LO Comp - The Gift that Keeps on Giving; European News Lowers Risk but Raises Rates
If you
have $100, maybe you can buy a house. For the next year, in some states buyers need a down payment of only $100 to purchase a
HUD-owned REO home. The buyer must be an owner-occupant, utilizing
financing insured by the FHA. Standard FHA underwriting guidelines apply, and
the sale must be for the full amount
of the current list price. (hmmm…) This is being done in the Denver and Atlanta
HUD regions, and can also be applied to an FHA 203k loan which can be used to
fund repairs and renovations on the home. The 203k program allows buyers to
finance both the mortgage and additional money for rehabilitation needs with a
single government-insured loan. Shop 'til you drop: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/reo/reohome.
I always
feel like I am opening a can of worms when I bring up LO comp. But the issue just won't die. I received this note:
"There seems to be some confusion out there among lenders on rebates. Who do they belong to? If a
lender is operating under a borrower-paid compensation plan, and there is a
rebate that exceeds the third party fee, some lenders seem to assume that it is
their money, whereas others' policies are to give the funds to the borrower
within the 1%/$2000 limit of a no cash-out refi. In our exciting new regulated
world, how can regulators allow different lenders to have different policies
with regard to excess rebate?"
In a similar vein, Home Savings of America spread the word that, "Under the Regulation Z LO Compensation Rules, Premium Points (amount above par) must be credited to the borrower and may be applied to borrowers 3rd party closing costs, per diem interest, escrow impounds deposits and lender. HSOA has made changes to our policy to allow for the payment of property taxes from excess premium pricing under certain conditions. Once the premium points have been applied to the 3rd party closing costs, per diem interest, escrow/impounds deposits and lender fees premium points may be applied to property taxes that are current and due at closing. Premium points cannot be applied to the payment of any delinquent/past due property taxes. Premium Points cannot be applied to property taxes for FFG products or for properties located in the state of TX. Premium points cannot be applied to broker fees. Borrowers are not allowed to receive a credit for the excess premium at closing.”
Recently
the commentary noted, "Lenders say they are charging relatively higher
mortgage rates because of tighter lending standards, falling home prices and a
lack of capacity to process new home loans, all of which have increased costs.
And the Fed can't mandate that, right?"
Someone
wrote in, “Yes, lenders have the flexibility to easily charge more or less at
any time they desire and also to derive that compensation from both the
borrower AND through the sale of the loan. Unfortunately
the 'Fed' via Dodd Frank HAS mandated exactly the opposite for mortgage brokers.
Brokers can only change their compensation at specific intervals determined by
the wholesalers they work with. The flexibility to change compensation is
either good for both, or it's not. In addition, brokers can only derive
compensation from the lender or borrower, not both like banks do. Clearly
for the borrower, having the flexibility to pay broker compensation both
directly and through lender compensation is an advantage. Yet the
discrepancy in both setting compensation and how it is paid exists. Begs
the question why? The reason brokers flourished is because they proved
their worth to the consumer. Obviously these many obstacles imposed on brokers
have contributed to their reduced numbers. Licensing requirements are another
impediment to brokers’ ability to expand while banks have no such limiting
requirements, yet the banks are unable to handle capacity so they raise their
rates and consumers pay more. So again, how has this helped the consumer?”
Here in
the Northeast Berkshire Hills Bancorp has
agreed to acquire The Connecticut Bank and Trust Company for approximately
$30mm in cash and stock (138% of Connecticut Bank’s tangible book). And in
North Carolina, seeking to boost capital, Waccamaw
Bankshares will sell 11 branches, $180 million in deposits, and $98 million
of performing loans to First Bancorp
for a 1.5% premium.
Looking at a little big lender/investor news, Bank of America issued a disaster update for the state of New York
over the remnants of Tropical Storm Lee. GMAC
Bank Correspondent Funding (GMACB) will begin to assess $125/loan fees for
missing Final Documents aged greater than 180 days based on the November 2011
Missing Final Document Report (which focuses on the Recorded Mortgage, Recorded
Assignment and Final Title Policy). And starting December 1, for conventional
conforming loan applications GMACB will require “successful submission of UAD
compliant appraisals to the UCDP prior to purchase as described in bulletins
CL11-090 and CL11-096. If using GMACB's VEROS Appraisal Management System
exclusively, no further action by you is necessary.”
Well, rates are up this morning. But
yesterday rates were up also, more on potential news from Europe rather than
U.S. economic news. (We did, however, have New Home Sales increase by 5.7% in
September – a five month high! The supply of homes at the current sales rate
fell to about 6 months, the lowest since April of 2010.) 10-year notes plunged .625
to 2.20%. Rate-sheet mortgage prices were worse by about .250. Mortgage banker
supply came in around $1.5 billion, just fine given demand from the Fed,
servicers and money managers.
The big
news overnight was from Europe, but here third quarter GDP was +2.5%, as
expected, although the price index was a little higher than expected. Weekly
Jobless Claims came in at 402k – hardly any change. (Later we’ll have Pending
Home Sales, and a $29 billion 7-yr note auction.) But across the Atlantic European
leaders agreed to boost the region's bailout fund and struck a deal with
private banks and insurers to accept 50%
losses on Greek bonds, along with foreseeing a recapitalization of hard-hit
European banks and a leveraging of the bloc's rescue fund to give it firepower
of 1 trillion euros ($1.4 trillion). Stocks
liked the European news, and with “less risk” in the world bond prices are
worse: the 10-yr is up to 2.30% and MBS prices are worse about .375.
Here is
part 2 of the thirty-one top things that you will never hear a Southern boy say:
15. I just couldn't find a thing at Wal-Mart today.
14. Trim the fat off that steak.
13. Cappuccino tastes better than espresso.
12. The tires on that truck are too big.
11. I've got it all on the C: DRIVE.
10. Unsweetened tea tastes better.
9. My fiancé, Bobbie Jo, is registered at Tiffany's.
8. I've got two cases of Zima for the Super Bowl.
7. Checkmate
6. She's too young to be wearing a bikini.
5. Hey, here's an episode of "Hee Haw" that we haven't seen.
4. I don't have a favorite college team.
3. You guys.
2. Those shorts ought to be a little longer, Becky Mae.....darlin'
AND THE NUMBER ONE THANG THAT YOU WILL NEVER HEAR A SOUTHERN BOY SAY:
1. Nope, no more for me. I'm driving!
If you're interested, visit my twice-a-month blog at the STRATMOR Group web
site located at www.stratmorgroup.com. The current blog takes a look at
Fannie & Freddie & the FHFA, and the changes they have in the hopper.
If you have both the time and inclination, make a comment on what I have
written, or on other comments so that folks can learn what's going on out there
from the other readers.