HARP Input from LO's and Investors; Comment on the CFPB's RESPA & TILA Proposals

Things are decent in the mortgage insurance biz: MI companies wrote $5.4 billion in new pools of risk in February. Mortgage Insurance Companies of America (MICA) includes numbers from its members like Genworth, MGIC, and Radian, but not from companies such as UG or Essent - two big "up 'n comers."

And some mortgage companies are continuing to expand as their business grows. I have been retained by a San Francisco Bay Area-based wholesale lender that is looking for underwriters, funders, and Broker Service Representatives (processors) for its San Francisco and East Bay branches.  The company offers A-Paper Agency and jumbo loans and has a reputation of exceptional service and leading edge technology. The company lends in 3 states, has plans to expand into 15 more, and is projecting to fund approximately $3 billion in 2012 (versus $1.5 billion in 2011. They also expect to reach $2 billion in servicing this year. If you're interested or know someone who is, resumes should be sent to me at rchrisman@robchrisman.com.

And in another part of the country, Franklin American Mortgage Company is currently searching for a Regional Sales Manager for its Wholesale Division.  As most know, FAMC is one of the top 5 non-bank lenders in the U.S. The candidate would be responsible for the recruiting, hiring and development of AE's in OH, MI, IN, NC, DE, VA, WV, and the Washington, D.C. area. Additionally, FAMC is looking to hire AE's in its Western Region (Houston, Chicago, St. Louis, Los Angeles and WI) and it's Eastern Region (GA, OH, VA, NC, FL, MS, and MI). The company has four wholesale sites around the nation, is FHA Direct Endorsed, VA Automatic, a LAPP authority and a Fannie Mae, Freddie Mac and Ginnie Mae Approved seller/servicer.  Please submit resumes to Deepa Holland at dholland@franklinamerican.com.

Warehouse banks provide the life-blood for non-depository lenders. Noting the recent issues that some lenders are having with ewarehouse, Jack Nunnery with Texas Capital Bank writes, "Warehouse banks perform considerable due diligence on their mortgage banking partners.  I believe it is prudent the mortgage banker perform due diligence on the warehouse bank.  Whether or not the warehouse bank is a new name in the space or an existing warehouse bank, I recommend the mortgage banker go on site at the warehouse lender's operation center and make sure the counterparty is an acceptable 'fit'.  The warehouse bank is a critical component in any mortgage bank's strategic vision.  Why not kick the tires?"

A few readers wrote in to say that they had reported ewarehouse to the FBI, and to remind others to do the same. In addition, those harmed should provide all the sales people's names, addresses, phone numbers, etc. and any known persons to GSA and HUD so that they appear on LDP and GSA lists and are banned from government activity. And David Akre with Whole Loan Capital reminds us that not only are there plenty of legitimate warehouse banks looking for business but there is also a group on Linkedin for warehouse lending.

For upcoming events, all NAMB members are invited to join NAMB President, Don Frommeyer, for an hour-long conversation with the Director of the CFPB, Mr. Richard Cordray. "This webinar is limited to the first 1,000 registrants" and it is your opportunity to ask the CFPB Director specific questions which relate to our profession.

And out in California, the CMBA's 3rd Annual Sales & Marketing Conference is taking place next week near San Francisco. It is only $40 and this year is "focusing on retail, wholesale, correspondent lending, and industry information that will prepare you for tomorrow's mortgage market!" More here

How about some HARP 2.0 chatter from the origination trenches? An LO from North Carolina wrote, "I have been taking applications and declining lots of Harp 2.0 loans. Yes, declining. I have taken a dozen of these loan applications and here is what I have found. If your loan is owned by Fannie Mae you are in good shape. If your loan is owned by Freddie, you have a higher chance of your loan being declined for all the reasons Obama tried to remove in his HARP 2.0 announcement. Here is a sample what Freddie is declining: credit card balances exceeding 50% of the credit limit, LTV's over 125%, debt ratios over 45%. These are things that are Freddie-specific in LP. This has been a surprise and most originators did not expect this to be the case. Fannie, on the other hand, in my experience, has been approving loans regardless of LTV, DTI ratios are being approved over 60%, and there are no credit card balance criteria.  I would speculate that Freddie will have pressure in the future to have more relaxed underwriting, but as of right now, it is not really helping the homeowner."

A mortgage company owner wrote, "I am not a big fan of the program, and am seeing LO's salivating for this new "race to the bottom". As REFI shops compete I can already hear, "We will go to 350% LTV!  My thoughts are: 1) we are not going to do any of these that we sell to an aggregator. 2) We will only sell direct to FNMA. 3) We will not do any that exceed an LTV of 120%. This last point is not going to make me very popular with the LO's but going broke is not going to make me very popular with my wife and kids. The fact is that that we are still seeing a lot of fraud out there - I think more than we have in our 25 years. I am not going to let HARP 2.0 become a vehicle which easily allows someone else's monkey to jump from their back to mine."

The implications of the HARP's continue. Paul Jacob (Banc of Manhattan) observes that, "We've seen a tremendous pickup in originator selling of MHA-HARP related pools in the past week.  Issuance of the highest LTVs exploded in March, running at three times the average pace of the past year.  We also saw very big increases in selling of TBA-eligible tiers earlier this week (100% Refi 80-90 LTV, 90-95, etc.). MHA/HARP supply can only come from one place: refi's on May 2009 and earlier Fannie and Freddie originations.  We believe the supply explosion in HARP pools raises the possibility of faster-than-expected CPR prints on seasoned high coupons in the upcoming prepayment report.  If so, we're likely to see high coupon MBS prices come under pressure in the coming weeks." In other words, investors are indeed tuned in to the fact that older Fannie & Freddie loans could indeed be paying off early, regardless of LTV.

Honestly, I lose track of what the CFPB is involved in, versus what they're not involved in yet. The CFPB threw its weight into the courtroom recently by filing a friend-of-the-court brief in the U.S. Court of Appeals for the tenth circuit. The issue is whether homeowners can cancel their loans within a three-year period stipulated under the Truth-in-Lending Act, and whether a plaintiff need sue within the same timeframe before the right of rescission expires. The case in Denver involves a borrower who sued for an injunction against servicer HSBC in 2009 when an earlier notice of rescission went unnoticed. The CFPB is arguing that the borrower had met the minimum standards for rescission by filing it and that she required adequate disclosure forms from her servicer before it moved forward with foreclosure for her property. The CFPB also charged that earlier courts have "erroneously" thrown out rescission lawsuits on the presumption that a homeowner needs to file notice of rescission within three years. The CFPB said that it plans to invoke the same legal authority by filing amicus briefs in appellate cases from three other circuits. "We are committed to making sure that borrowers can exercise their rights to the full extent allowed under this law," CFPB Director Richard Cordray said in a statement. "The consumer's right to cancel gives lenders a powerful incentive to provide the disclosures that consumers need to make good financial choices."

What does the future hold for combined RESPA and TILA regulation? Things are still very much up in the air, but the CFPB gave investors their first indication in late February when it announced that it was forming a panel to get feedback from small business mortgage and settlement companies regarding the new combined RESPA and TILA disclosure forms and released a list of proposals currently under consideration. Lenders will be most interested in the fact that the CFPB is considering adding fees to the zero tolerance category, where there's already risk in that lenders are accountable for any fees that may exceed the GFE and HUD-1 Settlement Statement.  The fees would be charged by the lender's affiliated service providers, which means that lenders would have to be diligent with disclosing them on the estimate disclosure.  If the fees charged by an affiliated title insurance company, for example, turned out to be higher than indicated on the estimate disclosure, the lender would be responsible for customer refunds as well. 

One of the big questions here is whether or not the CFPB actually has the legal authority to impose tolerance restrictions on lenders. The changes could affect a number of other areas, including the definition of "application," which would expand the circumstances under which disclosures would be necessary; the language used in pre-application summaries of loan terms and settlement fees; average cost pricing; and electronic recordkeeping.  Everything is still in the discussion stage, so for those interested putting in their two cents, the CFPB will be accepting public comment until July 2012: http://www.consumerfinance.gov/notice-and-comment/.

All of this is much more interesting than our interest rates. The U.S. 10-yr closed at 2.22%, still good but we saw some investor rate changes Monday. Pretty much the only news was the ISM Manufacturing Index which came in pretty much as expected, but traders reported that they were seeing a lack of buyers, causing prices to drop and rates to nudge higher. Part of this might be caused by nervousness about the employment data coming out on Friday which is also an early close due to Good Friday. But in the early going rates are right back down, with the 10-yr at 2.16% and MBS prices better by .125-.250.

SOUTHERN KNOWLEDGE (Part 1 of 2)
A possum is a flat animal that sleeps in the middle of the road.
There are 5,000 types of snakes and 4,998 of them live in the South.
There are 10,000 types of spiders. All 10,000 of them live in the South, plus a couple no one's seen before.
If it grows, it'll stick ya. If it crawls, it'll bite cha.
Onced and Twiced are words.
It is not a shopping cart, it is a buggy!
"Jawl-P?" means "Did y'all go to the bathroom?"
People actually grow, eat, and like okra.
Fixinto is one word. It means I'm fixing to do that.
There is no such thing as lunch. There is only dinner and then there is supper.
Iced tea is appropriate for all meals and you start drinking it when you're two. We do like a little tea with our sugar. It is referred to as the Wine of the South.