Eminent Domain Still Out There; Wells and Chase Earnings; Investor and Agency Updates Continue

The 2010 Census showed that people who reported multiple races grew by a larger percentage than those reporting a single race.  According to the 2010 Census, the population reporting multiple races (9.0 million) grew by 32% from 2000 to 2010, compared with those who reported a single race, which grew by 9.2%. (Overall, the total U.S. population increased by 9.7 percent since 2000, however, many multiple-race groups increased by 50 percent or more.) Multiple-race data examines specific combinations, such as white and black, white and Asian, or black and Asian. (I don't think "mortgage banker Realtor" or "Realtor appraiser" was in there, but I know some top-notch couples that fit that bill.)

What are "the big guys" watching? Eminent domain seemed to be on the back burner, but the consideration of it is alive and well in Southern California. An article has appeared in favor of it but in a recent meeting the presidents of First Mortgage and Mountain West Financial (Clem Ziroli, Jr. and Mike Douglas, respectively, both spoke during public comment at a meeting of the controversial Joint Powers Authority created by San Bernardino County, Ontario and Fontana. The California Mortgage Bankers Association has done its part to point out the potential damage, and for a refresher on the topic you can watch this YouTube clip.

Besides eminent domain, there are lawsuits to watch. So besides Basel III, and the CFPB's QM/QRM waiting game, how about Flagstar Bancorp being one of the first to go before a judge over allegations of misrepresenting loans that got commingled in mortgage-backed securities. The case is being watched by Wall Street's largest firms because its outcome could affect litigation they are facing.

JPMorgan Chase (the #2 lender in the second quarter by volume across all channels, although it's volume was 1/3 that of Wells Fargo's) reported a record profit for the 3^rd quarter. The bank said it made $5.7 billion in the July-to-September period, shooting up 34% from the same period a year ago. Earnings were $1.40 per share, far exceeding the $1.21 predicted, and revenue rose 6 percent to $25.1 billion, beating expectations of $24.4 billion. Earnings were helped because the bank set aside less money for bad loans. It set aside $1.8 billion for potential loan losses, down 26 percent from $2.4 billion a year ago.

We also had Wells Fargo's numbers: Revenue was $21.2 billion, a shade lower than expected, although earnings per share were a penny better. Wells had more mortgage originations in the 2^nd quarter than Chase, U.S. Bank Home Mortgage, BofA, Citi, Quicken, and PHH combined, per National Mortgage News numbers, and has had 11 straight quarters of net income gains.

But while we're on Wells, Wednesday the commentary mentioned the bank's role or position in subprime lending, and not going too far down the credit curve. Several folks wrote with some slaps on the wrist. "I love the defense of Wells Fargo - what a joke! Wells had one of the largest sub-prime departments.  I personally know LOs with Wells that were told to put FHA borrowers into sub-prime product rather than FHA. (What I don't understand the government's suit against Wells is that it is regarding loans done from 2002-2004, but the real hard core sub-prime came from 2004-2007 - as far as I can recollect, FHA never had a stated income loan.  Remember the old saying, 'you sleep with dogs, you wake up with fleas.'"

And, "Wells prides itself on not falling too far down the credit curve? This is not true. They hired me to work under Norwest Mortgage, which they owned. It was so intertwined that we worked in the same building alongside the same loan officers and underwriters of Wells Fargo. In fact, I left because their sub-prime rates were higher (I recall about 1% in rate higher) than other wholesale options. They allowed us to broker out only if there was a compelling reason.  And 'found a lower rate elsewhere' was not a valid reason to use that channel."

And, "My guess is that Wells consistently concentrated their best pricing on conforming. Still, we wrote most condo loans through Wells because they didn't require condo docs!"

And lastly, "The sad part of this mess is that those that created and propagated the mess just keep on going.  That is too big to fail.  As 'criminal' as Wells might be (along with all the others), we need them to keep housing moving.  You know the game is rigged, but you have to keep playing as there is no other game available."

And an opinion on the H&R Block bank news, "In my opinion the loss of H & R Block bank is no loss. Many believe that H&R pushes very expensive loans to lower income tax payers via offering to 'give' them their refund immediately and the tax payer signs over the rights to the refund from IRS.  What most don't realize is there is a 30% or higher interest charge for that 4-6 week loan. If they are leaving due to Frank/Dodd, then this is the first positive thing I have seen from Frank/Dodd."

How about some relatively recent news from agencies, investors, and vendors? These will give you a sense of recent trends, but for full details read the actual bulletin.

In the wake of Hurricane Isaac, FEMA announced on September 21st that disaster aid has been made available in the state of Alabama in Baldwin, Mobile, and Pickens counties.

In response to the "current housing market conditions," the FHA has put in place temporary guidelines on condo project approval.  Changes have been made to the definition of "under construction," owner-occupant principal residence purchase requirements, the percentage of units that may be owned by a developer, mixed-use developments, investor ownership, delinquent HOA dues, insurance requirements, project certification, and pre-sale requirements.  See the official Mortgagee Letter (http://portal.hud.gov/hudportal/documents/huddoc?id=12-18ml.pdf) for full details of the temporary guidelines.  

HUD reminds lenders that the deadline for receiving extra credit on their FY2012 Servicer Performance Scorecards is October 31st. 

Freddie Mac has updated its delivery software to provide feedback on loans through selling system purchase edits and messages pertaining to the Uniform Loan Delivery Dataset requirements.  Credit policy and delivery requirements remain the same; the changes affect only the feedback sellers receive on their loans.  For complete details of the changes, see the "Selling System Tips for Resolving Delivery Edits" job aid (http://freddiemac.sparklist.com/t/419752/4682831/5146/26/).

The Workout Prospector system has also been updated so that certain fields no longer auto-populate.  Servicers are reminded that they can use their proprietary or third party system to evaluate borrowers for foreclosure alternatives so long as the final terms of the workout agreement align with the results produced by Workout Prospector.

There have been recent reports of Freddie sellers and servicers receiving invoices from FMFM-Agency or Fannie/Freddie Regulatory agency billing them for "DO/LP Agency Access Fees" and "Correspondent Agency Lender Access Fees."  These are not Freddie-generated and should be reported to the Financial Fraud Investigation Unit at mortgage_fraud_reporting@freddiemac.com.

Fannie Mae has issued clarifications on its hazard insurance coverage policy, the updates to which were originally announced back in August.  The changes will affect borrower-paid property insurance and lender-placed property insurance for Conventional first-lien loans, Conventional second-lien loans for which Fannie either had an ownership in the first-lien mortgage or paid off the first-lien mortgage in connection with the second-lien loan's foreclosure, FHA or VA mortgage loans that aren't conveyable to the insurer or guarantor, and RD-guaranteed loans serviced under the special servicing option.  Guidance has been clarified to state that, for loans where the foreclosure sale is held on or after October 1st, servicers must cancel hazard insurance coverage within 14 days after the property has been inspected and confirmed to be vacant by a Fannie-designated broker, agent, or property management company.

US Bank reminded clients that appraisal fees will be increasing as of October 7th.  Properties valued at less than $1,000,000 will incur a Set Fee, while properties valued at more than $1,000,000 will incur a Quote Fee, which will display as $1.00 on the online Appraisal Ordering System.

Fifth Third will be implementing the HARP enhancements announced by Freddie and Fannie earlier this month, which will relax various appraisal requirements for HASP Open Access and DU Refi Plus loans.  The minimum appraisal requirements still apply, and all appraisal reports must still be in color, be completed on at least the minimum required form by AUS, include an "as is" value, and produce a Submission Summary Report that confirms successful submission to the Uniform Collateral Data Portal.  Appraisals completed by companies on the Exclusionary list will not be accepted.

GMAC has updated its Jumbo tradeline requirements such that all loans require a credit score based on either a minimum of three active tradelines, each rated and paid satisfactorily for at least 12 months or a minimum 24-month credit history.  The tradeline requirements apply to borrowers whose income is being used to qualify for the loan, and it should be noted that authorized user accounts may not be used to satisfy tradeline requirements.  Active tradelines are defined by the date of the last account activity within a year of the current date and may be open or closed accounts.  These guideline changes apply to all new locks dated September 28th or after.

Mountain West Financial now requires that, for loans submitted with lender-paid compensation, all of the borrowers party to the transaction must be presented with an Anti-Steering Loan Options Disclosure.  Disclosures should be completed and given to the borrowers as soon as possible, as MWF requires borrowers to sign and date the form at least one day before closing, and the disclosures will be subject to review when the MWF Initial Disclosure package is issued.  This affects loans submitted on or after September 24, 2012.   Mortgage Broker and Loan Officer Compensation Disclosures must be completed, signed, and included in packages submitted to MWF as well.

Thursday the U.S. markets started off digesting news of the S&P downgrade of Spain and while this was somewhat unexpected it doesn't seem like markets care all that much. And it once again raises the question, "Does a rating change move the market, or is a rating change merely a reflection of what the market already knows?" When our markets opened, we found out that Weekly Initial Jobless Claims fell to the lowest level in four and a half years (and comes after last Friday's data that showed the Unemployment Rate dropped to its lowest level since January of 2009.) This is encouraging news from labor front. And RealtyTrac reported that foreclosure activity declined to a five-year low in September falling 7% from August and 16% from the same period last year. Is housing improving, or are there other reasons? Nothing goes up, or down, forever, and (just like at some point rates will slide higher, just not in the near future), the pace of foreclosures was unsustainable.

So agency MBS prices improved by about .125 by the end of the day Thursday, and the 10-yr T-note closed at 1.67%. And with the Fed buying $4 billion a day, why shouldn't mortgage prices do well - but how much shows up on rate sheets?

Today, besides the Wells Fargo and Chase earnings noted above, we've had the Producer Price Index for September. It was expected to drop from last month's +1.7% to +.7%, but came out +1.1% but the core rate (with no food or energy included for folks that don't eat or go anywhere) it was unchanged. The market is virtually unchanged from Thursday's close on a nice autumn Friday.

 
College football is tomorrow, and here's an entertaining 3 minute clip on some of the stars of the game - a must for any fan.