From The Huffington Post...

"Just When You Thought You Knew Something About Mortgage Securitizations," says Zero Hedge, you are presented with this almost hilariously complicated chart: CHECK THIS OUT

In the last few months, any time I am speaking in front a group of originators, one of the primary topics is compensation. I wish that I could tell everyone that until the large retail shops and investors weigh in and set their own policies, there will be a lot of misinformation, rumors, and irate producers - and currently there are few definitive proposals. A few weeks ago, I wrote some suggestions about how things might work, such as paying agents an annuity similar to how insurance agents are paid. I heard one of the owners of a growing mortgage company tell his agents something that made a lot of sense. "I like my business model just fine. It works - I make money, you make money. I don't want that to change, and I am going to do my best to see that your compensation doesn't change. I don't want to walk into the office on April Fool's Day and have every loan officer's desk be empty."

The MBA is helping. Say what you will about the MBA focusing on the needs of large originators at the expense of smaller lenders, the MBA will be hosting its second seminar on broker compensation. "Back by popular demand, this encore MBA Workshop will cover the same valuable material as the sold out November 10th Loan Originator Compensation Workshop in Denver. It's a new world for loan officer and broker compensation. Regulation Z and the Dodd-Frank Act could significantly impair your ability to compensate loan originators based on loan terms. What is permissible compensation for loan originators and what is not? Discuss over twenty different potential scenarios at this workshop. At the same time, the Department of Labor's recent interpretation of loan officer overtime could further discourage your top producers, while potentially rewarding the others. Learn about ways to handle the challenges of converting sales staff to non-exempt status. Discuss arguments and supporting documentation needed to claim an outside sales exemption." READ MORE

And it seems that a large number of companies are a) having fantastic years, but also b) wary of the future, and are limiting overhead and hiring in spite of current capacity issues. "We're busy now, but who knows about 2011?" Instead of hiring new agents, many companies are bringing in outside, or internal, business coaches to increase the efficiency and "numbers" of their production staffs. I spoke to Kitty Cole, one such loan agent coach, who said, "It is quite an eye opener to see how an average, or an above average, loan producer can increase their numbers in just a short period of time by focusing on what they're doing that works, eliminating time and energy on what doesn't work, and being more efficient." (If you want to contact Kitty, write to her at

The manager of Wells Fargo's wholesale channel, which is still a presence for brokers, told everyone, "I know that specifically the new compensation rules issued by the Federal Reserve effective April 1, 2011, are a key priority. At Wells Fargo we have a team in place working with our Legal, Compliance, Finance and Leadership groups to understand the regulation and determine what changes must be made to comply with the new rule and compensate you fairly. We are exploring several different models to allow for reasonable compensation, while also allowing you to continue to serve customers and provide a viable mortgage origination channel in the communities you support. We are confident that Wells Fargo's final compensation plan will enable you to receive fair compensation without altering your business model. Our goal is to work with you and support the viability of the Mortgage Broker industry. While we don't have the specifics yet, we will communicate our "go live" plan in February 2011."

And if you want to check out the template for compensation, go HERE

Will private mortgage insurance be tax deductible after 12/31? My vote is "yes", as no politician wants to beat on the housing market (mortgage bankers yes, property values no, or at least not directly. The unofficial word that I have is that the "PMI deductibility" is on tap for a vote in the coming months, but that it is part of a larger bill. And we all know what happens then: Congress will probably delay things until the last minute. One authority wrote, "It is unclear how the "tax extender" bill, of which the MI deduction is one of many provisions, will play out.  We are still assessing the impact of the election, especially in the House of Representatives where the Republicans took control and campaigned on aggressively reducing the federal deficit.  It is very unlikely that anything will be passed this year.  The provision will likely be applied retroactively."

Paul Jacob with Banc of Manhattan addressed an article in Bloomberg yesterday, titled, "Home Ownership Gets Tougher as Lenders Restrict FHA Mortgages". Basically, what servicers wants to service an FHA or VA loan if they lose more than they're expected to earn from doing it? Mr. Jacob points out that "servicers have been getting even tougher on VA restrictions than FHA -- not because VA houses are worse (in fact, they're better overall), but because of the limitations of the VA guaranty.  VA premiums already prepay more slowly than FHA; this development will reinforce that tendency." You can read the original article HERE

There are 19 banks where the CFO's are going to be busy between now and January 7th. They'll be putting in some OT, given that the Federal Reserve announced that those 19 are required to undergo new stress tests to show they can weather another recession. Those that pass the tests can boost dividends paid to investors, but even if the bank had no plans to do so, they must pass the test showing they are in good financial health and that they have adequate capital to absorb potential losses over the next two years.

A rough outline of the Fed proposal calls for banks to clear three hurdles before increasing dividends and buybacks: 1) pay back all government capital, 2) pass an updated stress test based on a 5% Tier 1 Common calculation, and 3) achieve the 7% minimum common equity to risk weighted assets under Basel 3. I am sure they'll figure it out - after all, what is the Fed going to do if our top 5 banks fail? Regardless, yesterday banks' stock prices tumbled after the news came out: Bank of America's by 2.68%, Wells Fargo's 1.21%, JPMorgan Chase's 1.09%, and Citigroup's a little less than 1%.

Along those lines, the National Information Center has just released consolidated financial statements for bank holding companies. The figures provide a good early estimate of changes in bank assets and liabilities, and banks have been big buyers of securities backed by mortgages. After allowing securities to run off during the first half of 2010, the top 50 bank holding companies added almost $50 billion of agency MBS in the third quarter. Holdings of US Treasuries also increased by about $41 billion, or an additional 23%, during the quarter. The conclusion is that banks continue to increase their stock of liquid assets in response to regulatory changes.

Unlike the last several days, yesterday was relatively quiet in the fixed income and equity markets. Sellers of MBS's almost took the day off, only selling about $1 billion - maybe everyone is already 90% covered. Few on the origination side like intra-day volatility, so yesterday was a good day. But the Irish situation (is the country even solvent?) remains unresolved and talks with the EU, ECB and IMF begin today but with no deadline for the discussions. Yesterday's decline in US annual core CPI inflation to its lowest level on record suggests that the Fed will continue on with QE2.

But after taking a day off, fixed-income markets got hit again overnight. This morning we've already had Jobless Claims, which were practically unchanged at +2k to 439k from a revised 437k. We still have Leading Economic Indicators and the Philly Fed later this morning. But really, should the Philly Fed survey mean anything to rates when Ireland or Greece is crumbling or the entire world is questioning QE2? After Jobless Claims we find the yield on the 10-yr back up to 2.91% and mortgages worse between .125-.250.

Three rednecks were working up on a cell phone tower: Cooter, Ronnie and Donnie.  As they start their descent, Cooter slips, falls off the tower and is killed instantly. As the ambulance takes the body away, Ronnie says, "Well, shucks, someone should go and tell his wife."

Donnie says, "OK, I'm pretty good at that sensitive stuff, I'll do it."

Two hours later, he comes back carrying a case of Budweiser.

Ronnie says, "Where did you get that beer, Donnie?"

"Cooter's wife gave it to me."

"That's unbelievable, you told the lady her husband was dead and she gave you beer?"

"Well, not exactly", Donnie says. "When she answered the door, I said to her, 'You must be Cooter's widow.' She said, 'You must be mistaken.  I'm not a widow.' Then I said, 'I'll bet you a case of Budweiser you are.'"