QM Update; Second Lien Problems; NMLS Expanding to Banks; CFPB Holds Lenders Accountable for Vendors

Remember
QRM? Not only is it not on the front
burner, but it may have been put back in the Tupperware container. QM, however, is very much alive and
well, and
the industry needs to be aware of it. And any headline including “Mortgage
companies fear
” is attention-grabbing.  (Read: Letter to Cordray Requests Industry Input into Qualified Mortgage)

National
appraisal management company Valuation
Management Group has a Sales Account Manager opportunity available in its
Atlanta, GA office. “The Sales Account Manager will create and develop
profitable relationships with mortgage lenders, community banks, and credit
unions. Additionally, the person will actively prospect for new accounts and
maximize sales potential with existing customers. A requirement of the
opportunity is to have banking, mortgage, AMC and/or real estate experience.” The
firm (the 22nd fastest growing-private company and 1st in Real Estate in the
nation on the INC 500 list) has a website at www.valuationmanagementgroup.com;
qualified candidates should submit their resume to Patrick McMillen at Patrick.mcmillen@vmgappraisals.com.

On the other side of the nation, after recently opening up a regional Branch in
Northern California (Roseville) Caliber
Funding and is looking to hire Wholesale A.E’s in Northern CA, WA, OR, ID, CO,
MT, WY, and Utah.  Caliber is one of the fastest growing Wholesale
lenders in the country and offers excellent compensation, great benefits,
superior technology, open territories and a variety of loan programs including
USDA, Jumbo, FHA/VA, Homepath and Conventional.  Backed by Lone Star
Funds, Caliber Funding is aggressively expanding its footprint in the Wholesale
channel.  Wholesale candidates must be high producers with an active
Broker base.  To learn more visit caliberwholesale.com, or to inquire
about available job opportunities with Caliber please email sean.drake@caliberfunding.com
or matt.mancasola@caliberfunding.com.

Remember
when everyone did 2nd mortgages? The chickens are coming home to
roost: JPMorgan Chase confirmed that $1.6
billion in second mortgages have been reclassified as nonperforming
even
though about 88% of them remain current! The loans are subordinate to
delinquent first mortgages and are expected to eventually be total losses,
prompting calls from regulators to reclassify them now. Wells Fargo and
JPMorgan Chase both reclassified many second mortgages as delinquent, even
though they are current, because the first mortgages to which they are
subordinate have already gone delinquent.

Big banks
hold many 2nds in their portfolios. It was two years ago when President Obama
vowed to eliminate the danger of financial institutions becoming “too big to
fail,” but now it has become apparent that the
nation’s largest banks are bigger than they were before the credit markets
seized
. The Federal Reserve reported that at the end of 2011, the Top 5 (JPMorgan
Chase, Bank of America, Citigroup, Wells Fargo, and Goldman Sachs) held $8.5
trillion in assets, equal to 56% of the U.S. economy. This is up from 43% from
five years earlier, and these five banks are about twice as large as they were
10 years ago. I remember the 1984 breakup of AT&T (Ma Bell) into the Baby
Bells – imagine doing that with a bank!

Freddie,
lightening up on HARP 2.0 underwriting? Or should Fannie tighten up? I guess
more lax underwriting is prevailing.

Will banks
require originators to be licensed by the NMLS? The Conference of State Bank
Supervisors (CSBS) and its subsidiary – the State Regulatory Registry LLC (SRR)
– announced the expanded use of NMLS by
five state banking agencies (MS, OK, RI, VT, and WA) for the licensing and
supervision of non-depository financial services industries beyond the mortgage
industry.
“With the implementation of updated uniform NMLS Licensing Forms
(these five state agencies) are managing license authorities covering a range
of industries, including money transmitters, debt collectors and sales finance
companies.” One Massachusetts regulator noted, “We are building upon the
success NMLS has had in bringing greater consistency, transparency, and
supervision to the oversight of the mortgage industry. Now, with updates to the
System, state regulators have the ability to not only enhance oversight of the
mortgage industry, but a broad range of financial services industries that
provide important access to credit to American families.” In addition to the
five state agencies currently managing other license authorities on NMLS, six
more agencies plan to expand their use of the System this year with an
additional nine expected to do so in 2013.

Saturday the commentary noted that, “The Vermont Mortgage Bankers Association and Mortgage Bankers/Brokers
Association of New Hampshire are hosting a Mortgage Compliance Conference
next weekend on the 18th and 19th.” The dates are fine, but should have
read “next week” – hopefully no confusion resulted.

Occasionally,
or pretty often, the question comes up about MI companies and HARP 2.0. (The question also comes up about
warehouse banks accommodating HARP product, and the list is pretty skinny.) As
best I know, all MI companies are participating in HARP including those who are
bankrupt or have stopped writing policies (Triad, PMI, and Old Republic jump to
mind by I am sure there are others). If one considers that the MI company, such
as MGIC, is in first loss position on any loans the MI company has insured
already, it is easy to see why the company would be motivated to improve a
borrower’s position and avoid a possible claim. For example, MGIC will transfer
a cert on any insured loan, if it meets HARP requirements, regardless of DTI, LTV,
occupancy, etc. There seems to have been more restrictions placed by investors
than the MI’s at this point, since each investor/servicer has its own appetite
for/concerns about the program. And many post updates on their websites, such
as TRIAD’s.

The question came up recently about ambiguity in the HUD sentence from ML
2012-02: “FHA-approved DE lenders that
sponsor third-party originators are responsible for ensuring that each
third-party originator they sponsor adheres to FHA’s requirements when
originating loans for that lender.”
What kind of increased TPO oversight
are lenders planning in an effort to meet this broad requirement? A highly
placed attorney wrote to me, saying, “FHA-approved DE lenders that sponsor
third-party originators are responsible for ensuring that each third-party
originator they sponsor adheres to FHA’s requirements when originating loans
for that lender. Unlike elsewhere in ML 2012-02, that sentence does not make a
distinction between FHA approved TPO’s and non FHA approved TPO’s.  That
raises the question of whether the sponsor needs to ensure compliance with all
FHA requirements even if the third party is not an FHA lender. I haven’t seen
others interpreting it in a broad fashion.  Rather, I think the better
reading, given the FAQ clarifications and my overall sense of the Bulletin, is
that FHA would permit a distinction to be drawn between FHA requirements
applicable to FHA approved TPO’s on the one hand and non-FHA approved TPO’s on
the other.” One is advised, of course, to seek their own legal counsel for
interpretation questions.

Along those lines, the CFPB issued a
bulletin Friday reminding financial institutions that they may be held
accountable for violations under contracted service providers
. The agency
said that banks and nonbank entities need to supervise their third-party
vendors with due diligence, consistently request and review their internal
controls and training materials, and establish clear expectations about
compliance. The CFPB also called on financial institutions to adopt the
internal controls necessary to supervise vendors, reaffirming the agency’s role
as both a formal supervisor and informal trendsetter in the industry. Richard
Cordray said, “Banks and nonbanks must manage these relationships (third
parties) carefully and can be held accountable if they break the law.”

The last Housing
Starts numbers didn’t give the building industry much to cheer about, although
it reflects what they probably already knew: starts pulled back in February as
single-family housing starts declined a disappointing 9.9%. (Yesterday’s NAHB
index showed home builder confidence dropping for the first time in seven
months.) But how about that multi-family sector -up about 85% over last year!
And building permits for both single- and multi- family homes posted sizable
increases in February, suggesting somewhat stronger building activity in the
months ahead. Coming in to this morning’s number, Wells Fargo’s economics staff
expected that overall starts would post a nearly flat reading for the month of
March, at a 696K unit pace. But Housing
Starts were down almost 6%
, 654k, the weakest since October, but Building
Permits were +4.5%.

Looking at
the markets, both stocks and bonds
improved yesterday
. More specifically, the US T-note was better by about
.250 in price and ended the day at 1.97% while MBS prices were better by about
.125. But folks are tentative, and it seems that this market is generating as much
confidence as a Secret Service Agent telling his wife he has an under-cover
assignment. Also moving rates today is the “risk off” bid this morning from Spain’s
12-18 month auction overnight being well received, relaxing some fears and
sending yields on Spanish bonds lower. We’ll also have some non-market moving
news later when Industrial Production and Capacity Utilization for March come
out. To start the day we find the 10-yr
at 2.00% and MBS prices worse about .125.

(I think that I first saw this letter to John Block, the Ag Secretary under
Reagan, and it repeats under every administration.)
Dear Secretary of Agriculture Tom Vilsack,
My friends, Darryl and Janice, over at Jonestown, Oklahoma, received a check
the other day for $1,000 from the government for not raising hogs. So, I want
to go into the “not raising hogs” business myself next year. What I
want to know is, in your opinion, what is the best type of farm not to raise
hogs on, and what is the best breed of hogs not to raise? I want to be sure
that I approach this endeavor in keeping with all government policies. I would
prefer not to raise Razor hogs, but if that is not a good breed not to raise,
then I can just as easily not raise Yorkshires or Durocs.
As I see it, the hardest part of this program will be keeping an accurate
inventory of how many hogs I haven’t raised. If I can get $1,000 for not
raising 50 hogs, will I get $2,000 for not raising 100 hogs? I plan to operate
on a small scale at first, holding myself down to about 4,000 “not
raised” hogs, which will give me $80,000 income the first year.
Now another thing: these hogs I will not raise will not eat 100,000 bushels of
corn. I understand that you also pay farmers for not raising corn and wheat.
Will I qualify for payments for not raising wheat and corn not to feed the
4,000 hogs I am not going to raise? I want to get started not feeding as soon
as possible, as this seems to be a good time of the year to not raise hogs and
grain. I am also considering the “not milking cows” business, so
please send me any information on that also.
In view of these circumstances, I understand that the government will consider
me totally unemployed, so I plan to file for unemployment and food stamps as
well. Be assured that you will have my vote in the coming elections.
Patriotically yours,
Duster Benton
P.S., Would you please notify me when you plan to distribute more free cheese?

 

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