Aug. 14, 2012: Mortgage jobs; production rankings; is eminent domain eminent? Realtor/LO banter; Citi cuts MGIC

Aug. 14, 2012: Mortgage jobs; production rankings; is eminent domain eminent? Realtor/LO banter; Citi cuts MGIC Rob Chrisman

Here’s one place that doesn’t have any RESPA violations or lot line arguments – yet: http://www.360cities.net/image/curiosity-rover-martian-solar-day-2#-330.69,10.16,70.0.

Coming back to residential mortgage production volume rankings, if you don’t want surprises, you’ll be fine reading this information on production rankings for the recent time period: http://www.equities.com/news/headline-story?dt 12-08-13&val73400&catfinance.

And narrowing things down even farther, in Washington a regional bank is expanding its mortgage operation. Banner Bank, a publicly-held Washington state financial institution founded in 1890 (nice price movement: http://finance.yahoo.com/q?sºNR) is growing: with offices throughout the Northwest Banner is looking for loan originators, processors, underwriters, and closers in all locations in Washington, Oregon, and Idaho. I know the folks at Banner Bank pretty well – they’re a good bunch – and here is more on the mortgage operation: http://bannerbank.mortgagewebcenter.com/. Contact the team at homeloans@bannerbank.com.

Does our industry really need the subject of eminent domain weighing on it? We don’t, but here it is anyway. If investors are skittish about purchasing securities backed by loans that can be plucked out, prices are expected to drop, resulting in higher rates – and once again new borrowers will pay the price. Mortgage Resolution Partners is behind the movement, and to the best of my knowledge funding for the project is still a bit of a mystery. For more information one can visit Mortgage Resolution Partners’ website at http://mortgageresolution.com/fact-or-fiction, or perhaps send an e-mail to its CEO Graham Williams where the nomenclature could be GWilliams at mortgageresolutionpartners, dot com.

The securities industry has come out against it, and now the FHFA has also due to the dangerous precedent it might set for the entire securitization industry. Chicago is going to consider eminent domain. The commentary, and the press, mentioned this a few weeks ago. http://mortgageresolutionpartners.com/sites/default/files/attachments/chicago_r2012-695.pdf. Also considering the move are the Northern California areas of Berkeley, Sacramento, and Elk Grove: http://www.latimes.com/business/money/la-fi-mo-eminent-domain-20120813,0,5429200.story.

But last week, even though municipalities are focused on non-agency securities, Freddie & Fannie’s FHFA issued a notice to warn of the controversial use of eminent domain to seize underwater mortgages. Kind of like your big brother showing up when you felt threatened by someone (besides your big brother). SIFMA, the trade organization representing the securities industry, protesting the proposed actions and indicating that such an action would trigger litigation against the local governments and ultimately backfire on the communities’ borrowers, limiting credit in the future.  In response to those comments, California Lieutenant Governor Gavin Newsom politely told SIMFA to shut up. The FHFA, as conservator of Freddie Mac and Fannie Mae (the GSEs), said its obligation is to preserve and conserve the GSE’s assets and to minimize costs to taxpayers. These entities purchase a large portion of the mortgages originated in the U.S. the notice says, and they hold private label mortgage backed securities containing pools of non-GSE loans. Banks also have large holdings of such securities and accept collateral that consists of mortgages of member financial firms pledged in exchange for advances of funds. The FHFA has significant concerns about the use of eminent domains to revise existing financial contracts and the alternation of the value of GSE or bank securities holdings.  In the case of the GSEs resulting losses would ultimately be borne by taxpayers.  FHFA also expressed concern that the programs could undermine and “have a chilling effect” on the extension of credit by investors that support the housing market. So it has determined that it might need to take action both as conservator of the GSEs and regulator for banks to avoid a risk to safe and sound operations and avoid taxpayer expense. The proposed use of eminent domain raises issues about the constitutionality of such an action, the application of federal and state consumer protection laws, the effects on holders of existing securities and on millions of negotiated and performing mortgage contracts.  There are also issues regarding the role of the courts in administering or overseeing such a program and, in particular, critical issues surrounding the valuation by local governments (as is typical in eminent domain proceedings) of complex contractual arrangements that are traded in national and international markets.

The mortgages would be taken at fair market value, and then restructured into new loans with terms reflecting the current market. In the notice, which was sent to the Federal Register, FHFA stated it had “significant concerns about the use of eminent domain to revise existing financial contracts and the alteration of the value of Enterprise or Bank securities holdings.” What is the impact on millions of negotiated and performing mortgage contracts? Through notice in the Federal Register FHFA said it is accepting input on topic through its Office of General Counsel no later than September 7, 2012: http://www.fhfa.gov/webfiles/24143/EminentdomainPR8812F.pdf.

On to a different, more optimistic topic – will the government extend the Mortgage Forgiveness Debt Relief Act through 2013? Possibly: http://www.dailyherald.com/article/20120810/entlife/708109989/.

On the Realtor/LO question, David Oldenburg writes, “My perspective on Realtor/ Loan Officer and who has a harder job… I have worked as a Realtor and a loan officer over the last 20+ years. I have been a broker for 20 years and I own both a real estate company and a mortgage company and I have trained both and cross-trained both for 2 decades. I also trained and wrote training courses for both loan officers and Realtors on a national level.  I have seen many loan officers, make the jump to become a Realtor and they do it very easily and most have success and make money.  They also tell me they can’t believe how much easier it is to be a Realtor.  I have yet to see a single Realtor make the jump to becoming a loan officer with any great success. The last 5 Realtors who have tried have all given up within 12 months and they all tell me they were shocked that working as an LO was so much more difficult than working as a Realtor. I have also personally worked as a Realtor and as an LO and there is no comparison, the Realtor job is far easier to learn, far less technical and the pay per deal is far higher.”

But Mr. Oldenburg continues to opine. “Within 3 years the 3% commission per side will be a thing of the past.  There are already billion dollar companies working on models, like Zillow has for LO’s. Models that would make Realtors bid on business in their areas. The one who agrees to give up the highest level of their commission to get the deal is the one who gets the deal.  LO’s have been bidding for business online for years and it is finally going to happen for Realtors. I suggest Realtors join forces with LO’s and quit debating about who works harder. We all work hard these days and right now we are all slowly being down-sized, over-regulated and will ultimately be replaced if we do not band together.”

And Linda from Florida writes, “We both work very hard for our money and especially through these last few years of constant changes in the mortgage industry. The Flat Fee proposal presentation – why would that be a good idea for real estate or the homeowners? It only benefits the banks, at best. NAR is working hard in DC for regulation. Here’s the link to the database of submissions this past year: http://www.ksefocus.com/billdatabase/index.php. Make sure you select all since there are many pages to view.”

Citibank issued a credit policy update on approved private mortgage insurance companies – MGIC did not make the cut. “When private mortgage insurance (MI) coverage is required, it must be provided by a Citibank approved company. Effective with new loan registrations on or after September 1, 2012, Citibank will no longer accept Loans having mortgage insurance issued by MGIC. Pipeline Loans having MGIC as the MI provider must be purchased by Citibank no later than October 31. Effective September 1, 2012, the approved MI companies are: Essent, Genworth, Radian, UGIC, and CMG. Additionally, the same September 1, 2012 Loan registration date and October 31, 2012 purchase deadline apply to Loans from Correspondents with delegated underwriting authority that use MGIC for contract underwriting.” Fortunately for us, there is not much going on in the fixed-income markets (which include most mortgage-backed securities): no real news in the United States, quiet overseas, no auctions, no nothin’. The U.S. 10-yr note closed at 1.65%, almost unchanged, and rate sheet MBS prices were also nearly unchanged.

This morning we had the Producer Price Index for July, where the index was seen higher +0.2% but actually came out +.3%. The core rate (ex-food and energy) was also higher than expected at +.4%. But the big surprise came with July’s Retail Sales figures. Anticipated at +0.3%, ex-autos +.3%, it came in at +.8%, ex-auto +.8%. Since consumers fuel the economy, these strong numbers have pushed rates a little higher: in the early going the 10-yr is up to 1.70% and MBS prices are worse by about .250.

(Listen, there are too many jokes flying around concerning politics to ignore them. I will do my best to keep them even, but just know that the parties and people can easily be switched and re-used every four years.)

Last Saturday afternoon, in Washington, D.C., an aide to Nancy Pelosi visited the Bishop of the Catholic cathedral in D.C. He told the Cardinal that Nancy Pelosi would be attending the next day’s Mass, and he asked if the Cardinal would kindly point out Pelosi to the congregation and say a few words that would include calling Pelosi a saint. The Cardinal replied, “No. I don’t really like the woman, and there are issues of conflict with the Catholic Church over certain of Pelosi’s views.”

Pelosi’s aide then said, “Look, I’ll write a check here and now for a donation of $100,000 to your church if you’ll just tell the congregation you see Pelosi as a saint.” The Cardinal thought about it and said, “Well, the church can use the money, so I’ll work your request into tomorrow’s sermon.” As Pelosi’s aide promised, Nancy Pelosi appeared for the Sunday worship and seated herself prominently at the forward left side of the center aisle. As promised, at the start of his sermon, the Cardinal pointed out that Ms. Pelosi was present. The Cardinal went on to explain to the congregation, “While Ms. Pelosi’s presence is probably an honor to some, the woman is not numbered among my personal favorite personages. Some of her most egregious views are contrary to tenets of the Church, and she tends to flip- flop on many other issues. Nancy Pelosi is a petty, self -absorbed hypocrite, a thumb sucker, and a nit-wit. Nancy Pelosi is also a serial liar, a cheat, and a thief. I must say, Nancy Pelosi is the worst example of a Catholic I have ever personally witnessed. She married for money and is using her wealth to lie to the American people. She also has a reputation for shirking her Representative obligations both in Washington and in California. The woman is simply not to be trusted.” The Cardinal concluded, “But, when compared with President Obama, Ms. Pelosi is a saint.”

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 FinCen, SAR’s, and the impact on mortgage lenders. 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.)