MARI Says Loan Fraud "Significantly Understated"; Risk Retention Reform Issues; Jumbo Loan Pricing; Many Important Investor Updates
A Mississippi State trooper pulled over my brother on I-65. The trooper asked, "Got any ID?" My brother replied, "Bout whut?" How about "what the initial/informal volume reports are saying about April production levels?"
Well, on a scale of 1-10, January was a 5, February was a 6, and March was a 9. April seems to be coming in around an 8. So, for the most part, while we moved down a little from March, activity is still better than January and February.
Many regard this is as good news, given some of the dire "2010 will be 50% of 2009" predictions that mortgage banking analysts are promulgating. Still, we could see quite a drop off ahead unless guidelines loosen, properties appreciate, the job market improves, or rates drop significantly. So if you're not seeing any of those in your crystal ball, plan accordingly. READ MORE
Mortgage Asset Research Institute (MARI) states that reported incidents of mortgage fraud and misrepresentation by professionals in the mortgage industry are continuing to climb and increased by 7% from 2008 to 2009. Is it more fraud or better reporting of previously undiscovered fraud? Either way, MARI believes that mortgage fraud is "significantly understated". Florida has moved back into first place in the country for mortgage fraud and misrepresentation, followed by NY, CA, AZ, MI, MD, NJ, GA, IL, and VA. The top fraud incident type in 2009 - representing 59% of all reported fraud types - was application misrepresentation. Next were frauds related to appraisal and valuation misrepresentation, which increased from 22% of reported misrepresentation in 2008 to 33%. With an 11% increase, this is the most notable increase in reported fraud types in 2009. Thank you HVCC?
HERE is the release.
If you'd like to own a piece of Ellie Mae, you will soon have a chance. Ellie has filed papers with the SEC for an initial public offering worth up to $86.25 million. The company, which sells software to mortgage originators, has hired Goldman Sachs as the lead underwriter, along with William Blair, Keefe, Bruyette & Woods, Macquarie Capital, Piper Jaffray, and ThinkEquity. Maybe not so coincidentally, Ellie Mae reported earnings of $1.7 million on sales of $37.7 million in 2009.
Are mortgage companies really going to have to reserve capital (up to 5%) for securitized loans, thus constricting hedging and volumes & liquidity in the secondary markets?
CML America and Lenders One are garnering support for an amendment which would create a "zero category" of risk retention for "qualified mortgages" -- those mortgages that meet standard underwriting criteria. The amendment would mean that standard fixed rate, adjustable rate, and jumbo mortgages would not be subject to any capital charge. High risk loans (option ARMS, neg-am, etc) would remain the focus of the risk retention provision. CML and Lenders One recommend contacting your US Senator through their Legislative Assistant (LA) and telling the LA that not only are you a business owner in the state and that you are concerned about risk retention for mortgages in the proposed Dodd bill. "Very clearly state that Senator Landrieu has an amendment that permits risk retention for higher risk mortgages but exempts the kinds of products that had nothing to do with the mortgage crisis" and ask that they "support Senator support Senator Landrieu's amendment, and advise them that Senator's Stabenow and Hagen are also co-sponsoring." (It doesn't have an amendment number yet.)
According to Reuters (I guess that is one way to release mortgage pricing news), CitiMortgage sharply reduced rates on jumbo loans. The CEO announced that the company cut rates (raised prices) on 30-year fixed-rate and 5/1 adjustable-rate loans. "We are beginning to see a lot of interest in the jumbo market," Das said. "We want to demonstrate that Citi is a leader in jumbo mortgages and we believe that end of the market has been underserved," he added. Most banks are comfortable holding on to their jumbo loans - there are some nice spreads.
GMAC Financial Services, owner of ResCap, and who hasn't paid back its TARP money, reported its first quarterly profit ($231 million from the bank, but $162 million after including losses from other divisions) since receiving Troubled Asset Relief Program, or TARP, funds (which have not been paid back yet). And on Monday GMAC will rebrand itself Ally Financial Inc., thus matching one of its businesses, Ally Bank.
Universal Mortgage, a private mortgage bank in Wisconsin that's been around since the 1960's, will begin permanently closing the business this month, eventually eliminating about 100 jobs.
Fannie Mae has suspended its Permanent High Balance product lines, so most pricing systems are no longer offering them.
Bank of America correspondents were provided guidance from the investor on the Fannie Mae Electronic Appraisal Submission Requirements (Fannie's announcement 09-14 which introduced new requirements for submitting appraisals electronically). The latest indication is that it will be effective on or after July 1 and that Fannie is "developing the Collateral Data Delivery (CDD) service to accept appraisals and addenda in XML MISMO or ACI formats or first generation PDF format." BofA will require its clients to meet this requirement for all conventional loans regardless of AUS used, and that clients should start discussing these requirements with their appraisal providers now to confirm appraisal reports can be provided in acceptable XML formats (MISMO or ACI) or in first-generation PDF format (note: PDF formats are subject to a conversion fee).
Chase, and other investors, define a "non-arm's length transaction is one in which there is a direct personal or financial relationship among any of the parties to the transaction. A builder "model home" purchased for the intent of lease back to the builder/developer is an example that may be indicative of a non-arm's length transaction. A non-arm's length transaction includes a requirement that states if the property is newly constructed, the occupancy must be a primary residence. Since model homes are classified as new construction, and a builder "model home" leaseback is classified as a Non-Owner Occupied/Investment transaction, builder model-home leasebacks are not eligible for delivery to Chase.
Chase also stated its policies on short sales and forgiveness which apply to all conventional (Agency and Non-Agency), FHA and VA loans, regardless of underwriting method. Chase does indeed accept delivery of loans for home purchased through a short sale. But underwriters should be very aware of potential fraud. "When the buyer is purchasing a loan through a short sale transaction, the underwriter must obtain documentation directly from the current mortgage holder to evidence their authorization of the short sale, verify with the current mortgage holder that the short sale was negotiated directly with the Seller and that there were no third party negotiations, and review the HUD-1 Settlement Statement for unusual fees and payouts that might indicate possible red flags. Chase notes that borrowers may pay additional fees, including a short sale processing fee, payments to subordinate lien holders, delinquent taxes, etc., and that additional documentation requirements will apply.
SunTrust put out a handy-dandy "Frequently Asked Questions Guide" to compliance and RESPA issues. (Does the number of "frequently asked question guides" from various Federal agencies and investors mean that they manuals weren't thorough enough in the first place?) https://www.stmpartners.com/manual/cor/general/ComplianceFAQ.pdf SunTrust also reiterated its stance on FHA appraisals (Mortgagee Letter 2010-15) and effective for FHA case numbers assigned on or after February 15, the effective date of an appraisal, originally ordered as an FHA appraisal, cannot be before the FHA case number assignment date. "The effective date of an FHA appraisal may be before the FHA case number assignment date only if the appraisal was originally ordered for conventional lending, HUD REO or government guaranteed loan purposes, but was performed by a FHA Roster Appraiser and is being converted to a FHA insured mortgage, and the certification field in the Appraisal Logging Screen in FHA Connection is completed, when the appraisal effective date is more than ten (10) days prior to the case number assignment date.
Flagstar Bank told its brokers that it will no longer purchase loans where the loan amount on the Note does not match the approved loan amount on the Commitment Letter, although it will make an exception if the loan can be recalculated to support the base/gross loan amount on the Note. Otherwise, in order for Flagstar to purchase the loan, any loan, it must reclose with a lower loan amount. The investor also told folks that any Fannie HomePath loans with an appliance incentive destined for Flagstar must now be closed and funded with Flagstar on or before June 30, 2010. Various pricing engines have also released Flagstar's MyCommunity 97 High Balance product lines.
It seems that there are plenty of folks in the mortgage business looking for jobs. But there are also plenty of companies looking to expand, hire, or buy more loans. Guarantee Mortgage has gone from 150 loan agents to 250 loan agents in the last few years and did over $2 billion last year. The company, which is licensed in CA, WA, OR, CO, and HI, is actively looking for branches and agents. Contact Bob Siefert at bsiefert@gmwest.com.
American Pacific (CA) continues to expand as well, and continues to add branches west of the Rockies. With a relatively large branch and agent network, interested production folks should contact Kurt Reisig at kareisig@apmortgage.com. On the East Coast, Sidus Financial, a subsidiary of Yadkin Valley Bank and Trust, is looking for a vice president in Secondary Marketing: mid-level secondary candidate with good hedging experience (i.e. big national resumes are likely too big for this role), "a good fit may be # 2 at a larger organization that may be ready to lead the department, or the secondary department manager at a mid-sized company." Contact Paul Conway with a resume, why you'd like the job, and comp history at pconway@conwaygreenwood.com.
On the investor side, everyone wants to buy more loans, right? Here are a few that may be off your radar screens. Astoria Federal Savings, which has over $20 billion in assets and is a portfolio lender, is looking to expand its correspondent loan production. The company is looking for correspondent clients who originate jumbo ARM loans (wholesale or retail) in states like CO, CT, GA, IL, MD, MA, MO, NH, NJ, NY, NC, PA, SC, TN, TX, VA, DC, and WA. (Not in CA, AZ, FL.) Contact Randy Plankey at rplankey@astoriafederal.com.
Lake Michigan Financial, a credit union in Michigan, continues to be a "boutique investor without mass marketing". The company is purchasing 90% conforming and government fixed on a BE or mandatory basis, along with Agency high-balance, ARM's and jumbos (but nothing from CA, NV and AZ). Contact Mike Winks if you're interested: michael.winks@lmcu.org.
Yesterday was not a particularly busy day on mortgage trading desks, although rates were a little higher to start the day. Traders report that current coupon yields are above 4.40% and that the spread to Treasuries remains somewhat high. We did have a fair amount of news, all of it reflecting economic recovery. The ISM Manufacturing Index increased to 60.4 in April, up from 59.6 in March and 56.5 in February, and growing at its fastest pace since 2004. Construction Spending increased .2% from the revised February number (private construction spending - residential - fell 0.9% below February totals, but was more than offset by an increase of 2.3% in the public sector for education structures and highway construction).
This is mythical and deep... truly beautiful.
A man asked an American Indian, "What is your wife's name?"
He replied, "She's called Five Horses".
The man said, "That's an unusual name for your wife. What does it mean?"
The Old Indian answered, "It old Indian name. It mean 'Nag, Nag, Nag, Nag, Nag'!"