CFPB and the MI Biz, Audit Comments, and Discussion Group; What Redwood Trust & PennyMac's Results Show Us
Fortunately, on this 67th anniversary of the world's first atomic bomb attack on Hiroshima, there is little going on with rates (the 10-yr is basically unchanged from Friday) since there is so much to talk about like jobs, CFPB updates, and updates on Redwood Trust and PennyMac.
Expanding companies continue to look for talent. Bay Equity LLC, a mortgage bank located in Northern California, is looking for Conforming, FHA and VA Underwriters to work in its new Concord Operations Center. Qualified applicants will have 5+ years of current experience in underwriting and processing, must be able multi-task and work in a fast-paced environment, and experience with DU, Encompass and Datatrac systems preferred. Please send resumes to recruit@bayeq .com and reference job BE-COC-GU-RC in the subject line. You can also learn more about Bay Equity by visiting www.bayeq.com.
Peoples Bank (KS) is looking for a Sales Manager and Processors in its Scottsdale, AZ facility. The Sales Manager will, "ensure compliant, lawful, sound and profitable production of Direct-to-consumer (DTC) (non-retail) mortgage loans with decreased volatility and improved production and net revenue. Processors should be able to process FHA, VA, and conventional loans, which includes obtaining and verifying information as required by these products; the ideal candidate should have a minimum 2 years of retail loan processing experience. Resumes should be sent to Kelli Park at kpark@bankingunusual .com.
And independent retail mortgage banker Vitek Mortgage Group is seeking a
Chief Compliance Officer for its Sacramento headquarters. The 25 year old
purchase-focused company (VITEK), which has its GNMA seller/servicer approval
and its FNMA seller approval, continues to grow and expand. The Chief
Compliance Officer will manage all compliance and quality assurance for the
company. The ideal candidate should have 5+ years of compliance management
experience. Candidates should send their resumes to Karen Drew at kdrew@teamvitek .com.
When it rains, it pours - for the mortgage insurance industry. One thing you don't want to hear is, "The CFPB is on line 2." The Consumer Financial Protection Bureau has served subpoenas to AIG (owner of UG), MGIC, Genworth, and Radian. The CFPB asked for documents and answers to written questions about captive mortgage reinsurance deals.
It turns out that, in spite of having no budgetary or scope-of-influence limits, under the Regulatory Flexibility Act the CFPB must consider the economic impact its rules could have on such small businesses as community banks and mortgage brokers and meet with these small operators to gather input. Some argue that the CFPB's proposed rule to consolidate mortgage disclosure forms could cost lenders, brokers and other industry players in excess of $100 million, with smaller participants facing $60 million or more in costs.
Many non-depositories have been audited/examined by the CFPB. Guild, for one, and currently twelve examiners are camped in Sierra Pacific's offices in Sacramento. Link
I received many comments from firms that have been examined. "Forget
about production. Our company has three 'seasons': preparing for an audit,
being audited, and addressing the audit findings."
"We were told by our attorney that it is very unlikely that a pure broker
like we are will ever be audited in the short run; we are just way too far off
the radar. Mortgage banks doing respectable volumes are definitely 'on the
radar.' And companies are having their entire database of loans examined for
pricing issues, not risk issues. This is surprising until one realizes that the
examiners, who for the most part are pleasant, have little or no experience in
mortgage origination. Price is easy to measure, but there is no understanding
of risk - and every mortgage banker knows the impact of risk on pricing."
"Although I am not going through an official CFPB audit, my joint venture
is going through an internal simulated audit. It is an eye-opener. Compliance
is a very big item even down to the subject line of my emails. Do internal
communications include the first and last name of the borrower, and the loan
number? (That needs to go in the body of the email.) Reg. B, at all
levels whether it is with myself or with the underwriters, is very big as well.
At some point companies will be over-regulated, and the borrower will pay the
price through less completion or higher prices."
"Rob, we are in the midst of an audit. I am not allowed to go into too
much detail, but for one thing the CFPB staff needs to be trained by our staff
- it is like they're on training wheels. The bureau is almost like a disease
that learns from one host, and then uses that information when it travels to
the next host. Any company slated for an audit had better have every rate
sheet, pricing algorithm, loan level price adjustment, and servicing released
premium for every day, and be able to produce it. With our audit the focus has
been on tracking a series of loans from rate lock through to close, and each
adjustment or change to make sure that total pricing transparency occurred, and
no discrepancies took place inside of secondary marketing or with the LO. And
the examiners don't crack files - it is all electronic."
"A few months back I was meeting with the head of secondary for a
mid-sized (150 mil per month) lender who advised his company had just survived
an audit and one of the net results was printing new business cards for every
employee in the company from the receptionist to the president. The new
business cards had to list every state the lender is licensed in to include
license numbers. Naturally the lender is licensed in all 50 states so the
back of their business cards lists all the info in a size 4 font...you need a
magnifying glass to read the thing. I thought he was pulling my leg until he
handed me one of his business cards."
There is now a user's group on LinkedIn for comments by lenders being audited. (Heck, maybe the notes above should go in.) "This group was set up to create a resource center and information hub for those in our industry wanting to learn more about CFPB audits from those presently or soon to be going through an audit. If you have been, are currently going through an audit OR know someone who has been through this, and are open to sharing information on a formal or informal basis - this is the group for you." Here is the URL.
Lastly, Joe Garrett, noted industry consultant, wrote, "Even if the CFPB hasn't contacted you about scheduling an exam, it's quite possible that they are monitoring you. They have stated that they will, to the extent possible, use existing information, including exams by state regulatory bodies, your HMDA reports, lawsuits filed on behalf of consumers, consumer complaints filed with the CFPB, newspaper articles, web postings, Neighborhood Watch Scores, lenders' websites, and your loan volume. Oh yes, they are watching you." Where's George Orwell?
Speaking of increased regulations, FinCen's August 13th is fast approaching and with it, the new requirement for Anti-Money Laundering policies for Mortgage Bankers and Brokers. Barbara Werth is hosting a free webinar on Anti-Money Laundering policies on August 8th at 2PM EST. There is no cost of the webinar, and anyone interested should email Barbara at: barb@MTToday .co so she can send you call-in information.
Late last week the industry received Penny Mac's quarterly results. Love 'em or hate 'em (for being a rising star on the origination side, or for accusations of buying back loans CW/BofA personnel originated in the first place for pennies on the dollar but originally sold at 105, respectively), the fact it originated $3.4 billion in the 2nd quarter through it correspondent channel set tongues wagging. Of that, $1.8 billion was conventional and $1.6 billion was FHA/VA - "Penny" only reported $2.6 million of jumbo product. (Depository banks love the margins on that stuff!) PennyMac has publicly announced a target of $2 billion per month of production, leading some to wonder if PennyMac's management is repeating history when Countrywide's management would discuss market share goals. (Although we're in a different environment now, product, pricing, and service are still paramount.)
PennyMac is expanding on the East Coast, with an Ops center in Tampa, and claims that of its 117 Correspondent Lending Group clients, about half of them have a net worth over $10 million. As we all know, counterparty monitoring and accountability is important! For more detailed information one can visit this link.
Up the coast in Northern California, Redwood Trust also announced results, and also set tongues wagging with news that it plans to jump into the market backed by taxpayer-supported Fannie Mae and Freddie Mac. The residential REIT said it's seeking approval from F&F to start using them as bond guarantors by year-end. Redwood, founded in 1994 and better known as a jumbo securitizer using loans originated by PHH Mortgage, First Republic Bank, Citi, and so on, has issued six of eight non-agency securitizations of new loans in recent years. "Many small originators will now need to find new buyers, such as Redwood, to purchase their loans," management noted.
So now we have Redwood, better known for buying jumbo loans from banks and mortgage lenders to package into bonds, creating junior-ranking, potentially higher-yielding slices it retains, now entering the fray for "vanilla" products. It's also, apparently, selling some whole loans ($86 million of ARM's last quarter, for example), as are several investment banks. During the 2nd quarter Redwood added 17 approved loan sellers, bringing its total to 37, and raised its year-end target by 10 to 50. Its results can be viewed at http://www.redwoodtrust.com/press_releases/.
And if the overall origination pie is going to shrink, may-as-well try to take a bigger slice, right? "If BofA, MetLife, ING, don't want it, and Ally/GMAC and Wells Fargo are scaling back, we're happy to have it" one production head wrote to me recently. The industry has seen large blocks of servicing already moving from depositories to non-depositories - Fortress Investment Group CEO Randy Nardone said that big banks are shying away from mortgage- servicing rights. That's because of "looming increases in capital requirements" for the contracts tied to the Basel III international accord, earnings volatility caused by swings in the asset's value and the "continual headline risk" created by being in the business, he said. Fortress owns Nationstar Mortgage Holdings, also making a name for itself as it grows originations and servicing. And industry experts point to Two Harbors Investment Corp. (TWO), the REIT run by Pine River Capital Management LP, as a name to watch, especially as the REIT takes a good look at jumbo securitizations and buying blocks of REO homes to rent out. Catch the wave!
A quick look at the markets shows... not much. The ECB and the Fed disappointed market expectations last week. Growth forecasts are being ratcheted down, as are inflation expectations, risk assets and/or financial conditions. Congress in its 5-week campaign recess and much of the key data out of the way, so rates may not do much depending on what happens in Europe, and they're more focused on vacations and the Olympics. "U.S. economic data from the end of July/early August was below potential but not bad enough to call in the cavalry" as Comerica's economics report noted.
Unlike last week, this week is very light in terms of economic news in the U.S. There is nada today, tomorrow, and pretty much Wednesday for rate-moving news (although Wednesday we have some productivity and unit labor numbers). On Thursday Initial Claims numbers will be updated through the Department of Labor publishing the number of filings for state jobless benefits and some Trade Balance figures. Friday we'll see some updated Import/Export prices on goods. Our "benchmark" 10-yr closed Friday at 1.58% and this morning it is a shade better at 1.56% with MBS prices better by maybe .125.
LO's are using social networking like never before - Mark Zuckerberg a CIA
agent? More:
http://www.realecontv.com/videos/the-stock-market/facebook-users-overestimated.html.