Consumer Mortgage Hotline Up and Running

The Consumer Financial Protection Bureau
(CFPB) is now accepting mortgage complaints from consumers who have experienced
problems across the spectrum of the mortgage universe, i.e. documents,
servicing, and foreclosures.  The Bureau announced
the mechanism for submission on its website,

Complaints will be reviewed by CFPB
staff and then forwarded to the relevant financial institution for review and
resolution.  Institutions have 15 days to
respond to CFPB regarding each complaint and are expected to resolve the
majority of them within 60 days.  During
the process consumers will be able to check the complaint’s status on the
website and ultimately will have the option of disputing any resolution.

The Bureau started taking credit
card related complaints and inquiries last July and will expand Consumer
Response to handle complaints and inquiries about all other consumer financial
products and services – including those involving nonbanks such as payday lenders,
debt collectors, and credit reporting agencies – by the end of 2012.

In addition to the website, consumers
may submit complaints, inquiries, feedback, or just tell CFPB their story via: 

  • Toll-free call  –
    1-855-411-CFPB (2372)
  • Fax – 1-855-237-2392
  • Letter –  P.O.
    Box 4503, Iowa City, IA 52244

New CFPB director Rich Cordray appeared
on The Last Word television program
Thursday evening and was challenged by host Lawrence O’Donnell to return within
six months with proof that the agency is providing transparency and real
assistance.  Cordray accepted the
challenge.  Stay tuned.  

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Mortgage applications surge amid record-low rates

Mortgage loan applications surged 23% last week, according to the Mortgage Bankers Association, as record-low interest rates convinced many homeowners it was time to refinance into lower-cost loans.

Mortgage Rates Steady While Borrowing Costs Rise Slightly

Mortgage Rates
continue to ebb and flow in the same pattern that has persisted for over a month.  The average Best-Execution interest rate for a 30yr fixed loan has remained at 3.875% during that time and the closing costs associated withtthat rate have been gently rising and falling, with increasing regularity.  We’ve rarely strung together 3 days in a row with movements in the same direction (i.e. borrowing costs rise very slightly 3 days in a row, while Best-Ex stays at 3.875%), and the actual difference in those costs day over day continues to be fairly minimal.

Those borrowing costs rose very slightly today, a reasonable conclusion to the previous two sessions offering all time low rate/fee combinations.  This means that whereas 3.75% was “as close as it’s ever been to sharing equal recognition with 3.875% as a viable choice for Best-Execution,” that’s no longer the case today, but it should be noted that the buydown schedule (amount of additional closing costs required to move down in rate) at some lenders allows for scenarios with even lower rates to make sense depending on your preferences and qualifications.

If you didn’t catch Friday’s Article, which
went into a bit more detail on how we determine “Best-Execution,” it’s
worth a read.  But the bottom line is really this: regardless of the
actual interest rate levels, there’s no other way to say the following: rates are as low as they’ve ever been.  How long will
this continue?  There’s no way to know for sure, but we generally
advocate a conservative approach with rates at all time lows. 
“Conservative” in this sense simply means that history has shown us how
quickly record-low rates can disappear.  While we certainly wouldn’t
rule out the possibility that rates can improve, we’ve already been
experiencing the fact that further gains are hard-fought and take more
time than gains seen in the middle of the range. 

Whatever your disposition toward locking vs floating, it makes sense
to set yourself a “stop,” of sorts, by deciding on a rate slightly
higher than what you’re currently being quoted, at which you’d lock at a
loss if the market moves against you.  Locking in such a scenario can
prove exceedingly frustrating more often than not as the higher
probability eventuality has been for rates to return lower, but this
pales in comparison to the potential frustration of rates NOT returning


  • 30YR FIXED –  3.875%, 3.75% as close as it’s been
  • FHA/VA -3.75%
  • 15 YEAR FIXED –  3.375% / 3.25%
  • 5 YEAR ARMS –  2.625-3.25% depending on the lender

Ongoing Lock/Float Considerations

  • Rates and costs continue to operate near all time best levels
  • Current levels have experienced increasing resistance in improving much from here
  • There are technical reasons for that as well as fundamental reasons
  • Lenders tend to get busier when rates are in this “high 3’s” level
    and can throttle their inbound volume by raising rates or costs.
  • While we don’t necessarily think rates are destined to go higher,
    given the above facts, there seems to be more risk than reward regarding
  • But that will always be the case when rates
    operate near all-time levels, and as 2011 showed us, it doesn’t always
    mean they’re done improving.

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Freddie Mac: Speedy Recovery Seems Unlikely in 2012

“Perspectives on the housing market
depend on where you sit,” according to Freddie Mac’s U.S.
Economic and Housing Market Outlook

for January.  The monthly forecast noted
that existing home sales increased in November, the inventory of unsold homes
decreased to a six to seven month supply, and Freddie Mac’s economists predict
home sales will grow between 2 and 5 percent in 2012. 

there is “a historically large gap between sentiments of buyers and sellers.”  Nearly 80 percent of American households
believe it is a good time to buy a home, but sellers are not as happy, with
only 7.6 percent who responded to a Mortgage Bankers Association survey
believing that it is a good time to sell. 
If this gap doesn’t narrow, Freddie Mac’s economists say, the
housing-market recovery will be delayed.

The monthly report titled Toasting the New Year with a Glass Half Full
concludes that, while the economy is undoubtedly in a better place that the
same time a year ago, a speedy recovery still seems unlikely this year. 

Other highlights of the Outlook

  • Economic growth will likely
    strengthen to about 2.1 percent in the first quarter.
  • The current U.S. unemployment rate
    of 8.5 percent is likely to increase after seasonal gains are reversed.
  • Mortgage rates are projected to
    remain very low, at least in the beginning of 2012.

Frank Nothaft, Freddie Mac, vice
president and chief economist said, “With the new year comes a sense of
cautious optimism. There are some positive signs in the job market and consumer
confidence; housing is starting to raise hopes for continued gradual economic
recovery. But the economy still is giving some mixed messages.”

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Wells’ Mortgage Earnings Indicative of Industry? HUD to Limit Appeals?; CFPB Appraisal Fees

Federal Reserve does other things besides keep overnight Fed Funds at 0% for
years at a stretch. It releases some interesting stats on mortgages that, if
you need a filler for a presentation you’re doing, might come in handy – you’ll
notice mortgage debt dropping.

I don’t think that many in the business have an awareness of how Basel III will
impact banks
, and therefore mortgages and servicing, and therefore mortgage pricing for consumers.” I
tend to agree, although I am trying to alert folks about the possible

Basel III
is expected to be the norm for banks around the world, which brings up the
question, “How do borrowers finance
their homes in other countries?
” There is an in-depth look at this –
click on the link near the top right of this page.

Yesterday Citigroup missed estimates, reporting
disappointing earnings although net credit losses fell 40% as full-year net
income grew 6%. Citi Holdings (the bank’s operation set up to handle its toxic
debt remnants) saw its revenue fall $6.4 billion, but Citi released $1.5
billion in loan loss reserves, a 35% decrease from 2010 – nice to see.

Wells Fargo beat estimates with a 2011 net income
up 28% from 2010, helped by a release of $600 million from loan loss reserves
during the 4th quarter. Wells has tended to focus on the consumer
(as we’ve all noticed, given its 30%+ mortgage market share) and not on
investment banking as other banks have done. Wells Fargo said its bucket of
nonperforming loans in the fourth quarter declined roughly 20% from the period
a year earlier. Its loan total grew to $770 billion in 2011 from $757 billion at
the end of 2010, and profit in the
community banking division, which includes Wells Fargo’s retail branches and
mortgage business, soared 30 percent
. New mortgages rose 35% to $120
billion from the prior quarter, and net interest margin, the difference between
what the bank pays for funds and what it earns on loans and securities, climbed
to 3.89% from 3.84%.

banking non-interest income stood at $2.4 billion for Q4, up $531 million from
third quarter 2011, on $120 billion in originations, compared to $89 billion in
originations in Q3. Mortgage banking non-interest income in Q4 included a $404
million provision for mortgage loan repurchase losses, compared with $390
million in the third quarter (included in net gains from mortgage loan
origination/sales activities). Net mortgage servicing rights (MSRs) results
were a $201 million gain, compared to a $607 million gain in Q3 of 2011. The
ratio of MSRs to related loans serviced for others was 76 basis points and
the average note rate on the servicing
portfolio was at 5.14 percent
. Wells Fargo’s unclosed pipeline as of Dec.
31 was $72 billion, compared to $84 billion at Sept. 30, 2011.

Wells is seeing what many mortgage
banks are seeing in the FHA/VA sector
Yes, government loan production has increased, but so have delinquencies. By
the end of the fourth quarter, $19.2 billion of these loans were more than 90 days
past due, up from $16.4 billion the previous quarter and $14.7 billion at Dec.
31, 2010. (Wells became the top FHA and VA mortgage originator in the country
after 2010 and originated more than $112 billion worth of these guaranteed

Here is an
interesting note related to Wells’ FHA update. “Rob, I have a quandary that maybe you or one of the readers can help with.
We are a small mortgage broker shop incorporated in 1991. Up until recently we
were a mini-eagle when HUD/FHA eliminated that particular category. This is the
first part of the problem. We are no longer able to track the loans we
originated. We can see the general numbers up to last year when we were no
longer able to order case numbers with our ID. The previous loans’ performance,
however, is still being tracked within the two year time frame. And here is the
issue: our compare ratio is way out of
. As you know the compare ration is the percentage of loans that are
delinquent compared to the total number of loans originated. The problem has two parts. First the
lenders want explanations for the loans that are being shown as in default but
we can no longer find out who they are. So there is no way to do an
explanation. Second, the compare ration is only comparing the loans upon which we
ordered the case number, so the list for the last two years is becoming smaller
and smaller every month as the loans form this year are not being added, but of
the three loans one was late last year. So my compare ratio has gone from under
100 to 100 to 150 to 200 and is now 250! Eventually, just before they are all
over 2 years old it will be over 1,000. I
can’t be the only broker that this is happening to!
Multiple calls to the
FHA resource center have only ended in frustration as all they can tell me is
how to get the number. What should I do?”

One list
that neither Wells or Citi find themselves on is the list of four Wall Street banks who will be bidding
on the $7 billion mortgage-related securities previously owned by AIG
are due to be auctioned tomorrow by the Federal Reserve Bank of New York. Goldman Sachs, Barclays Capital, Bank of
America and Credit Suisse will bid on the debt
, which was acquired by the
New York Fed as part of the bail-out of AIG in 2008. The auction is being
managed by BlackRock Solutions. The $7 billion is part of a $20 billion portfolio
housed in a special purpose vehicle called Maiden Lane II. If the Fed obtains a
good price, subprime debt could rally because the sale will remove a
significant amount of supply that has been hanging over the market, investors
said – prices of subprime debt fell last week as rumors of the Maiden Lane II
sale circulated among traders and investors. Stay tuned…

All these
loans began their lives as applications, and the MBA’s study, representing 75%
of retail originations, showed that apps
were up 23% last week
. Purchases were up over 10% and refi’s were up over
26% – accounting for over 82% of all applications (the highest refinance share
since October 2010).

If you want to complain about HUD loan limits, you’d better hurry. HUD has proposed eliminating maximum loan
limit appeals.
Late last week HUD published a proposed rule to eliminate
the process by which interested parties may appeal the maximum allowable loan
limit for a geographic area. Noting the modern availability of
sales-transaction data at the county level, HUD states that there is no longer
a need to allow requests for alternative limits. Further, the appeals disrupt
HUD’s overall loan limit determination process, and, by eliminating appeals,
HUD will be able to release annual loan limits earlier, thereby providing more
certainty to the market. HUD also noted that, because of the availability of
transaction data, it received zero requests for appeal of the 2011 loan limits. Copy of the proposal

Have you ever wanted to see how a rating agency looks at a residential MBS? Kroll recently rated one of Redwood Trust’s
, and here is all the nitty-gritty.
The mortgage loans were originated by First Republic Bank (55%), PrimeLending
(19%), PHH (11%), Wintrust (3%), Flagstar (8%), Sterling Savings Bank (2%),
Cole Taylor Savings Bank (1%) and Guardhill Financial Corporation (1%). 
The mortgage loans will be serviced by First Republic Bank (55%), Cenlar (19%),
PHH (11%) and Select Portfolio Servicing (15%).

news, its “Rule” appears to “have eliminated
the commentary language included in the Fed’s version which allowed appraisal
management companies (AMCs) to include the fees
they have been paying
appraisers to comply with Dodd-Frank’s “customary and reasonable” appraiser fee
requirement. ASA has repeatedly stated its belief that the Fed’s interpretation
and the massive loophole it created ran contrary to the plain language and
clear intent of Dodd-Frank.” Maybe it is a deliberate decision by the Bureau to
reject the Fed’s dubious and troubling interpretation, maybe not.
Fortunately with all this, rates are doing very little. The 10-yr T-Note seems
content around 1.85%, mortgage prices did very little yesterday while Thomson-Reuters
reported that mortgage banker selling appears to have been between $1.5 and
$2.0 billion, which was partially offset by the usual Fed support. Perhaps mortgages
may struggle a bit more than they have so far this year as some investors
believe that much of the tightening in the event of QE3 has been priced in.

morning we’ve already seen the Producer Price Index for December -.1%, ex-food
& energy +.3%; the -.1% is better than expected. At 9:15AM EST are
Industrial Production and Capacity Utilization, expected +0.5% and 78.1%
respectively, and finally at 10AM EST homebuilder sentiment is gauged with the
NAHB Index (Jan) called unchanged at 21.0. After
the PPI interest rates are basically unchanged from Tuesday’s close.

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