Clarity on Buybacks? MI in the Age of HARP; High Level Mortgage Jobs

Here we are on the day that teenagers everywhere in the Northern Hemisphere despise: the solstice. The sunrise in Nome is around 4:19AM. Even here in Ft. Lauderdale, at the Mortgage Bankers Association of Florida conference, sunrise is at the 6:29 (88 degrees and rain, by the way) - that's darned early. Savor it, 'cuz we start losing daylight from here on out. 

The sun doesn't determine buybacks. They generally flow from the agencies, down through the aggregators, possibly to the smaller lenders - and many of the worries in lending are caused by the uncertainty of the whole thing. But financial stocks rose Tuesday after the FHFA said they were revising guidelines that could reduce lenders' risks of kickbacks: it was working with Freddie and Fannie to "provide lenders a higher degree of certainty and clarity around repurchase exposure and liability as well as consistency around repurchase timelines, incentives and remedies." Here's the story.

I have been retained to help in a search by a large Irvine-based California Mortgage Banker that is seeking an Executive Vice President of Retail Sales to oversee the expansion of its corporate retail sales division and regional branch offices.  Rated as one of America's Top 100 Mortgage Companies in 2011 by volume, the company is committed to its steady expansion.  Reaching out to consumers nationwide from a central location in Orange County, the company has grown to be an industry leader in both the purchase and refinance markets for FHA, VA, Conventional, HARP2 & Jumbo Loans. If you know someone who is interested, please have them send their resume to me at rchrisman@robchrisman .com. (I am at the Florida MBA conference, so please excuse any delays in responding.)

And in Northern California, Redwood Trust is seeking experienced underwriters to support its growing jumbo conduit. "Thus far in 2012 Redwood Trust, a Real Estate Investment Trust (REIT) has created 3 private label securitizations and is a leader in bringing liquidity back into the private investor market."  The Due Diligence Underwriter will coordinate and manage due diligence credit and compliance reviews with lenders and 3rd party vendors, render decisions on credit exceptions, and manage relationships with external business partners, primarily lenders selling loans to Redwood.  Successful candidates will have years of experience in manual underwriting, in-depth knowledge and experience with agency product, demonstrated ability to communicate effectively to both internal and external customers, and be eager to take on increasing responsibilities over time.  All inquiries will be kept strictly confidential and complete details can be found here.

Many loans gradually pay off (remember that word, amortize?) and the mortgage insurance situation changes. A while back Luke from Minneapolis wrote, "Hi Rob, I found a very good tool to use to find out when the MI is supposed to drop off based on the amortization time line from the Mortgage Insurance Companies of America's website. If the loan being refinanced was a purchase you can just put in the purchase price for the appraised value otherwise you need the borrower to provide their old appraisal if it was a refinance. You cannot get rid of MI by paying down principle if values are declining, I have had numerous customers experience that, but by law it is supposed to drop off based on the amortization time line based on LTV, rate and payments.  I was not aware of this and did some research after your Monday commentary and found out that I have a loan that I could close this week that should have the MI removed based on this calculator.  I am in contact with the servicer and can hopefully have it taken off prior to closing, saving the borrower over $5,000 in MI premiums." Thanks Luke.

And Ken P. from Washington wrote, "If a client was on an 85% LTV loan taken out 4 years ago, they are going to be pretty close to the 78% PMI elimination point based on the original appraisal. If the homeowner pays down the balance to 78% and gets the PMI removed under the Homeowners Protection Act - they can then qualify to do a HARP refinance without PMI (even if the appraisal shows that they are underwater).   Once the PMI coverage is cancelled there is no policy to renew and just like a borrower that had 20% equity doesn't require PMI, they will not require PMI because they have met the requirements based on their original loan obligation. So I am counseling clients that have PMI and are within reach of that 78% mark to look at making a principal reduction to get their PMI removed so they can get the maximum benefit from the HARP program." Thank you Ken.

It is time for some agency/investor/MI/bank closure updates. These recent bullet points should give you a flavor for what is going on out there, although it is always best to read the actual bulletin.

First, due to an unforeseen scheduling issue, the M&T Bank FHA Streamline Conference Call has been postponed.  Approved lenders are asked to contact their AE with any specific issues.  If you are not currently approved to do business with M&T Bank, please go to www.mtbcl .com for Correspondent Lenders or mtbwholesale .com for Wholesale Brokers to get signed up - at this point M&T is standing pat on its FHA Streamline policy.

Unfortunately in recent weeks the guys and gals at the FDIC, and the related organizations that assist in these matters, have been busy. Waccamaw Bank (NC) was closed, and the deposits transferred to First Community Bank (VA). The checking accounts of folks at Shabbona, Illinois' Farmers and Traders State Bank will now say First State Bank, also of Illinois. Depositors at Carolina Federal Savings Bank (SC) are now part of the Bank of North Carolina family. And in Oklahoma the owners of F&M Bank in Edmond said "welcome aboard" to the customers of First Capital Bank.

Five days ago regulators closed Tennessee's Farmers Bank of Lynchburg and sold it to Clayton Bank and Trust. In Georgia Security Exchange Bank was sold to Fidelity Bank; Fidelity obtains 2 branches, all of the deposits and entered into a loss-share transaction on $102.8mm of assets (68%). And here in Florida Putnam State Bank was sold to Harbor Community Bank with Harbor obtaining 3 branches and assuming all of the deposits and entering into a loss share transaction on $112.3mm of assets (66%).

The holding company for First Tennessee Bank (First Horizon National Corp.) is reportedly being accused of accepting kickbacks from mortgage insurers in a proposed class-action lawsuit filed in PA. The suit alleges home loan customers were referred to four insurance companies that paid reinsurance subsidiary referral kickbacks.

In Kansas Legacy Bank ($257mm) will acquire Alliant Bank ($15.3mm) for an undisclosed sum. And MidSouth Bancorp ($1.4B, LA) will buy two branches from Hancock Holding ($19.4B, MS) for an undisclosed sum.

New Freddie guidelines are in effect for cash-out transactions, whose proceeds may not be used as reserves.  Amended guidance on trade equity states that the net proceeds of the trade-in of the borrower's previously owned home are now permitted for purchase transactions.  The proceeds, which should be documented by an appraisal of the previously owned residence as well as a copy of the trade-in contract, are determined by subtracting any outstanding liens and any transfer costs from the lesser of the appraised value of the property or its trade-in price as listed on the contract.

Freddie has also issued updated guidance on rent credits stating that any of the borrower's prior rental payments are allowed to be credited towards the purchase price.  The payments may be used as Borrower Personal Funds.  The amount of credit towards the down payment is calculated from the difference between the market rent and the actual rent that was paid over the previous 12 months, the former of which is determined by the property's appraiser.  In such circumstances the loan file should include a copy of the rental/purchase agreement and copies of the borrower's canceled checks or money order receipts from the past 12 months to serve as proof of the rental payments.

Just as a reminder, FinCEN's  August 13th deadline for implementing an Anti-Money Laundering Program and filing suspicious activity reports is fast approaching.  Non-bank residential lenders and originators are required by the Bank Secrecy Act establish a program that includes written AML procedures, internal AML controls,  a designated AML Compliance Officer, ongoing training, independent testing, and SAR controls.

Wells Fargo Correspondent has updated its Mandatory and Best Effort options in an effort to simplify pricing and provide more options for government loans.  When locking Best Effort FHA, VA, and Guaranteed Rural Housing loans, sellers no longer have to select either GNMA I or II, as the Wells Funding website will display only one government price.  Mandatory commitments should still be registered as either GNMA I or II, however.  Interest rates on FHA and VA 15-year fixed loans are now permitted in increments of 0.125% instead of the previous 0.5%.  Wells' High Balance FHA Loan Program has also been enhanced to allow 15-year fixed rate and 5/1 ARM transactions, while 30-year fixed rate transactions may include amortization terms of 240-360 months.

The Wells Fargo Funding Market Classification List has been updated and is available in the Client Tools section of the website.  The Authorized eSignature and eDelivery Vendors list (Exhibit 22) has been updated as well and now lists CSi as approved for both electronic signatures and delivery and updated contact information for DocuSign®.

The National Reverse Mortgage Lenders Association will be hosting a news conference call at 1PM EST on June 21st to announce its "Borrow with Confidence" public education campaign. Dial (412) 317-6789 to call in.

Mountain West Financial is offering a webinar on down payment assistance programs that will take place on June 21st.  Interested parties can register here.

Yesterday was a relatively quiet day in the markets - in fact MBS prices were nearly unchanged. The U.S. Census Bureau and the Department of Housing and Urban Development reported that permits for the construction of new privately-owned residential construction jumped 7.9% in May. But Housing Starts fell by 4.8%. Slice and dice and pick apart the number however you see fit, but Starts are 26% higher than where they were a year ago. And the trend in permits appears to be more unambiguously positive.

The 10-yr closed at 1.62%, where it has hovered for quite some time, but that could change later today as we hear the FOMC decision and whether they will ease or not. Ease more? Heck, overnight rates are already at 0%. The smartest guys in the room really don't expect much out of the Fed, and most likely they will disappoint all expectations and simply tell us that they will continue to be ready to ease if economic data continues to weaken. For interest there is a press conference afterward by Chairman Bernanke - all that happens after 2PM EST (11AM PST). In the very early going the 10-yr is sitting at 1.63% and agency MBS prices are where they were Tuesday afternoon.

(There has to be some mortgage banking analogy with this clever oldie.)
A young boy enters a barber shop and the barber whispers to his customer, "This is the dumbest kid in the world.  Watch while I prove it to you."

The barber puts a dollar bill in one hand and two quarters in the other, then calls the boy over and asks, "Which do you want, son?"
The boy takes the quarters and leaves the dollar.  "What did I tell you?" said the barber. "That kid never learns!"
Later, when the customer leaves, he sees the same young boy coming out of the ice cream store & says, "Hey, son!  May I ask you a question? Why did you take the quarters instead of the dollar bill?"
The boy licked his cone and replied, "Because the day I take the dollar, the game's over!"