Originator Compensation Lawsuits; REITs on the Rise; HARP Extension; Realtor Advertising; Lender Updates

In the old days, Realtors' advertising was simple and straightforward. Maybe even "old fashioned." Now? RealtorRap

Wouldn't it be something if this whole compensation thing was put on hold for months? Think of all the tens of millions already spent in attorney and operation costs, and the fact that many companies have already rolled it out. It is rumored that House Financial Services Committee Chairman Spencer Bachus is drafting a letter which will be mailed to Chairman Bernanke early this week and which specifically request that the Board delay implementation of the compensation rule and will site its inconsistency and vagueness as some of the reasons for the requested delay. In addition, a letter co-authored by Senators David Vitter from Louisiana and Jon Tester from Montana was sent Bernanke requesting a delay in the implementation of the Fed's loan originator compensation rules.

The industry is watching the lawsuits filed by NAMB and NAIHP. I received this note from one industry vet, "Where is the MBA in all of this? The MBA, in my opinion has a conflict of interest. Its biggest members are clearly the largest lenders, who are not mortgage bankers they are banks: the 'Banks that are Mortgage Bankers Association'. Pure mortgage banks are under-represented. If this Rule goes into effect and it is as bad as expected, the wholesalers are in trouble if they do not have a bank behind them. What are mortgage bankers supposed to do? Clearly, what is in the interest of Chase is not in the interest of any mid-size wholesale investor."

FHFA will not be giving up HARP for Lent. It announced an extension of the Home Affordable Refinance Program, which is administered by Fannie Mae and Freddie Mac, to June 30, 2012.  In addition, Fannie Mae and Freddie Mac will make the following adjustments to their programs: Freddie Mac will exempt HARP loans from their recently announced price adjustments and Fannie Mae will conform their eligibility date to May 2009.  The program expands access to refinancing for qualified individuals and families whose homes have lost value. Looking at the stats for loans with LTV's from 80-125%, HARP did about 190,000 in 2009 and 622,000 in 2010. FULL STORY

TMAC Mortgage Co filed with the SEC to raise up to $300 million from an IPO. The company said it expects to use all the net proceeds to buy agency securities, including fixed-rate residential mortgage-backed securities and adjustable-rate mortgage securities. Deutsche Bank, Barclays Capital and Credit Suisse are underwriting the offering. TMAC itself is a Los Angeles-based, TCW-managed REIT formed to invest in residential mortgage-backed securities. This is indicative of a growing REIT trend: since the beginning of December 2010, mortgage REITs have raised about $5bn new capital, which has resulted in about $40-$50bn of net demand for agency MBS. If demand for MBS's is strong and the supply is down, one would expect prices to increase and rates to drop.

Broadly speaking, a REIT (Real Estate Investment Trust) owns and manages a pool of commercial properties and mortgages and other real estate assets and its shares can be bought and sold in the stock market. Its tax designation leads to a reduction or elimination of corporate income taxes since it is required to distribute 90% of its income, which may be taxable, into the hands of the investors. Mortgage REITs seem to have bought several billion dollars of higher coupon MBS which had resulted in higher coupon MBS significantly outperforming lower coupon MBS over the past three months. Most of this is new production due to the need to take delivery of actual mortgage pools (instead of buying TBAs and rolling them) so that helps the price of new pools versus that of existing pools. Watch for REIT's to garner a fair amount of attention going forward.

On Friday the First National Bank of Davis, Davis, OK was closed by the OCC, which appointed the FDIC as receiver. Someone at the FDIC called The Pauls Valley National Bank, Pauls Valley, Oklahoma, who will be assuming all of the deposits. Up in Wisconsin, Legacy Bank of Milwaukee also found its stationary worthless, as it transfers its deposits to Seaway Bank and Trust Company, Chicago, Illinois. In an FDIC-assisted transaction, bids are placed for both assets and deposits. When it comes to deposits, the liabilities are either bid at par or a premium, with the majority done a par. The acquiring bank gets a period of time to reset the stated rate down on all or a portion of the liabilities. In addition, the acquiring bank may also choose to impose fees. Of course, dropping the rate and increasing fees, means the acquiring bank will face run-off of volume so one of the key assumptions in an acquisition is what the predicted deposit defection will be, which in turn is based on the age of the account, the type of account, current balance, current rate, market rate (or alternatives) and the amount of other services utilized by the account. Most run-off happens within 3 months.

Provident Funding told its broker clients that if they "fund at least five lender-paid loans with Provident Funding in one month in the same state, the percentage level can be adjusted for the next month."

This Wednesday Kinecta Federal Credit Union is hosting a meeting & WebEx presentation from 8:30-10:00AM PST at its processing center in El Segundo. Call 1.800.854.4600 for more information. Meeting Number: 926 212 908 / Meeting Password: regzeasy. Go to KinectaMeeting 

Flagstar announced its jumbo ARM program credit score is increasing to 720 under for most circumstances, and for the week issued updates on a slew of changes including an AMC requirement update for delegated clients, news on the execution of the VA Origination Statement, clarifications and new policies on FHA refi's, revised the FHA MIP and case number policy, tweaked the program for condos and rental income and closing in trust, and discontinued the SureClose eClosing and ACH Payment programs. Recently Flagstar lowered the application fees for all new broker and correspondents, and also lowered the net worth requirements. (Applications are now $50 and net worth requirements are $25,000 for brokers and $75,000 for correspondents.) And as this column previously noted, Flagstar issued information regarding comp plans. LO's must be sure to structure their compensation plans correctly because if they want to get paid under both borrower paid and lender paid models, they need to be set up under the hourly/salary/bonus structure. Most lenders are no longer asking for and reviewing comp plans, but rather having customers submit an agreement or individual loan disclosure that reps and warrants they will be paid according to the new rules. Flagstar still requires brokers to take advantage of safe harbor option to avoid steering by providing a disclosure on a per loan basis, although it is still awaiting a possible industry standardized disclosure. For the initial roll out Flagstar will limit brokers to one schedule per ID.

Essent Guaranty is seeing some good signs out there in the housing market, and in on 3/25 turn is "implementing a prudent guideline eligibility expansion in conjunction with expanded pricing options to enhance our value proposition to our clients. Essent now offers credit guidelines and Monthly and Single Premium rate plans covering both fixed and Non-Fixed rate loans for LTVs up to 97% and FICO scores down to 660. As a reminder, for Retail originations, Essent continues to have no additional guideline limitations for properties located in declining markets except for condominiums in Florida," and it has removed Michigan from its list of designated declining markets; this expands the business acceptable to us for Non-Retail originations.

Home Savings of America announced a reduction in its High Balance adjustment for the Conforming 30yr Fixed (CF30J) to .80 from 0.900. HSOA will now allow current market relocks 30 days after expiration, cancellation, or denial on FIXED products. ARM products will still require a 60 day window to relock at current market, but the standard ARM margin on HSOA's government ARM products has been reduced to 2.00 from 2.25. The company recently released a slew of other changes to FHA loans centered on refinance charges, seasoning on cash-out transactions, occupancy of former investment property, etc.

Here is some good news: Prospect Mortgage introduced a new jumbo program. ProspectJumbo

Pinnacle Capital Mortgage sent out a series of underwriting guideline updates which included an updated LARA policy, a clarification of contingent liabilities, clarified that the financed property limit is cumulative for all borrowers, an updated calculation of HELOC payment on subject property, etc.

Stearns told broker clients about the upcoming critical TILA dates. The Broker and Compensation Agreements have to be to Stearns by 3/25, loans funded by 3/31 can be done under existing rules and regulations, and April 1 things change.

NYCB sent out a series of product updates, dealing in part with Fannie's DU Refi Plus Program, life estates eligibility, warrantable condo conditional final project acceptance, etc.

MSI has posted a clarification of the FHA Guidance changes and imposes MSI overlays, a revision of  the MSI Minimum FICO for 5/1 Streamline ARM loans, more information on USDA announcements, etc.

What is the bond market focused on? One item that has really turned some heads recently was the letter from PIMCO's Bill Gross, stating that its Total Return Fund sold all of its Treasury holdings. Mr. Gross has been right and wrong in the past. One quote said, "PIMCO's not sticking around to see what happens when QE II ends" in June. Currently 70% of the Treasury's annual bond supply is being gobbled up by the Fed through quantitative easing - what happens if the purchases stop? Even with the turmoil around the world there is little "Flight to Quality" bid for US Treasury debt because the Fed is "busy printing dollars to create Inflation to solve our own debt crisis.

Investors are also worried about the potential impact on global recovery the event in Japan could produce. Japan is the world's 3rd largest economy, the 4th largest exporter, 3rd largest importer of oil and 5th largest importer overall, so concerns are running high - Japan's debt is already at 200% of GDP. Even before the earthquake, Japan's economy had been struggling to recover from deflationary pressures and investors are concerned the government has little room to borrow the funds needed to support massive rebuilding efforts. Look for rebuilding projects to eventually be supportive to economic growth, as disaster cost estimates are nearing $200 billion. Look for central banks worldwide to keep liquidity flowing into the system, as they work together to ensure economic growth and Japan are supported.

Here in the US, there is no scheduled economic news today, but tomorrow we have the Empire Manufacturing number. On Wednesday we have some Export & Import Price data, the Producer Price Index, but also the end of the Fed meeting - don't look for any change to rates. Thursday is Jobless Claims, Housing Starts & Building Permits, and the Consumer Price Index. On the 17th we have Industrial Production & Capacity Utilization, along with Leading Economic Indicators and the "Philly Fed" numbers.  FULL STORY

Six retired Irishmen were playing poker in O'Leary's apartment when Paddy Murphy loses $500 on a single hand, clutches his chest, and drops dead at the table. Showing respect for their fallen brother, the other five continue playing standing up.

Michael O'Conner looks around and asks, "Oh, me boys, someone got's to tell Paddy's wife. Who will it be?"

They draw straws. Paul Gallagher picks the short one. They tell him to be discreet, be gentle, don't make a bad situation any worse.

"Discreet? I'm the most discreet Irishmen you'll ever meet.  Discretion is me middle name. Leave it to me."

Gallagher goes over to Murphy's house and knocks on the door. Mrs. Murphy answers, and asks what he wants. Gallagher declares, "Your husband just lost $500, and is afraid to come home."

"Tell him to drop dead!'" says Murphy's wife.

"I'll go tell him," says Gallagher.