Details on Cost to Process a Loan; NMLS Stats; More on Reasons and Strategies for Buybacks

Here in Arizona, at the Arizona Mortgage Lenders Association conference,
it is clear that mortgage origination and pricing is a numbers game. Many are
focused on how much more manpower it takes to close a loan now. (As a quick
note, one question LO’s and AE’s sometimes ask their lock/pricing desk folks
is, “Do you price based on competition, or based on what it actually costs
us to produce a loan?”) Does it cost more to process and close some
loans versus others?
STRATMOR just released some information that is
helpful for this: a statistical analysis on the fulfillment costs of loans by
purpose and type. It turns out that “fulfillment costs”, which
include processing, underwriting, and closing (no discount points or post-closing
costs), show a significant difference by loan type and purpose.

Specifically,
fulfillment costs for purchase loans ($1,700) were about $950 higher per loan
than refinance loans ($718), and fulfillment costs for FHA/VA loans ($1,500)
were $300 higher per loan than non-government loans ($1,200)
. Matt Lind
with STRATMOR observed, “The results demonstrate the striking
differences in fulfillment costs as a function of either loan purpose or loan
type. In particular, the $300 fulfillment cost difference between government
and non-government loans is contrary to the prevailing view held by many
lenders that the cost differences involved are currently small. These results
should be helpful to lenders trying to compare their back office performance to
other lenders; determining margins by loan type; and for pricing.” (If
you’d like the results, or to see other loan-related statistics, contact Matt
at Matt.Lind@Stratmorgroup .com.)

And
companies are continuing their search for personnel. Mission Hills Mortgage Bankers continues to grow and is seeking underwriters
for its Orange County Headquarters. MHMB, which has been around 42 years
in the retail sector, has future plans for aggressive expansion throughout the
western United States. This position would be responsible for the regional
underwriting of loans from several production offices.  Experience
requirements include a minimum of five years Conventional underwriting
experience. FHA Direct Endorsement and VA SAR certifications are a plus. 
Interested parties may forward resumes to dolivieri@mhmb .com.

Also in
California, Mountain West Financial has
an immediate opening for a Regional Production Manager in Northern California.
Primary responsibilities include, among other things, building the retail and
wholesale production for MWF’s fulfillment center in Sacramento, maintaining
pricing margins, and working with Operations to ensure the origination of high
quality production. Founded in 1990, MWF is headquartered in Redlands, is FNMA,
FHLMC, and GNMA approved, retains a majority of its servicing rights, and is
increasing its footprint in California and contiguous states. Resumes should be
sent to Michael Delehanty at michaeld@mwfinc .com.

 

The move
down in rates has capital markets and lock desks everywhere dusting off their renegotiation policies. Tina
Reid-Freeman with MIAC spread the
word to clients, “For all clients that are selling at least 20% of your
production servicing released, I am concerned that the historically wide levels
of best-efforts-to-mandatory spreads, combined with high industry volume, may
result in a contraction in investor pricing over the course of the month of
June. Please consider reducing your MTM
gain accruals for month-end may, to reflect a more conservative valuation
.
25 basis points on all unsold servicing-released product would clearly be
appropriate at this point. And consider placing additional forward
mandatory trades, in lieu of TBA MBS coverage, with your servicing released
investors. This may include Assignment of Trades or Direct trades in excess of
the closed loan inventory you currently have on hand, to provide some
protection to the servicing value in the pipeline. Please revisit your handling
of renegotiation requests and make sure all personnel understand that renegotiations
are a loss mitigation exercise. EVERY renegotiation is a cost to your bottom
line. If you must provide a concession to save a deal, .125% in rate is
typically enough to satisfy a borrower even if the market rally has been
significantly more.” Thank you Tina.

The number of companies, mortgages, and individual loan officers (MLOs)
licensed through the National Mortgage Licensing System (NMLS) continues to
increase due, NMLS said mainly to continued transitioning of a few state agencies
into the system. The number of licenses held by companies increased by
12% between the first quarter of 2011 and the first quarter of 2012 while
licenses held by MLOs increased by 13%.
For specific numbers, NMLS reports
that at the end of the first quarter there were 31,686 licenses held by 15,883
companies, 17,721 licensed branches holding 28,460 licenses, and 207,187
licenses issued 105,595 individuals.  There were 119 companies and 3120
individuals who reported they held both active state licenses and federal
registration. But year-over-year comparisons this year are not appropriate as
the first two quarters of 2011 had high activity due to companies coming into
compliance with new state laws.

Still, the numbers are mildly interesting: 88% of licensed companies engage
in first mortgage loan brokering, 73% offer second mortgages and 46%
write home equity loans.  First mortgage lending is offered by 22%
of licensed companies and second mortgage lending by 16%. And over 3,600,
or 23%, also have a non-mortgage related business.  A large majority of
both companies and MLOs are licensed to operate in only one state.

Most of those companies need funding, and yesterday I mentioned some
warehouse news related to ViewPoint Bank (no change expected). Another
warehouse bank – Torrey Pines Bank – announced its warehouse balances were up
over 30% in May
.  Tim McAvenia observed, “Acquisition speed from the
large national aggregators remains good and many of the newer investors are
providing impressive acquisition times, however  many medium sized
mortgage bankers are delivering more business directly to the agencies in
bulk.   Warehouse lenders have generally tightened guidelines,
particularly around bulge allowances and current ratio.  When
confronting capacity issues, cash is king
– we provide warehouse lines up
to $30 million for agency and jumbo originations.  Strong guarantors and a
$1 million tangible net worth are required for approval.  Torrey Pines
Bank also offers bridge loans, HELOC’s, residential and commercial construction
loans, commercial and multifamily real estate loans, SBA 504, revolving lines
of credit, equipment financing, HOA loans, and letters of credit. (For more
information, please contact Tim McAvenia, VP Warehouse and Specialty Lending,
at tmcavenia@torreypinesbank .com
– and no, this is not a paid ad.)

Last week I mentioned some reasons, statistics, and strategies on
loans that had been rejected (kicked) by investors
, and received a couple
notes. Matt Maurer from MountainView Capital wrote, “MountainView Capital assists with
approximately 10 pools a week of investor kicked loans and so far this year,
has assisted nearly 50 different originators find a home for their investor
kicked loans. Some recent investor kick reasons include RESPA cures
past 30 days, aggregator seasoning restrictions related to the time it takes to
cure conditions, FICO overlays, property type overlays, unsupported/declining
property values, condo project documentation, and failed FHA bond loans.” (If
you’d like to contact Matt with questions, he can be reached at mmaurer@mvcg .com.)

And Brian
Cerise with Steel Mountain Capital
wrote, “The talk of agency buybacks is becoming very real.  I have seen
more inquiries for these seasoned, performing loans in May than the rest of
2012 combined. I don’t know that I would call it a trend, but the ‘Tier 1’
aggregators seem to be picking on appraisals again lately. Declining value
is still an issue in many areas, and particularly for condos. FHA Streamlines
and VA IRRLs can be a great product for originators and borrowers alike, but
when defects occur they can be very expensive. An uninsured loan which is
more than likely underwater, and without income/credit qualification, has
little appeal to any investor – I would definitely recommend and additional
layer of QC prior to funding these loans. Lastly, when it comes to scratch and
dent loans, unless you have the liquidity and ability to properly service these
loans for the long term; it is generally in your best interest to sell them
ASAP.  A good pay history alone does not have the positive impact on price
that it once did. (Steel Mountain Capital is a principal buyer and holder of
whole loans, including a great deal of unsalable or “scratch & dent”
loans. If you’d like to reach Brian, his e-mail is bcerise@steelmc .com.)

Turning to
the markets, news an agreement was reached on a financial rescue of Spain’s banks was met with “relief” on
world markets. German Finance Minister Wolfgang Schaeuble said Spain is making
good progress toward putting its economy on a solid footing and even “the
biggest Spanish banks are stable.” I am no expert in international
economics, but I remain unconvinced that anything is “over” in Europe. This
Spain development doesn’t solve all the European woes by any means – there is
still a critical election to come in Greece (June 17) while EU officials need
to demonstrate some progress towards fiscal and banking unity when they hold a
summit June 28-29.

Regardless,
that is what is nudging stocks and bonds this morning, along with some positive
news on May economic growth from China this weekend. China may be a country
growing faster than many feared – remember the surprise rate cut from last week
was seen as a sign that growth was slowing more than Beijing was projecting.

While currencies and country’s futures are debated in Europe, second-tier economic
news continues to come out here in the U.S. There is zip today. Tomorrow we’ll
have some import and export price data, and then on Wednesday we’ll hear about
Retail Sales and the Producer Price Index. Thursday includes Jobless Claims and
the Consumer Price Index, and then we finish off the week with Industrial
Production and Capacity Utilization. With
all that we find our 10-yr nearly unchanged at 1.64% and agency MBS prices
nearly unchanged as well.

The 5
toughest questions for men. (Part 2 of 5; guaranteed to get me into hot water,
but I will gladly print the opposing view if someone sends it to me. I think
they came from Dave Barry.)
1. What are you thinking about? (Yesterday)
2. Do you love me?
3. Do I look fat?
4. Do you think she is prettier than me?
5. What would you do if I died?
Question # 2: Do you love me?
The proper response is: “YES!” or, if you feel a more detailed answer
is in order, “Yes, dear.”
Inappropriate responses include:
a. Oh Yeah, loads.
b. Would it make you feel better if I said yes?
c. That depends on what you mean by love.
d. Does it matter?
e. Who, me? 

…(read more)

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