CMLA Speaks Out; Few Tears or Fears Over PMIERs
True or false: "Unnecessary regulatory burdens are preventing qualified, credit-worthy borrowers from obtaining the American Dream of homeownership." That's according to testimony from the National Association of Realtors before the U.S. Senate Banking, Housing and Urban Affairs Committee. "'Realtors support strong underwriting standards to protect consumers from the risky lending practices of the past, but we are concerned that the pendulum has swung too far. In some cases, well-intentioned, but over-corrective policies are severely hampering the ability of millions of qualified buyers to purchase a home. I believe, and our members believe, that we have yet to strike the right balance between regulation and opportunity,' said NAR President Chris Polychron."
Political activism generated by the mortgage industry continues. Glen Corso, Executive Director of the Community Mortgage Lenders of America (CMLA), sent over, "Congress should streamline regulations for community-based mortgage lenders, banks and nonbank lenders alike, to keep consumer costs as low as possible and preserve a wider array of choices among lenders to serve homebuyers' financing needs. Testifying before the House Subcommittee on Financial Institutions and Consumer Credit at an April 15th hearing CMLA Chair and President of Republic State Mortgage Company Paulina McGrath detailed these policy recommendations, many of them jointly supported by the Community Home Lenders Association (CHLA), an association exclusively representing nonbank mortgage lenders. Eliminate the current 3 day waiting period between a revised disclosure and the closing of the loan if the revised disclosure has an APR for the consumer that is lower than the original disclosure. Exempt small lenders from the vendor oversight requirements. Direct the CFPB to concentrate their examinations on large lenders and those small lenders for which the CFPB has received a referral from another regulator and exempt those small lenders that have no such referral. Refine the definition of small servicer to include those small lenders that subcontract part or all of the servicing function to a subservicer.
Separately CMLA advocated the following additional step: Amend the SAFE Act to direct the issuance of a 180-day transitional license to registered, bank-employed loan originators who are subsequently employed by a non-bank lender, which will permit these loan originators to continue to work while completing state licensing requirements."
Yesterday for Agency news this commentary discussed the removal of the adverse market fee and the tweaking of the loan level price adjustments. But Fannie Mae and Freddie Mac also announced revisions to their Private Mortgage Insurer Eligibility Requirements (PMIERs). Updates from the 2014 proposed requirements include new loan seasoning factors, the option for an MI to decline to provide the GSEs with full delegation of loss mitigation activities, and an enhanced notice period prior to the GSEs taking remedial action against an Approved Insurer.
For PMIERs, the FHFA meaningfully and unexpectedly reduced the capital requirements for 2005-2008 vintage loans. The final rule also included provisions that allow capital credit for seasoning of loans, although this was partially offset by higher capital requirements on post-2012 loans. The rule did not give credit for future premiums (through either the unearned premium reserve or contractual premiums). MI companies will begin requiring that mortgage guarantors hold more capital against riskier loans: in order to back loans packaged into securities by Fannie Mae and Freddie Mac, insurers would have to hold liquid assets worth at least 5.6 percent of their risk exposure. That compares with about 4 percent under existing state-based rules that use a broader definition of capital.
There were two main changes to PMIERs. The capital requirement for loans originated in the 2005-2008 period was materially reduced. And a seasoning ("nothing wrong with a little seasoning, right Chef?") factor was introduced, which reduces the capital requirement as loans season. This was partially offset, however, by higher capital requirements on post-2012 loans. These changes make PMIERs compliance easier for the legacy mortgage insurers. We also will see more differentiated capital requirement grids which could result in the mortgage insurers (MIs) adjusting pricing - once again probably impacting borrowers. In comments submitted to the FHFA last year, to no one's surprise MI companies warned that requiring them to hold more capital against riskier loans would lead them to increase premiums for weaker borrowers. It doesn't take a rocket scientist to know that higher MI premiums for conventional loans could push borrowers toward the FHA program which cut its premiums earlier this year. Yes, I believe that the term is "competition."
PMIERs will go into effect at the end of 2015 and mortgage insurers will have to certify that they are compliant with PMIERs by March 1, 2016, with full compliance necessary by July 2017. But there's not time like the present, and some of the MI companies jumped on it!
ARCH MI thumped its chest a little and said that "if the financial requirements for private mortgage insurers...went into effect immediately, Arch MI would satisfy them.... Based upon our interpretation of the PMIERs and Arch MI's current portfolio and balance sheet, Arch MI's 'available assets' exceed the "minimum required assets" specified within the final requirements.
Radian interrupted ARCH and stated it could comply with the rules immediately by using about $330 million in assets it currently holds, and would need less money as capital by the Dec. 31 deadline.
At this point United Guaranty jumped up on a table and told everyone that it will be fully compliant with PMIERs on the effective date, December 31, 2015. "United Guaranty is committed to being prepared to withstand economic stress events. As an AIG member company, United Guaranty is part of a nonbank systemically important financial institution (nonbank SIFI) and participates in Comprehensive Capital Analysis and Review (CCAR) stress testing, which no other MI is currently subject to.
Also up on the podium were Essent and National MI, and they quietly whispered to themselves and reminded everyone that they had issued press releases estimating they were compliant with PMIERs as of the end of the 1st quarter - enough assets to meet their requirements.
And then MGIC rushed through the door and said in spite of a $230 million shortfall at 1Q15 (a number that includes the repatriation of assets from an insurance subsidiary but does not give credit for MTG's existing reinsurance transaction) it will likely be in compliance by the time the rules go into effect. The company has reached an agreement to restructure its reinsurance transaction that it believes will allow credit under PMIERs and also received regulatory approval from regulators to transfer $45 million of assets of other insurance subsidiaries to MGIC.
At this point the spotlight swept over to Genworth, sitting over by the potted rubber plant checking e-mails. Yes, let's not forget Genworth! GNW said its PMIERs shortfall remained at about $500-700 million on the effective date. Not exactly chump change, but they have plenty of good employees and a clever CEO to come up with some ideas.
The American Land Title Association (ALTA) published its preliminary 2014 Year-end and Fourth-Quarter Market Share Analysis. The report indicated that the title insurance industry generated $11.2 billion in title insurance premiums in 2014. The fourth quarter of 2014 produced $3.1 billion in title insurance premiums, with 19 states seeing an increase in title insurance premiums compared to a year earlier. The top five states with the highest percent increase in the fourth quarter included Oregon (15 percent), Missouri (12 percent), Arkansas (10 percent), Louisiana (10 percent) and Texas (7 percent). ALTA reported that Texas generated the most title insurance premiums in 2014, follow by California and Florida. The Fidelity Family had the highest market share at 32%, then First American Family (28%) and Old Republic Family (15%). To no one's surprise overall written title insurance premiums decreased in 2014 from 2013.
Up a little, down a little - that's what the bond market is doing. Friday things improved, yesterday they worsened, and still the 10-year T-note yield, as a proxy for mortgage rates, is in the same range it has been in for a few months (1.85%-2.00%). For those who follow what happens in the world's economies, the People's Bank of China cut the required reserve ratio by a full percentage point, the biggest cut since 2008. By reducing the amount of reserves that banks need to hold for every dollar of loans, the move should reduce pressure on China's beleaguered banking system and increase its capacity to lend. But...Kaisa Group Holding Ltd., a Chinese property developer, missed a $52 million interest payment on debentures due in 2017 and 2018.
I head to Kansas today (and then to Atlanta) so fortunately there are no market-moving events scheduled for today. The 10-year, which closed Monday at a yield of 1.90%, is sitting around 1.87% with agency MBS prices better than Monday by about .125.
Jobs and Announcements
In company personnel news Castle & Cooke Mortgage LLC is expanding and actively seeking highly skilled and experienced branch managers and their teams. "We're looking for branch managers and their teams that are seeking a platform that provides the support, technology, and advances needed to be an industry leader in today's marketplace. We have the key to your castle. The position reports directly to the SVP of Sales & Marketing and requires at least 2 years in branch management experience. Candidates being considered for this position will be subject to additional background checks as required." CCM is a direct Fannie/Freddie/Ginnie seller & servicer. Please contact Christopher Jensen (801-461-7132) for further information or click on the link above. EEO Statement - All qualified applications will receive consideration for employment without regard to race, color, sex, national origin, protected veteran status, or disability.
I receive regular questions from readers about bridge financing or short term private money loans. This segment of the business is alive and well, especially for Realtors. For example, Wildcat Lending, LLC is a private (or hard) money lender that is expanding in its offering to lenders. "Need a bridge loan or can't approve a 'subject to' appraised value? Institutional private money sources are becoming more accepted in the residential lending industry, and in this case Wildcat is willing to educate and show lenders how we do business. We lend on the After Repaired Value, or ARV, and our loans include both purchase and rehab funds. This is for investment properties only where generally an investor acquires, rehabs and either flips or keeps the property as a rental. Turn times can be days (remember those days?) and this is basically considered a cash offer!" Please email Jeremy Rehwald or Kai Chandler to learn more about Wildcat Lending's loan products and terms.
And PRMG is experiencing more organic growth. As PRMG continues to successfully build its national footprint throughout 2015, Paramount Residential Mortgage Group is actively hiring experienced Underwriters along with Sales Manages and Account Executives to help support and serve the entire Western (Northwest and Southwest) and Eastern (Northeast and Southeast) United States. "Sales Managers and Account Executives at PRMG have the rare opportunity to sell and support three different channels thereby creating a unique and very prosperous opportunity: retail, wholesale, and correspondent. As one of the Top 50 mortgage companies to work for in America, along with a record breaking month for the third consecutive time!-- PRMG has made it their mission to providing customers with the best possible product choice and service across retail / wholesale and correspondent channels! PRMG has nearly 1000 employees nationally and is licensed in 47 states with nearly 50 branches located throughout the country! Isn't it time that you took a good look at PRMG? Contact HR@prmg. net for a complete job description or confidential inquiries.
A quick correction to a note I had yesterday regarding Mortgage Capital Trading (MCT)'s hire of Joel Dumage to handle the Midwest. Joel's e-mail is jdulmage@mctrade. net.
And another congratulatory note, this time to Georgann DeGennaro who has been brought on by Caliber Home Loans Correspondent Sales Team as the Sales Director for the North Eastern Territory. Georgann will responsible for all correspondent activity for the states of CT, MA, RI, ME, NH, VT, and shoot her an e-mail if you are going to be in New York City for the National Secondary conference.