Texas Bank Sues the CFPB; Hawaii's New Originator Laws; Chicago Now Looking at Eminent Domain

"Rob, with the Wells news earlier this month, and FAMC's comp change last week, I am hearing rumors of all kinds of price and investor changes. On the pricing side, what will happen if rates continue to drop?" I have seen nothing definite, but "the jungle drums" are saying that soon the agencies will be making a g-fee increase, and investor pricing (investors being Wells, Chase, U.S. Bank, etc.) pricing should get worse by 5 to 15 basis points. Some of this may have already hit their best efforts pricing. It seems that this may be an industry-wide change, impacting all lenders, and in turn borrowers. On the plus side, some investors are opening up the 2.50% coupon for originators to sell into, meaning that 2.75-3.125% home loan rates. (And why not - Fannie 2.5%'s are at a one point premium.) Back on the negative side, for the wholesale channel, following FAMC's move it is rumored that a half a dozen investors are considering dropping "Borrower Paid" compensation plans. I don't have any details yet. Monitoring counterparty risk is the trendy buzz-phase, but any wholesaler could have trouble adhering to Dodd-Frank/CFPB regulations by monitoring what each broker client is doing, and possibly running the risk of a large fine from the DOJ by failing to do so - and who wants that?

For good news, Fremont Bank is growing and seeking wholesale underwriters, loan processors, relationship LO's, and other talented mortgage professionals. Founded in 1964 and one of the oldest independently owned and managed bank in the Bay Area, Fremont is expanding its Southern California Operations Division. Fremont funded nearly $4 billion in 2011, and was voted one of the Top Workplaces in the Bay Area 2011 and 2012. It will be hosting a Career Fair on Friday, August 3, from 11AM-7PM at 30 Enterprise, Suite 110, in Aliso Viejo. Interested individuals should submit their resume in confidence to jobs@fremontbank .com, or write for more information.

And for another job-related event, the Mortgage Lending Division of Carrington Mortgage Services, LLC is having an open house next week, Tuesday, August 7th from 5:30 to 7:30 PM at 1610 E. St Andrew Place, STE B-150 in Santa Ana. Carrington has openings for operations, sales, underwriters, funders, doc drawers, wholesale account managers, area sales managers, retail branch managers, loan officers, and wholesale AE's. This open house is invitation only, so be sure to RSVP.

"God bless The Great State of Texas, and the small banks there." No, I did not hear that from the CFPB. I heard it from a mortgage banker regarding a small bank in Texas that is suing the CFPB saying Dodd-Frank is unconstitutional. Here you go - many mortgage banking folks are probably wondering where to send the money.

About a month ago we had the industry concerned (rightly so) with the California Bill of Rights. Now Hawaii has turned heads by passing three new bills related to mortgage servicing and mortgage origination. Starting July 1 the first requires the Office of Consumer Protection to educate consumers regarding fraud schemes aimed at homeowners facing foreclosure. The bill also establishes that violators of Hawaii's Mortgage Rescue Fraud Prevention Act will be charged with a Class C felony and fined $10,000 in addition to other possible penalties. The Hawaii Secure and Fair Enforcement for Mortgage Licensing Act requires adjustments to loan originator registration fees and amends Hawaii's Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) to comply with recent changes to federal laws. Those who originate loans on behalf of a mortgage servicer are not required to register or obtain licensing so long as "[t]he employee's actions are part of the employee's duties as an employee of the mortgage servicer company" and the employee only originates residential mortgage loan modifications.

Similar exemptions are made for those who originate loans for nonprofit organizations if the nonprofit registers with the Nationwide Mortgage Licensing System and Registry. Registered mortgage loan originators acting as subsidiaries of federally-regulated insured depository institutions are now subject to provisions of the SAFE Act. Hawaii also passed a law affecting mortgage servicers. According to the new law, the Commissioner of Financial Institutions may require servicers to register with the Nationwide Mortgage Licensing System. Additionally, the bill states servicers must comply with all licensing requirements of the SAFE Act before offering loan modifications. Link

Well, this eminent domain thing is indeed spreading - now Chicago is looking at using it.

When I started in this business in the 1980's, we called it LIBOR. Shouldn't an abbreviation be all capitals? But it seems to have become Libor - maybe it is easier to type. Regardless, they're talking arrests for the folks that manipulated it.

It is the most widely used interest rate in the world. Libor is the London interbank offer rate, an interest-rate benchmark for many other rates, from commercial loans to mortgages. Estimates of how much is tied to Libor vary from $350 trillion to $800 trillion. (To put that in perspective, $350 trillion would pay for all U.S. government spending for 96 years.) Libor is calculated daily when London banks (through the British Bankers' Association) tell Thomson Reuters the interest rate they would expect to pay on a loan from another bank. Thomson Reuters drops those rates in the highest and lowest 25% and averages the 50% in the middle. Interestingly enough, there are actually 150 Libor rates, with maturities from overnight to one year, and in different currencies. Libor is a way of insuring floating-rate loans from a surge in interest rates, as rather than the rate actually paid, it is the interest rate the London Banks would expect to pay. This honor system becomes skewed when some banks artificially inflate or deflate their rates, depending on what would benefit them most. Some may have deflated their rates to give the impression that they were more creditworthy than they actually were. If Libor was artificially high when a borrower took out a loan, then the borrower paid more on the loan than they should have. Conversely, if Libor was artificially low, the borrower may have paid less than they should have.

The Berkshire Bank, a New York lender with 11 branches, sued 21 banks including Bank of America Corp, Barclays, and Citigroup for damages over the alleged manipulation of the London Interbank Offered Rate. Berkshire sought undisclosed compensation and punitive damages and the right to represent other lenders in a group lawsuit, or a class action, in a July 25 filing in federal court in Manhattan. The lender claims in the suit that Libor fraud lowered interest payments it received.

And now a House panel is involved. And some believe that Libor/LIBOR is on its way out anyway.

Here, as is nearly becoming standard, are some relatively recent updates from vendors and investors, and some training. As I warn folks, these will give you a flavor for current trends but for exact details read the bulletin.

The Georgia Department of Banking and Finance, and the FDIC, shut down Jasper Banking Company in Jasper, and turned things over to Stearns Bank National Association out of St. Cloud, Minnesota. And also on Friday the Federal Reserve Board announced its approval of the applications by Five Star Bank, Warsaw, New York, (1) to acquire four branches of HSBC Bank USA, National Association ("HSBC"), McLean, Virginia, that First Niagara Bank, National Association, Buffalo, New York, contracted to purchase from HSBC; and (2) to establish branches at those locations.

Members of Ballard Spahr's Consumer Financial Services and Mortgage Banking Groups will present a humorous (but instructive) look at "what not to do"-things that can trigger the unwanted attention of the CFPB. "How to increase your risk through inadequate compliance management and complaint handling systems; How to allow key service providers to create risks by operating without oversight; How to violate substantive laws such as ECOA and UDAAP; How to attract CFPB attention by taking the position that if a practice is not expressly prohibited, it is permitted; How to stonewall the CFPB when it issues a civil investigative demand to your company; The unimportance of preparing for your company's first CFPB examination; and Why SCRA compliance, which involves so few of your customers, is irrelevant." By focusing on these and other examples, we will share our views on how your institution should interact with the CFPB so that it does not end up in the CFPB's crosshairs. More

Flagstar has resumed funding loans in several zip codes affected by the wildfires in Colorado.  Any such properties are required to be re-inspected; re-inspections should have taken place on or after July 9, 2012.

In the wake of the wildfire activity in Colorado and the flooding in Florida, Kinecta reminds clients to follow the updated disaster policy, which requires properties in designated counties to be re-inspected by a licensed appraiser.  Should the property be deemed uninhabitable, unsound, or otherwise affected by the disaster, a new full appraisal must be ordered, while the original may be used if the property is deemed to be in the same condition as before the disaster.  An Appraisal Update (Fannie Form 1004D), Completion Report (Freddie Form 442), or DU Property Inspection Report (Fannie Form 2075) are the inspection forms that Kinecta will accept.  Properties whose appraisals weren't completed before the disaster require a full appraisal to be carried out.

Mountain West Financial has clarified its policy on Non-Arm's Length Transactions to provide additional details on scenarios where an exception may be made.  The loan file will be subject to a Pre-Funding Audit in cases where the estate agent and loan officer are employed by the same business entity in order to re-verify all the information submitted as well as any individual licenses for companies, real estate agents and mortgage loan officers.  Loan officers are not permitted to participate in family members' transactions, and a loan officer's spouse may not notarize the documents for the transaction.

This morning the markets seem much more concerned about what may happen this week rather than what happened Friday or over the weekend. But Friday saw a huge uptick in selling by originators. Wells Fargo's economics team suggests that "Growth Remains Slow but steady." That pretty much sums things up, given the GDP news, New Home Sales, and Durable Good numbers.

This week, addition to all European gyrations, we have a lot of scheduled news here in the U.S. There is nothing for today, but tomorrow is Personal Income & Consumption, along with the Employment Cost Index, a PCE Price number, the Case-Shiller 20-city index, Chicago PMI, and Consumer Confidence! Wednesday is the private jobs ADP number, always of questionable validity in predicting the government's total number on Friday. We'll also have an ISM Index and Construction Spending. More importantly we'll have the Fed announcement will be the primary focus. Investors will be looking for further easing or indications that it will take place in the near future. And there will be an ECB meeting on Thursday, along with Jobless Claims and Factory Orders. Finally on Friday we'll have the usual first-Friday-of-the-month employment data.

In the early going, rates are a shade better than Friday afternoon - one would expect a bounce back after the price "worsenings" Friday. The 10-yr's yield has gone from 1.56% to 1.53%, and rate-sheet MBS prices are better by about .125.

RETIRE WHERE?   Here are some of your choices - I keep receiving them from readers, part 6 of 7;

You can retire to Florida where.
1. You eat dinner at 3:15 in the afternoon.
2. All purchases include a coupon of some kind -- even houses and cars.
3. Everyone can recommend an excellent dermatologist.
4.  Road construction never ends anywhere in the state.
5.  Cars in front of you often appear to be driven by headless people.