Freddie's PR Nightmare; Servicing's Negative Earnings Impact; More on MetLife's Fade
Do you think it takes a long time to have a loan purchased by Wells or MetLife? Try running the world's longest lab experiment, begun in the 1920's.
Fortunately finding a job in mortgage banking doesn't take eighty years. In Toms River, New Jersey, Glendenning Mortgage currently has an opening for a DE Underwriter to join its team. Business has been too good for Glendenning, which has found itself outsourcing a portion of its underwriting needs - it would like to bring that back in-house entirely. The successful candidate should be highly experienced in FHA, VA, USDA and Conventional underwriting guidelines and will join a firm that has built a reputation for service excellence since its inception in 1989. Interested candidates may contact the firm's president, James Anzano, for details visit its website at: www.glendenning.com.
And for job seekers on the West Coast, an expanding Orange County, California mortgage banker is seeking a Senior VP of Credit Policy. "The candidate must have experience in the areas of credit policy formulation, product development and implementation, investor relations including Fannie/Freddie/Ginnie direct, multi-channel originations, and management of the Underwriting Department Team Leaders." Products include conventional and FHA/VA and USDA. To be considered for this role please email your resume to me at rchrisman@robchrisman.com. Any inquiries will remain confidential. (I will be heading to Austin today, and then to Miami on Thursday, so there may be a slight delay in responding - but I will.)
For more company news, in Illinois Town and Country Bank will buy a branch in Quincy from Associated. (Associated had announced late last year that it planned to close 21 branches in total with 3 in Illinois.) And Walton family-owned Arvest Bank Group is acquiring Union Bank, therefore tripling its footprint in the Kansas City area by increasing to 20 branches and $633 million in deposits. It's an all cash deal with bank level P&A acquisition with an earn-out mechanism. Union Bank has approximately $458.7 million in total assets, a 3.82% leverage ratio, and 25.6% NPAs/Assets. Most importantly, the merger removes the last sizeable troubled institution in the Kansas City market from the potential FDIC-assisted deal pipeline.
Someone had better get the PR department on the phone. Has Freddie Mac been betting against homeowners? There was a lot of chatter yesterday about how Freddie has sold off the principal on loans into mortgage-backed securities and is only retaining the interest of the loan for revenue, and how they are betting on borrowers inabilities to refinance to lower coupons, thereby mitigating that return on higher existing margin loans.
The FHFA did respond late Monday afternoon. FHFA Answers Conflict of Interest Charges against Freddie Mac
I've always wanted to start my own rating agency, and now might be my chance because Fitch is going to "open its kimono".
Last week the commentary mentioned a statement that "the Democrats rejected a 5% rule that would require a minimum down payment on home loans from federal agencies. Senator Chris Dodd (D-Conn) is quoted as saying that his reasons saying that 'passage of such a requirement would restrict home ownership to only those who can afford it.'" Thank you to Leslie H., who pointed me toward TruthorFiction's statement that "Senator Chris Dodd did not make that remark. The source for this eRumor is an article by satirist John Semmens who writes a weekly Semi-News feature for the Arizona Conservative. Semmens wrote about a proposed amendment that failed in the Wall Street Reform Bill, which Senator Bob Corker (R-Tenn) proposed to raise the minimum down payment to 5% for federally assisted home loans." Here is the story.
There has also been a lot of news on the foreclosure front (a possible settlement happening but without California and without a broad legal release for banks), refinancings (Obama promises to send a proposal to Congress although most think it will be limited only to non-agency mortgages), and modifications (an expanded HAMP was unveiled Friday and joins the expanded HARP announced a few weeks back). But few in the industry believe that any of these mortgage plans will be game changing. The "new" refinancing plan outlined by President Barack Obama a week ago was short on details - and given Congress' inability to break its gridlock few expect anything to happen (especially during an election year). Congressional Republicans are opposed to additional intervention in the mortgage market and are philosophically opposed to a bank tax. Taking this slightly farther, the fact that the president is seeking congressional approval could be interpreted as a sign that the administration has taken its own refinancing efforts as far as it can without legislation. And investors don't like being subjected to policy changes ("policy risk"), so pricing could become an issue.
Turning our eye to servicing, the recent bank results were not great. High servicing expenses are expected to be a drag on the top banks for some time to come. JPMorgan Chase's mortgage servicing expenses totaled $925 million in the fourth quarter, down 4% from a year earlier, but the CFO said that servicing costs will continue to be high in the first half of 2012 - 75% of which is due to costs for defaulted loans and foreclosures. (JPMorgan Chase posted a $258 million loss in its mortgage unit, compared with a profit of $330 million a year earlier.) Some of the biggest hits in the 4th quarter came from mortgage repurchase requests, which show few signs of ending. Wells took a $404 million provision for mortgage loan repurchase losses; JPMorgan Chase took a $390 million provision; B of A set aside $263 million for repurchases and Citigroup took a $200 million hit. Meanwhile, SunTrust Banks Inc. said Friday it had to increase reserves for mortgage repurchases to $320 million. Attorneys are quick to point out that Fannie Mae and Freddie Mac are being very aggressive in pursuing repurchase claims because they have a statute of limitations of between four to six years to do so.
The jungle drums continue to beat
about MetLife's fade into the sunset of forward mortgage originations. I received this note: "I am a
quality control auditor currently employed with MetLife Home Loans. I can't
really speak for the wholesale side, but if it's anything like us here in
retail, we ARE funding loans but everything is bottlenecked in a QA/QC process.
Once the decision was made to dissolve the company rather than sell it we
immediately went to a 100% QA audit environment. Previously, auditors in the
branches were doing 100% but the audits were quick. QA based out of MetLife's
headquarters does full-file re-underwrites; they were only pulling 50% or less
of files, so now to go to 100% has been utter hell. We do our reviews in the
branch once a loan is ready to doc out, but then we wait a day for a purchase,
up to 5 days for a refi to get thru QA. It feels like they didn't sufficiently
staff the QA department before making the decision and got completely
overwhelmed. They've been bringing on more bodies but it's out of control. By
the way, the official announcement was that we are funding thru April 30th.
Originations have obviously ceased, however, and a lot of ops staff was given
their 60-day notices yesterday but there will still be a skeleton crew until
the end. I'm very sad MLHL is closing, and it very frustrating for the over
4,000 of us who had hoped to have a future here."
And a MetLife AE sent out a note to clients, "All loan files must be
delivered by January 31st (and must be locked). All expired locks will result
in file cancellation."
Through this all, rates continue to be good. Yesterday U.S. rates dropped, with the reason attributed to continued fears associated with the European debt crisis. Heck that will be going on for years! Our 10-yr T-note improved by about .5 in price (closing at 1.84%).
In MBS-land, selling volume picked up, but these lofty price levels are causing a little concern among investors. If mortgage rates drop, will current production refi again? The low rate environment anticipated through late 2014, the strong supply/demand dynamics, and increased odds for QE3 all make for an interesting environment. But borrowers are still faced with higher fees, stagnant values, and documentation requirements that many view as extreme - all these serve to limit refinancing. Yesterday MBS prices improved by about .125.
Today for
news in this country we'll have the Employment Cost Index (ECI) for the fourth
quarter, the S&P Case-Shiller House Price Index, the Chicago Purchasing
Manager's Survey, and Consumer Confidence for January. But when countries are caving in Europe, is what a purchasing manager did
last month in Chicagoland critical? Tomorrow is the ADP employment numbers,
ISM Index, and Construction Spending. Thursday is Initial Jobless Claims and
unit labor costs. And on Friday is "the big daddy" here in the United
States: the monthly employment data. In
the early going we find the 10-yr at 1.83%, and MBS prices pretty much
unchanged from Monday's close.
Two rules for success in life:
1) Don't tell people everything you know.
2)
If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog discusses residential lending and mortgage programs around the world. 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.