Feedback on Risk Retention and QRM Definition; Short Sale Delays; Loan Servicers Blamed for Foreclosure Crisis; Lender Bulletins

Remember today is Ash Wednesday, the first day of Lent.

This commentary has made comments in the past about how reverse mortgage originators could find the Gray Panthers or AARP protesting outside their house one morning - which doesn't look good on the evening news. Unfortunately for HUD, that is not far from the truth: HUDAARP 

As the industry vet who sent this to me quipped, "Well, at least Fannie & Freddie didn't blame the brokers for the foreclosure mess!":  Loan Servicers to Blame for Foreclosure Crisis

Anyone seeing this headline probably did a double take: "FDIC Announces Settlement With World's Foremost Bank." It turns out that it is in Sidney, Nebraska - but even the initials could turn some banking heads. "The FDIC announced a settlement with World's Foremost Bank, Sidney, Nebraska (WFB), for alleged unfair and deceptive practices in violation of Section 5 of the Federal Trade Commission Act as well as violations of the Truth in Lending Act. The FDIC also issued its list of state nonmember banks recently evaluated for compliance with the FDICCRA 

The relationship between a lender and a Realtor is a complex one, but with the focus turning more and more to a purchase market it always helps to know who the players are.  Keller Williams Realty announced that it is now the second-largest real estate franchise in the United States based on the total number of sales professionals, surpassing Century 21, according to research conducted by REAL Trends. "The company claimed the number two spot with 77,672 U.S.-based associates at the end of 2010, just two years after claiming the number three spot from RE/MAX International...Including its presence in Canada, Keller Williams closed the year with 79,315 associates and 701 offices" and has international plans.

The discussion about Qualified Residential Mortgages, those not included in risk retention calculations, continues. Martin at Acris Solutions wrote: "Rob, this whole QRM talk of 5% retention all the way down the supply chain is ridiculously impractical.  Like industry volume stats that inaccurately sum loans multiple times, retention requirements imposed on each party could create reserves of as much as 20% (from the broker, the wholesaler, the investor, and the security issuer). Perhaps retention ought to be born purely by the issuer, who in turn will demand quality measures across all bands of production that help manage risk and ultimately ensure securitization performance." Paraphrasing, "The issuer would hold the riskiest pieces, taking first losses but profiting on the high-side for expected, or better than expected, performance. The rating agencies, dealing with unaccountability and conflicts of interest, should be subject to stronger SEC oversight, agency reps and warrants, rating insurance, or perhaps ratings derived by an automated underwriting engine, developed and maintained by a consortium of issuers, Wall Street underwriters, rating agencies and a government oversight committee. The investment bankers, who seem to have little accountability, are the ultimate brokers and represent a sector in the supply chain that ought to have skin in the game through stronger reps and warrants, retention, or performance based compensation.

"For midsize mortgage banks and wholesalers, a 5% retention requirement is not feasible in the absence of increased premium pricing. Buybacks are clearly a reality for this player in the mortgage supply chain, and stronger reps and warrants imposed since the financial meltdown hold many existing lenders highly accountable. Solutions may lay in loan or pool level insurance offered by the investor and paid by the correspondent lender, industry average lost reserve accounts maintained with the investor, reliable insurance to cover borrower level loan fraud, and/or a national report card with lender scoring based on Call Report data. Lastly, for loan brokers, imposing retention requirements at this level is financially impractical. Recent regulatory changes under the SAFE Act, RESPA, Reg. X, and the TIL's Reg. Z will statutorily reduce abuses imposed on consumers.    Holding brokers and originators accountable with transparent loan performance and fraud reporting via NMLS Call Report data hopefully will ensure bad players are effectively eliminated from the industry."

I received this question, if anyone out there has a tip: "Have you ran into firms having specific challenges as to how they will compensate retail LO's on Jumbo Portfolio and State Bond products that in some cases 'may' have lender paid comp that is below the predetermined level, and fixed commission structures that they have put into place for the LO's in their company?  It seems the Fed has recognized this challenge but has offered no logical approach besides stating you can't change compensation unless you can prove the additional cost to originate. Any thoughts?"

How are those short sales out in California going? According to Realtors, not so good: ShortSaleDelays 

PHH Mortgage will be offering a series of webinars covering the broker compensation changes including, "An Overview of the Federal Reserve Ruling on Loan Originator Compensation, PHH Mortgage's policies on lender paid compensation and Safe Harbor requirements, the impact and changes to SOAR, and How to prepare the GFE." PHH's clients have the links to the sessions, which are on Tuesday, March 22 11:30AM EST, Tuesday, March 22 3:30PM EST, Wednesday, March 23 11:30AM EST, and Thursday, March 24 2:30PM EST.

How about another webinar on LO comp? Mountain West, a west coast wholesaler, is offering one on March 14, 9-10AM PST. MWF 

Or another one, this one from vendor LoanSifter on the 15th, 2PM CST. LoanSifter

EverBank recently sent out a nine-page "Broker Agreement Loan Originator Compensation Addendum" to its broker clients. "This Loan Originator Compensation Addendum to the Broker Agreement is entered into by and between EverBank, a federal savings association organized and existing under the laws of the United States of America ("Lender") and..." If I am reading the verbiage correctly, though EverBank doesn't need to see a broker's plans as to how LO's will be paid, it now has the right to audit the broker's payroll with regards to its loans.

CitiMortgage rolled out its "Ineligible Originator List." Please check it for any list additions that may affect your ability to sell CitiMortgage loans.  This list shows brokers, correspondents or other loan originators whose loan originations (or who have any role in the origination) are not acceptable to CitiMortgage for purchase."

Caliber's guidelines surrounding the allowable age of appraisals have changed to 60 days for conventional loans and 90 days for FHA loans. For conventional loans, "The property must have been appraised (or inspected, if that is the level of property fieldwork recommended for an AUS-processed mortgage) within the 60 days that precede the date of the note. If the appraisal is more than 60 days old as of the date of the Note, a new appraisal must be obtained. This applies to existing construction only. New Construction appraisals must be dated within 120 days of the note." For FHA loans the 90 days applies to existing, proposed, and under construction properties.

It's becoming an ARM market, right? Home Savings of America told clients that it is dropping the standard margin on Government ARM loans from 2.25 to 2.0%. On the other hand, Bank of America has discontinued its FHA 3/1 ARM 2.25 Margin, FHA 5/1 ARM 2.25 Margin, VA 3/1 ARM 2.25 Margin, VA 5/1 ARM 2.25 Margin, FHA Streamline 3/1 ARM 2.25 Margin, FHA Streamline 5/1 ARM 2.25 Margin, FHA $100 HUD Repo 3/1 ARM 2.25 Margin, and FHA $100 HUD Repo 5/1 ARM 2.25 Margin loans.

Chase, as others have, has suspended its FHA and VA Buydown products - an unintended consequence of unclear paperwork issues.

Icon Residential, in compliance with the Federal Reserve Board's new rules regarding broker compensation, is providing brokers with a Lender-Paid Compensation Election Form. It allows brokers to select a compensation percentage, which will be applied to all lender-paid transactions. "The compensation selection you make will be applied to all eligible lender-paid transactions until the next open election period, which will occur on a monthly basis.  The compensation selection will apply to the specific branch ID identified on the form. Icon will require a separate, complete form for the home office and each branch office." Customers need them in by 3/18!

NewDay Financial, LLC announced that Doug Douglas has been named chief financial officer of the company. Most recently, Doug served as executive vice president of business processes for American Home Mortgage.  NewDay Financial is a VA-approved lender.  Information about its VA home equity and refinance loan programs is available at www.newdayveterans.com or over the phone at 800-995-0341.  NewDay Financial is also a HUD-approved reverse mortgage lender. Seniors can call 1-800-410-4201 for information or visit www.newdayreverse.com, where seniors and their family members can learn more about reverse mortgages, apply online or schedule a call with a reverse mortgage specialist.  In addition, NewDay Financial retail branch offices serve customers in select markets, including the Chicago, Philadelphia, Baltimore and Washington, D.C. metropolitan areas, as well as Austin, Texas.

Yesterday's results of the 3-year note auction were strong, but not strong enough to turn the market around. It drew the highest cover ratio (an indication of demand) since November, and the yield came in at about 1.30% - the risk free rate for 3 years, right? But with slightly lower oil prices, and no market-moving news, the 10-year note lost about .375 (3.55%) while the Dow closed up over 120 points. Overall, MBS volume held below normal.

Today, as with every Wednesday, we saw the MBA's Mortgage Application Survey for last week. Mortgage applications increased 15.5%, with the refi number up 17% and the purchase number up 12%. "An improving job market is beginning to pave the way for an improving housing market." Refi's accounted for about 65% of applications, and ARM loans are up to 6% of apps.

The day's major highlight, outside of watching oil prices (above $105 per barrel), is the second leg of the latest round of Treasury auctions with $21 billion in 10-year notes at 1:00PM EST (tomorrow is the 30-yr auction). On Friday we have Retail Sales (Feb) and Michigan Sentiment (Mar). We find the 10-yr sitting around 3.53 and MBS prices sitting around unchanged.

Customer Service at its finest...

Customer: 'I've been calling 700-1000 for two days and can't get through. Can you help?"

Operator: "Where did you get that number, sir?"

Customer: "It's on the door of your business."

Operator: "Sir, those are the hours that we are open."

Samsung Electronics
Caller: "Can you give me the telephone number for Jack?"
Operator: "I'm sorry, sir, I don't understand who you are talking about."
Caller: "On page 1, section 5, of the user guide it clearly states that I need to unplug the fax machine from the AC wall socket and telephone jack before cleaning. Now, can you give me the number for Jack?"
Operator: "I think it means the telephone plug on the wall."

Allstate Insurance
Caller: "Does your European Breakdown Policy cover me when I am traveling in Australia?"
Operator: "Does the product name give you a clue?"

On another occasion, a man making heavy breathing sounds from a phone booth told a worried operator: "I haven't got a pen, so I'm steaming up the window to write the number on."