Originator Compensation FAQ Part V; FHA Anit-Flipping Waiver Extended; HUD Issues Guidance on New FHA Remittance Process
It is the last day of January already? Time flies. This year we have 4 unusual dates: 1/1/11, 1/11/11, 11/1/11 and 11/11/11. Is it a coincidence that you can take the last 2 digits of the year you were born, plus the age you will be this year and it will equal to 111? Maybe this is another Fed regulation...
Of great interest to banks is that the FASB announced that it was dropping a proposal to mark bank loan portfolios to market after a lengthy effort by the banking industry to kill the proposal. Instead, the board will use an amortized cost model, rather than one based on fair value, to measure "financial assets for which an entity's business strategy is managing the assets for the collection of contractual cash flows through a lending or customer financing activity." FULL STORY
Companies are certainly hiring out there. Altamont Home Loans, part of Atlantic Home Loans, is hiring in the San Francisco Bay Area: "experienced, high-energy loan officers with a strong desire to dramatically grow their business and personal income. AHL has been around since 1989 and is licensed in 11 states, and provides its loan officers with "the latest technology, phenomenal support, exceptional compensation plans and access to a responsive management team that understands and promotes entrepreneurial spirit. Please send inquiries to careers@atlantichomeloans.com.
Consumer Loan Services is looking for a mid-level Secondary Marketing manager in the Wisconsin area. (The company is a credit union service organization CUSO mortgage operation owned by Marine Credit Union.) Originations come from Marine Credit Union but also from credit unions and small banks in 7 states. CLS is also building a portfolio by private-label servicing for its correspondent clients, a good niche these days. If you're interested contact the president Jay Garten at jay.garten@consumerloanservices.com.
A search is on for a National Underwriting Manager position, located in North Carolina, along with senior level wholesale AE's in Georgia, Virginia, and North Carolina. If you know of anyone, they should contact Paul Conway at pconway@conwaygreenwood.com.
Anyone interested in GSE reform and servicing compensation may want to listen in to a Banc of America Securities/Merrill Lynch call today at 7AM PST. Participant Passcode: 1239593, dial-in number US/CAN Toll Free: 1-888-797-2983. (It will also be available for the next 7 days, in replay form, at 1-888-203-1112, Passcode: 1239593.)
HUD issued a mortgagee letter focused on a change in the remittance process for over claimed amounts of FHA single family claims. This modification of the existing process is being made in response to the Department of the Treasury's mandate for all agencies to switch from their current lockbox services to Treasury's Pay.gov collection service. MORTGAGEE LETTERS
Here is a list you probably don't want to be on. HUD also announced the cause and effect of termination of DE Approval taken by HUD's FHA against HUD-approved mortgagees through the FHA Credit Watch Termination Initiative. This notice includes a list of mortgagees which have had their DE Approval terminated. http://edocket.access.gpo.gov/2011/pdf/2011-1527.pdf.
The FHA flipping waiver was extended. FHA's "temporary" waiver of the agency's 'anti-flipping rule' was extended through 2011. With certain exceptions, FHA regulations prohibit insuring a mortgage on a home owned by the seller for less than 90 days, but this is now waived. "Since the original waiver went into effect on last February, FHA has insured more than 21,000 mortgages worth over $3.6 billion on properties resold within 90 days of acquisition."
HUD recently provided additional guidance on claim filing requirements for FHA's refinance program for underwater borrowers. The program, begun last August, taps funds from the Emergency Economic Stabilization Act (EESA), administered by the Department of the Treasury, for partial payment of a mortgagee's unpaid principal balance. Mortgagees must first contact the government's designated claims processor, Wells Fargo, at ctsclaimsprocessor@wellsfargo.com to register and receive directions on how to submit claims. HUD CLIPS
Wells Fargo had a 25% residential mortgage market share in 2010. So their position on compensation is going to carry some weight. Even though the new compensation rules don't take effect until April Fool's Day, agents should know that investors will want loans priced prior to 4/1 to fall under the new arrangement. As an example, Wells Fargo told its broker clients that "Loan files priced under the current compensation rules will need to have a Wells Fargo application date on or before Friday, March 25, or will be subject to the new compensation requirements. All brokers will have to submit loan officer agreements to Wells Fargo by March 15, 2011- including if you are a sole proprietor or a partnership."
In addition, Wells got the word out that, "When the lender-paid model is used, the broker will need to select a quarterly compensation level. Several lender-paid compensation levels will be available that vary by state, and a minimum and maximum also will be set to ensure compliance with fair and responsible lending principles. More details about the quarterly compensation levels will be provided in the coming weeks - including the specific state levels and the minimums and maximums. This will help broker owners prepare their own loan officer compensation agreements. As you prepare to select a quarterly compensation level and prepare your loan officer compensation agreements, one factor to consider is your PerformanceWorks tier. Your PerformanceWorks tier pricing will be paid through compensation or price on every individual loan - regardless of whether you select the consumer- or lender-paid model. Lender paid loans - the 0.25 or (.125) will increase/ (decrease) compensation to the broker in addition to their chosen lender compensation level. Consumer paid loans - the .25 or (.125) will increase/ (decrease) price to the consumer."
Below is Part V of the compensation Q&A, put forth by the MBA and Fed. Remember that company's individual policies may differ from these to some extent, as there is still a lot of interpretation - just don't steer the consumer into a less favorable product.
Q16. In a rural area, because of lower loan volume, it is not economically feasible to lend unless loans are priced higher than in areas with more significant lending volume. To encourage loan originators to originate loans in the rural area can a higher commission be paid to loan originators for loans originated in the rural area than for loans originated in areas with more significant lending volume?
A. Fed Response - Yes. Providing for different compensation in an area because of costs is recognized in Commentary Section 226.36(d) (i)-3.viii as a permitted basis to vary compensation. Further, the Board notes in the supplementary information that it believes the ability to vary compensation based on the costs of origination is sufficient to address geographical differences.
Q17. May a creditor pay greater compensation to incent originators to make CRA loans?
A. Fed Response - No. Page 58523 of the supplementary information in the Federal Register notice indicates: "Some also urged the Board to permit higher compensation for certain loan types, for example, small loans, loans under special programs that assist first-time home-buyers and low- or moderate income consumers, and loans that satisfy the creditor's obligations under the Community Reinvestment Act (CRA). As discussed above, creditors can encourage originators to make small loans as well as large loans by setting a minimum and maximum payment for each loan if they compensate loan originators a fixed percentage of the amount of credit extended. See comment 36(d) (1)-9. The Board believes, however, that allowing compensation to vary with loan type, such as loans eligible for consideration under the CRA, would permit unfair compensation practices to persist in loan programs offered to consumers who may be more vulnerable to such practices."
Q18. A lender permits loan officers to lower prices on loans for various reasons, including meeting competition and customer relationship issues, subject to loan level and aggregate limitations. The compensation of the originator does not vary when prices are lowered and is based on loan amount. If a loan officer exceeds the permitted levels for lowering prices (i.e., fails to comply with company policy), can this be taken into consideration in a performance review to determine the loan originator's commission for an upcoming period?
A. Fed Response - No. Such action may become subterfuge for compensating an originator based on the terms or conditions of a loan.
The news out of Egypt on Thursday/Friday pushed bond prices higher & rates lower, and the stock market lower. MBS volume, depending on who you ask was either next-to-nothing or above the recent average. 10-yr notes rallied almost .5 down to a yield of 3.33%, and rate-sheet MBS prices were better by .250-.375, depending on coupon. One trader warned that "supply is nothing to write home about, yet still there and money managers have become better sellers into higher dollars."
As long as Egypt hangs in there, and Europe doesn't crumble, and China continues to buy our debt, the biggest economic event this week will be the employment report on Friday. But we do have a boat-load of US economic information prior to Friday. Today we've already had Personal Income and Consumption (Spending), along with the PCE Prices number. PI was +.4%, as expected, and PC was +.7%, stronger. Later, at 7:45AM MST we have the Chicago Purchasing Manager's numbers. After these numbers the 10-yr is at 3.36% and MBS prices are about .125 worse.
Tomorrow is Construction Spending and an ISM Index number. Wednesday the usual MBA index for apps but also the ADP private payroll change numbers and on Thursday the jobless claims numbers and also some kind of productivity number, another ISM number, and Factory Orders. Friday is the Big Dog: Nonfarm Payrolls (expected up about 100k) and the Unemployment Rate (expected at 9.4%).
Drinkin' and drivin' in Newfoundland.
Two Newfies, Archie and Harry, were driving down the road drinking a couple of beers.
The passenger, Harry, suddenly said, "Lord tundering...up ahead - it's a police roadblock!! We're gonna get busted fer drinkin' dese here beers!!"
"Don't worry," Archie said. "We'll just pull over and finish dese beers, then peel off the label, stick it on our foreheads, and trow the bottles under the seat."
"What fer?"
"Jist let me do de talkin', OK?"
So they finished their beers, threw the empties out of sight and put a label on each of their foreheads.
When they reached the roadblock, the police officer took a long look at the two of them and said, "You boys been drinkin'?"
"No sir," said Archie, pointing at the labels. "We're on the patch."