The Push for Simpler Home Loan Paperwork; NAR on QRM; Cross-Qualification Requirement
Seen on a doc drawer's bulletin board: "I don't mind coming to work. It's the 8 hour wait until going home that's killing me."
Here is some news of interest to start the week: there is a push to simplify the disclosure paperwork given to borrowers when obtaining a mortgage. Huh? What? The CFPB might actually combine mortgage forms, or make them simpler? SimplerPaperwork
But things have become more complicated in Montana, where the state adopted revisions to the "Montana Broker, Mortgage Lender, and Mortgage Loan Originator Licensing Act" which is now known as the Montana Mortgage Act. Will it be indicative of what is in store for other states? The revisions include provisions for the licensing and regulation of mortgage servicers, updated application and licensing requirements for brokers, lenders and originators, a reduction in the number of hours required for continuing education, changes to recordkeeping, reporting, bonding and disclosure requirements, and prohibitions against certain acts by mortgage lenders and mortgage servicers. Here is a copy of the adopted 2011 Montana House Bill Number90.
Kinecta Federal Credit Union, with $3.5 billion in assets, continues to make the news. It recently has expanded into the Northwest, Midwest and Southwest territories, and is still looking for wholesale AE's in Sacramento, Southern California, Washington, Idaho, Utah, Arizona, Colorado, Wisconsin, Illinois and the Northeastern US. The credit union has over 220,000 member-owners across the country, and obviously likes the wholesale channel. "Account Executives will develop and maintain relationships with wholesale and correspondent mortgage loan brokers to gain loan business." If you, or someone you know, are interested please send a resume to Erika Schlarmann at eschlarmann@kinecta.org.
Any time you see SunTrust, AIG United Guaranty, and "lawsuit" in the same story, it is probably worth checking out. The lawsuit was brought by SunTrust Mortgage, which alleged that UG refused improperly to provide coverage for insured mortgage loans that had gone into default. The Virginia court awarded attorney's fees and expenses in connection with the defendant's motion for sanctions, but denied motions to dismiss the action, to sanction outside counsel, and to provide an adverse inference instruction to the jury. The firm of BuckleySandler printed the opinion: SunTrustAIG
Also in the legal arena, and involving non-agency loans, lawyer Talcott Franklin representing mortgage- securities investors said they will send letters to American Home Mortgage Servicing and four bond trustees asking them to seek repurchases of loans made by H&R Block's Option One Mortgage. Should Option One be forced to buy back mortgages that failed to meet its contractual quality promises? It is not a minor question: H&R Block may face a maximum liability of $12.8 billion from mortgage repurchases.
NAR has issued its opinion of the potential implications of QRM. The public opinion period ends on June 10, and NAR's opinion, which includes, "...strong evidence shows that responsible lending standards and ensuring a borrower's ability to repay have the greatest impact on reducing lender risk, and not high down payments..." carries some weight. NAR
Who's buying dem mortgages? The National Information Center released consolidated financial statements for bank holding companies for the 1st quarter, providing additional information to the FDIC data to be released soon. Banks continued to add agency mortgage-backed securities from January through March to the tune of about $30 billion. This is a strong number, although not as notable as $38 billion and $48 billion in the 4th and 3rd quarters, respectively. For those interested in the non-agency MBS market, non-agency holdings declined $8.6 billion over the same period. Once again, looking at the move in non-agency amounts one wonders what would happen if Freddie & Fannie ceased to exist. The latest H.8 report from the Fed shows that domestic bank holdings of agency MBS have increased by $15 billion over the week ending on May 4. This latest spike brings the year-to-date spike in agency MBS holdings of domestic banks to $58 billion, mostly attributed to the purchases of large banks instead of small banks.
Last week the commentary had this quote from
a reader: ""With regard to the comment of bank sellers of REO requiring
cross qualification with a preferred lender, there are reasons beyond
building origination business that it may be required. Whether dealing with a
foreclosure or a short sale, the bank needs to be assured the buyer is
legitimate and will be able to complete the purchase in a timely manner.
Some lenders pre-approving a borrower on an REO may not be able to meet a tight
closing deadline. A ruse some of the foreclosure rescue companies use is to
provide purchase and sale agreement signed by a fake buyer with a fake approval
letter as a strategy to get a foreclosure delayed."
I received an earful. "What I'm constantly running in to as a LO is
my buyers not even having any chance at their offers being considered by a
seller due to the speed, ability, and "policies we have that require I
talk to the buyer" that these required cross-qualification loan officers
possess. If the performance of my buyer was really the only concern,
these cross-qualifying LO's wouldn't be trying to snake my buyers by putting
loan quotes together. Also, one "unintended consequence" of
this process is potentially resulting in lower sales prices of these homes and
the deterioration of our national equity due to the fact that the true highest
& best offer was not even considered due to the delays surrounding
cross-qualification. Sellers should review all offers, send out multiple
counters, accept an offer, then and only then complete their
cross-qualification before opening escrow. This will ensure that these
REO banks and short sale banks are truly netting the highest and best sale,
which will in turn result in the proper direction of home values in a truly
free market. When a home sells under market, it de-values every Note on
homes that is affected by this latest sale that becomes the latest sales
comparable, and it's a real problem."
Also, from another lender, "I have not seen an article about LO's saying they need a subprime product again or Alt-A product in order to continue doing business. Everyone in the business is hurting, but we're playing by the new rules. It is the Realtors who are asking for the riskiest products to make their money. These are the same people who demand 6% commission yet throw the loan officer in front of a bus if they charge 1.25 points (or 1.25% commission). In short, their true colors are shining once again. They seem unable to adapt to a lower commission when everyone else (appraisers, mortgage companies, etc.) are changing to the time. I cannot believe their 6% commission has not come under attack yet."
"I have to call BS on the comment of one
of your readers. Myself, having been an originator for 16 years and having
spent a lot of time dropping off doughnuts, attending Realtor luncheons, home
shows, presenting homebuyer seminars, and just plain scrounging for business,
I've noticed Realtors are quick to point out the legality of referring/sending
a borrower to a specific loan officer when they don't want to send anything
your way. I've also noticed they have no hesitation in pushing borrowers
toward their spouse, nephew, aunt, etc. Additionally, it's not uncommon for
builders to own their own brokerage, mortgage, or title companies. They write
their contracts to incentivize and steer borrowers into using all of their
services. The entire point of becoming a preferred lender is to build
origination and try to capture a captive market. Why would lenders knock
themselves out trying to become someone's preferred lender if it wasn't?"
And lastly, "It's really funny you mentioned this. Take a look at this and
let me know: www.Mylastoption.com and www.thelastoption.com and www.prolongmysale.com. I've had to start doing
RE again and started to see that my full-price offers from fully qualified
buyers weren't even being presented, or I don't even get a call or email back
from the listing agent. I've started turning in these brokers with the Board of
Realtors. Conversely, REO's have the opposite problem: turn in an offer, wait
for the listing agent to get a highest and best offer, and then I see it's
'double ended' or at least from a very close realtor. It must be nice to have
the listing and always be able to come in at highest and best offer. These REO
listing agents should have to publish all offers publically so everyone can see
what is happening. But the banks won't care as long as the property is sold,
which means no one will care and this will continue."
Focusing on more temporal things, we had a nice little rally on Friday. Traders attributed this to the opinion that the inflation numbers were not worse than they actually were, another Treasury auction was out of the way, weak commodity prices help the Fed keep short term rates stable, and so forth. By the end of the day 10-yr notes closed at 3.19%, practically unchanged for the week. MBS prices were roughly unchanged for the week.
Many agree that the "wildcard"
remains the situation in Europe, which includes Greek debt and the arrest of
IMF's Strauss-Kahn, and this might be the focus this week. But the U.S. is
set to hit its $14.3 trillion debt limit today. Over the weekend,
Republicans spelled out in greater detail what they want in return for
supporting an increase to the debt ceiling. Democrats warned of the likely
consequences of allowing the nation to default. Economic news this week is on
the light side. Today we have the Empire Manufacturing number, about half of
last month's. Tomorrow is Housing Starts and Building Permits for April, along
with Industrial Production and Capacity Utilization. Wednesday is the MBA's app
data, and the 4/27 FOMC minutes. Thursday is Jobless Claims, and Existing Home
Sales. Then on Friday are Leading Economic Indicators and the Philly Fed. FULL ECON CALENDAR
High school kids sure have it all figured out!
At a high school in Montana, a group of students played a prank. They let three goats loose in the school. But, before turning them loose, they painted numbers on the sides of the goats: 1, 2, and 4.
School administrators spent most of the day looking for No. 3.