Stonegate Expansion; Trends in the LO Job Description; Studies Point to Mixed Picture for Building & Lending

By: Rob Chrisman • Wed, Mar 5 2014, 5:04 PM

When I was on a pipeline hedging trading desk, we were often expected to have a crystal ball about where the market was going. None of us had one, although we did have coins to flip about where rates were going to be the next day, but the California Public Employees Retirement System (CalPERS - the largest state pension fund at $283 billion) has already told us something about the future. The fund adjusts its asset allocation model every 3 years, and in June 2014 CalPERS will reduce its allocation in stocks from 50% to 45%. Sorry - I am sure that news is already in the market.

In New York, Sterling National Bank announced that it has acquired the business of New York City based Apple Mortgage Corp, a leading residential mortgage broker. Under the terms of the agreement, the entire Apple Mortgage team will be joining Sterling. "Sterling National Bank's residential mortgage business is unique in the way it operates in three capacities: originating and holding loans in its own portfolio, selling loans into the secondary market, and, when necessary, acting as a broker. With the addition of the Apple Team, Sterling has further enhanced its mortgage lending opportunities."

And in Indiana, Stonegate made some folks' day by announcing it will hire 400 folks within the next few years. That is a significant move. Inc.com lists the company has having 444 employees currently. Glad to hear!

Mortgage loan originators (MLOs) everywhere know that the deadline for the stand alone Uniform State Test (UST) is in 25 days. LO's that were licensed prior to April 1, 2013 need to pass or register for the exam by that date if they wish to originate in a participating States after April 1, 2014. If LO's don't do the stand alone UST, and they want to originate in a participating State after the deadline, they will have to retake the full National exam including UST. Mortgage Training Today is offering 2 conference calls to present the material that will be covered in the test; the calls are scheduled for March 19^th and 26^th from 1-2:30 CST. The cost of the conference call is $75 which includes a study guide and unlimited sample tests for the exam. Anyone interested can go to to register. And no, this is not a paid announcement.

Two Californians face up to 35 years in prison if convicted of federal charges of hacking into mortgage brokers' computers to steal personal information from more than 4,000 victims and defrauding them by wire. And people in the industry wonder why the industry has an uphill PR battle.

HARP production has slowed down, but while going strong it provided a good wage to some LOs. But perhaps the LO of 5 years ago is a dying breed, similar to that of the typewriter repairman, or the numerous travel agents that dotted the United States. And how will LOs deal with Millennials? Are we moving to a low cost environment? Possibly - I am hearing of moves toward lower commissions while at the same time LOs are becoming counselors to their clients rather than order takers if they want to add value. And Ed Conarchy (contributing faculty of Vantage Productions and Cherry Creek MLO) writes, "I am truly a counselor to my clients. I give holistic financial advice to all my clients to make sure they choose the correct mortgage to complement their holistic finances and financial goals. 'Americans devote the largest portion of their incomes to housing. Consequently, how you handle the purchase (financing) of your home will have far reaching implications on virtually every facet of your financial life, including your ability to save, pay for college, and plan for your retirement.' So today I first educate consumers on the importance of saving for retirement as soon as they can - that time is their friend when it comes to wealth creation. That they should focus on prepaying their 401k vs prepaying their mortgage. And the message is needed. A recent study shows that 94% of US workers are not maxing out their pre-tax retirement account contributions to the IRA max allowed. My goal is to get MLOs to see there is more to our industry than being a mortgage order taker, that you can really help consumers out focused on fiscal literacy, that education (and not sales) makes you bond with the consumer. (If you'd like to reach Ed, write him at econarchy@ccmclending.com.)

The longer I am around this biz, the more I realize I don't know. I'd never heard of "Black Knight", but it is part of LPS, and it told everyone yesterday that "January Mortgage Data Shows Further Declines in Loan Originations and Fewer Refinance Prospects." It is nothing any lock desk couldn't have told us, but this is a more formal version.

Not to be outdone in the research department, CoreLogic told us that home prices, including sales of distressed homes, increased nationally by 12 percent in the 12 months ended in January (That's easy to remember.) This was the 23rd consecutive month in which the company's Home Price Index (HPI) showed prices up nationally on a year-over-year basis. Excluding distressed sales, prices rose almost 10%. But it doesn't stop there: the CoreLogic Pending HPI indicated that February 2014 home prices, including distressed sales, were projected to increase 12.5% Y/Y.

And while we're showing off our research talents, Zelman & Associates released its "Land Development Survey" showing that land activity is holding up but that weather is having some impact. (Click Here To Access Report) "In January, our overall demand score ticked upward for the second consecutive month, following sequential declines in the prior four months, signaling still-solid absolute levels of demand and continued confidence in early 2014. The uptick in confidence would align with the positive order and traffic trends highlighted in our most recent homebuilder surveys. However, our demand indices by lot type were more mixed, with finished lot demand down slightly from December and raw land demand relatively flat. The choppy trends across our demand indices show that despite the reversal of the mid-2013 decline, a more consistent upward trend in demand for land will be contingent on further confirmation of a strong spring selling season and clarity around the direction of the market in 2014.

Here's an optimistic outlook from the MI sector tied to shift to purchase mortgage market, combined with a little self-promotion. John Clifford, SVP of Commercial Operations at Genworth MI, said the company increased its NIW by 35 percent in 2013, in part by offering the most expansive underwriting guidelines in the industry. "Our expansive guidelines and very competitive pricing should help lenders approve more borrowers as the mortgage market continues its shift from refinance to home purchase activity. After recording our first full-year profit in several years in 2013, we're focused on accelerating this growth through 2014 and beyond, while continuing to focus on prudent underwriting and strong risk management."

But United Guaranty Corporation has been ranked the number one mortgage insurance company by sales (defined as first-lien new traditional mortgage insurance written, or NIW) and market share for each of the past two years, according to Inside Mortgage Finance. United Guaranty set a corporate record in 2013 with NIW totaling nearly $49.4 billion, with 28.1 percent market share, according to the February 21 issue of Inside Mortgage Finance. In 2012, United Guaranty topped the same list with NIW of just under $37.3 billion and market share of 28.4 percent.

Yesterday, when reciting some Parkside underwriting guidelines for its non-QM product, I noted, "All transactions are subject to a maximum LTV of 80%, and DCR exceptions will be permitted on a case-by-case basis." That is not LTV - CLTV is correct. "Parkside offers a non-QM product for NOO properties that qualifies on Debt Coverage Ratio (DCR) instead of DTI. 3/1 & 5/1 - qualify at Note Rate; qualify with 100% of rents when using rental survey or lease, "We now go to: 50.01 - 60% LTV with DCR = 1.3, 40.01 - 50% LTV with DCR = 1.2, <= 40% LTV with DCR = 1.1; Max CLTV is 80% in all cases. Exceptions on DCR will be looked at on a case-by-case basis."

InterLinc Mortgage Services LLC has announced the acquisition of HomeTown Mortgage Services Inc. resulting in a combined annual production of $700 million with 228 employees, a stronger presence in the state of Alabama and the future addition of Georgia to the 13 states InterLinc currently serves.

Impac has updated its Government guidance to require a TOTAL Scorecard Approve/Eligible decision for borrowers with only one credit score and a non-traditional credit report from a pre-approved credit agency for borrowers with no score. Guidelines on derogatory credit events "with Extenuating Circumstances" have been amended to allow reduced waiting periods, subject to underwriter discretion and appropriate documentation, and the minimum acceptable FICO has been updated to 620.

Impac has revised its Jumbo Premier guidelines to require that the loan file include verifications of compliance with QM, ATR, and the Points and Fees rule, along with evidence of Undisclosed Debt Monitoring. As a reminder, Impac will not purchase HPMLs on any of its Jumbo programs.

As noted in the commentary yesterday, lock desk folks have been saying that apps have picked up. Sure enough, this was confirmed by the MBA's weekly report (that covers 75% of retail lending) which showed its seasonally adjusted index of mortgage application activity rose 9.4 percent in the week ended Feb. 28. Refinancing applications rose 9.6 percent while purchase applications rose 9.4 percent.

As opposed to the last few weeks when volatility took a vacation, it has come back this week. Most agree that we'd rather have peace in Europe and Asia (and anywhere else) than low rates. So it is a good thing that global tensions eased after Russian President Putin sent troops back to bases after recent military exercises near Ukraine, right? But Monday's "flight to safety/flight to quality" improvement reversed itself in the stock and bond markets. The 10-yr T-note shot up to 2.69% and agency MBS prices dropped about .5.

Today we've had ADP for February, which does not include government jobs. The expectations were for +158k and it came in at +139k. We'll also have ISM services for February; ISM non-manufacturing is expected at 53.5 versus 54 previously. And at 2PM EST the Federal Reserve releases its Beige Book which provides economic anecdotes from around the country in preparation for the FOMC meeting on March 18-19. Rates are little changed this morning; the 10-yr closed at 2.69% and this morning it is sitting around 2.69% and agency MBS prices are unchanged.