News on 3% and G-Fee Changes; FDIC Training Video on ATR and QM

For those of you who'd rather watch a video than read the written word, the Federal Deposit Insurance Corporation (FDIC), which knows a thing or two about banking, announced the release of the first in a series of three new technical assistance videos developed to assist bank employees in meeting regulatory requirements. These new videos will address compliance with certain mortgage rules issued by the CFPB. This first video covers the Ability to Repay and Qualified Mortgage Rule and is intended for compliance officers and staff involved in ensuring the bank's mortgage lending operations comply with CFPB rules.

In Fannie & Freddie news, during testimony yesterday at the Senate Banking Committee, FHFA Director Mel Watt opened the door to the possibility of ending the GSE conservatorship. However, there is not a short-term fix and the Treasury Department would need to make changes to the Senior Preferred Stock Purchase Agreements. As a reminder, the Treasury Department has a "sweep" established under the third amendment to the Senior Preferred Stock Purchase Agreements which prevents Fannie and Freddie from building capital. Thus, they are currently undercapitalized and until they are allowed to build up their capital levels, they will remain in conservatorship.

In fact, most think that Fannie and Freddie will remain in conservatorship and won't be unwound, at least any time soon: any road to administrative action addressing the GSE conservatorship is long, complicated, and littered with political potholes. And everyone has their own agenda - for example, Senator Warren's exchange with Director Watt over the FHFA's unwillingness to embrace principal reduction on GSE loans.

Of more interest to borrowers and lenders, Director Watt announced that the FHFA will release details regarding the return of the 3% down-payment product in December, but expect it to include conditions such as housing counseling, stronger credit scores, lower DTI ratios, or different pricing. Analysts believe that there must be policy clarity on three separate, yet interconnected, policy initiatives before fully assessing the impact of the 97% LTV product's return: the FHFA's finalization of the Private Mortgage Insurance Eligibility Requirements (PMIERs) as it may impact mortgage insurer premiums, the FHFA's forthcoming G-Fee decision, and the FHA's next step with its mortgage insurance premium.

Director Watt stated that the FHFA will release its G-Fee decision in the first quarter. Every LO out there can tell you that loan level price adjustments (LLPAs) are a huge concern and hindrance in lending. But many expect G-Fees to remain relatively static but for the LLPA grid to be flattened in order to reduce pricing for borrowers in lower credit bands. Recall that the FHFA suspended plans to raise guarantee fees in January because the agency's new director, Mel Watt, said more study was required. There is a fine balance between increasing access to credit and doing so in a prudent manner - making loans to borrowers who will pay the loan back.

This morning we had Jobless Claims, and recently Wells Fargo Securities Economic group published a report indicating that the recession created a greater share of part-time employment and the labor market is much weaker than unemployment rates suggest.  While full-time jobs are growing again, the amount of these jobs are well below the precession level. At the beginning of the recession, total employment fell 8.6 million, but full-time employment dropped 11.3 million. Today, there are still 2.1 million fewer Americans working full-time than in November of 2007. The lack of full-time jobs adversely affects the housing industry, as few part-time workers buy homes. Fortunately, the share of full-time employment is growing which should encourage consumer spending in 2015. Part-time employment rose by 414,000 workers since last October, but full-time employment has increased by 3.4 million. At that pace, the level of full-time workers would recover by July 2015.

We had a fair amount of news yesterday. Housing Starts unexpectedly fell in October, slipping by 2.8% but a 4.8% jump in permits to near a 6-1/2-year high suggested the housing market was steadily regaining strength. Single Family starts rose from 668k to 696k, while multi-family fell from 370 to 313. We are a long way from "normalcy" in housing starts.

But everyone was yammering about the release of the Fed minutes. The Fed focused on the sunny side things thus downplaying global woes in October. Mortgage-backed securities held firmer most of the day although they eventually closed the day worse by .250 than Tuesday's closing price levels.

But that was yesterday, and today we've had weekly Jobless Claims at 291k, a drop of 2k from a revised 293k. We also had the October Consumer Price indices (seen lower core and headline but was unchanged and +.2%, respectively), and ahead of us is the Philly Fed Index (20.7 last), Existing Home Sales (5.17M prior) and October Leading Economic Indicators (+0.8% previous). We saw a 2.35% close on the 10-yr on Wednesday. In the early going it is at 2.34% with agency MBS prices a shade better.

Jobs and Announcements

For jobs, Silverton Mortgage, a highly respected direct retail lender with headquarters in Atlanta continues to grow and is interviewing for a Regional Sales Manager.  "Our production team is looking for an energetic, talented candidate with a proven track record to grow and enhance their current sales force of 60+ MLO's with a focus on recruiting and training. The position will be based in Atlanta and covering the southeast (while seeking growth opportunities in the 12 licensed states). Silverton's first to market technology and marketing focus, combined with a strong company culture, provides an amazing platform to grow sales. While being honored Inc. 500/5000's list 4 consecutive years, Silverton continued to receive 98+% client and agent satisfaction results, and prides itself on being a communication company that excels at mortgages.  Candidates prepared to make a difference should apply to Hr@silvertonmortgage. com."

On the compliance side of things, The Compliance Group, Inc. is searching for Quality Control Auditors - and you may be able to work from home. The Compliance Group is a nationwide compliance company and it is looking for experienced Quality Control Auditors to perform Quality Control Audits on closed mortgage loan files. Experienced candidates should have a strong background in QC audits with underwriting experience, DE and VA Lapp designations are preferred, excellent communication skills, detail oriented and has the ability to work remotely. Interested candidates should send confidential resumes to tcgcareers@thecompliancegroup. net  or if you have questions contact Shirley Rodriguez.

The Houston area-based firm of Charbonneau & Associates, Inc. has been engaged by a publicly traded bank's mortgage subsidiary to assist in the expansion of the mortgage banking entity. The bank is domiciled in Wisconsin and has assets of approximately $2 billion. The mortgage company is a retail mortgage banker who currently originates approximately $175 to $200 million per month. The company is looking for retail origination platforms that are originating $20 million or more per month. For inquires or more information, or to set up a meeting at the MBA's conference in San Diego, please contact Larry Charbonneau.

While we're on M&A, SNL Financial analysis finds banks have closed 2,599 branches this year vs. 1,137 opened for a net decline of 1,462. That level is just below the yearly total of 1,487 of 2013. Total US branches now sit at 94,752 and are down about 1.5% from the end of 2013 and the lowest overall level in 8 years. Speaking of which... First National Corp. (VA) has agreed to buy six branches in Virginia from Bank of America. (In July, the company announced the launch of its new mortgage division, "First Mortgage", not to be confused with Ontario, CA's First Mortgage.) Inland Bank & Trust ($1.0B, IL) will acquire College Savings Bank ($500mm, NJ) for about $30 million. In Michigan Sturgis Bank & Trust Co. ($307mm) will acquire The West Michigan Savings Bank ($38mmI) for about $4mm. Bank of North Carolina ($3.7B, NC) will acquire Valley Bank ($886mm, VA) for about $101mm in stock or roughly 1.7x tangible book. In Minnesota Wells Federal Bank ($240mm) will acquire St James Federal Savings ($27mm). BOKF ($27.6B, OK) said it will discontinue its grocery store branch model and close 29 branches and relocate an additional 10 in-store branches to new locations. The bank expects to save $7mm to $8mm annually and said changing customer behavior toward more mobile and online banking was a key factor.