Cash for Keys: Paying Delinquent Borrowers to Vacate Homes; MLO Compensation in Australia; FBI Joins MBA to Fight Mortgage Fraud

Overheard at work: "AT&T to wed T-Mobile. Following the ceremony, there will be no reception."

Hopefully there is reception in rural areas - like Detroit. The Census Bureau has also been releasing the 2010 population counts for various states, including Michigan. Columbus and Indianapolis's populations rose. Nearby Chicago's population declined by almost 7% and Cleveland's dropped by about 17%. But Detroit lost a quarter of its population over the last ten years. 25%! Detroit now has the same population that it had in 1910, before the auto industry boom. "Now's not the time to look in the rear view mirror," said Robert Ficano, the Executive for Wayne County, home of Detroit. I think that I will frame that quote.

In addition, the U.S. Census Bureau reports that state government tax collections decreased about $14 billion to $705 billion in fiscal year 2010, following a drop of $66 billion in 2009. According to the survey, corporate net income tax revenue was $38 billion, down 6.6%, while tax revenue on individual income was $236 billion, down 4.4%. General sales tax revenue was $224 billion, down 1.8%. For more information about this survey Census.

According to a story in the Financial Times, "The five biggest US mortgage servicers were told this week at a private meeting with regulators to consider paying delinquent borrowers up to $21,000 each as part of a broader settlement of the foreclosure crisis...The industry-wide "cash for keys" program would involve the biggest servicers paying borrowers as an incentive to leave their homes." "Banks would pay borrowers who are more than 90 days behind on mortgage payments up to $1,000 to seek independent financial advice and up to $20,000 in cash as a "fresh start" payment towards living costs in a new home. They would have to vacate their properties quickly and leave them in good condition." Sheila Bair, FDIC chairman, raised the idea but people involved said it was not an official government proposal and was rejected strongly by some of the banks.

Anyone needing presentation material on "the shadow inventory" may want to use NAR's, which has a colorful state map: NARMap.

I continue to receive notes about current events. "Parts of the industry seem to disregard the fact that if legislation continues to cause broker numbers to dwindle, mortgage wholesalers will no longer find it feasible to operate, and the entire channel could disappear.  Local community attorneys will also be affected as the 'Big 4' will be controlling all parts of every transaction."

Another note: "Why is there so much press against the 30-yr mortgage? The 30-yr mortgage did not cause the credit crisis. This is yet another example of regulators not being able to find one single cause of the credit crisis, and swinging at different parts of our industry like they are some kind of piñata, and they have the blindfolds. If the banks want to better match their assets and liabilities by emphasizing ARM loans, that is fine, or if a borrower wants a loan to match their expected ownership period I understand, but saying that a 30 year term for a mortgage is bad is plain wrong."

David Dunham with The Center For Mortgage Professionals wrote, "I ran across this note on mortgage brokers in Australia in Wikipedia. Now while the dynamics of the market are different than here in the US, one cannot dismiss the elegance of a compensation schedule that rewards the originator for servicing duration. The longer the loan sticks, the more you can make. And, the lower initial comp keeps the scalpers at bay - more focus will be on client control and retention and originating more transactions instead of trying to get maximum yield on the initial transaction. 'Approximately 35% of all loans secured by a mortgage in Australia are introduced by mortgage brokers...Australian mortgage brokers do not usually charge a fee for their services as they are paid by the lenders for introducing loans. They are paid an up-front commission that is on average 0.66% of the loan amount and an ongoing trail commission that is on average 0.18% of the loan amount per annum paid monthly. These commissions can vary significantly between different lenders and loan products. Although mortgage brokers are paid commissions by the lenders this does not alter the final rate or fees paid by the customer as it may in other countries. Mortgage brokers do not have the ability to charge the customer a higher or lower rate and in return obtain a higher or lower commission.'"

Wednesday's commentary noted, "Regardless of the fee income from the reverse mortgage origination business, no one wants to run the risk of the Gray Panthers or AARP picketing their office during the Channel 5 news. Bank of America, Wells Fargo, and now Financial Freedom have ended that channel." That was slightly misleading, in that Wells Fargo eliminated the reverse mortgage offering in its wholesale channel, but not in Wells' retail channel. Per Wells Fargo, "the Retail Reverse Channel is alive and well with no plans to eliminate...Only a small percentage of our Reverse volume came through Wholesale."
 
Earlier this week I discussed 203K and HomePath programs. Some agents know about them, others don't, but RenovationReady (Renovation) may help. I can't personally endorse the product, but per the marketing piece, "RenovationReady is the single source for real estate agents, lenders, and home buyers to streamline the home renovation lending process. It provides free property pre-inspections to identify the scope of required repairs to meet lending standards and adds the property to our exclusive property search engine. Using pre-inspection renovation data, we provide specialized loan processing and transaction coordination procedures to close the loan within 45-days. On behalf of our lender-client, RenovationReady provides post-closing loan administration, draw disbursements, progress inspections, and fund control. These proprietary services guarantee the renovation project is on-track, statutory lien procedures are managed, and risks are minimized."

The FBI and the MBA entered into an agreement to combat mortgage fraud, and will make available a Mortgage Fraud Warning Notice as a "proactive means of educating consumers and mortgage-lending professionals of the penalties and consequences of this criminal activity." FBIMBAFraud.

GMAC's correspondent clients adjusted its 5/1 Government ARMs with 2/2/6 Caps by +.250 a few days ago. In addition, starting with yesterday's rate sheet GMAC, with perhaps a nod toward the way gasoline prices are noted, began offering a series of 3.99% and 4.99% note rates.

Davis + Henderson announced that it has entered into an agreement to acquire Mortgagebot LLC (Wisconsin) for a purchase price of $232 million of cash. Mortgagebot, founded in 1997, provides web-based mortgage point-of-sale solutions for nearly 1,000 consumer direct, loan officer and branch and call centers for banks and credit unions that originate mortgages. Davis+Hederson.

Parkside Lending, a west coast wholesaler, released compensation presentation materials to its brokers. Parkside is holding a webinar today at 10AM PST, along with a few next week, covering the pricing engine, the compensation administrative tools, and rate sheets. Brokers can sign up by emailing nancyjo@parksidelending.com.

In kind of a slow day, yesterday MBS prices worse/down by about .250. Looking at the big picture, in speaking to various groups, I am sometimes asked about the direction of rates. Lepre (LoanMine) writes, "Low Treasury yields are discouraging the addressing of the massive amount of public debt. Our nation is taking on debt at an unsustainable rate. The MegaMillions Jackpot last weekend was $201,000,000. Is that a lot of money? That is the amount of debt the Treasury Department will add every 70 minutes of every day this year. This week the House voted to cut spending $6 billion. That is 1.5 days' worth of deficit...Congress recognizes that the country's debt path is unsustainable. While the economics of the matter is straightforward - cut spending, raise taxes, or both - the politics is not. And if voters cannot insist, or are not going to insist, on fiscal sustainability, and if Congress is not going to control public finances on its own accord, then one must conclude that the fiscal process is lacking a necessary ingredient.

Have you ever wondered who first uttered the phrase, "You gotta be kiddin' me?" (Parental discretion advised.)

Well, it just so happens to have originated through the Father of Our country, way back when George Washington crossed the Delaware River with his troops.

There were 33 in Washington's boat.  It was extremely dark and storming furiously and the water was tossing them about.

Finally, Washington grabbed Corporal Peters and stationed him at the front of the boat with a lantern.  He ordered him to keep swinging it, so they could see where they were heading.

Corporal Peters, through driving rain and cold, continued swinging the lantern back and forth, back and forth.

Then a big gust of wind and a wave hit and threw Corporal Peters and his lantern into the Delaware.  Washington and his troops searched for nearly an hour trying to find Corporal Peters, but to no avail. All of them felt terrible, as the Corporal had been one of their favorites.

Washington and his troops landed on the other side, wet and totally exhausted.  He rallied the troops and told them that they must go on.

Another hour later, one of his men said, "General, I see lights ahead."

They trudged toward the lights and came upon a huge house. What they didn't know was that this was a house of ill repute, hidden in the forest to serve all who came.

General Washington pounded on the door, his men crowding around him.

The door swung open, and much to his surprise stood a beautiful woman. A huge smile came across her face, to see so many men standing there.

Washington was the first to speak, "Madam, I am General George Washington and these are my men.  We are tired, wet, exhausted, and desperately need warmth and comfort."

Again, the Madam looked at all the men standing there, and with a broad smile on her face, said, "Well, General, you have come to the right place.  We can surely give you warmth and comfort.  How many men do you have?"

Washington replied, "Well, Madam, there are 32 of us without Peters."

The Madam said, "You gotta be kiddin' me."