Jumbo Loan Comeback, Lower Stocks and Rates, Next Week’s Treasury Auctions, Deutsche & MetLife Earnings

Comeback For Jumbo Loans
What is the American Securitization Forum? Darned if I know, exactly, but they were meeting in Washington DC and came out with a statement conjecturing that non-agency product (a $1.2 trillion market 4-5 years ago, $25 billion in ’08 and $44 billion in ’09) may start to be securitized again later this year. The reason? There’s more talk about it this year than last! Right now, however, jumbo loan production is pretty small, and profit margins are pretty slim since jumbo rates aren’t all that much higher than agency rates. (I have an idea! Let’s split the pools into tranches, and then have Wall Street work with the rating agencies… oh, never mind, I guess we tried that.) As I mentioned yesterday, banks are holding onto this product, but if other buyers materialize and the loans can be sold at profits, things could loosen up. Whole loan packages and syndications of interests in pools of loans may be steps in the right direction.

More on the return of Jumbo mortgages and mortgage securitization overall from this Bloomberg report.

Next Week’s Treasury Auctions
Today we have already seen the weekly Jobless Claims number and productivity numbers and will have Factory Orders later on. In other words, pretty quiet on the economic news front. We do have another $81 billion in 3, 10, and 30 year Treasury instruments to auction off next week. Overall, rate-wise relative to Treasury securities, mortgages have been doing well. In fact, if an investor buys a current coupon mortgage security (without originator profit margins) their yield will be less than 70 basis points higher than the 10-yr Treasury yield!

Higher Jobless Claims, Lower Rates
Jobless Claims unexpectedly rose last week, up 8,000 to a seasonally adjusted 480,000 in the last week of January. The four-week moving average for new claims rose 11,750 to 468,750 last week, which is the third straight week of increases. And U.S. non-farm productivity rose faster than expected in the fourth quarter up 6.2%. For all of 2009, productivity grew 2.9%. Employers have been cutting costs and headcounts. The bond market likes the news, and is retracing yesterday’s losses: mortgage prices are better by .250 and the 10-yr is back down to 3.65%.

2010 Planning Questions For Mortgage Companies
Although the industry saw a nice pickup in locks last week, and mortgage bankers and brokers are by nature an optimistic lot, careful planners are continuing to look at 2010 as a “down in volume” year. God forbid any mortgage companies shut down, but it is bound to happen: does management have a point at which they will lock the doors? Is it based on volume or profits? Loss of net worth? No one wants to think about it, but criteria should be set.

Commercial Loans Up 12% 4Q09 vs. 3Q09
MapQuest really needs to start their directions on #5. Pretty sure I know how to get out of my neighborhood. Speaking of neighborhoods, in signs of a rebound from very low levels, according to the MBAA, commercial and multifamily mortgage loan originations in the fourth quarter of 2009 were 12% higher than they were during the same period last year and 15% higher than during the third quarter of 2009. Loans for hotels were up 105%, retail loans were up 101%, industrial property loans were up 59%, but multifamily loans were down 8%.

Biggest Commercial Lenders
Who are the big commercial servicing companies out there? At the end of 2009, Wells Fargo topped the charts with about $475 billion in U.S. master and primary servicing volume. Next were PNC Real Estate/Midland, Berkadia Commercial Mortgage, Bank of America, KeyBank Real Estate Capital, and GEMSA Loan Services. (A primary servicer is generally responsible for collecting loan payments from borrowers, performing property inspections and other property-related activities. A master servicer typically serves in a fiduciary capacity and is generally responsible for collecting cash and data from primary servicers and then providing that cash and data, through trustees, to investors, per the MBAA.)

GMAC Cutting 550 Jobs, Including DiTech
GMAC, however, plans to cut over 550 jobs and close three offices in an effort to cut costs. Bloomberg reported that GMAC will cut over 300 positions at Res Cap’s offices in California (DiTech) and North Carolina, according to a spokeswoman. And auto loan servicing offices in NC and Tennessee will close, eliminating another 200+ jobs.

Home Loan Applications Up 21% Last Week
Applications rose 21% from the week before, according to MBAA stats, heading back to volumes similar to mid-December. Is everyone, whoever is left, trying to jump on the refi wagon (refi rocket?) before rates go up? Maybe – apps to refi were up over 26%. Purchases were up over 10%. And the four-week moving average, to catch the trend, showed apps up over 7%. And at this weekend’s Super Bowl party you can tell folks that refi’s still make up 69% of applications.

Deutsche & MetLife Earnings
Deutsche Bank (Germany’s biggest bank, and having a presence here in the US) posted a fourth straight quarterly profit versus a loss in 2008. The company earned $1.8 billion in the fourth quarter. PNC will be repaying $7.6 billion (about 70%) of the TARP funds.

MetLife announced that its fourth quarter revenues fell 12% to $12.3 billion, and net income in the quarter fell 70% to $289 million. For the year, MetLife’s total revenues fell 19.4%, and its net loss for the year was $2.4 billion. MetLife Bank, however, the nation’s 11th largest funder of residential mortgages, had operating earnings of $65 million in the fourth quarter, a 400% increase from the same period a year earlier, and may still be exploring entering the warehouse and correspondent sectors.

NAMB Partners With Appraisal Company
NAMB is the National Association of Mortgage Brokers. NAMB Enterprises, a wholly-owned subsidiary of NAMB, has partnered with Olde City Lending Solutions to offer mortgage broker appraisal ordering services for FHA loans. The “NAMB Appraisal Ordering System” uses blind ordering of appraisals on FHA loans, and its press release states that it is portable from lender to lender. (I am sure that somewhere, someone knows why this is not a conflict of interest.)

Loan Officer Tips For Good Faith Estimates
US Bank’s wholesale division sent out a great “Top Errors of GFE’s” list. Although it won’t make the David Letterman show, they are reminding operation staffs that:

Adjusted Origination Charges (Blocks 1 & 2) needs to be completed correctly. (Page 2 Box 1 should include all income the broker/lender expects to receive, with the exception of discount points. This includes, but is not limited to, origination fees, broker fees, broker compensation (such as that typically earned from YSP), and USBHM’s commitment fee. Box 2 should include any credits for over-par pricing/YSP (Box 2) or discount points paid to lower the rate/ below-par pricing (Box 3.) Only one box may be checked and only one dollar amount may appear in Block 2.)

Homeowner’s insurance (Block 11) needs to be completed, especially for purchase transactions.

Important dates section needs to be completed correctly – page 1. (Box 1 must include the rate expiration date if the rate is locked, Box 2 must include a date that is at least 10 business days from the date of the GFE, excluding Saturdays, Sundays, and legal Federal Holidays, Box 3 must include the rate lock period if the rate is locked; or “N/A” if the rate is floating, etc.

Owner’s title insurance (Block 5) must be completed for all purchase transactions.

Tradeoff table needs to be completed, and the completion of the first column of the table is required in all instances. (Completion of the second and third columns is not required under RESPA; however, may be required under other state and/or local law or regulation.)

Lender information needs to be completed.

Escrow account information must be compatible with an indication of whether or not escrows are required. (If the “Yes” box is checked, then the dollar amount of the escrows must be included in the box above. If the “No” box is checked, then the box above should state an escrow amount of “$0.”)

Upfront MIP/VA funding fee must be listed when applicable (Block 3) – page 2.
The date the GFE was prepared must appear on the disclosure, beneath the property address.

Lastly, the originator’s e-mail address must be complete.

Daily Humor
There was an unfortunate accident at the Guinness Brewery one afternoon, and poor Patrick Murphy drowned.

When his boss went to see the widow Murphy to tell her of the news, she was understandably distraught. After a few minutes, she pulled herself together and asked how it happened.

The boss said that he fell over a railing and into a vat of the beer.
She nodded and after a pause asked, “Please, at least tells me that he passed quickly.”

The boss lowered his eyes and said, “Sorry, ma’am. Truth be told, he got out three times to piddle.”