ECOA and QM are Under CFPB; Appraisal-related Repurchase Demands; Wintrust Financial Results

Do you
live in a small town? Many in the real estate and mortgage business do live in
rural communities (FNC, for example, with the slogan “Know Your
Collateral” has its headquarters in Oxford, Mississippi, and Franklin
American’s is in Franklin, Tennessee) and here is the latest “Best Small
Town” rankings.

Banks-that-own-mortgage-company
earnings continue, the latest being Wintrust
Financial (parent of Wintrust Mortgage
: www.wintrustmortgage.com/) which
reported a net income applicable to common shares of $21.96 million for the
first quarter, compared to $15.37 million last year, better than expected.
Revenue was also higher, as was net interest income. During the first quarter
Wintrust completed and announced four separate transactions, including
completing its seventh FDIC-assisted
transaction
in February (Charter National Bank & Trust). Mortgage banking
revenues from Wintrust Mortgage also increased $510,000 when compared to the fourth
quarter of 2011 and increased $6.9 million when compared to the first quarter
of 2011. Much of this was due to “an increase in gains on sales of loans, which
was driven by higher origination volumes in the current quarter
due to a favorable mortgage interest rate environment.”

As opposed
to Wintrust, which is expanding, Bank of
America’s workforce seems to be shrinking.

Yes, the CFPB’s realm apparently includes ECOA.
The bureau released a statement regarding their intention to aggressively
enforce the Equal Credit Opportunity Act. The CFPB has stated that it is giving
“fair notice” that it intends to pursue violations of ECOA as part of its
examination and enforcement work with lenders since it is illegal and poses a
threat to economic stability and access to affordable housing.  A link to
the full text of the notice may be found here.
Given that most things in our world involve consumers or money, the CFPB’s
potential reach and powers concern many.

QRM (which
basically required originators and/or securitizers – it was never really clear
– to hold 5% of production in cash) has taken a back seat, if not being put in
the trunk, to QM news. Qualified Mortgage proposals, which focus on the lender
making sure that the borrower can repay their debt, are alive and well. Thirty-three housing related organizations,
including NAR, the MBA, American Bankers Association, and various consumer
groups, have signed on to a letter advocating that a broadly defined definition
of a Qualified Mortgage (QM) be attached to the forthcoming Ability to Pay regulation
being formulated by the CFPB. The letter urged the Bureau to avoid an
unnecessarily narrow definition of QM that will cover only a “modest
proportion loan products and underwriting standards and serve only a small
proportion of borrowers.”  This, the letter states, would undermine
prospects for a housing recovery and threaten the redevelopment of a sound
mortgage market.

The letter
said
that while the groups hold different views about whether the QM should be
designed as a safe harbor or a rebuttable presumption they are united in urging
the CFPB to construct a broadly defined QM using clear standards to help the
economy and to ensure that the broadest universe of credit-worthy borrowers are
able to obtain safe loan products for all housing types. Defining QM too
narrowly would throw many of today’s loans and borrowers into the non-QM
markets, putting lenders and investors at a high risk of an Ability to Pay
violation and even a steering violation.  As a result, these loans are
unlikely to be made and if they are they will be far costlier, burdening those
families least able to bear the expense.  In addition, these higher priced
loans would not be exempt from including important protections against the very
practices and loan features that drove the highest failures in the mortgage
boom, features that are embedded in the QM

And the Volcker Rule, which
effectively could eliminate banks using MBS’s to hedge borrower’s rate locks,
impacts many other financial services. Here is the Securities Industry and
Financial Markets Association (SIFMA)’s
opinion
.

Appraisal-based
repurchase demands have plenty of issues that appear to be grounds for
argument. Here is a link to one site (Bilzen
Sumberg
) that might be of use to anyone dealing with them.

The Mortgage Banking Group at Ballard
Spahr reminds us that “FinCEN Starts E-Filing of New CTR and SAR Forms –
Mandatory Use of New Forms Soon to Follow.”
“The Financial Crimes Enforcement Network (FinCEN)
announced on March 29, 2012, that it is now accepting the new Currency
Transaction Report (CTR) and Suspicious Activity Report (SAR) forms for filing
on the BSA E-Filing System. Financial institutions may continue to use existing
forms until July 1, 2012, at which point all CTR and SAR reports must be filed
electronically. Though the newly released CTR and SAR forms contain new and
expanded lists of data elements, FinCEN emphasized that the new forms do not
change existing statutory and regulatory obligations. New features and data
elements in the recently released CTR and SAR forms include: Fields related to
the subject’s Internet presence, such as ‘e-mail address’ and ‘website (URL)
address,’ a more limited number of characters to create a SAR Narrative, though
this is somewhat offset by the added ability to attach spreadsheets that the
institution believes would be useful to law enforcement, a North American
Industry Classification System (NAICS) code field, and an ‘auto-populate’
feature that allows an institution to avoid the time of re-entering duplicative
information.”

What is the Homeownership Preservation
Foundation
(HPF)? It is an independent national nonprofit dedicated to
helping distressed homeowners navigate financial challenges and avoid mortgage
foreclosure through its Homeowner’s HOPE Hotline (888-995-HOPE). The HPF
announced that reported mortgage foreclosure scams have surged nearly 60% this
year – just what the industry needs…”Most of these scams involve individuals
supposedly offering mortgage foreclosure avoidance assistance that trained HPF
counselors provide at no cost.  Sadly, with most scams, no meaningful
services are ever provided.” For the complete write up, visit this link.

Let’s not
forget the Golden Rule, which some folks say is, “He who has the gold
makes the rules.” This seems to be important in the disposition of assets
(read: houses) by Freddie & Fannie. Big investors are buying foreclosed homes
by the thousands after prices have dropped by about 1/3 or more in many areas.
As an example of this phenomenon, just one firm, Waypoint Real Estate Group, armed with over $400 million in cash
from a Silicon Valley private equity firm, plans
to buy another 10-15,000 homes just this year
. Pennies on the dollar and
with hundreds of thousands of these coming on the market every month, something
on a grand scale might be the way to go. Along those lines, foreclosure filings
were reported on 198,853 U.S. properties in March, a 4% decrease from February
and a 17% decrease from March 2011. Per RealtyTrac, March’s total was the
lowest monthly total since July 2007, and also the first monthly total below
200,000 since July 2007.

The
markets are certainly ticking along. I love it when economists and “experts”
talk about uncertainty. Isn’t everything in the future, to one degree or
another, uncertain? From my limited vantage point, the economy is doing “ok”,
which is certainly better than sinking. But some are quick to point to rising
layoffs, falling home sales and slowing manufacturing activity as indicators
that the economic recovery is headed for a springtime stall for the third year
in a row. But as we all know, recent signals have been mixed, with worrisome
indicators following positive ones-such as consumer confidence and auto
sales-that suggest the recovery remains on track. Economists generally believe
total economic output in the first three months of the year grew at a rate a
bit above 2%-slower than at the end of 2011 but significantly stronger than the
same period a year ago. As one story noted, “It’s been the weakest recovery in the post-World War
II period
, and that hasn’t changed,” said David Rosenberg, chief
economist for investment firm Gluskin Sheff.

Anyway,
with mortgage origination volumes running about average on Thursday, and buying
interest from the usual suspects solid, mortgage prices did pretty well on
Thursday. MBS prices closed higher by 6 “ticks” (almost .250 in price) on 30-year,
current coupon mortgages, and Treasuries retained their flight to safety bid on
a combination of continued worries over Europe and the weak Initial Claims report
with the 10-year T-note improving by .250 and dropping to a yield of 1.95%.
(Wax on, wax off, risk on, risk off, as news from Europe has regained some prominence.)
There is no news today, and the 10-yr is
sitting around 1.99% and MBS prices worse by about .125.

Sunday is
Earth Day, which involves a lot more than ex-hippies dancing on mountain tops
in Marin County or around lakes in Vermont. So instead of a joke, today we’ll
have some stats on…housing, care of the Census Bureau. In 2010 there were an
estimated 2.2 million occupied housing
units heated by wood (less than 2% of all homes) versus 57 million homes heated
by gas – about half.
The average time, on average, spent traveling to work
was 25 minutes, with Maryland being the worst at 32 minutes and North Dakota
being the best with 16 minutes (commuting to Washington DC versus…?). Lastly, the
average size of a single-family house built in 2010 was about 2,400 square feet
(they’re still building single family homes?) with an average sales price of $272,900,
up slightly from 2009 but down markedly from 2007’s $313,600.

 

…(read more)

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