Volcker Rule; Government Lending; Future of FICO
A Bank Director survey of bank directors, execs, and HR officers finds the top compensation challenges last year were, in order, tying compensation to performance, recruiting commercial lenders, compensation and benefit costs, retaining key people, and competitive pay.
The Government and Residential Lending
Mortgage lender Financial Freedom agreed to pay a settlement exceeding $89 million to resolve allegations it broke laws stemming from its role in a federally insured reverse mortgage program, the U.S. Justice Department said yesterday. The privately held Austin, Texas-based company is alleged to have tried to obtain insurance payments for interest from the Federal Housing Administration despite failing to properly disclose that mortgagees were ineligible for such payments, the department said in a statement.
Given the Republican slant on removing government from lending, it is no surprise that some in the Senate are seeking government shrinkage from mortgage market. Though Republicans and Democrats at a Senate banking committee hearing agreed the government's conservatorship of Fannie Mae and Freddie Mac should end, the process is unlikely to be simple. Testifying at the hearing, Federal Housing Finance Agency Director Melvin Watt refused to offer input on legislation to restructure the companies, saying the question was beyond the scope of his agency's mandate.
Treasury Secretary Steven Mnuchin charged five financial regulators with a review of the Volcker rule during a meeting of the Financial Stability Oversight Council. The industry has long questioned the measure's vague definition of which activities are prohibited.
Over at the FDIC, Vice Chairman Hoenig believes that bank-activity separation is the key to stability. Consolidation is increasing the banking industry's vulnerability to market shocks, says Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corp. He recommends in a detailed proposal separating large banks' consumer lending and investment banking.
The American Bankers Association (ABA) has called for a delay in the HMDA regulation(s) on January 1, 2018. And the ABA has joined the move toward dismantling Dodd-Frank altogether. The announcement came in the form of a white paper but alerts the Department of Treasury to the possibility of a complete rewrite to all financial laws and regulations.
As a reminder, HMDA, which is now in the domain of the CFPB, data includes the race, ethnicity and sex of the applicants. In order to ensure the government has data to analyze, lenders must request (but cannot require) the demographic information from each loan applicant. Jeremy Potter opined, "What's interesting is that consumers are increasingly declining to provide such information. As online application processes give control of the question to consumers, I am interested to see if consumers continue to decline to provide this information. If so, how many loan applications need to be excluded before the government cannot accurately analyze a lender's data? For instance, if 33% of a lender's loan applicants do not provide the demographic information, is the remaining 2/3 a valid sample? How can we get an accurate picture of lending patterns without 1/3 of the data?"
The House of Representative reopened an issue related to the future of FICO scores and indeed took the first steps to ensure a plurality of credit scoring models could compete. Many believe FICO uses antiquated modeling that relies too heavily on things that are not as relevant anymore. Lenders like SoFi and Float have moved away from the device in underwriting some loans.
The National Association of Realtors (NAR) has made it crystal clear that it won't stand for any monkeying around with the mortgage interest deduction (MID, for those who enjoy acronyms) when it comes to tax code changes. NAR President William E. Brown weighed in on the President's tax proposal with the following statement. "For over a century, America has committed itself to homeownership with targeted tax incentives that help lower- and middle-class families purchase what is likely their largest asset. No surprise, real estate now accounts for over 19 percent of America's gross domestic product, or more than $3 trillion in investment.
"But for roughly 75 million homeowners across the country, their home is more than just a number. It represents their ambitions, their nest egg, and the place where memories are made with family and friends.
"Targeted tax incentives are in place to help people get there. The mortgage interest deduction and the state and local tax deduction make homeownership more affordable, while 1031 like-kind exchanges help investors keep inventory on the market and money flowing to local communities.
"Those tax incentives are at risk in the tax plan. Current homeowners could very well see their home's value plummet and their equity evaporate if tax reform nullifies or eliminates the tax incentives they depend upon, while prospective homebuyers will see that dream pushed further out of reach. As it stands, homeowners already pay between 80 and 90 percent of U.S. federal income tax. Without tax incentives for homeownership, those numbers could rise even further. And while we appreciate the Administration's stated commitment to protecting homeownership, this plan does anything but...We look forward to working with leaders in Congress and the administration to reform the tax code, while preserving America's long-held commitment to homeownership."
Capital Markets
Fed Chicago President Evans says the FOMC should unwind its assets at a gradual but sufficient pace to normalize the balance sheet within 3-4 years. Makes sense to me! The NY Fed continues to buy $1-2 billion a day of agency MBS, using money from early payoffs, thus assisting the demand side of the supply & demand equation.
Tuesday was a good day for the bond markets as MBS closed "higher in price and tighter on spread" amidst better buying from both retail and the Fed to go with limited supply as treasuries were better bid. After the poor Housing Starts and Building Permits numbers the 10-year yield touched a mid-morning low of 2.31% and ending the day at 2.33%.
We've already had the only scheduled news today, which is the every-Wednesday at 7AM ET MBA's survey on applications (not locks) from last week: -4%. We commence the work day with the 10-year at 2.29% and agency MBS prices better .125-.250 versus last night.
Jobs and Products
Nearly two decades of underwriting experience gives LenderLive Correspondent Lending leverage in its non-delegated program which continues its impressive growth. While you're committed to providing borrowers with a timely and hassle-free approval, we're committed to giving you the resources and tools to best serve your customers. Underwriting turn-times average 24-48 hours. An intuitive technology platform allows for easy loan administration and tracking. Utilize our embedded pricing engine or any of the most popular third-party engines. As an added plus, LenderLive offers FHA and VA sponsorship. Contact National Sales Manager, Bob Kallio to learn more.
Recognized as the leader in the non-Agency space, Angel Oak Mortgage Solutions is continuing its aggressive hiring spree by looking to add Wholesale Account Executives in markets across the country, specifically in Atlanta, New Orleans, Pittsburgh, Portland, Northern CA and Northern VA. To continue to deliver an extraordinary customer experience while realizing record monthly volumes, they are also hiring underwriters and other operations positions in their Atlanta headquarters. If you've been thinking about making a move into the fastest growing segment of the mortgage industry, there's no better time. Come join the nation's top Non-QM lender by emailing careers@angeloakms.com to start the conversation or watch this clip from their Mortgage News Network's Top Mortgage Employer's interview on what it's like to work for Angel Oak.
"We are looking for the next great national sales leader to join our team. Equity National Title, an innovative and customer-focused national title agency entering its 28th year of business, is expanding its National Sales Team. We had had three consecutive years of growth and profitability, and offer a best-in-class opportunity as a National Sales Executive. We are a leader in applying digital technologies to closing all types of residential loans and supporting Purchase Money lenders (centralized or distributed) nationwide. We are looking for candidates who have successfully sold mortgage-related services or title services to C-level and mid-level mortgage lender managers for ten or more years. They will attract new lenders to our industry-leading services as well as expand existing relationships. Additionally, he/she will have strong producing relationships and be comfortable in a culture that puts employees and customers first. Check us out on our website first and then send resumes to Jim O'Donnell, President."
In servicing news, "Do shiny objects have you distracted? Leaders have the important job of deciphering between which shiny objects are imperative to the success of their business and which shiny objects are nothing more than a distraction. Don't let distractions get in the way of deciding what matters most when picking your subservicer. Some believe the three things that matter most when picking your next subservicer are as follows: 1) Does their technology provide exceptional transparency and ease of use so that the servicer can compliantly and easily manage their MSR portfolio from a subservicing oversight perspective? 2) Does the subservicer treat the portfolio like a commodity or like their own brand name is attached to the borrower's experience? 3) Does the subservicer strive to give best in class customer service while offering competitive cost structure to their servicer clientele? I am sure many of you are drawing a blank when considering if this exists in the marketplace right now.
Well, The Money Source (TMS) is proud to introduce its world class subservicing platform to answer all three of these questions. Borne out of the frustration of working with many of the usual suspects in today's subservicing landscape, TMS Subservicing not only built a platform focused on their core values of People Matter and Rock Solid Service, but they also invested in developing the disruptive software known simply as SIME (Servicing Intelligence Managed Easily). SIME, combined with NPS (Net Promotor Scoring), and a culture obsessed with service is what TMS considers the winning combination for servicers looking for a subservicer who not only will treat their portfolio as if it were their own, but also provides the subservicing oversight transparency that is lacking in today's competitive landscape. To celebrate the launch, TMS Subservicing is proud to offer its Flagship Servicing Transfer Program to all new clientele who move their servicing to TMS. The Flagship Servicing Transfer Program offers special incentives which rival the most competitive of offerings available in the marketplace. To learn more about how you can take advantage of all that TMS Subservicing offers, visit www.GetSIME.com.
First quarter data published by the Richey May Select benchmarking program shows that production volume among independent lenders decreased by 30% compared to Q4 levels, but was up by 4% compared to Q1 of 2016. Even with the slowdown in volume, net income was on par with Q4 due to increases in secondary gain on sale and unfunded lock pipelines. Many more precise and relevant metrics on peer performance are available to Richey May Select participants just 35 days after quarter end. Richey May recently launched an enhanced version of its platform, offering independent lenders a more dynamic and intuitive interface, increased efficiencies and even more timely financial and operational data. For more information, visit Richey May's webpage or contact Tyler House.
Since TRID was enacted, it seems lenders have gone to great lengths to avoid collecting the fateful "six pieces" of information until the right time. Luckily, technologies have become more nimble to provide a better 1003 experience for both loan officers and borrowers. One example is Maxwell's Customizable Loan App, which allows originators to edit, hide or add as many or as little questions as they need, saving different templates for each situation. The guided loan application experience saves-as-you-go for the borrower and can be exported as a Fannie 3.2 into any LOS. Maxwell's system can then piggyback on the loan app to collect borrower docs. To learn more about the new Customizable Loan App and all of Maxwell's features around document collection and borrower communication, request a demo here.
"Your borrowers spend a lot of time on Facebook, yet most MLOs lack the skills to turn Facebook into a lead machine. Join National Mortgage Professional Magazine and Jason Lutz from TBWS Group for a complimentary nmp webinar where you can learn How to Get Referrals from Facebook Without Begging or Annoying Your Friends and Followers. This takes place tomorrow, Thursday, May 18, at 2PM PM EDT. In this webinar, you will learn proven strategies to get social media referrals without selling. Nothing is worse than that guy on Facebook that is constantly selling their product or service. I know you've got one of those friends. Sign-up here."