Jun. 29, 2012: Mortgage IT job; macro tax implications of refinancing; investor updates including Fifth Third’s cutting off NY

Jun. 29, 2012: Mortgage IT job; macro tax implications of refinancing; investor updates including Fifth Third’s cutting off NY Rob Chrisman

The popular press has latched on to the “The average U.S. rate on the 30-year fixed mortgage stayed this week at the lowest level on record” story. (In fact, the lack of volatility recently prompted one trader to note, “This market is harder to move than Joan River’s eyebrows.”) But through my travels and e-mails, my belief is that mortgage bankers, Realtors, and others in the “inside”, for lack of a better term, couldn’t care less. Lenders are all too busy trying to have pipelines close, deal with underwriters auditing files seven days a week, allocating scarce personnel, padding profit margins to slow volumes, and buying lunches for their hard working staffs on the last business day of June. Unfortunately it represents yet another divergence in the public’s perception of our business versus what is really happening – few loans are “slam dunks.” Here’s a quick thought that someone should mention to the U.S. Government: with billions of dollars of loans being refinanced every month, borrowers are lowering their monthly payments by paying less interest. And if they’re paying less in interest, they can deduct less on their annual taxes, right? Which means that, for a given income, a person’s tax liability goes up, right? So not only is the government making a killing on the interest it is earning from mortgage backed securities, but perhaps the government stands to make even more by people paying more in taxes. For more in-depth reading, check out http://pfr.sagepub.com/content/40/3/339 – I guess the government can use the added revenue to fund the CFPB’s expansion. And Mike D. from Mountain West sent this article over, regarding interest deduction helping mortgage banker profits:  http://www.smartmoney.com/spend/real-estate/study-mortgage-deduction-raises-rates-1339507849401/.

I have been retained by a leading independent mortgage banker who is looking to further strengthen its executive team with a Chief Information Officer. The mortgage banker, headquartered in the intermountain west with a large national footprint and expected fundings this year of $4 billion, has an immediate opportunity for the right candidate who has a demonstrated ability to interpret technology and market trends as a foundation for technology and product roadmaps with application development and support, quality assurance and business intelligence. The person should also be an innovator with a deep understanding of the mortgage business and best-of-breed technology solutions to develop systems that are uniquely suited to meet the needs of our company, and extend our technology advantage in the marketplace. The successful candidate will have a strong background in business solutions and change management, building high-performing teams and practical experience in software development and vendor management. If you know someone interested, please have them send their resume to me at rchrisman@robchrisman.com.

The MBA in New Jersey had a “town meeting” this week focused on the impact of the CFPB and yes, non-depository mortgage companies should listen up. “Under the Dodd-Frank legislation that is currently being implemented bit by bit over the financial services industry, the impacts will likely be most acutely realized during the first field audit of non-depository mortgage companies by the CFPB.” Ballard Spar’s Richard Andreano noted the Anti-Steering provisions of Dodd-Frank apply to all creditors, including depositories and non-depositories. While this has everything to do with LO comp, it also has implications for Fair Lending and TILA compliance and opens the door for future litigation by adding penalties which include actual damages, treble damages, costs, and attorney’s fees. Additionally, the already extended 3 year statute of limitations is waived completely for borrowers who go into foreclosure, prompting Mr. Andreano to inform the audience of mortgage lenders, bankers and brokers that “they need to start documenting how the borrower reached a loan product decision, and to retain that documentation in the file as part of a future defense. This will likely come up in every future foreclosure defense case”.  When asked if “steering” can happen prior to an application for a loan, such as during the initial fee worksheet or sales process, he responded with an emphatic yes, and added “no one, but for a few large banks, is even thinking about this”. The implication being that they should be.  Marketing/advertising and sales practices are squarely within the CFPB’s sights – attention that should help motivate mortgage execs to think about the compliance aspects of these practices and the technology that supports them.

On the good side of things, MERS had yet another in a long string of legal victories. A district judge in Florida ruled this week in favor of MERS, dismissing a recording fee suit. In Fuller v. MERS, Judge Schlesinger dismissed with prejudice a six-count claim seeking relief under the provisions of Florida’s Recording Statutes and alleging civil conspiracy, unjust enrichment and fraud.  Judge Schlesinger found that “MERS has not committed an unlawful act, or a lawful act by unlawful means,” saying, “First, this Court must be clear that the recording of mortgage assignments, under Florida law, is at the complete discretion of the party wishing to record the document.” “This is the second significant and precedent-setting decision for MERS in fee recording suits.  Not only did Judge Schlesinger determine MERS is lawful, he also noted that the county clerk lacks standing to sue or collect damages from MERS – as was also recently ruled in Kentucky,” said Janis Smith, MERSCORP’s Vice President for Corporate Communications.  “Recording the mortgage in MERS’ name in the land records fulfills the purpose of the recording statutes,” added Smith.

Here are some somewhat recent investor updates, providing a flavor for the environment. They just don’t stop. As always, it is best to read the actual bulletin.

Fifth Third’s Wholesale and Correspondent Lending Groups, effective July 1, announced to clients, “Due to recent changes in the Mortgage Lending licensing requirements for the state of New York, Fifth Third Mortgage Company will discontinue mortgage lending for properties located in the state. No new applications or registrations will be accepted after midnight eastern standard time, Sunday July 1. Any existing or new registration or applications in the Fifth Third pipeline prior to midnight eastern standard time Sunday July 1, 2012 will be honored.”

In Ohio, Westfield Bancorp will acquire Western Reserve Bancorp for $18 million and pay off about $5 million in Western’s TARP.

HUD’s Santa Ana and Denver Homeownership Centers are offering a series of webinars on housing counseling compliance this summer in partnership with the Rural Community Assistance Corporation.  Designed for HUD-approved counseling agencies, the series will be divvied up into six sessions throughout July and August.  Topics covered include the 9902 (http://www.surveymonkey.com/s/HUD9902); reporting (http://www.surveymonkey.com/s/HUDReporting); group and individual counseling (http://www.surveymonkey.com/s/HUDCounseling); work plans, QCP, and data security (http://www.surveymonkey.com/s/HUDPlans); CMS systems and HCS (http://www.surveymonkey.com/s/HCS_CMS); and FHA HAMP and FHA loss mitigation (http://www.surveymonkey.com/s/HUDFHAHAMP_LossMit). Upon noticing an increase in errors when submitting documentation, US Bank issued a reminder about Note and Truth in Lending requirements.  Note errors such as listing an incorrect change date or margin, using the wrong index, and discrepancies between the late fee on the Note and the late fee in the documentation all decrease a loan’s chances of being eligible for purchase.  Putting down the wrong late fee can result in a Fair Lending violation.  Common Truth in Lending mistakes to avoid include incorrect Note, disbursement, and one month prior to payment dates for ARM programs where the first change occurs after 60 months; using the wrong change date in the “Maximum Ever” column; incorrect margins; and inaccurate mortgage insurance or escrows. Following the announcement that MERS registry would require the ORG ID as of June 4th, Flagstar will be using the Originating ORG ID Exception for transactions where it is generating the MIN number and the originator closes in their own name.  Flagstar will continue this practice until July 5, 2012, by which time all clients should have provided their ORG IDs by emailing their confirmation and Flagstar Bank Lender ID to brokerdelegatee@flagstar.com. Flagstar reminds clients that it will not purchase FHA loans from DE Delegated Correspondents if the escrow balance was deducted from the principal balance on the payoff statement and/or listed in the 100 or 200 sections of the HUD-1 Settlement statement as a credit.  This applies to FHA loans that closed on or after May 1, 2012. Out on the West Coast Pinnacle rolled out its 30-year fixed rate VA Jumbo loans, which are available for amounts less than $1 million for purchase and cash-out refinances.  The down payment must be at least 25% of the purchase price or Notification of Value, whichever is less, and borrowers must have a minimum credit score of 660, no bankruptcies or foreclosures within the past seven years, and no housing lates in the past 12 months in order to qualify. A number of topics in the PCM Guidelines have been clarified and updated, including the sections on conforming and conforming high balance loans, enhanced DU Refi Plus loans, HomePath loans, Good Neighbor Next Door guidance, Pinnacle Plus products, the condo-PUD matrix and questionnaire, and the PCM Mortgage Clause.  The sections on FHA, VA, and USDA loans have also been updated. Everbank has increased the maximum LTV on 15-year fixed rate DU Refi Plus loans to unlimited, effective for conforming and high balance loans.  A Property Field Waiver is needed for 15-year fixed rate loans with LTVs over 100%. The GMAC Client Guide has been updated, the full details of which are accessible via the GMAC website at http://click.e.gmacrfc.com/?jufe221574726d017f7d1479&lsfde71c797d6d017d73177875&mfef7117372640d&lfe9716767165077b77&sfe271371706704797d1d73&jbffcf14&t.  This includes the updated guidance on Ability to Repay in West Virginia. The Kinecta Wholesale Lock Policy, which allows any lock that has expired to be re-locked for 30 days using either the original lock date pricing  less 50 basis points or current market pricing, whichever is lower.  Locks that have expired or been cancelled by Kinecta or the originator are eligible for current market pricing 45 days after the cancellation or lock expiration date, whichever is longer, and locks re-locked within the 45 days from the expiration or cancellation date are subject to all prior extension fees.

Turning to the markets, we’re still driven by Europe. Snoop Dogg was detained in Norway after arriving with large amounts of pot and cash, and Fox News reported that “European Leaders Reject American Stimulus Package.” (Haha.) Thursday’s volumes were below average, with the usual folks selling and the usual folks buying (including the Fed with its usual $1.2 billion per day – what will happen to agency product when it stops?). MBS prices finished better by about .250 and our 10-yr T-note finished better by about .375 (1.58%).

But that was “so yesterday.” Overnight the markets received a “short in the arm” as the EU surprised the world with some new measures: it will propose a single bank supervisor, after which euro-zone banks will have direct access to the ESM. This should reduce the pressure on sovereign debt of Spain and Italy. Today we’ve had Personal Income & Consumption. Respectively expected +0.2 and unchanged respectively, that is exactly where they came in.

Later we’ll have the Chicago PMI (expected slightly higher) and the final reading of Michigan Sentiment (called unchanged). With the news from Europe rates are higher today, with 10-yr at 1.65% and MBS prices lower/worse by about .250.

Romney Blasts Supreme Court, Calling Healthcare Act ‘Worst Idea I Ever Had’ Vows to Repeal Own Law WASHINGTON  – Just minutes after the Supreme Court upheld President Obama’s Affordable Care Act, Republican presidential nominee Mitt Romney slammed the Court, calling the law “the worst idea I ever had.” “I vow to repeal this law on my first day in office,” he told a crowd at a campaign rally.  “Until then, I will work tirelessly to make people forget that I used to totally love it.” At the White House, President Obama greeted the news of the Court’s decision in muted fashion: “I haven’t been this pumped since I smoked bin Laden.” Dissenters in the 5-4 decision included Justice Antonin Scalia, who wrote, “The only medical procedures the government should pay for are exorcisms.” Senate Minority Leader Mitch McConnell also had harsh words for the healthcare law, telling reporters, “Under Obamacare, you will be forced to marry a gay doctor.” But perhaps the most negative appraisal came from Speaker of the House John Boehner: “This is a dark day for America. If we are forced to have healthcare, it’s only a matter of time before we have education.”

(Thank you to the Borowitz Report for this one.)   If you’re interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog discusses the issue of the Freddie Mac & Bank of America buybacks, and its potential impact on the industry. 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.

Rob

(Check out http://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx or www.TheBasisPoint.com/category/daily-basis. For archived commentaries, go to www.robchrisman.com. Copyright 2012 Rob Chrisman.  All rights reserved. Occasional paid notices do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)