Cloud-based Mortgage Valuation; SEC Drops Wells Fargo Inquiry; More on CFPB Exams from OB

Better to be approximately right than precisely wrong. And a lot of neighborhoods are trying new things in real estate - thanks to Tony B. for this. It is an example of locals financing their own properties to help themselves.

And lenders continue to expand - business is good! In Kentucky and Ohio Victory Mortgage, LLC, is seeking Loan Originators and support staff for its new branch in Columbus, Ohio. Victory is a subsidiary of Victory Bancorp based out of Northern Kentucky and is expanding its branch network to include the Columbus Ohio market. It is one of the top seven largest lenders in the Greater Cincinnati Area and is "the affiliate lender for Fischer Homes who has been the Greater Cincinnati Area's largest homebuilder for the past five years, and Fischer Homes' entry into the Central Ohio market is what is driving Victory Mortgage's expansion." The LO position will include developing and maintaining a quality network of business relationships with Fischer Homes as well as other referral sources including realtor and refinance business.  Resumes for Loan Originators should be emailed to Jason Welch at jwelch@victorymortgage .com.

And a few states over, but without geographic restriction, Peoples Bank (KS) is searching for retail loan officers, focused on purchase business, across the nation. Peoples is a federally-charted (FDIC) community bank that was founded in the mid-1800's, has a solid mortgage banking culture which has evolved over 30 years, and which will close $2.5 billion in 2012 in all 50 states. Peoples Bank has Fannie/Freddie approvals, significant warehouse spread, proven and tested compliance practice, scalable state-of-the-art Information Technology platform and a solid back office which delivers consistently competitive service levels (like consistent 72 hour underwriting turn times). Please send your confidential resumes or questions to Marcia Robertson at mrobertson@bankingunusual .com.

Does the SEC ever say, "Oops, my bad!"? Apparently it does: "Wells Fargo says it won't face SEC action on mortgages," and here is the story.

TransUnion reports the percentage of mortgage holders at least two months behind on their payments declined in 3Q to 5.41% vs.5.49% in 2Q. This is the lowest level in 3Ys, but still well above the 1% to 2% historical level. Optimists say that this means things are improving, while critics will say that those inclined to be behind on payments have already been foreclosed upon.

Here are some relevant sites, questions, and observations recently received:

Tammy Butler with Optimal Blue addresses CFPB exams - page down once here.

"If the FHA would try to impose mortgage insurance for the life of the loan they would be in violation of a federal compliance law, the Home Owners Protection Act (HOPA).  There is even a covenant in security instrument regarding mortgage insurance so this is not something FHA can change easily, without changing the regulation. Congress would have to vote on that and loan documents would have to be changed. That would take a year! Just some information from an aging compliance person!"

"Rob, what happened to the train of thought that believed that current housing policies, including the $25 billion servicer settlement, harmed those who have done the right thing-those who didn't overleverage their homes, paid their mortgages on time, didn't borrow more than they could afford, or saved all their lives but are now punished with near zero interest rates?" Good question and one that many in the industry wonder.

Here's another: "As I was filling out the NMLS call report the other day and my numbers were not working out, it occurred to me that they will rarely ever work our correctly. Here is the situation. The call report asks for the number and total dollar amount of applications taken and the number and amount of loans closed, denied etc. So far so good. Except when a loan is taken in one quarter and finalized in another with a different loan amount. The math can't work out and the system will not allow it to not match. Kind of an interesting quandary. I'm a pretty small shop but how do the big lenders do it when it could be tens of thousands of dollars a quarter."

Steve S. observes, "A couple of year ago there was a study out on the FHA loans with down payment assistance.  For loans over 680 credit score there was no difference in the delinquency or foreclosure rate as compared to standard FHA loans with down payments.  When you got below 680 the numbers went off the charts. So the problem with FHA is that they don't have a floor on credit scores.  And raising the premiums won't stop the bad loans." [Editor's note: it comes down to ability to repay, right?]

John J. with Patriot Bank Mortgage writes, "HUD seems to think there is no price elasticity for HUD loans by their raising premiums and monthly go-alongs. The HUD fund up until the euphemistically called financial crisis was healthy because it had a broad spectrum of credit quality loans.  Certainly there were the edgier low-income, first-time home buyer loans but there were also lows with very good credit quality. The reason these better borrowers went with an FHA/VA low was primarily for the low down payment requirements.  The HUD share of business waned in the early 2000's because of sub-prime lending which had fewer 'hoops' to jump through to get a loan.  The financial crisis hits and sub-prime dissolves. Now where do these low quality loans go?  Back to HUD. Once the private mortgage insurance industry stabilized, they decided to get back in the game.  They must just love the fact that HUD thinks they can work their way out of their dilemma by raising premium rates.  All that does is make HUD the real lender of last resort.  The better qualified borrowers who might once have chosen an FHA/VA loan can now scrounge up just a bit more down payment and get an agency loan with private MI, which incidentally is cheaper than HUD premiums and getting cheaper each time HUD raises theirs. The answer for HUD is to lower premiums to encourage the higher quality loans but tighten underwriting guidelines, principally FICO/DTI ratios where the borrower is but a 'flat-tire away from defaulting'."

Turning to relatively recent lender & investor changes, we're no longer in the environment where payments were calculated using algorithms and flood insurance was checked against FEMA maps in house, no typos allowed on FHA or VA submissions, credit reports were hand delivered and borrowers had no access or right to view them, women of child bearing age were excluded from using their income to quality (until ECOA came out), conventional qualifying ratios were 25 and 33. So...

360 Mortgage raised the price cap on its government products from 4.50 to 6.00 points today.  The price cap is the total of the compensation paid to the broker (by the lender) and premium credited to the borrower (after all adjustments are taken in to consideration).  The reason for this change is to increase YSP available to credit to the borrower so that brokers can offer low or no cost streamlines.  (360 continues to offer streamlines down to a 640 credit score and have no requirements regarding the prior servicer.)

Residential mortgage lender Platinum Home Mortgage Corporation (the one based in Rolling Meadows, Ill, not the myriad of other Platinums) announced that Mike Azzarello, CMB has been named senior vice president and managing director of its "Traditional Correspondent" Lending Division.  In his new role, Azzarello will build the new traditional correspondent program group, based out of Jacksonville, Florida.

As per the GSEs' recent clarification, MGIC has announced that it will not require lenders to represent the condition of disaster-affected properties for HARP loans.  MGIC has further updated the disaster policy or its HARP Refi-to-Mod program to state that lenders must obtain exterior-only inspections for properties in areas that have been impacted by a natural disaster to assess whether or not any damage has been sustained.  These inspections don't need to be submitted to MGIC but should be kept in refinance loan files.  Provided that there either isn't any material damage or the damage has been sufficiently repaired before closing, HARP RTM properties remain eligible for the program.  In cases where there is material damage and the property isn't restored to its pre-disaster condition before the refinance closes, the property will be rendered ineligible.

Veros, GMAC's appraisal management service, has added AMC Axis to its appraisal rotation. Axis will be slotted into the vendor distribution and can also be selected manually.

Level1Loans and IntraPrise Solutions, Inc. announced the creation of Level1Analytics LLC, a joint venture to provide cloud-based mortgage valuation and other financial modeling software to owners and managers of mortgage and mortgage related assets. Each of the companies has a 50% joint ownership in the private venture, which is led by Dr. Thomas J. Healy, CMB of Level1Loans and Jeff Van Voorhis of IntraPrise Solutions. Read more

M&T Bank will no longer allow lender-funded advances to establish new escrow balances on FHA Streamline refinances as of November 28th.  Loan packages received on the 28th and after where the HUD-1 discloses an escrow advance will not be eligible for purchase.  In cases where a loan has been received by funding but not purchased by the deadline, the lender should document that the package has been made whole either by payment having been received from the borrower or the paid-off lender before M&T can authorize purchase.  Premium pricing to defray closing costs and prepaids with lender credits will still be permitted for FHA Streamline refinances.

Let's all be careful what we wish for, as one trader noted yesterday, "Treasuries were on the rise again Tuesday on the strong demand for the US two year note auction and concerns that US budget negotiations were not making progress." Does that mean that if & when the U.S. government "mans up" and settles the fiscal cliff issue, rates will rise? Perhaps not, as the markets would rather have certainty than uncertainty - but it is better than the alternative which could easily harm our economy but push rates lower. But if a LO's borrower is out of a job because companies won't hire due to the economic climate, a low possible refi rate won't help.

On Wednesday we saw some price movement during the day, but for the most part MBS prices were pretty flat on below-normal volume. We learned that New Home Sales decreased 0.3% in October, but is up 17.2% year over year. The median sales price was $237,700; the average was $278,900. The seasonally adjusted estimate of new houses for sale at the end of October was 147,000, which represents a supply of only 4.8 months at the current sales rate. The press doesn't seem to be focused on that "shadow inventory" any more.

Treasuries continued to move higher, and thus rates lower, due to risk aversion associated with the uncertainty of a resolution to the fiscal cliff crisis before year-end but prices on MBS were essentially unchanged (spreads widening).

Today we've had Initial Jobless Claims for last week (expected to drop from 410k to 390k, it went from a revised 416k to 393k) and the second reading on third quarter GDP (expected to move from +2.0% to +2.8%, it came out nicely at +2.7%). Later we have yet another in the seemingly endless chain of housing numbers (Pending Home Sales) and the final leg of this week's coupon auctions with $29 billion in 7-year notes. In the early going the 10-yr is up to 1.64% and MBS prices are roughly unchanged.

My wife was screaming at me: "Leave!! Get out of this house!" she ordered.
As I was walking out the door she yelled, "I hope you die a slow and painful death!"
So I turned around and quietly asked, "So now you want me to stay?"