Credit Unions' View of CFPB's APR; Redwood's Latest Deal; What is the Average Gfee Now?

"Rob, in the old days, I'd go to conferences and secondary marketing people would compare their status by comparing guarantee and guarantor fees. They don't do that anymore, but with all this gfee news, is there an average gfee?" Yes there is. Fannie even has it in its financial statements. Those who don't know how gfees figure into things should know that it is added into the pricing of a government backed mortgage (Fannie, Freddie, FHA, VA, and so on): the higher the guarantee fee, the worse the price to the borrower. If your gfee for a conventional loan is 0, and have a mortgage at 3.25%, you could put that loan straight into a Freddie or Fannie 3% security (the .25% difference is for servicing, of course). But if your gfee suddenly increases to 50 basis points, then either the loan goes into a 2.50% security (3.25% - .25% servicing - .5% gfee) or the lender "buys down" the gfee to 0. The buy down rate (2:1, 3:1, 4:1, whatever) depends on the investor, contract, market, etc., but the cost is passed on to the borrower, of course.

You can find the gfee details in the tables of agency 10Qs at www.fanniemae.com or http://www.freddiemac.com/investors/er/. For example, on page 32 of the 2nd quarter financials, Fannie disclosed a 40.3 basis point average charged fee on new acquisitions during the three months ending June 30, 2012. Look in the middle of table 16 on that page. Of course this does to include the recently announced increase effective with December pools. And, remember that a portion of that funds the TCCA that added 10 basis points starting in April 2012. Put another way, the 40.3 includes the TCCA charges, but not the upcoming increases. With Freddie Mac, go to site and see the table on page 28 of Freddie's 2Q10Q - the third quarter will be out next month.

Guarantee/guarantor fees impact every lender, big to small. Speaking of big lenders, I have been retained by a "Top 5" non-financial correspondent lender in the Northeast seeking an experienced senior account executive to manage the Pacific Northwest territory of multiple states containing 75 approved correspondent accounts. The candidate preferably will live within that region and manage their accounts execution to deliver both delegated and non-delegated best efforts delivery. If you, or someone you know, are interested, please send a confidential resume to me at rchrisman@robchrisman .com. (I am traveling to Austin, TX today, so please excuse any delays in writing.)

Due to a high rate of growth BofI Federal Bank (Bank of Internet USA) is currently looking for talented TPO Account Managers, Retail Loan Processors, Warehouse Lending Specialists, Underwriters and a Retail Processing Manager. BofI Federal Bank recently announced the opening of a new branch in Carlsbad as well as their corporate headquarters moving to La Jolla, near San Diego. These opportunities may be available in either location depending on the position. Please forward all resumes to Traci Holley at tholley@bofifederalbank .com for consideration.

Today is Wednesday, which means that everyone waits up all night to hear the MBA's stats on last week's application news. Apps fell about 4% from the previous week (adjusted for the pseudo-holiday) but of particular interest was the purchase index. It increased by 1%, putting the index at its highest level since June. The MBA's seasonally adjusted refinance index, however, fell 5.3% although it still makes up 82% percent of total applications. For more of a look into the refi numbers, the FHFA released its monthly refinance report for August. Highlights from the report include: HARP accounted for nearly 24% of all refinances during the month, 50% of HARP applications came from the 80-105% LTV bucket, 27% of HARP applications came from greater than 125% LTV bucket, YTD HARP volume stands at 618k; Inception-to-date HARP volume stands at 1.6 million, and more than 70% of the HARP volume in Nevada, Arizona and Florida came from >105% LTV borrowers in August, versus 51% nationwide. Speaking of states, HARP volume as a percent of total refinances for Nevada, Arizona and Florida was at least 50% in August, versus 24% nationwide. Overall, HARP had a much higher market share both in July and August in states that have been particularly hard hit by the housing downturn including Nevada, Arizona, Florida, Utah, Idaho, Michigan, and Georgia. 

Credit unions have feelings too! And apparently some of them don't like the CFPB's take on Annual Percentage Rate (APR).

Speaking of the CFPB (again), there are some rumblings, reported by the Wall Street Journal, that the CFPB is considering giving mortgage lenders protection from certain lawsuits in order to encourage lending to well-qualified borrowers. The industry is waiting for Qualified Mortgage (QM) standards, fearing the worst but hoping for the best. It is rumored that the CFPB is considering providing a full legal shield for high-quality loans that qualify, mandating that judges rule in lenders' favor if consumers contest foreclosures. "For a smaller category of loans that still meet the 'qualified mortgage' guidelines but carry higher interest rates-a group similar to 'subprime loans' - lenders would receive fewer protections. In those cases, consumers could argue in court that lenders should have known that they couldn't afford the mortgage...small and midsize lenders have been the most vocal in calling for such a "safe harbor," contending that their biggest competitors (Wells, BofA, Chase) can more easily absorb the risk of lawsuits." The MBA, of course, has said it would like to see even broader protections for lenders to cover more loans. This runs counter to consumer groups who have argued that the mortgage rules need to include stronger safeguards to prevent a return to the reckless lending practice of the mid-2000s - a view most in the mortgage industry view as short sighted.

This discussion is of great interest to Redwood Trust, the only firm dealing with rated RMBS (residential mortgage-backed securities) in the secondary marketplace - mostly jumbos. (You should know, however, that Lou Ranieri's Shellpoint Partners filed a shelf registration with the SEC to issue nonagency mortgage-backed securities.) Per Kroll Bond Ratings, Redwood increased the number of mortgage originators included in its latest RMBS securitization (the 5^th this year) while cutting back on the number of loans with second-liens to enhance the quality and risk of the overall transaction. And why not fill these with loans that have low loan-to-value ratios, high FICO scores, 100% documentation of income and assets and relatively large balances. Mortgage originators included in the pool include First Republic Bank (24%), PrimeLending (17%), Flagstar (9%), and Cornerstone (6%) - other lenders make up the remaining 43% of the pool, showing that Redwood is indeed expanding its client base. The average LTV is 67%, and no loan has an LTV or CLTV greater than 80%. The percentage of the pool at 80% CLTV is 23%.

How about some underwriting, investor, and agency news over the last few weeks?

Do you have a borrower in a drought state? This is worth a read.

California's Pacific Premier Bancorp ($1.1B) will pay about $54 million to acquire Texas' First Associations Bank. First Associations does not accept retail or consumer deposits and only works with homeowner associations and HOA management companies nationwide. The move gives Pacific Premier low cost core deposits and improves its deposit base.

The USDA has announced that no changes to rural designated areas based on the 2010 Census data will be made prior to March 2013 unless specifically stated otherwise. The USDA/Rural Housing funding for both purchases and refinance loans has been exhausted-that's it for FY2012.

In another reminder, the FHA has adjusted the net worth requirements for lenders seeking to renew their approval.  All lenders whose fiscal years end after May 20, 2013 must have an adjusted net worth of a minimum $1-2.5 million.  The exact minimum requirement to which a lender will be subject will be determined by how much it participates in FHA single and multifamily programs and the degree of servicing it does for multifamily programs.

In certain cases, the temporary changes to condo project guidelines that the FHA implemented in mid-September allow exceptions to the 25% non-residential/commercial space requirement for mixed-use developments.  For projects where non-residential/commercial space exceeds that but comprises 35% of the project or less, it's possible to submit an exception request to the jurisdictional Homeownership Center.  Exception requests for projects that don't satisfy either the 25% or 35% limits can be submitted to the Underwriting and Processing Division of the Philadelphia Homeownership Center, whose full address can be found in the Condominium Project Approval and Processing Guide.  For further guidance on the temporary changes, a set of FAQs has been published on the Condominium Mortgage Insurance section of the FHA-HUD website. 

HECM users greeted the new HERMIT system on October 9th.  More information on HERMIT can be found here.

Fannie Mae has updated the Selling Guide to include recent changes made to the weighted-average coupon limit on fixed-rate mortgages in MBS pools, inactive and deactivated lender status, custodial depository and document custodian requirements, and the calculation of HCLTVs with permanently modified HELOCs.

Two new whole loan products have been added to DU Refi Plus and Refi Plus as part of Fannie's initiative to support borrowers with higher LTVs.  The new products, which permit LTV ratios greater than 105%, allow lenders to deliver loans with terms between 15 and 20 years against a 20-year whole loan commitment rather than a 30-year whole loan commitment.  For mandatory commitments, terms may be between 181 and 240 months, but best effort commitments require 240-month terms.

As part of the initiative to align Fannie and Freddie's selling and servicing contracts with those of the FHFA, Fannie has made several changes to its policies on compensatory fees, defaults, performance metrics, servicer violations, transferring and terminating servicing, and response time frames.  The new provisions become effective on January 1, 2013.

DU users are reminded that Version 9.0 will be implemented over the weekend of October 20th.  Changes include the removal of Expanded Approval recommendations and updates to credit risk methodology, maximum LTV/CLTV/HCLTVs for a variety of loan types, appraisal and income documentation, project review requirements, guidelines for high-balance loans, and Underwriting Findings reporting.

Freddie Mac has announced that it will be revising two areas of the Servicer Success Scorecard criteria, the first being investor reporting.  The Custodial Account Review measurement will be eliminated from the cash management guidelines, while the Data Integrity and Operational Management categories have been updated to increase the focus on system reporting.  The default management criteria in the Loss Mitigation and Default Timeline Management categories have also been modified; a new workout effectiveness performance measurement has been added as well.  All of the above go into effect on January 1, 2013.

Those who don't adhere to Freddie guidance when servicing Freddie loans can look forward to paying increased compensatory fees for REO rollback, aged data errors, and contract noncompliance.  There are also new fees for unauthorized servicing transfers, unreported transactions, and loan simulation, and at present, Freddie is revising how it calculates the fees for reporting noncompliance, EDR reporting noncompliance, and cash remittance interest reimbursement.  Balloon/reset, referral to non-retained attorneys, and research and reconstruction fees have been eliminated.

On to the markets! Rates, including those for home loans, crept up a little yesterday, resulting in a pick-up in mortgage banker selling. The Consumer Price Index (CPI) was reported and both the headline and more closely watched Core CPI were reported at 2%, above expectations. Wait a minute - if the yield on the 10-yr is 1.72%, and inflation is greater than that at 2% a year, isn't that problem? Sure it is, especially when the Fed has repeatedly mentioned that 2% is about where it wants to see inflation. Investors will not support or buy fixed income securities (including those backed by mortgages) if this continues. No one expects rates to change much for a long time, however, although yesterday agency MBS prices worsened about .125.

But today is a new day, and we've had yet another read on the housing market this morning (besides the MBA's application index) with September's Housing Starts & Building Permits duo. Starts were expected to increase about 2.5% and Permits about 1%. Starts were up a surprising 15%, and Permits were up almost 12%! Rates have indeed moved higher - primarily attributed to some signs of improvement in the European financial markets. (A reminder to be careful about what you wish for!) The U.S. 10-yr is at 1.76% in the early going, and MBS prices are worse by about .125.

Romney's tax plan is finally revealed: http://www.romneytaxplan.com/.