The FDIC released a list of orders of administrative enforcement actions taken against banks and individuals in September. For the most part, I doubt anyone wants to wind up on this list. Of the 82 "matters", there were 30 consent orders, 11 removal and prohibition orders, 26 civil money penalties, 1 cross guarantee liability, 5 prompt corrective action, 1 voluntary termination of insurance, 1 section 19 order, 5 orders terminating an order to cease and desist, and 2 notices of charges and of hearing. To view all orders online, visit the FDIC's Web page at and click on "Recent Orders".

The SEC reportedly published a letter its website today saying that lenders must disclose circumstances that they "reasonably expect" to have an "unfavorable impact" on financial results. The Bloomberg article noted that the SEC believes banks should set aside funds for litigation and "other contingencies when it is probable" that they will have losses. Chase, BofA, Wells, and Citi have set aside a combined $10 billion to cover buybacks. Banks should also disclose financial obligations that stem from packaging loans into securities. Sounds like a great project for the new intern...

MERS continues to be under the microscope, except now analysts are examining its role in commercial loans rather than in residential loans. Barclays published a piece on its role in the commercial sector. Historically, every time a mortgage was transferred, it was expected to be assigned. Traditionally, these assignments were handled via a paper process. After a CMBS (commercial mortgage-backed security) deal was closed, it was expected that the underlying loans would be assigned to the respective trusts within a reasonable time frame (usually a year) following the deal closing date. In reality, many of the older deals have missing assignments, and the Barclays piece notes that it was estimated that less than 25% of the loans securitized in the conduit deals prior to 2000 were fully assigned to their respective trusts - thus the creation of "MERS Commercial".

On the residential side, of course, where a single mortgage could be assigned multiple times before being placed into the RMBS Trust, MERS is very active. Once the loan is closed and assigned to MERS, it does not need to be subsequently re-assigned multiple times, since MERS will act as lender in the local recording office and remain "the mortgagee of record" for the life of the loan no matter how many times the loan is sold or the servicing is transferred. So no post-closing assignments need to be prepared, reducing securitization costs and mitigating the risk of repurchase requests.

In commercial mortgage originations, MERS role is a two sided coin. A benefit is the ability to have registration at the loan level (and not the property level) making assignment easier for multi-property portfolios and complex loan structures. However, in a workout situation a single registration might create additional issues (for example, if collateral is uncrossed and one of the underlying properties is sold at foreclosure auction, whereas the other remains as collateral in the CMBS trust). Barclays believes that any problems or issues with MERS on the commercial side will be very limited. "We believe there are legal remedies available to limit the negative effect. As such, there could be a scenario where MERS originated loans could see a possible extension in liquidation timelines by a few months, but this should not affect CMBS valuations on a fundamental level." In addition, foreclosures of commercial properties are still relatively low.

Fannie sent out two releases on Friday. One focused on servicing (which focused on the retirement of Payment Reduction Plan, clarification of the Mandatory Pre-filing Policy for mortgage loans in Florida, waiver of escrow deposit accounts, flood insurance requirements, and submission of underwriting/servicing review files), and one was a Lender Letter which told servicers that, effective immediately, "they are required to work closely with the Housing Finance Agencies (HFAs) as they assist borrowers in states with Hardest-Hit Fund (HHF) programs". Both can be seen in their entirety at .

Freddie issued basically an identical announcement detailing the requirements for a servicer working with HFA's. These programs provide temporary financial assistance to eligible unemployed and underemployed borrowers with options that help them make their monthly mortgage payments or restore their mortgage to current status through a lump sum reinstatement payment." Its fact sheet can be found at .

Months ago Wells Fargo Financial (the consumer finance division - like auto loans, unsecured loans, some real estate lending) announced it would eliminate 3,800 of its 14,000 jobs. 250 jobs, including 150 in Des Moines, were cut last week and will be this week as the functions are folded into other Wells Fargo mortgage and banking operations. "The total number of displacements will be lower than originally announced because of the number of employees moved into other Wells Fargo openings."
Bank of America correspondents were given some guidance where "large or unusual patterns of deposits are not consistent with the borrower's employment, earnings and/or savings profile". "In addition, for conventional and VA loan programs, the source of any earnest money deposits (EMDs) must be verified using the following documentation: A copy of the borrower's cancelled check and two month's bank statements (up to and including the date the check cleared) to evidence a sufficient average balance to support the amount of the earnest money deposit" and any large deposit to the account must be addressed.

ING adjusted its adjustment changes, and told wholesale clients about its one-time float down and advance lock changes. It removed the price adjustment for loans below $1.5 million, and for loans above $1.5 million it increased the adjustment to .75. "Pipeline loans below $1.5 million are eligible for removal of the old Loan Amount Price Adjustment of 0.50 as well as a one-time float-down to today's rates."

GMAC released five bulletins to its correspondent clients, a few of which involve relatively complex underwriting issues beyond the scope of repeating here. "VA Loans - Reporting Gross-Up of Non-Taxable Income when Qualifying Borrowers", "Client Guide Update - FHA Loan Programs", "Client Guide Update - Conventional Loan Programs", along with updating a closing settlement request form and the introduction of the conforming 10/1 LIBOR ARM.

A new rule, issued by the FRB and FTC, amends the Fair Credit Reporting Act (FCRA) regulations, and requires a lender that uses a credit report or score in connection with a credit decision to send a notice to a consumer when, based on a credit report or score, the lender grants credit on "material terms that are materially less favorable than the most favorable terms available to a substantial proportion of consumers." The new rule is referred to as the Risk-Based Pricing Rule, and compliance is required on applications received on or after January 1, 2011. SunTrust Mortgage is requiring that its correspondent clients comply with this new regulation for applications taken on or after January 1. "The Federal Reserve Board and the Federal Trade Commission have provided an exception for the mortgage lending industry, intended to streamline compliance by eliminating the need to determine who should receive a "Risk-based Pricing Notice", and the need to target such notice to those individuals. In exchange for streamlined compliance, in lieu of the "Risk-based Pricing Notice", mortgage lenders must provide a special notice to all consumer applicants. The notice must contain the consumer's credit score, as well as additional information about credit scores. SunTrust Mortgage has provided a model notice that incorporates the existing FCRA "Notice to Home Loan Applicant"."

Fifth Third correspondents had some condo news: 5 3 will accept a condo warranty provided by the correspondent lender, but still requires the completion and submission of a completed Condo Questionnaire for all loans secured by a condo property. "Fifth Third will accept alternative Questionnaire's, as long as the information contained in the Questionnaire is similar to the Fifth Third version. Fifth Third Correspondent will review all condo documentation to verify that proper procedures and documents were used to warranty the condo property based on Fannie and/or Freddie guidelines." Fifth Third also reminded clients of its "Appraisers Do Not Use List", found at

"Welcome back my friends, to the show that never ends. We're so glad you could attend, step inside, step inside." Both the GDP and the Employment Cost Index did little to change anyone's mind about this week's FOMC meeting. The bounce off of Wednesday price lows (and heights in yields) continued Friday, and with supply down somewhat mortgages "tightened" to Treasury rates. MBS prices finished the day better between .250-.375 with buyers (including mortgage companies buying back hedges) stepping in on very limited supply - only about $500 million.

This week has the potential to be very volatile. Tomorrow we have the elections here in the US, and an FOMC meeting tomorrow and Wednesday with the second round of quantitation easing (QE2) expected. Around the world we also have the European Central Bank, the Bank of England, the Bank of Japan and the Reserve Bank of Australia all meeting. We also have Personal Income and Consumption today, along with Construction Spending. Zip tomorrow during the elections, Wednesday has some ADP employment numbers and the mortgage application index, Thursday jobless claims and productivity, and then on Friday the unemployment numbers. Personal Income was -.1%, and Consumption was +.2%, along with some back month revisions - not dramatically different enough from expectations to move the markets much, given what is ahead of us. Rates have improved slightly from Friday's close, with the 10-yr down to 2.58% and mortgages better by about .125.


Since we're in the midst of the World Series, did you ever wonder why the strike out tracking sometimes has K's forwards and sometimes backwards?  A "K" sign backwards means a batter is struck out while looking and not swinging. A "K" sign pointing forwards means the batter struck out swinging.

(The following can be used for either party, and does not necessarily reflect my views.)

An elderly man suffered a massive heart attack. The family drove wildly to get him to the emergency room.

After what seemed like a very long wait, the ER doctor appeared wearing his scrubs and a long face.

Sadly, he said, "I'm afraid Grandpa is brain-dead, but his heart is still beating."

"Oh, Dear God," cried his wife, her hands clasped against her cheeks with shock. "We've never had a politician in the family before!"