Amherst Explains Massachusetts Foreclosure Reversals; More on Citi's Originator Compensation Guidance; Lots of Lender Updates

Last week's Massachusetts' court decision, involving Wells Fargo and US Bank, is garnering lots of discussion in the press. As a quick refresher, the Massachusetts Supreme Court ruled against USB and Wells, upholding the opinion of the lower court that two foreclosures were invalid because the banks, acting on behalf of the securitization trusts, didn't prove they owned the mortgages.

Amherst Securities, however, argues that the ruling itself is not as negative as the headlines, and is unlikely to cause delays beyond that already being experienced. "The Massachusetts Supreme Court ruling does not question the validity of securitizations, it allows for assignment in blank and it provides a guide for what the banks would have needed to show to prove they owned the mortgages. Investors should also be aware that the two foreclosures questioned in this case were not done through MERS, and if they were, these issues may not have arisen."

Amherst goes on to say, "It is important to realize that if these loans were in the MERS system, which they were not, the chain of ownership would have been easier to prove. If a loan is in the MERS system, MERS becomes the mortgagee of record, as the nominee of the holder with the beneficial interest in the mortgage. When a loan is originated with MERS as the nominal mortgagee (or is assigned to MERS post-origination), MERS tracks all further mortgage loan and mortgage servicing transfers and other assignments until ownership or servicing is transferred to an entity that is not a MERS member. About 60% of the residential mortgages in the US go through MERS." To sum I up, "The main findings from the court were  that (1) mortgage had to be assigned to the foreclosing entity  BEFORE foreclosure, not after; and (2) the entire need of assignment has to be in proper order before the last assignment (to the foreclosing entity) can be declared valid."

I'd like to clear up a little confusion with Citi's announcement regarding compensation measures. Namely, as I mentioned, Citi reiterates that broker compensation may come from two sources, "borrower paid" and "lender paid."

In my effort to summarize the bulletin, things might have been confusing. Citi states that if the broker is being compensated under the "borrower paid" scenario, "the amount of compensation is negotiated between you and your borrower(s) and can vary from one transaction to the next. The borrower may use credits from the interest rate chosen to pay for third party fees, but may not be used to cover your compensation. The borrower may pay discount points to reduce the note rate. The borrower must pay the broker compensation from their own funds or from proceeds of the new loan. You may offer concessions, reduce your fees, or pay for tolerance violations." Under the "lender paid" program, "The amount of compensation will be based on a set percentage of the loan amount and cannot vary from one transaction to the next. The borrower may use credits from the interest rate chosen to pay for third party fees. The borrower may pay discount points to reduce the note rate. The compensation cannot come from the borrower. You may not reduce your compensation by offering concessions or paying for tolerance violations."

The Fed, who knows a thing or two about MBS's, having purchased $1.25 trillion of them, announced that it will consolidate its existing MBS pool holdings as Megas & Giants. These are pools the Fed already owns, so there won't be a buy or sell effect on the market or any direct impact on current originations, but there may be some ramifications "down the road."  FRBNY PRESS RELEASE

HUD has recently issued three Mortgagee Letters. HUD will begin collecting the unique identifiers assigned by the NMLS to individuals and entities participating in the origination of loans submitted for insurance by the FHA. Second, there is an extension of the temporary condominium policy guidance issued in ML 2009-46 A, which extends the 12/7-12/31 policy through 6/30/2011 for most programs. Third, HUD clarifies FHA's Quality Control requirements "in light of recent changes to the lender eligibility criteria for participation in various FHA programs," along with QC requirements for servicing transfers and loan sales, reporting of fraud and material deficiencies, and the required timeframes for mortgagees to review rejected applications. HERE ARE THE MORTGAGEE LETTERS

Wells Fargo got the word out to its broker clients about its HVE expiration date for the Freddie Mac Relief Refinance Mortgage Program. "Loans that qualified using Home Value Explorer (HVE) - rather than a full appraisal - must close prior to the expiration of the HVE value. Loans unable to close prior to the expiration date require a new HVE value or a full appraisal with a value that supports the transaction." Wells also alerted brokers as to changes to its environmental and serious hazards policies, along with some changes to "Allowable Donations from Entities on High Balance Conforming Loan Program Transactions."

SunTrust reminded its clients of the impending Reg. Z Truth-In-Lending (TIL) disclosure statement requirements, which take effect at the end of this month. "The revision changes the monthly payment schedule replacing it with a tabular summary, provides worst case examples if the interest rate and monthly payment can increase, and discloses that consumers are not guaranteed to be able to refinance their transaction in the future."

Flagstar recently made changes to its price adjustments on government loans for credit scores from 620-639, reminded originators that for loans with property addresses in FL, HI, and SC, are not currently required to comply with the SAFE Act until generally March. Flagstar also combined two price adjustments on government loans with FICO greater than or equal to 700 into one adjustment, and in a week will be changing the FICO/LTV and subordinate financing price adjustments on Agency products. Lastly, it introduced a new set of VA products for use when a borrower is paying off only existing mortgage debt, including seasoned secondary liens. "The new products will allow loan-to-value (LTV) ratios as high as 100% (calculated using the base loan amount)."

U.S. Bank Home Mortgage Wholesale Division clarified its position on active FHA loans in broker's pipelines after the end of December without FHA Direct Endorsement or Authorized Agent approval. "In order to proceed with these loans, not fully approved by December 31st, in your pipeline, you must transfer these loans to our CUSB channel. In a similar vein, as of 1/1/2011 you may no longer have access to the FHA Connection and are unable to remit your Up Front Mortgage Insurance Premium (UFMIP) on loans that were closed in your name. If you are selling the closed loan to U.S. Bank Home Mortgage, below outlines the procedure for USBHM to transfer UFMIP remittance to FHA (HUD) on your behalf."

Nationstar Mortgage got the word out to its broker clients about the recent changes in ordering new FHA case numbers through its system, the updated requirements for compliance with Fannie Mae's Loan Quality Initiative (LQI), and some Nationstar policy changes including that the broker submit a copy of the originator's license in each file, that both the loan originator's NMLS ID and state license number be verified during registration, prior to acceptance of the application. A copy of the state license must be included with the application submission.

Fifth Third adjusted prices, giving brokers good and bad news. Its pricing add-ons for conforming jumbo loans are decreasing (the current hit of .75% for purchase & rate & term will go from .75% to .375%, and the hit for cash out on a conforming jumbo will go from 1.75% down to 1.375%). But Fifth Third will start having an add-on of .75% for FHA jumbo loans (above $417K).

Union Bank's rate lock policy was changed slightly: "Purchase and refinance packages must now be received within 30 days from the date of rate lock.  Packages not received within 30 days of the lock date will be priced at the "higher of" pricing.  Purchases will be relocked for 60 days and refinances will be relocked for 90 days." Union Bank is also publicizing its 30-Year Fixed Jumbo mortgage which is available for loan amounts over $417,000 and up to
$5 million.

Synovus Financial said it plans to cut 850 positions and close branches (39 in the first half) in 2011, as the Georgia-based bank continues to cut back its operations to lower costs. Synovus cut 300 jobs last year, and has apparently posted eight straight quarterly losses

Lennar, based in Miami and the third-largest U.S. homebuilder, posted a smaller quarterly profit compared with last year. The company, which has operations in 14 states, reported earnings of $32.0 million versus $35.6 million a year ago. Revenue fell 6 percent and new orders fell 5 percent to 2,520 homes, although its stock is up about 25% in the last three months.

Bank of Internet signed a strategic alliance with Capital Markets Cooperative. "CMC patrons will take advantage of proprietary jumbo loan products with underwriting features that go beyond standard jumbo guidelines.  Backed by the strength and stability of Bank of Internet, $1.6B in assets, these unique jumbo products will allow CMC Patrons all over the country to increase loan production."

As you'd expect with rates at these levels, along with everyone's estimates for lower 2011 production volumes, MBS trading is way below "normal" - less than 50% of where it has been in recent months. We have a lack of market-moving data, Treasury auctions that commence today, and recent MBS "outperformance" relative to other fixed-income securities. That being said, MBS prices gained 7 ticks on the lowest coupons and were flat to lower on 5.5s on up. 10-year notes were better by about .250 in price (3.30%).

"If you can start the day without caffeine, if you can get going without pep pills, if you can resist complaining and boring people with your troubles, if you can eat the same food every day and be grateful for it, if you can understand when your loved ones are too busy to give you any time, if you can overlook it when something goes wrong through no fault of yours and those you love take it out on you, if you can take criticism and blame without resentment, if you can ignore a friends limited education and never correct him, if you can resist treating a rich friend better than a poor friend, if you can face the world without lies and deceit, if you can conquer tension without medical help, if you can relax without liquor, if you can sleep without the aid of drugs, if you can honestly say that deep in your heart you have no prejudice against creed, color, religion or politics, then my friends, you are almost as good as your dog!"