Business vs Consumer Purposes; Wells and Chase Numbers Reflect Industry Trends
What happened yesterday? Donald Rumsfeld (remember him?) sent his annual letter to the IRS, telling the agency that, because of the complexity of the tax code, he has no idea if he paid his taxes correctly.
AmeriSave Wholesale & Correspondent Lending is looking for a few good men and women! AmeriSave is recruiting AEs for its West, East and Midwest Regions. "At AmeriSave, we support local lending. We pair technological innovation with sensible risk management in mortgage lending in order to provide wholesale and correspondent lending to mortgage bankers, mortgage brokers, community banks and credit unions. Add to this formula integrity, efficiency, competitive rates and excellent customer service, the mortgage experience becomes our motto: Safe. Simple. Mortgages. Our technological innovations and unique processing services provide the local lender a much-needed avenue into high performance, high volume mortgage lending on a local level. Our mission is to be accessible and open in our communication with our customers. AmeriSave's loan performance is outstanding. This exceptional performance is the basis for pricing advantages with investors and mortgage insurance companies. It also translates into a no-risk advantage for our lending partners. AmeriSave has a full range of secondary market mortgage products, is a Fannie/Freddie and Ginnie approved lender and a national Full Eagle Direct Endorsement with FHA. A sales background in wholesale/correspondent lending, mortgage insurance, or agency work is preferable. Qualified individuals should submit their resume to resumes@amerisave. com.
Supreme Lending "utilizes the most advanced technology to maintain its extraordinary level of customer satisfaction while adhering to its mission to process loans from application to closing in 30 days or less. How does this set Supreme apart? Supreme combines its innovative web based paperless process and automated underwriting systems with a team of IT individuals passionate about thinking outside of the box to create unique software solutions. This coupled with an atmosphere of proactive teamwork and communication, allows for the consistent delivery of its best-in-class service to both customers and associates alike. The Company's dedication to technology, high quality customer care, and unbeatable support are often cited by tenured Branch Managers and Loan Officers as key ingredients for their enduring success in the marketplace." Learn more about Supreme Lending's Retail Branch opportunities and become part of this dynamic forward thinking team here, or e-mail recruiting@supremelending. com.
And to meet growing demand in its licensed states, Stonegate Mortgage is hiring established retail Mortgage Advisors and Managers to build territories. Please follow the link to read more about the positions and about Stonegate Mortgage. Stonegate Mortgage originates, finances, and services agency and non-agency residential mortgages through its network of retail offices and approved third party originators. It also provides financing through its fully integrated warehouse lending platform, NattyMac. "Operational excellence, financial strength and commitment to customer service and technology have positioned the firm as a leading provider in the emerging housing finance market." Interested applicants should apply through the Stonegate Mortgage Careers Page.
People who study mortgage lending and trends continue to ruminate on the Wells Fargo and Chase numbers from Friday. JPM's mortgage origination volume was down 27% QOQ and 68% YOY and mortgage application volume was down 17% QOQ and 57% YOY. Both closings and application volume came in somewhat weaker than expected. One positive point of note is that retail applications were down 7.6% but correspondent was down 26%, so it looks like the company was giving up some share in the correspondent channel. Wells Fargo's QOQ mortgage volume was down 28% but applications were down 7.7%.
JPM's gain-on-sale margin came in at 172 basis points, down from 212 bp last quarter. Wells Fargo's gain-on-sale margin was down somewhat more modestly to 1.61% from 1.77%, a 9% decline - probably closer to the overall industry. The value of the JPM's MSR (mortgage servicing rights) declined to 106 bp which was 2.86x the servicing fee from 118 bp which was 3.11x the servicing fee at the end of 4Q. The equivalent numbers for WFC were 85 bp of 3.15x the servicing fee compared to 88 bp or 3.26x in 4Q. What does it all tell us? Nothing that the smallest lender isn't seeing: residential lending volume is down, margins are slimmer, it is tougher to make a loan, and lenders may not be able to count on servicing to beef up their balance sheets. Are we having fun yet?
Maybe's today's MBA applications numbers for last week will help them a little. Apps were up 4.3%, with refis up 7% and purchases +1%. Refis accounted for 52% of apps, and ARMs are still 8%.
Borrowers in Hawaii, unfortunately, woke up to a story that many of them may have been a victim in yet another scam.
Just what we need: more advocacy groups to track. Here's the latest on special interest groups taking sides over the still breathing, and relatively healthy, corpus of Fannie and Freddie.
Yesterday the commentary contained some information on the differences between "business purpose" and "consumer purpose." ("...There are roughly five primary factors that must be considered in order to determine business purpose from consumer purpose...") I received a well-thought out not from Julia Wei, an attorney with Peter N. Brewer. "We have litigated this issue frequently on behalf of private lenders in defending against borrower claims that the loan was a 'consumer' loan and they should have received a TIL disclosure, along with other alleged violations of consumer statutes. As defined by Title15 of the United States Code Section 1602(h), "consumer" refers to transactions where the loan proceeds are used primarily for personal, family or household purposes. The code section further goes on to state in Section 1603(1) that extensions of credit for primarily business, commercial or agricultural purposes are exempt from TILA. [See also Regulation Z § 226.3 (a)(1).] The Ninth Circuit had applied a multi-factor test, which was derived from Federal Reserve Board interpretation of 12.C.F.R. Section 226.3(a)(1)(1983). [Thorns v. Sundance Properties (9th Cir. 1984) 726 F.2d 1417.] The Ninth Circuit considered all five of the factors you noted in your column."
Ms. Wei's note continued. "The most on point case in California applying the Thorns factors is that of Weber v. Langholz. In this 1995 case, the borrower, Ms. Weber, was a 89 year old widow living on Social Security and investments. She borrowed $160,000 and secured the loan with her primary residence. She then used the proceeds to buy coins. When she defaulted on the loan, she sued her lender claiming that the lender had violated TILA and failed to give her the notice of the right to rescind. The lender argued that TILA did not apply because the investment of the loan proceeds in coins was not 'primarily for personal, family, or household purposes.' The Weber Court evaluated the factors enumerated in Thorns and noted that the borrower had invested nearly $600k in coins, that the loan amount of $160,000 was very large and she personally managed her investment funds. The Weber Court held the Truth in Lending Act did not apply because the loan was for a business purpose and exempt. [Weber v. Langholz (1995) 39 Cal. App. 4th 1578, 1583-1584.]" Thanks Julia! If you'd like to reach her at The Law Offices of Peter N. Brewer, write to Julia@brewerfirm. com or read the company's blog.
At the Tri-State mortgage conference last week I had the opportunity to spend some time with Jennifer Squillante, a client manager with B2R Finance L.P. out of Manhattan. It turns out that B2R, besides being hard to type, will offer loans to individuals who have dozens, or hundreds, of properties. "We lend primarily upon the value and cash flow of the underlying collateral. We do not review the personal debt to income ratios of our applicants." I am not going in to all the details - you can contact Jennifer directly at jsquillante@b2rfinance. com - but once again we are seeing capital in search of yield going around or outside the QM box for loans and borrowers that make sense.
Continuing on with some relatively recent lender and investor updates...
Mountain West Financial has aligned its guidelines on a number of topics with that of the Agencies, including not considering divorce as a Qualifying Event for FHA Back to Work, calculating stocks/bonds used as reserves as 70% of the vested value, and not allowing real estate agents to provide closing cost credits. Several other guidelines have been updated as well; LTVs of up to 125% are now allowed under DU Refi Plus, LTVS of up to 80% will be permitted for Conventional cash-out ARMs, and the 10% borrower cash investment requirement for VA manufactured home transactions has been removed.
MWF has rolled out a new procedure that allows transactions to be underwritten and receive a full Credit Approval without the borrower having chosen a property, which is available for purchase transactions under all products, programs, and occupancy types. Brokers can create a file to submit to underwriting that lists the address as "123 No Property" and then, once a property has been selected, submit a new 1003 with the address and updated Details of Transaction.
Effective for all Conventional, FHA, and VA transactions that use ConformX through DocuTech, MWF is allowing the submission of electronically signed Initial Disclosure packages. Lenders are reminded that investor restrictions prohibit electronic signatures on the Final 1003/Uniform Residential Loan Applications, and originators are still required to wet sign.
Impac is now licensed and accepting loans in the state of Vermont.
In order to keep its correspondents up to date on CFPB regulatory changes, PHH has published an FAQ document in the CFPB Resources section of the SOAR website. The most recent version of the document can be accessed here.
PHH is now allowing late fees to be included in the new loan amount for FNMA DU Refi Plus HARP transactions on the condition that they appear on the payoff statement for the original loan. These are the only fees associated with the existing loan that may be included in the new loan amount, as FNMA does not allow the inclusion of unpaid returned payment charges, escrow shortages, or recoverable balances. Lenders are reminded that Freddie does not permit late fees to be included in the new loan amount for Relief Refi Open Access transactions.
At New Penn Financial, a foreign national does not need a social security number. A valid passport and visa are required with no minimum length of stay. Visa Waiver programs are acceptable too.
Here are some stats proving that markets sometimes tend to move more on surprises versus expectations than on economic trends. The Fed announced the 1st reduction to its asset-buying program (i.e., quantitative easing - QE) on 12/18/13. The $10 billion reduction in monthly purchases (from $85 billion to $75 billion) was widely expected to result in higher interest rates. The yield on the 10-year Treasury note closed at 2.83% on 12/17/13. The yield on the 10-year Treasury note closed at 2.62% last Friday on 4/11/14. Rates have actually dropped this year in spite of QE being gradually curtailed.
The National Association of Home Builders Housing Market Index was below expectations at 47 in April versus a projected 50. While builders were "expecting sales prospects to improve in the months ahead" said NAHB Chairman Kevin Kelly, Chief Economist David Crowe observed there were headwinds facing both potential buyers and home builders: ongoing tight credit conditions and limited availability of lots and labor.
The market didn't do much Tuesday, so I won't waste your time discussing small moves in MBS prices or the 10-yr. yield (which closed at 2.63%). We should keep in mind, however, that global events overseas certainly trump any kind of minor economic news that is scheduled for the U.S. But there is some news out today: mortgage applications (noted above, up about 4%), March Housing Starts and Building Permits, March Industrial Production and Capacity Utilization, and the 2PM EST release of the Fed's Beige Book (with riveting economic anecdotes from the 12 Districts in preparation for the April 29-30 meeting). In the early going today the 10-yr is sitting around 2.65%, and agency MBS prices are worse a shade.