HARP 2.0 Chatter; Agencies Say No to Private Transfer Fees; The CFPB & Privacy

In this environment, not only are many mortgage lenders making good returns, but the Treasury is as well. The Treasury Department may announce today that taxpayers have made a $25 billion profit on mortgage bonds purchased at the height of the meltdown, per the Wall Street Journal. Treasury had spent about $225 billion on purchases of mortgage debt over 16 months before it began selling the securities last year, and it completed the last of the sales last week of debt backed by Fannie & Freddie.

Leader Bank, N.A. is hiring underwriters, processors and closers. Leader is headquartered in Arlington, MA (near Boston) and is a federally chartered community bank and was the 10th largest lender in the Commonwealth in 2011.  All job postings and descriptions can be found at www.leaderbank.com.  Qualified candidates should send their cover letter and resume to jobs@leaderbank.com with the position they wish to apply for in the subject line. Leader Bank, N.A. is an Equal Opportunity and Affirmative Action Employer.  Leader Bank, N.A. does not discriminate because of any protected class.

(And on the opposite coast, in Southern California, JMAC Lending is looking for experienced underwriters and funders for its Irvine location. The listing was posted last week, but the company revised its e-mail for resumes - it is careers@jmaclending.com.)

As the commentary has mentioned several times, if loan officers think that the pricing, policies, and procedures for HARP 2.0 loans will be a "walk in the park", they are sadly mistaken. First, if course, is the pricing. Should/would an investor pay the same price for a 150% LTV 4% loan as they would a 70% LTV 4% loan, everything else being equal? It comes down to investor appetite, which has a direct correlation between who the original investor on a refinanced loan was, and what are the existing reps & warrants - who was servicing the loan? Which leads to the second complication (servicing) and many lenders saw the confusion on that issue when Wells Fargo's wholesale and correspondent divisions Friday spent the day revising their announced guidelines.* Many lenders are rolling out the product today, and a good number of the LTV caps based on the differences between refinances done on loans already in a particular servicer's portfolio and those outside of it. Not only that, but each investor may have different LTV caps based not only on servicing but also the agency (Freddie and Fannie) and on MI company - and not all MI companies will take this product. And each wholesaler will have varying guidelines for their brokers. Sounds like fun.

(*Well Fargo spread the word to both wholesale and correspondent clients that, "The max LTV for Fannie Mae DU Refi Plus loans that are non-Wells Fargo serviced will remain at 105% LTV/110% CLTV. Although it was previously communicated that we would accept non-Wells Fargo serviced loans, this decision has changed.")

In other agency news, the FHFA prohibited both Freddie and Fannie from holding any interest in a mortgage carrying a private transfer fee. The proposal has been kicking around for about a year, and impact the fees that are sometimes attached to a property by the developer and homeowners have to pay it when reselling the house. The rule does not apply to private transfer fees paid to homeowner associations, condominiums, cooperatives and some tax-exempt organizations. The FHFA rule can be found here.

When in doubt, throw stones at your competitors! Apparently the credit rating agency Moody's, which many believe is just as much to blame as any other older rating agency for their share of the credit crisis, is questioning the work of some of its competitors.  "However, some recent cases have come to market for which we believe increased risk has not been adequately mitigated for the level of ratings assigned by another agency," they said. Fight on the playground at recess!

Big day today - I guess. Today is when lenders must submit fully compliant Uniform Appraisal Data (UAD) electronic appraisal report data to the Uniform Collateral Data Portal (UCDP). My bet is that everyone reading this already has it (to ensure UAD delivery compliance into UCDP) in place. Now, if only we wouldn't hear rumors of problems with the portal (UCDP).

Friday I noted a possible problem with the public's awareness of HARP and HAMP. The source of the survey on awareness of HARP and HAMP is FreeScore.com.

The CFPB's latest maneuverings, focused on privacy & confidential information, are turning some heads. Last Monday the agency addressed the treatment and scope of confidentiality protections accorded information collected from supervised institutions through the CFPB's supervisory process. The bulletin in question states that institutions providing privileged information to the CFPB pursuant to a supervisory request will not waive any privilege that attaches to such information. In addition, the bulletin indicates the CFPB will treat information obtained through the supervisory process as confidential and privileged. Further, the agency notes that it will only disclose such information to prudential and state regulators, when necessary and/or appropriate, and to law enforcement agencies, only where justified, as determined by the CFPB. NAMB, for one, announced that it is "working for a legislative solution to help protect the status of privileged information to ensure a positive working relationship with our regulators".

More specifically, the CFPB's proposed rule would add a new section providing that "a person's submission of any information to the CFPB in the course of the CFPB's supervisory or regulatory processes would not waive or otherwise affect any privilege that such person might claim under federal or state law with respect to the submitted information." "The Dodd-Frank Act did grant the CFPB all the powers and duties of the prudential regulators regarding their transferred consumer financial protection functions. The CFPB concludes that this grant of powers and duties includes the ability to receive privileged information from supervised entities without resulting in a waiver of any privileges." See for yourself.

Is there a correlation between the Miami condo market between 2003 and 2007 and today's Treasury market? Perhaps - David Zervos with Jefferies notes that during that time period "regulatory arbitrage" in the mortgage market was taking place wherein faulty correlation assumptions allowed risky loans to be pooled so that 60 to 70 percent of the assets were deemed zero risk weight AAA securities. "As such, banks could lever these assets ad infinitum with no capital charge - and they did. A few years of massive levered spread collection, along with some very large bonus payouts, were followed by the mother of all bailouts." As the securitizers looked for more and more loans to pool, in order to feed the voracious bank balance sheet arbitrage monster, they reduced lending standards and drove house prices to record heights - in other words, government induced non-economic buying of an asset. In sub-prime it was a government induced regulatory arbitrage that led to non-economic buying of Miami condos. "The prices were driven up for short term gain, even though the longer term valuations were absurd. Folks got paid huge within this short time frame via the arbitrage, while the long term time bomb ticked. And when the bomb went off, anyone with levered inventory was properly gutted! The US Treasury market has also been affected by a government induced regulatory arbitrage - it is called 'QE'." Traders and investors, instead of buying & flipping condos, are buying and flipping long dated Treasury and Agency MBS securities. "The opportunity to get in front of a non-economic, federally backed, arbitrage induced buyer of duration is a gift from heaven." And we can guess how it might end - could last week's rate movements have been a signal?

This also peripherally leads to a note about the world's stock markets. Last week, in Japan, the Nikkei was flattish but closed out the week up about 2%. It is now up nearly 20% for year - the best performing stock market in the world! But in Hong Kong the Hang Seng is up over 15%, China is +9%, Brazil is +19%, Europe +12%, and our S&P 500 is up over 11%. Stocks and bonds don't always move in opposite directions, but remember that many components of what pushes stocks higher can also push rates higher - primarily expanding economies. For originators, the bad news is higher rates, but the good news, in theory, is that an improving economy will help more borrowers (and properties) qualify.

At least the markets quieted down Friday after a week of rate worsening. The 10-yr T-note closed at 2.30%, with a renewed focus on gas prices for anyone who has filled up recently. This week is an odd week for economic news in this country - mostly housing news. Today is yet another housing market index number (NAHB's), tomorrow are the twins Housing Starts and Building Permits, Wednesday the MBA comes out with last week's applications, Existing Home Sales will come out on Wednesday along with another housing index (this one from the FHFA), and New Home Sales will be released on Friday. Jobless Claims and Leading Indicators are scheduled for Thursday.

One of the interesting things to note is the growing gap between median prices for new versus existing homes. As of January, median existing home price was about $155k and median new home price was about $217k - 40% higher. There is a standing joke about driving a new car off the lot drops the value by 50% - but is that the case with a home? Are there so few new homes that people are really paying a 40% premium for one? Stay tuned! In the meantime, rates & prices are a little better this morning: the 10-yr is at 2.27% and MBS prices are about .125 better.

Senior Citizen Texting Codes:

ATD: At The Doctors
BFF: Best Friend Fell
BTW: Bring the Wheelchair
BYOT: Bring Your Own Teeth
FWIW: Forgot Where I Was
GGPBL: Gotta Go Pacemaker Battery Low
GHA: Got Heartburn Again
IMHO: Is My Hearing-Aid On
LMDO: Laughing My Dentures Out
OMMR: On My Massage Recliner
OMSG: Oh My! Sorry, Gas
ROFLACGU: Rolling On Floor Laughing And Can't Get Up
TTYL: Talk To You Louder