Housing Markets After Government Help Ends
There is no one that will disagree with the statement that the mortgage markets benefited from government intervention last year. And practically everyone believes that, given the significant challenges housing is facing, the government will stay focused and do whatever it takes to support the market. For this reason, analysts feel that this year we’ll see home price stability or only moderate weakness. Of course, we still have the ARM resets, but if the Fed keeps overnight rates near 0%, and short term rates stay low, ARM loans may not be going up much in rate and may actually decline. And when the Fed purchase program comes to an inevitable end, whether it is in March, or later, banks and money managers will be the primary buyers of agency MBS until the private market kicks in again.
Market Update: Treasury Supply Hurts Rates
The market did not do so well yesterday and in fact I saw some intra-day price changes from some investors. Treasury supply issues don’t help, with the US government continuing to sell large amounts of fixed income securities to finance the deficit. The 10-yr sale went “ok”, and today we have $13 billion of 30-yr bonds to wade through. Dealers reported an increase in mortgages for sale as both servicers and originators were in selling, and it was estimated that volume increased to $2.5 billion instead of the recent pace of $1.5 billion per day.
Today we will have Jobless Claims and Retail Sales, along with Import/Export Prices. Ahead of those numbers the market were pretty quiet. As it turns out, Retail Sales unexpectedly fell in December by 0.3% last month, the first decline in three months, after rising by an upwardly revised 1.8 percent in November. The yield on the 10-yr is 3.76% and mortgage prices are better by about .125 versus the close Wednesday.
Senators Ask Fed To Ban Lender-To-Broker Pay
The Fed’s comment period on Reg. Z and yield spread premiums (YSP) ended Christmas Eve. But not before several Senators fired off a public letter to the Fed Chairman. Senators ask the Fed to ban yield spread premiums as the “final” amendments to Regulation Z. (YSP is lender compensation to mortgage brokers for originating loans. Mortgage brokers—as opposed to mortgage loan officers who work for banks—are paid either by the borrower directly or by YSP). Those in the business obviously had several months to voice their comments, but the Senators’ letter ties YSP’s in with subprime lending saying, “they too often stripped the wealth that working families accumulated over many years. Eventually, they stripped wealth from our entire economy…. the broker also stood to earn thousands of dollars in additional bonus payments from the lender if he could convince the family to take out a higher priced mortgage…”
I am glad that they cleared this up, and noted that yield spread premiums and subprime loans caused the credit mess. I’d always thought it was investor demand, Wall Street actions, poor rating agency judgment, questionable borrower and lender ethics, etc. Their letter makes it much more straightforward. (Ha!) Here’s an article on the status of things.
As one originator noted, “The problem they cite may be now irrelevant due to the new GFE, which requires that the broker disclose their total compensation under ‘Origination Charges,’ and though this number may include expected credit from the lender, the form does not allow for an entry titled, ‘Yield Spread Premium.’ It requires any credit from the lender (like YSP) be included as a credit to offset the borrowers’ out-of-pocket closing costs. So ‘YSP,’ as an accepted mortgage finance term, no longer exists due to RESPA 2010. Brokers earn ‘Origination Charges’ and lenders either pay a credit or charge a discount based on rate. As with most government efforts, this is late and off-target.”
However, the fact remains that much of the public believes the information in this letter. And some are quick to point out that most savvy brokers will figure out a way to be compensated for originating a loan, even if the yield spread premium goes away.
Notes on the New Good Faith Estimate
What seems to be a common mistake that brokers are making on the new 2010 Good Faith Estimates (GFEs)? According to Wells Fargo’s wholesale group, they are receiving loans with multiple GFE’s – they only want one. And loans with a signed and dated 1003 and GFE dated before 1/1 do not need to be re-disclosed – brokers can use the old GFE and do not need to send a new one. Lastly, the GFE must match the Fee Detail Sheet exactly.
Remember that HUD’s public stand was a recently announced 120-day moratorium on the new RESPA rule provided good faith efforts are being made to comply with the new rule. Neither the effective date of the rule nor the obligation to comply has changed; however, HUD will be lenient with companies for the first 120 days as long as they follow existing rules & FAQs and have made a sufficient investment in technology, training and quality control. This sounds pretty subjective, and it is best just to follow the guidelines.
National Mortgage Licensing
Are you part of the Nationwide Mortgage Licensing System?
The public can view Mortgage Loan Originator licensing information through the NMLS Consumer Access path starting January 25th. The website (NMLS Consumer Access) will make information available about mortgage loan originators due to the SAFE Act. Information will include the NMLS Unique ID, agent’s name, business phone & fax, an indication as to whether the agent is engaged in other business as director, owner, employee, etc., any other names being used, employment history for the last 10 years, license name/number/status by jurisdiction, along with license sponsorship, and branch location associated with the individual. Brokers and agents are being encouraged to review their information in NMLS that will be made publicly available to ensure that it is how you wish the information to be represented publicly. The NMLS is a system of record for state licensure and any information submitted requires an attestation by you to its accuracy.
A trial program for placing this information on chips and implanting them in brokers will begin soon in some parts of the nation. (OK, I just made this one up.)
MetLife Becoming A Big Mortgage Player
Apparently MetLife is thinking about truly competing with the Wells’ and Bank of America’s of the world by possibly entering into both correspondent residential lending and warehouse financing. Back in 2008, MetLife bought the origination and servicing divisions of First Horizon (Memphis, TN) and now is supposedly 11th in the nation in both residential lending and servicing. In an interview with National Mortgage News, their spokesman said MetLife is “exploring these sectors.”
FIVE RULES FOR MEN TO FOLLOW TO A HAPPY LIFE:
1. It’s important to have a woman who helps at home, who cooks from time to time, who cleans up and has a job.
2. It’s important to have a woman who can make you laugh.
3. It’s important to have a woman you can trust and who doesn’t lie to you.
4. It’s important to have a woman who is good in bed and who likes to be with you.
5. It’s very, very important that these four women do not know each other.
(And no, this is not a quote from Tiger Woods.)