Warehouse Advice for Loans in Disaster Areas; Market Exec on Borrower Expectations

Builder chatter? Builders in Texas, Louisiana, and Florida now have a choice: build new homes or help repair existing stock. Labor will be in short supply, as will materials. What about land? Prior to the hurricanes, after a successful spring selling season, builders planned ahead to fill their land pipelines in 2018.

Flood, Hurricane, Disaster Updates - Funded Unsold Loans on the Warehouse?

The National Flood Insurance Program is set to expire in 19 days. What will Congress do about it? In July, the National Association of Realtors announced it had reached an agreement with the U.S. House Financial Services Committee on key legislation to reauthorize and reform the NFIP with important modifications to retain grandfathering and reduce rate increases. But that was two months ago. The industry wonders what progress will be made.

How about the impact on the financial system of companies that own thousands and thousands of homes in the Houston and Miami areas? Think Blackstone, Starwood, Colony, or American Homes 4 Rent. Critics say many families can only rent and not buy starter homes due to them. Starwood Waypoint Home is looking to sell $771 million of rental bonds soon, but buyers are balking. Starwood owns almost 35,000 homes that it operates as rentals nationally, and its new single-family rental (SFR) bond will mortgage 4,443 of those properties.

"Rob, what does a small mortgage banker do that has most of its production in Houston area loans and now has several loans that have funded and are on the warehouse line and now before they could be sold, many of them are flooded?"

That's a tough spot but one that happens more often than we think. The best-case scenario is that your warehouse line is willing to work with you on holding the loan until repairs are finished (without increasing the rate). And then the investor is understanding about the aged loan when you finally can sell. Best to be very close to these borrowers and make sure they will and can repair ASAP. Worst case the warehouse will want you to buy the loans back or take a large curtailment.

One source said, "First step, look in the loan files to make certain the borrows have flood insurance, along with whatever other coverage they might have. Second step, have a forthright talk with the warehouse lender. The mortgage banker, regardless of size, owns those loans and has borrowed 98-100% against them, so the lender is very much at risk. A lender may be fully protected by the insurance, but management needs to do an assessment of that quickly and concurrently needs to have the homes inspected."

Another advised, "First and foremost immediately contact the warehouse provider. Rob, trust me, the warehouse bank does not want these units back... and generally speaking, the mortgage company is better qualified to determine and provide ultimate restitution and resolution to the homes. Therefore, any lender should start with contacting the warehouse provider with as good list of units in question.

"Second, as quickly as possible determine status and length of time to update the home to a saleable status. In some cases, it may only require a certification of un-habitabilty. If, however, repairs are required then then Both the mortgage company and warehouse bank need to determine what is a fair time frame for home repair and ultimate sale.

"The warehouse bank may require some or partial curtailments to help reduce the exposure.

But as I mentioned, the bank does not want these units but neither does the mortgage company. Depending upon financial strength of mortgage company may also determine an ultimate team approach strategy."

The MBA has created a webpage filled with information for lenders and vendors surrounding the hurricane damage.

Darren MacDonald sent, "I came across this in my local newspaper here in the Twin Cities last Sunday. Great message about the spirit of our friends in Texas written by an adjuster. Scroll about half way down the page to the section titled, 'Our community of strangers - Natural Disasters Division... TO MY FELLOW TEXANS.'"

Cornerstone Home Lending, a Houston-based non-bank with 1800 employees nationwide and an estimated $8.5 billion in fundings this year, has responded quickly to the aftermath of Hurricane Harvey. Per CE0, Marc Laird, "In 2004 we established the Cornerstone Care Fund to assist our team members during a tragic event or a personal financial crisis. Funded by voluntary monthly contributions by our team members, we have already provided more than $135,000 of financial assistance directly to 33 team members who experienced flooding during Hurricane Harvey." Even though Cornerstone's corporate headquarters building has been closed due to flooding and a power outage, their disaster readiness kept all systems running and allowed employees to work remotely to fund all loans on time.  And, forbearance plans have been offered to all customers in FEMA disaster areas to assist their recovery process.

Wells Fargo Funding will continue to purchase Loans in its pipeline for properties located in the state of Florida. Contact your regional sales team with any questions, to work closely with you to understand your needs and provide collaborative support. Details for handling properties affected by the storm will be provided. You can find its Disaster Policy in Seller Guide Section 820.19 and refer FHA and VA handbooks, and the current FEMA website for current and future disaster declarations. (Of course, after the damage, WF's Disaster Policy in its Seller Guide goes into effect.)

FEMA has posted counties in U.S. Virgin Islands declared as Major Disaster Areas. For loans submitted with an appraisal dated on or before the incident period end date or for those submitted without an appraisal, Sun West will require an interior and exterior inspection prior-to-funding or purchase of any loans with subject properties that are determined to be at risk. The inspection must verify that the property is sound, habitable and in the same condition as when it was appraised. Access Sun West Seller Guide under HELP section in sunsoft. Refer to Sun West Forward Mortgage Seller Guide (Section 404.07) and Sun West Reverse Mortgage Seller Guide (Section 3.23) for more details.

Capital markets

I received this note from a capital markets exec at a well-known lender concerning setting expectations for locked borrowers. "Now that rates are back to low-levels not seen since the election last November, we've seen an increase in our pipe, mostly due to refinance volume. With each additional staff member taking on more files (Closing is closing more, Underwriters are underwriting more, Processors are processing more, etc.), that can create an additional back-log when trying to close files.

"Most borrowers on the phone will at some point ask about closing times for your company. I've seen everything from an eight-day close, to a 14-day close, to a 21-day close, to a 30-day close promised to borrowers. It's kind of like the old golf adage, 'Drive for show, putt for dough' - what I mean is it is easy to perk up a borrower's ears promising them a fast close, but what really matters is setting realistic expectations and delivering on those promises. If a company advertises an eight-day close, but when you speak on the phone, the LO now says it will take 15, they have now lost some of the borrower's trust. Promising a 21-day close and delivering a 21-day close is much more valuable from a brand perspective.

"Now, the process will differ slightly depending on whether it is a purchase or refinance, agency or jumbo, but the framework is similar. For a standard 30-day close, I'd venture the process is something like: application, disclosures, appraisal, and title work in the first week, initial underwriting and 3rd party/title docs in the second week, final approval and CD out in the third week, and wire out in the fourth week. Manipulate your timeframes how you like, but overpromising and underdelivering to the borrower is a quick way to eliminate a potential referral."

Looking specifically at the market last Friday, things were pretty quiet although for the week rates were down. In fact, as a proxy for the general rate environment, the 10-year Note's yield was close to 2.00%. Much of the attention was on hurricane damage and movement in Texas and Florida.

For scheduled supply, this week today we have a $24 billion 3-year note auction, tomorrow is a $20 billion 10-year note auction, and Wednesday put your spare change to work bidding on the $12 billion 30-year bond auction.

For economic news, we have zilch today and tomorrow. Wednesday things pick up with the usual MBA survey of last week's applications, but also the Producer Price Index. Thursday is the Consumer Price Index and Jobless Claims. Friday expect Retail Sales, September's Empire Manufacturing Index, August Industrial Production & Capacity Utilization duo, July Business Inventories, and preliminary September Michigan Sentiment. Rates are worse versus Friday (the 10-year is yielding 2.10% and agency MBS prices are down about .250) due to Irma not being as catastrophic as forecast.

Jobs

Kinecta Federal Credit Union has an opening for a Senior Secondary Marketing Manager. Kinecta celebrates its 77th anniversary this year and takes great pride in providing excellent service to its members while building a fantastic company culture for its employees. We are extremely committed to mortgage lending having just completed an LOS upgrade and project retail volume of $600M this year. This position will focus on managing agency (FNMA, FHLMC, FHLB and GNMA) loan sales and deliveries as well as assisting with daily pipeline hedging through QRM. The position is also located in Manhattan Beach, CA and will report directly to the FVP of Secondary Marketing. If you are interested in joining the Kinecta Team, please contact Kinecta HR recruiter Anthony Jackson.

Mortgage Search & Acquisition, (MSA) an executive search firm specializing solely within the national mortgage banking community, is seeking an experienced Recruiter to join its team. Over its 30-year history MSA has earned a reputation for matching candidates who possess the greatest value proposition with its clients. MSA's client base continues to grow and has resulted in the need for a new Recruiter to join the ranks. Candidates should have a minimum of two years recruiting experience in a commission driven environment or at least 5 years' experience in a production leadership (Sales) role within the mortgage banking industry, where recruiting was a large part of their responsibilities. MSA Recruiters all work remotely; the best candidates will be those who are very entrepreneurial in spirit and able to work independently. Experienced recruiters will enjoy the most aggressive commission split in the industry and the opportunity to work with some of the best lenders in the Financial Services arena. Qualified candidates should send their resume in confidence to MSA President Tami Coffey.

First Community Mortgage is excited to announce that Amy Ramsey has joined its Correspondent Lending team covering North and South Carolina, Florida, Georgia and Kentucky. "With over 20 years of Mortgage Banking experience, Amy will develop and deepen business partner relationships in our growing Correspondent channel. FCM recognizes that people are the key to successful partnerships and we are committed to offering unparalleled service and support to our business partners with our Human Mortgage approach. If you are interested in learning more about FCM's Correspondent Lending and our Human Mortgage, please contact Amy."

Kevin Crichton, President and Chief Operating Officer of E Mortgage Management, LLC (EMM) announced its partnership with STRATMOR Group's MortgageSAT, a borrower satisfaction measurement tool that provides EMM real-time access to borrower feedback. "EMM's mission is to create Raving Fans of each customer. The partnership will help pinpoint client engagement to ensure the customer journey is a positive experience throughout the entire mortgage process from beginning to end. The partnership with STRATMOR provides EMM the opportunity to guide its customers through today's challenging home financing decisions. The survey tool allows EMM customers to automatically post their reviews to Zillow.com, a site that is currently receiving over fifty-percent of all real estate search traffic. EMM can also benchmark its origination satisfaction scores against other participating lenders via a real-time web portal and analyze satisfaction as it may vary across borrower, loan and origination process by region, branch, loan officer and back office personnel."