CFPB to Impact Servicing! The Volcker Rule Bringing an End to Hedging Rate Locks?

Here is an interesting question to ask your boss: "If a project is running behind schedule, should the boss add personnel to it in hopes of speeding it up?" The knee-jerk answer is often "yes" but when you think about it, it turns out the answer is no: adding personnel to a project often increases the delay. "The most enduring is demonstrating Brooks' Law: Adding manpower to a late software project makes it later. Complex programming projects, and many roles in mortgage origination planning, cannot be perfectly partitioned into discrete tasks that can be worked on without communication between the workers and without establishing a set of complex interrelationships between tasks and the workers performing them. Therefore, assigning more people to a project running behind schedule will make it even later. This is because the time required for the new personnel to learn about the project and the increased communication overhead will consume an ever increasing quantity of the calendar time available" - I think we've all seen this happen. Here is the theory.

WCS Lending is expanding its retail and wholesale channels and searching for experienced mortgage professionals to join the firm, including LO's, DE and LAPP underwriters (nationwide), and a government underwriting supervisor and post-closing manager for its state of the art corporate facility in Boca Raton, Florida. (The LO's would join any one of WCS's seven branch locations in Florida, New York, Michigan, Ohio, Delaware, or Hawaii.) Established over 10 years ago, WCS Lending is a mid-sized nationwide mortgage banker that has won Inc5000's for America's Fastest Growing Private Companies from 2009-2011. For more information on the firm visit http://www.wcslending.com  and to apply resumes should be sent to jobs@wcslending.com. WCS Lending is an Equal Opportunity and Affirmative Action Employer, M/F/D/V.

Mission Hills Mortgage Bankers, a well-known 42-year retail mortgage originator (headquartered in Orange County California) continues to grow and is seeking underwriters and loan processors for its Orange County California headquarters. MHMB business plans call for aggressive expansion throughout the western U.S. Underwriting positions are responsible for the regional underwriting of loans from several production offices.  Experience requirements include FHA DE and VA SAR certifications and a minimum of five years' experience.  Loan processing opportunities are available in the company's consumer direct office in Orange County and its Klamath Falls branch location. Interested parties should forward resume with salary history to hr@mhmb.com.

Practically every loan originated in the United States has a rate lock, e.g., the lender has guaranteed a certain rate and price to a borrower for some amount of time. And this rate lock is hedged, either by the investor or by the lender, usually by using MBS's. Could the Volcker Rule, contained in Dodd-Frank, bring an end to banks and lenders hedging their borrower's rate locks? It is still up for debate, but it is definitely a concern in the industry well summarized on page 4 in this letter from Wells Fargo to the SEC, FDIC, etc.

Recently we discussed how the CFPB may determine your 401(k) rules. Today comes word that the CFPB will determine how mortgages are serviced. Tomorrow we will discuss its new slogan: "Anything money, anything people - The CFPB is There." Okay, just kidding on that last one, but here is the preliminary story on the servicing.

Over the years I have lost track of the org chart for RFC, GMAC, GMAC/Ally, ResCap, and so on, although I know that I have coffee mugs from several of them. But this could be big news: "Ally will cease underwriting and trading mortgage-backed securities at its broker-dealer and dismiss most of its 33 traders and analysts." Here is the complete story.

There is a lot going on over in Washington and Oregon. First, Washington Federal will acquire South Valley Bancorp (OR) for stock and a cash earn-out up to a maximum of approximately $39 million based on collections of a specific pool of assets. And sparkling wine corks were popped at Mountain Pacific Bank (WA) when it announced regulators have terminated a C&D with the bank from three years ago.

How about some investor/lender updates from the last few weeks. As always, it is best to read the actual investor bulletins - information provided here is meant to show trends rather than timely detailed specifics.

First, the FHA has made a clarification to the Frequently Asked Questions (FAQ) on Mortgagee Letter 2011-11. It focuses on the definition of "Net Tangible Benefit": It is either a 5% reduction to the P&I of the mortgage payment plus the annual MIP, or refinancing from an ARM to a fixed rate mortgage in accordance with the conditions in the "net tangible benefit" matrix. (Reducing the term of a mortgage is acceptable on a streamline refinance if the new mortgage meets this net tangible benefit test.)

One policy that was mentioned about 10 days ago appears to be unfounded: "The FHA has updated loan guidance to state that rental income paid by a family member is not an eligible source of funds when taking out a loan on a converted primary residence." I can't find the source of this - I don't make this stuff up! - and apologize for any confusion that this may have caused.

More HARP 2.0: the DU Refi Plus program at Kinecta is expanding. Price adjustments are now available on Kinecta's daily Rate Sheets, and the updated overlay matrix has been updated as well. Kinecta reminded lenders that, although it will accept a Property Inspection Waiver in lieu of an appraisal, the file must include evidence that the property is not a condo, co-op hotel/motel, timeshare segmented ownership project, a houseboat or any other property type ineligible for Fannie loans. Lastly, in accordance with Fannie's recently modified regulation B7-3-04, Hazard Regulation Coverage for Units in Project Developments, Kinecta changed its coverage requirements for condo and PUD units.  Where previously it required these properties to have 20% coverage, Kinecta is now requiring insurance policies that cover 100% of the replacement cost of the unit's interior as determined by the insurer.  If the HOA/Master/Blanket policy covers 100% of all common, exterior, and interior insurable areas, the borrower doesn't need to have insurance for the individual unit; if not, the borrower must have full walls-in coverage.

On HARP 2.0, Everbank and Interbank are enhancing their relevant products to feature finance with unlimited LTV, and Guild and Mountain West Financial revised their DU Refi Plus guidelines.

A few weeks ago, in the wake of the recent tornado activity in the Midwest, and tornadoes in Texas, Flagstar is requiring properties in several areas to be re-inspected and deemed "satisfactory" before being granted Final Prior to Close status.  The requirements apply to all properties, including those that did not require an appraisal. All FHA, VA, and USDA Rural Housing loans underwritten by Flagstar now require borrowers to have FICO scores of at least 640.  For borrowers with scores between 620 and 639, their loans must be locked on or before March 29th and must disburse on or after May 11th. And following the HARP enhancements, Flagstar is introducing the Fannie Mae DU Refi Plus II and modifying the Freddie Mac Relief Refinance II.  See the full memo.

Wholesaler Mountain West Financial now requires the most recent tax transcripts available (in this case, the 2011 IRS Transcripts) upon receiving a 4506-T executed by the borrowers, regardless of the AUS Findings income guidelines.  Loans that receive a DU Approve or an LP Accept should have the tax transcripts for the number of years of income documentation filled in on the DU Findings Report or LP Feedback certificate.  The full requirements depend on the status of the borrower's tax return; contact MWF for details. MWF has issued clarification for the Monthly Income, Assets and Liabilities, and Details of Transaction sections (V, VI, and VII, respectively) of the Uniform Residential Loan Application (URLA) on Streamline refinances.  Lenders are also reminded that the URLA should be signed by the borrower when the application is made.

Before the case assignment order date of an FHA or VA ARM loan rolls around, originators are required to ensure that the borrower has received the Consumer Handbook on Adjustable Rate Mortgages (CHARM) and that this has been documented via a completed acknowledgement form.  FHA loans will require a completed 92900A form in addition to the acknowledgement form, which should be signed and dated by all the borrowers; VA loans will require a completed 18-2602 form in place of the 92900A.  This protocol goes into effect on Monday, April 9th.

The VA has updated guidance to indicate that, although employment of less than 12 months is not considered stable and reliable, it may be considered so if the employer's evaluation provides evidence that suggests a high likelihood of the borrower remaining at the current place of work.  In a case where the borrower holds a skilled position (nurse, lawyer, paralegal, and computer systems analyst are all cited as examples), training, education, and special skills are also taken into account.

USDA Refinancing is now available for Guaranteed USDA loans with or without an appraisal that were closed by Mountain West Financial.   Interested buyers, apart from meeting the current income requirements, must live in a rural area that is eligible or was eligible at the time of the original loan closing, have no late payments for the past 12 months, and have a FICO score of 620 or over.  Also on offer are rate term refinances with an appraisal.

There isn't much to talk about with interest rates. After the early close Friday, Monday was a snoozer of a day. Per Thomson Reuters, buyers outnumbered sellers, volatility dropped, and overall mortgage banker selling was about half of what it has been. Agency mortgage security prices did a shade better than Treasury prices - probably due to the drop in supply. Today we have the first leg of this week's supply: $32 billion in 3-year notes, but aside from that there isn't much moving rates. The 10-Year Treasury yield is at 2.01% while MBS prices are improved.


Here's a "thought of the day" for Libertarians out there:

The food stamp program, a part of the Department of Agriculture, is pleased to be distributing the greatest amount of food stamps ever.
Meanwhile, the National Park Service, also part of the Department of Agriculture, asks us to "Please do not feed the animals" because the animals may grow dependent and not learn to take care of themselves.