NY Finally has its own MBA; Accronym Update: QRM, NMLS, CFPB, FHFA, & HUD
I was dealt a serious setback yesterday here at the MBA conference, being held in the immense Four Seasons, Mandalay, Delano, conference center complex. While among the slot machines (the two that stand out are "Pirate's Booty" and "Gorilla's Mist") I ran out of breadcrumbs that I was using to sprinkle along my path so that I could find my way back to my room. I did, however, see Pete Rose signing autographs in a book store at the Mandalay - apparently his popularity comes and goes in sync with the popularity of non-prime/sub-prime lending.
Who said there's nothing new under the sun? New York finally has a statewide mortgage bankers association. "The association is there for you! The full time staff, with both extension mortgage banking and association management experience, will provide members with training and educational opportunities, legislative alerts, media coverage, discussions of issues with regulators, and much more. Join now, paying your 2015 dues, and become a member for the balance of 2014 at no charge. Our website is under construction, but you can obtain a membership application by emailing Tiffani Clark or Marianne Collins, Executive Director and COO.
At an MBA event last night I was able to spend a few minutes with FHFA Director Mel Watt (and his son Brian), which was very cool. He is definitely in this "for the long haul" and appears that he is doing his best in weighing all factors in making decisions regarding the FHFA. Of course that does not mean that gfees and loan-level price adjustments are going to be reduced, but we will see. As the commentary mentioned yesterday very early in the morning, the Agencies did make a move to 97%. It was greeted with mixed reviews. Lenders prefer to have more clarity on what might cause a buyback years down the road rather than changes to LTV. And will the big lenders go along with the move? Many, if not all, MI companies will insure up to 97% already, and the MI industry's trade group made a statement:
"USMI welcomes the announcement today by FHFA Director Watt that FHFA and the GSEs are working on sensible and responsible guidelines for expanding access to 97% loan-to-value (LTV) low down payment mortgages. Restoring access to these mortgage loans is an important option that will help credit-worthy borrowers - especially first-time homebuyers - gain access to affordable homeownership. Private mortgage insurance has been readily available to all creditworthy borrowers in this market segment for well over a decade, and those responsibly underwritten low-down-payment loans have a long track record of good performance. It is an example of how private mortgage insurance can help make mortgage credit available to more qualified borrowers, working with lenders of all sizes, while protecting taxpayers. Return of a 97% LTV mortgage purchased by the GSEs for all creditworthy borrowers would expand access to credit while providing substantial first-loss protection for taxpayers provided by private capital. USMI looks forward to learning more about the program and working with FHFA and the GSEs to responsibly expand the availability of mortgage credit."
As noted yesterday and above, one significant reason that mortgage lenders have been reluctant to expand the credit box is due to lack of clarity on putback risks that extend for the life of a loan. Watt announced that an agreement had been reached between the lenders, GSEs and the FHFA, "in principle on how to clarify and define the life-of-loan exclusions". He said they were more clearly defining the exclusions "so that lenders would know what they are and when they apply to loans that have otherwise obtained repurchase relief." He added the GSEs would be providing details about the updated definitions in coming weeks. Watt also said the FHFA was working with FNMA and FHLMC to develop guidelines for mortgages with LTVs of between 95% and 97%. Further details about these new guidelines also would be available in coming weeks, he said.
Remember that the Federal Housing Finance Agency is working on a single bond for government-sponsored entities as opposed to separate securities issued by Fannie Mae and Freddie Mac. The mortgage industry largely supports the idea of a single GSE bond. Read SIFMA's recommendations on the FHFA proposal.
"Increased government regulations are hobbling the mortgage industry. That was your overwhelming response as compiled in the initial September edition of the Collingwood Group Mortgage Industry Outlook Report. We ask that you take a couple of minutes to provide feedback to be used in our October Survey. By participating you will receive an insider's look at the results prior to publication. As always, your identity and answers will be kept strictly confidential. Click here to take the survey!"
HUD's latest effort to fight discrimination in housing is by giving $38.3 million to more than 100 fair housing organizations and other non-profit agencies in 43 states and the District of Columbia to address housing discrimination. Here is its announcement. Critics wonder if this the right way to fight housing discrimination? Or are there better strategies for tackling this thorny problem?
As a reminder, the CFPB has issued a guide on the manufactured housing market which includes information on how these homes are financed and who purchases them. Although manufactured homes account for just 6% of all occupied housing, the CFPB is interested in them because they offer affordable housing opportunities for low income and underserved communities. The CFPB's report obtained its information from HMDA data, data voluntarily provided to the CFPB as well as information from industry groups, consumer groups and government agencies. The guide highlights that most families living in manufactured homes reside in rural areas and have half the median income and a quarter of the net worth of other families. The document also states that about 3/5 of households who own their home, also own the land it is located on and more often, pay higher interest rates for their loans.
In order to obtain more information on manufactured housing, the CFPB may update HMDA data, by adding a field to indicate if such loans are secured by real or personal property. The CFPB believes that consumers living outside of urban areas, older households and low-income families are "financially-vulnerable" and manufactured homes may be a source of affordable housing for these groups. Here is the link to the CFPB: http://www.consumerfinance.gov/.
Per a Fed announcement, a group of six federal regulators will meet tomorrow to finalize the risk retention/qualified residential (QRM) exemption rules required under Dodd-Frank. The market is expecting a QRM rule which will track the CFPB's Qualified Mortgage (QM) rule which would be a positive for the mortgage insurers as it would not mandate a high down payment-something that was proposed when the rule was first proposed over three years ago. The rule, mandated by Dodd-Frank, requires any securitizer of an asset-backed security to retain at least five percent of the credit risk unless 100% of the loans in the pool are made up of high-quality residential mortgages (the QRM exemption). Originally, the rule would have required a large down payment which would have, in our view, negatively impacted private mortgage insurers (MIs). However, since then, the rule was re-proposed and the regulators opened the door to a lower down payment requirement.
Most believe that the high down payment requirement will be dropped - a good thing for the MI biz. And many expect the QRM exemption will be similar to the CFPB's QM which requires prudent underwriting practices (e.g., fully documented and verified borrower information) and bans non-amortizing loans and other nontraditional lending practices. All in all, look for whatever comes out tomorrow to provide some needed certainty to the asset-backed market. The rules are not retroactive so they do not apply to outstanding ABS, but instead should allow industry participants to gauge the rule's impact and proceed accordingly.
The Nationwide Mortgage Licensing System and Registry (NMLS) delivered a proposal for comment that would change the Mortgage Call Report (MCR). Licensed mortgage lenders are required to file quarterly and annually reports that includes information relating to loan activity, servicing and financials. The Conference of State Bank Supervisors (CSBS) proposal would mandate mortgage lenders to report on the amount and count of closed loans that are Qualified Mortgages, create a new definition of "application", require additional nationwide and state specific service reporting and require additional fields to encompass changes in loan application amount. The proposed changes can be found here. Comments are due October 30th, with final changes expected in November and implemented as soon as May 15, 2015. The MBA is urging the CSBS to postpone changes to the MCR so it can be simplified and align its data with HMDA reporting requirements.
During the second annual Ginnie Mae Summit, Ted Tozer, the president of Ginnie Mae spoke about their innovative program and policy initiatives in response to an evolving mortgage market. Tozer said that the departure of customary depository banks from mortgage lending and servicing is transforming the housing industry and is a different market than the one that Ginnie Mae was shaped in. He went on to say, "60% of Ginnie Mae's top ten issuers are non-depository institutions, which presents a wide range of complex challenges for the industry." Ginnie Mae's initiatives include: A report titled "An Era of Transformation" which includes issues in mortgage lending due to the financial crisis in 2007-2008 and Ginnie's approach to these challenges. Apart from the position paper, Ginnie Mae is finalizing changes to its net worth and liquidity requirements and improving their Acknowledgement Agreement which will expand liquidity by allowing issuers to use mortgage servicing rights as collateral. Ginnie Mae will also begin to evaluate issuers and help them come into compliance, starting on January 1st, 2015. Finally, Ginnie Mae collaborated with the Federal Home Loan Bank of Chicago and launched a pilot program to give small financial institutions greater access to the secondary market.
Looking at the markets Monday, in general we saw the same supply and demand functions moving MBS prices somewhat and they improved about .125 by the end of the day. For scheduled news we have Existing Home Sales (Sep) at 7AM Las Vegas time (economists are expecting a minimal increase to 5.10 million from 5.05 million in August) along with the Philly Fed non-manufacturing index for October.
For numbers, Friday the 10-yr closed at 2.20%, Monday we saw a 2.18% close, and it is currently 2.21% - overall things have quieted back down. Agency MBS prices are worse a shade.
Jobs
Speaking of popular products, New American Funding's Wholesale Division is now offering Jumbo product for both Primary Residence and Second Homes with extremely competitive pricing. The fully delegated product allows purchase, rate and term refinance, and cash-out refinance. LTV's up to 80% and loan amounts as high as $3,000,000. "Your borrowers can choose from 30 or 15 year Fixed as well as 5/1, 7/1 and 10/1 ARMs. Please visit us on the web for complete program details at NewAmericanGuidelines or call a local Area Sales Manager for details. Don't miss this opportunity to combine NAF's great service with a fully delegated Jumbo product! If you do not have a current Area Sales Manager assigned to your account please call us directly at 877-999-0799 and we will have one assigned!"
On the jobs side, Peoples Bank (KS) is searching for quality Retail Loan Officers focused on purchase business. Peoples is focusing on growth in Northern California, Kansas, and Florida. It is a family-owned, federally-charted (FDIC) community bank founded in 1871 with a "solid mortgage banking culture which has evolved over 30 years. Peoples Bank is a Fannie/Freddie direct lender, has significant warehouse spread, 'common sense' underwriting, a cooperative and supportive internal Departments, and a solid back office which delivers consistently competitive service levels (like consistent 72 hour underwriting turn times or less)." Please send your confidential resumes or questions to Monica Quenzer or find out more at www.bankingunusual.com.