due to two key points. First, BASEL III - regulated financial institutions
worldwide are being held to universal standards set forth in the recently
announced BASEL III accord. US banks are particularly affected by Mortgage
Serving Rights (MSR's) levels as a percentage of BASEL III calculated Tier I
capital. In addition to the MSR segment, there are two other segments
that come into play individually and all three segments together are measured
against Tier I capital as well. With each of these segments, as well as the
three combined, there is dollar limits for each segment AND all three combined.
If you exceed calculated individual and/or combined segment dollar limits, the
institution has to hold additional capital.... In short, this becomes extremely
expensive, extremely unlikely. Each financial institution will be unique in
their management of these segments. The second key point and in concert with
#1, in BAC's decision to sell Correspondent Lending is our relationship to the
ultimate borrower/consumer. With pressure from the BASEL III accord, BAC and
other financial institutions have to decide how to allocate capital to meet
each institutions short, mid and long term strategies and plans. BAC is
committed to the consumer and deepening this relationship. With these two
points in mind, BAC decided that challenges presented from BASEL III accord and
consumer growth could best be met through the Retail channel going
The note goes on. "2. The BAC Correspondent channel has value and active discussions are taking place on its sale. Clearly this is a very sensitive topic and I cannot go any further at this time. I will ask for your trust on this and leave it at that for now. 3. For those that we Warehouse, everyone has asked about what will happen with the Warehouse group and function. It's business as usual. I know you would want to hear more, but it really is true, business as usual. As clients come up for renewal today, we are processing, reviewing and approving these renewals as I write this note to you. 4. Lastly, I want to emphasize that loans locked with BAC Correspondent today and in the future will be honored. Any decision about Correspondent Lending will protect and honor current and future pipelines and give plenty of time to decide how you want to handle future business." (Be advised that I cannot say whether or not this is an official BofA notices, or one person's thoughts.)
Perhaps some of the 30,000 folks who may be laid off from Bank of America could find a position with Quicken Loans. But only 500 of them, and they must move to Detroit.
Bank of America's correspondent clients, and yes, there are still
clients and a business channel, were reminded that, "Per current United
States Code (Title 38, Chapter 37, Section 3729) and recently passed Public Law
112-026, VA Funding Fees are set to decrease for VA transactions funded after
September 30, 2011." As lenders know, the fees and their changes are
dependent on loan purpose, whether the borrower is in the military or in the
reserves, the down payment, and whether it is a first-time user of the VA
program or a subsequent user. BofA's clients were told that "effective
September 1, 2011, VA will accept UAD compliant reports. Effective immediately,
Clients may use appraisals that are in either UAD or non-UAD compliant formats
when delivering FHA and VA loans to Correspondent Lending for purchase. Clients
are required to comply with the UAD requirements for FHA loans effective with
case numbers assigned on or after January 1, 2012. Correspondent Lending will
announce further UAD requirements for VA loans upon release of the official VA
Circular. Clients are responsible to ensure that all appraisals and properties
meet HUD and VA requirements."
GMAC Bank Correspondents were told that "all Conforming ARM products will no longer be able to offer a 40 year amortization term. The maximum term will be 30 years." GMAC's clients were also told that, "On transactions where the loan originator is paid by the lender, GMACB will permit a Principal Curtailment on purchase and refinance loans (in certain conditions) as a result of excess premium rate credit. The excess premium must be identified on the HUD-1 Settlement Statement and is limited to the amount of the excess premium rate credit (listed)." GMAC's bulletin went on to describe the details, and it is best to read it.
MetLife had the servicer-quality rating on its home-loan business cut by Moody's Investors Service. "The rating downgrade is mainly due to deterioration in call-center metrics for the customer-service department, indicating an insufficiently staffed customer-service call center," Moody's said today in a statement. "Abandonment rates in 2010 reached 30 percent for customer service, performance levels that are significantly worse than its peers." But the company is trying to expand, and in June, for example, the company agreed to supply KB Home with loans for first-time buyers. MetLife's servicer-quality rating was cut to SQ3+ from SQ2- by Moody's. The rating firm said it also withdrew the grade at MetLife's request: MetLife.
How about this economy? Last Friday the yield on the US 10-yr. Note hit 1.88%, based on a variety of factors. Really, are minor US economic releases really important when entire countries are in danger in Europe? Thus we find our low rates as investors continue to flock to US debt, in spite of the downgrade by S&P some time ago. Market concerns over Eurozone sovereign debt default and a weak U.S. employment report for August are certainly keeping rates low.
We still have this week's $66 billion sale of 3- & 10-year notes and 30-year bonds. The US Treasury's 3-yr Note auction went fairly well, and it is certainly worth taking a step back from and reminding ourselves, "Investors are tying up their money for 3 years at a yield of only .334%." 10-yr notes ended yesterday roughly unchanged at 1.93%, and MBS prices were roughly unchanged as well.
A pirate walked into a bar, and the bartender
said, "Hey, I haven't seen you in a while. What happened? You look
"What do you mean?" said the pirate, "I feel fine."
"What about the wooden leg? You didn't have that before."
"Well," said the pirate, "We were in a battle, and I got hit with a cannon ball, but I'm fine now."
The bartender replied, "Well, OK, but what about that hook? What happened to your hand?"
The pirate explained, "We were in another battle. I boarded a ship and got into a sword fight. My hand was cut off. I got fitted with a hook but I'm fine, really."
"What about that eye patch?"
"Oh," said the pirate, "One day we were at sea, and a flock of birds flew over. I looked up, and one of them pooped in my eye."
"You're kidding," said the bartender. "You couldn't lose an eye just from bird poop."
"It was my first day with the hook."