Flagstar Settles Fraud Charges; More on HSOA's Demise; Letters on Citi and Provident

When asked, most people would not want to know the exact date of their death. But an idea of how an insurance company gauges and calculates your life expectancy can be interesting.

Financial firms have life expectancies also, and Flagstar appears to have extended theirs by agreeing to pay $133 million to settle claims its mortgage unit engaged in fraudulent lending practices. The government says the bank improperly approved residential home mortgage loans for government insurance.

On the hiring front, in Northern California, VITEK Mortgage Group is hiring, primarily in its Operations Department. The company has been around for 25 years, and is anticipating a solid 2012. In particular, the company is looking for people with several years' experience: a Secondary Marketing Manager (with recent in-depth experience with hedging and securitization of mortgage loans), a Compliance Manager (thorough understanding of state and federal regulations, QC, underwriting, and servicing & compliance requirements of the agencies), a Senior Underwriter for conventional and government loans, Loan Processors with recent experience processing conventional and government loans, and a Post-Closing Lead (recent experience in a post-closing role such as doc drawing or funding). Phew! Qualified candidates are invited to submit their resume directly to Karen Drew in VITEK's HR Department at HRD@teamvitek.com."

And in Kansas, Peoples Bank is looking for a Director of Mortgage Operations to provide strategic guidance and management of the entire mortgage function. The person will be a part of senior management, set standards and goals, determine metrics, establish policies and processes, maintain oversight of all written mortgage lending processes and procedures, and is responsible for the development, implementation and management of the overall mortgage budget that is consistent with the overall strategic plan and budget of the Bank. Experience working with servicing a big plus, and managing >$1 billion mortgage operation is required. For the full list of responsibilities and requirements, or if you know someone who might fit the bill, inquiries should be sent to Ruth Stevenson at RStevenson@bankingunusual.com.

At the other end of the spectrum, details continue to come in on Home Saving's failure.  Unlike most other banks shuttered by the FDIC, no buyer stepped up - no one was attracted to the usual U.S. government guarantees to cover losses on failed banks through the use of loss-share agreements as apparently the quality of the assets is poor. The FDIC will be forced to retain all of the assets of Home Savings, which will join the $30 billion of junk assets (technically known as "resolution receivables balance") that it has accumulated from other failed banks. Depositors won't see another bank's name on their branch or checks - instead they will be mailed out checks today up to the deposit insurance limit of $250,000.

On closing out pipelines, HSOA told clients, "For loans that are approved AND locked:  we will continue to process and close. For loans not approved, including forward locks: will not continue to be processed and will be withdrawn. Loans approved and not locked will be handled on a case by case basis.  If the loan is early enough in the process, we encourage you to find another resource. However, we do not want to severely compromise the borrower's position and will consider these on an individual basis. We will be happy to provide transfer letters on any appraisals that are currently in the name of Home Savings of America.  Please submit your request to your Senior Loan Coordinator and they will ensure that it is taken care of promptly.

Here is a link to a Q&A fact sheet regarding the Home Savings of America closing.  It has information and a phone number to call: (questions #31 - 38 deal with what happens to loans in process.)

The buzzword question, "Too big to fail?" is becoming more evident: the 5 largest U.S. banks held 38% of all deposits at the end of 2011, up from 29% in 2005, or about 31% growth over this period.

One of their mortgage-bond trust departments is "transforming." Wells Fargo & Co.'s mortgage-bond trustee division is planning to hand its duties to investigate soured home loans and pursue lender repurchases to other companies, in a move meant to address the appearance of conflicts of interests. WF serves as trustee on about 700 mortgage-bond transactions, expects to take the step for at least 20 in the next few months. "Wells Fargo is seeking to avoid suggestions its trustee work can be influenced by unrelated repurchase demands against its own home-lending unit, as investors seek compensation for debt that never matched its promised quality, Bartlett said. The bank will probably use the approach, which wasn't requested by bondholders, on other transactions, he said." Here is the story.

About a week ago the commentary discussed some ugly delinquency and foreclosure numbers from a major investor. I received this note: "Let it be said that paying up for CRA does not go unpunished, unless your name is Robert Rubin. 'Since 2004, more than 30 percent of loans originated or underwritten by CitiMortgage have gone into default. HUD said that CitiMortgage's default rate soared to over 47 percent on loans originated in 2006 and 2007, resulting in foreclosures, evictions, and depressed real estate values, all to the detriment of the national housing market and the national economy.' Robert Rubin 'served as the 70th United States Secretary of the Treasury during both the first and second Clinton administrations. Before his government service, he spent 26 years at Goldman Sachs eventually serving as a member of the Board, and Co-Chairman from 1990-1992. His most prominent post-government role was as Director and Senior Counselor of Citigroup, where he performed ongoing advisory and representational roles for the firm. From November to December 2007, he served temporarily as Chairman of Citigroup and resigned from the company on January 9, 2009. He received more than $126 million in cash and stock during his tenure at Citigroup.'"

And I received this on Provident's condo change. "Fannie's new guidelines, effective January 1, are changing the way many lenders look at condos and which is probably why Provident said UNCLE! In Fannie's Servicing Guide Announcement SVC-2011-23, for Condominium Insurance Requirements, Fannie set forth new requirements for 'master or blanket insurance policies that combine insurance coverage for multiple condominiums and other residential or substantially residential projects that are unaffiliated, the HO-6 insurance policy coverage amount, and HO-6 insurance requirements and elimination of "walls-in" insurance coverage terminology.' Among other things Fannie now requires the servicer to 'obtain the insurance policy as well as all of the necessary schedules, endorsements, statement of values, or other associated documents to appropriately evaluate the insurance coverage. If a servicer determines that a condominium project is covered by a master or blanket insurance policy that is combining insurance coverage for multiple condominiums and other residential or substantially residential projects that are unaffiliated, the servicer must ensure the policy meets' several requirements, including coverage limits that 'meet the higher of the following: be greater than or equal to 50% of the total insurable replacement value for all condominiums and other residential or substantially residential projects insured under the policy, or be greater than or equal to 150% of the total insurable replacement value for the single largest condominium or other residential or substantially residential project insured under the policy but not more than 100% of the total insurable replacement value for all condominiums and other residential or substantially residential projects insured under the policy.'"

One thing that we don't seem to hear about in the media is "a double dip" in terms of recession. Jobs and housing, housing and jobs - Initial Jobless Claims have moved down, and it appears that the residential real estate markets tightened up in January, very good news, as both new and existing home sales showed improvement. Existing home sales increased by 4.3% in January, although New Home sales actually decreased in January but the level for December was revised up. Year over year, new-home sales were up 3.5% from January 2011. Yes, there are certain reasons for this, such as the median price of a new home dropping nearly 10% from a year ago, but still, it is decent news. On Friday we learned that even the University of Michigan Consumer Sentiment Index increased. Sales of mortgage-backed securities don't necessarily equate to locks, but if they did, lock desks had a big pick up last week. Traders reported much heavier-than-normal MBS sales volumes, and, given the laws of supply & demand that dictate MBS prices, when supply increases and demand is constant the price drops.

For economic news, whereas last week we hardly had any here in the U.S, this week we have plenty. Today is another housing indicator - Pending Home Sales. Tomorrow is Durable Goods and another housing indicator - the Case-Shiller 20-city Index, and Consumer Confidence. Wednesday the 29th are GDP and the Chicago PMI, along with the Fed's Beige Book talking about economic conditions in the various districts. Thursday is Jobless Claims, Personal Income & Consumption, an ISM Index, and Construction Spending. Rates have dropped - the 10-yr is down to 1.93% and MBS prices are .125-.250 better than Friday afternoon - mostly due to the expected impact of higher oil prices and lack of progress in Europe (a surprise?).

An elderly couple is both having problems remembering things.

During a checkup, the doctor tells them that they're physically okay, but they might want to start writing things down to help them remember.

Later that night, while watching TV, the old man gets up from his chair. "Want anything while I'm in the kitchen?" he asks.

"Will you get me a bowl of ice cream?"

"Sure."

"Don't you think you should write it down so you can remember it?' she asks.

"No, I can remember it."

"Well, I'd like some strawberries on top, too. Maybe you should write it down, so as not to forget it?"

He says, "I can remember that. You want a bowl of ice cream with strawberries."

"I'd also like whipped cream. I'm certain you'll forget that, write it down?" she says.

Irritated, he says, "I don't need to write it down, I can remember it! Ice cream with strawberries and whipped cream - I got it, for goodness sake!"

Then he toddles into the kitchen. After about 20 minutes, he returns from the kitchen and hands his wife a plate of bacon and eggs.

She stares at the plate for a moment and says, "Where's my toast?"

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 the role of rating agencies in the current environment. 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.