PHH Restructuring; MBA Classes; Servicing Comp Change Bearing Away; Harsher Fraud Penalties Coming?

The e-mail
wires here in Miami have been burning up with…e-mails.

PHH clients received a note from Norm
explaining the recent restructuring. “I am writing to let you know we
recently decided to reallocate resources from our Correspondent Lending channel
to our Private Label Solutions and Real Estate Field Sales distribution
channels. Although this action will reduce our Correspondent Lending volume, I
want to be clear that we are committed to Correspondent Lending and will
continue to participate in the business with a renewed focus on our high
quality and long term customers. We made this decision in response to ongoing
challenges posed by the volatility in the global economy, the capital markets
and the housing markets. We believe these market uncertainties require an
increased emphasis on liquidity and cash-generation. While our company focus
may shift and adapt with the current market environment, our priorities remain
the same, including an unwavering commitment to customer service.”

Lenders One clients also received a note
about PHH
, recently downgraded by S&P (join the club!), under
investigation by the CFPB, and which carried out significant layoffs earlier
this week. “Given the potentially serious nature of the situation, we have
endeavored to find out as much as possible so that we could share tangible
information with the Members.  However, we also want to avoid spreading
rumors or providing misinformation. To that end, we can think of no better way
to ensure the most accurate distribution of information than to invite each of
you to participate in the upcoming PHH
earnings call
which, fortuitously, is scheduled for next week…’PHH
announced plans to release its fourth quarter 2011 results on Monday, February 6,
2012, after the market closes. The Company will host a conference call at 10AM
EST on Tuesday, February 7, to discuss its fourth quarter 2011 results. You can
access the conference call by dialing (888) 510-1762 or (719) 457-2634 and
using the conference ID 4120134 approximately 10 minutes prior to the call. The
conference call will also be webcast, which can be accessed at under webcasts and

Not to be outdone in sending notes, Wells
Fargo’s wholesale management (Kevin Sexton, Bill Trees, and Jim Wyble) sent out
a note to brokers
. “As the competitive landscape for third party
lending continues to evolve, we wanted to take this opportunity to confirm our
commitment to Wholesale lending and our broker community. As other lenders exit
the Wholesale business, we believe 2012 promises to be a great year with ample
opportunity as we continue to work together and remain focused on quality.
Wells Fargo Wholesale Lending is committed to serving you and your customers.
For more than 15 years, Wells Fargo has been an industry leader in the
Wholesale channel. As we’ve demonstrated time and again, Wells Fargo is invested
in the long-term success of you, your borrowers and the wholesale business. You
can count on our dedicated team to partner with you to provide valuable
products and programs to American homebuyers in a fair and responsible

Back in September the FHFA, the overseer
of Fannie & Freddie, released a “white paper” suggesting a change
to the way servicers are compensated.
FHFA’s goal was to propose a new
servicing compensation structure to (i) improve service for borrowers; (ii)
reduce financial risk to servicers; and (iii) provide flexibility for
guarantors to better manager non-performing loans while promoting continued
liquidity in the TBA market. It asked for comments on reducing the Minimum
Servicing Fee (MSF) from 25bp to 12.5bp to 20bp. (The proposal established a
separate account within the trust structure of the MBS which is funded by
reallocating around 5bp from the borrowers payments, and would be available to
pay for non-performing loan servicing.) Under this proposal, servicers were to move
from receiving 25bp of servicing to receiving a fixed dollar amount based of
compensation if the loan is current ($10/loan). And in order to protect
investors from churning, the enterprises were to do the following: implement a
net tangible benefit test for streamline refi programs, enhance monitoring and
tracking of prepayment speeds for each servicer, and restrict the amount of
excess IO in a pool. But lacking was a plan for guidance on what a servicer
might earn should a loan go delinquent.

We’ve come
to learn that the FHFA is preparing to
back away from this plan to overhaul the minimum servicing fees
paid on
Fannie Mae and Freddie Mac loans, after intense, across-the-board industry
opposition to the idea. “Sources” say it’s pretty much over and done with, and
in a non-descript message FHFA spokeswoman Corinne Russell e-mailed,
“Considering changes to the structure of mortgage servicing compensation
is an important component of improving the operations of the future mortgage
market. We received useful input on the discussion paper, and will provide an
update on next steps in the near future.” Most servicing advisory firms came
out against any radical changes to compensation, as did the MBA. (Editor’s note: haven’t we had enough change
and uncertainty from outside the industry – why do we need more from within

Live and
learn. There are a lot of learning
opportunities from our MBA for mortgage folks out there.
(Probably even a
few where this might happen).
For example from Feb 13-15, “Collections and Early Intervention: Regulatory
Requirements and Implementation Strategies is for all the collections and
customer service managers, leads, and supervisors out there to help design
compliant strategies and processes for handling collections” – Link.
Continuing on, for asset managers, relationship managers, servicing managers,
and commercial real estate primary services who service CMBS loans, “CMBS
Restructures: How to Work with Customers on Non-Performing Loans” outlines the
specific details of the responsibilities, standards, and circumstances
associated with CMBS loans. More information for the Feb 16 course.
And anyone who works in REO and is interested in asset management protection
should look into “REO and Property Preservation,” which will help participants
with strategy, managing remediation costs and timetables, and calculating
return on the repair dollar and its influence on the markets.  This one
will take place from March 12-13.

The FDIC will host a national conference
on “The Future of Community Banking” on February 16 in Arlington,
. The conference will provide a forum for community bank
stakeholders to explore the unique role community banks play in the country’s
economy and the challenges and opportunities this segment of the banking
industry faces. Ben Bernanke and FDIC Director Tom Curry are scheduled to
deliver the keynote addresses at the conference. FDIC Acting Chairman Martin J.
Gruenberg will also make remarks –  additional information.
Before you book your flight, attendance at the conference is by invitation and
will be open to credentialed members of the media – so the conference will be
broadcast live and archived through a publicly available webcast on the FDIC’s
Web site here.

In keeping
with regulation trends, the US
Sentencing Commission has proposed harsher sentencing guidelines for securities
and mortgage fraud violations
. (Who knew our government had a
sentencing commission – but these days who is surprised?) It is seeking comment on whether or not the current guidelines
under Dodd-Frank account for potential and actual harm to the public and
financial markets from securities, mortgage and financial institution
fraud.  Regarding securities, the Commission is focusing on insider
trading, while for mortgage fraud, they’re looking to amend the way loan fraud
loss is calculated. The latter would be assessed by taking into account
the amount recovered from the foreclosure sale where the collateral is disposed
as well as reasonably predicted administrative costs incurred by the lending
institution associated with the foreclosure of the mortgaged property. The
Commission also wishes to amend the sentencing for specific financial harms
such as “jeopardizing the financial institution.”  To view the proposal in
full, see
Note as well that they are accepting public comments until March 19th!

The California Department of Real Estate
(DRE) is constantly asked, regarding short sale transactions, whether a buy can
be charged to compensate either the sale negotiator or the broker.
of July 2011, California state law prohibits the charging of additional fees in
exchange for the written consent of the sale.  Under the Real Estate Law,
short sale fees may still be charged, but, to maintain a certain level of
transparency, the negotiator must be properly licensed under California law,
and there must be full written disclosure to all parties involved, including
the short sale and originating lenders.  The compensation fees must be
disclosed in the purchase agreements, escrow instructions, and HUD 1
statement.  Any “special fees” charged must be authorized by the DRE via
an advance fee contract; Additionally, the Real Estate Settlement Procedures
Act (RESPA) requires these fees to correspond to an actual service performed-in
other words, the buyer must be getting work done for any money paid.  Any
“junk” or “special” fees and they’ll be on you like a ton of bricks.

Yup, rates are good, and should be for quite some time. Like Ground Hog Day,
yesterday was more of the same: good supply/selling from mortgage bankers (maybe locks are picking up with these
record low rates?
) met by more demand by the Fed, hedge funds, banks, and
money managers. Investors are piling into agency MBS in anticipation of a QE3
round from the Fed – officials have been hinting lately about plans to
potentially launch another round of QE (w/this one focused on mortgages instead of Treasuries). The
Fed’s appetite continues to be a constant $1-1.2 billion a day, so any selling
above or below that by originators tends to tilt the scale. (Bernanke, who
testified yesterday in Washington, said nothing new to move the markets.) Yesterday,
by the close, MBS prices were better by almost .250 and the 10-yr T-note closed
at 1.83%.

We’ve had
the 1st-Friday-of-every-month jobs numbers this morning. January’s Nonfarm
Payrolls, expected +150k, down from +203k in December, came out at +243k. The
Unemployment Rate dropped from 8.5% to 8.3% (the lowest in almost 3 years). With
no substantive news from Europe, this will probably determine trading for
today, and soon after the strong jobs number
the 10-yr worsened from 1.82% to 1.92%, and MBS prices appear worse by .375-.50

For more weekly insight into MBS / secondary markets, make sure to read and subscribe to: Calculating Current Coupon in a Record Low Rate Environment by Bill Berliner.

A guy took his blonde girlfriend to her first football game.
They had great seats right behind their team’s bench.
After the game, he asked her how she liked it.
“Oh, I really liked it,” she replied, “especially the tight
pants and all the big muscles, but I just couldn’t understand why they were
killing each other over 25 cents.”
Dumbfounded, her boyfriend asked, “What do you mean?”
“Well, they flipped a coin, one team got it and then for the rest of the
game, all they kept screaming was, ‘Get the quarterback! Get the quarterback!’ I’m
like…Helloooooo? It’s only 25 cents!!!!”


If you’re
interested, visit my twice-a-month blog at the STRATMOR Group web site located
at The current blog discusses
residential lending and mortgage programs around the world, part 2. If you have
both the time and inclination, make a comment on what I have written, or
on other comments so that folks can learn what’s going on out there from the
other readers.

…(read more)

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