2013 HMDA Data Out; MBS Holdings in Flux; Student Debt Impact Quantified


like to put my money to work. I could earn some decent dividend returns
(3-4%) if I buy some Exxon, or ATT. Or maybe I should start
loaning my money out like this lender,
and earn a 200-300% APR. (Pick a state and slide the dollar amount bar,
and watch the APR magically change.) And we wonder why lenders have a
bad reputation…or maybe it is merely a matter of risk versus return.

Chase breathed a sigh of relief Monday
when, “Virginia Attorney General Mark R. Herring (D) dropped JPMorgan
Chase from a mortgage securities lawsuit against the country’s biggest
banks, after learning that his predecessor Ken Cuccinelli (R) had
already struck a confidential settlement with the bank.” Huh? Confidential settlements? What about transparency? The plot thickens…

is John Burns Consulting? Aside from working for home builders, I don’t
know exactly who it is. But its researchers believe that student debt caused 414,000 houses not to be sold.
(And I guess the 414k, through the multiplier effect, quickly turns
into billions.) But student debt is not going away, although students
and families hope for college tuition appreciation to slow down given
that the inflation rate is nearly 0%. Millennial Martine Torres
suggests, “The real estate industry is up in arms about first time home
buyers being saddled by debt and are therefore not purchasing homes.
Yes, these factors contribute to the lack of first time home buyers but
the mentality of the ‘millennial’ generation has  shifted
from generations in the past that were eager to get married and buy a
home to being more career-driven and being content with renting. My
generation does not want to get tied up in mortgages at a young age and
is delaying marriage; parental dependence is also at an all-time high.  The ‘millennial’ generation is commitment-phobic.

Yay! The new HMDA data is out! The CFPB released the 2013 HMDA data.
Remember that the regulators use HMDA data in their examinations to
determine whether a lender is complying with fair lending laws. With the
addition of more data points in the proposed HMDA regulations, many
believe future HMDA data will become more critical in fair lending
examinations. For further information regarding the HMDA data, click on
the hyperlinks and URLs in the CFPB press release. “The Federal
Financial Institutions Examination Council (FFIEC) announced the
availability of data on mortgage lending transactions at 7,190 U.S.
financial institutions covered by the Home Mortgage Disclosure Act
(HMDA). Covered institutions include banks, savings associations, credit
unions, and mortgage companies. The HMDA data made available today
cover 2013 lending activity, and include applications, originations,
purchases and sales of loans, denials, and other actions related to

the HMDA data comes from lenders, and let’s check in with some
relatively recent announcements to see what some have been up to lately.

Per Bulletin 2014-46, issued August 12, 2014, U. S. Bank Home Mortgage
announced that “effective immediately for all new FHA applications and
FHA loans in process, USBHM was removing the additional reserve
requirement on FHA loans when a borrower is vacating the primary
residence and converting it to an investment property. The current
requirement of 6 months PITIA reserves for both properties is being
reduced to follow the current FHA requirement of 3 months PITIA reserves
for both properties. Correction: Effective
immediately for all new FHA applications and FHA loans in process,
USBHM is removing our reserve requirement on FHA loans when a borrower
is vacating the primary residence and converting it to an investment
property. The current requirement of 6 months PITIA reserves for both
properties is being eliminated. No reserves will be required.”

A federal court in North Carolina ruled against the Federal Deposit Insurance Corp.’s takeover and multimillion-dollar loan loss claim against Cooperative Bank.
The fact that the court ruled against the FDIC’s $40 million claim
against the former NC bank officers is viewed as a victory for “the
small guy.”

Utilizing the Approved eSign Vendors list from Mountain West Financial,
electronically signed initial disclosure packages for Conventional,
FHA, and VA transactions are acceptable. Investor restrictions do not
allow electronic signatures on the Final 1003/Uniform Residential Loan
Application (URLA). Loan Originators must “Wet Sign” the Final 1003, no

Franklin American Mortgage’s
recent bulletin includes updates on Conventional Property Insurance,
Private Road Maintenance Agreements, Secondary Financing – LP, DU
Release Notes, VA New Construction, Closing Costs, USDA Annual Fee, All
Products Incidental Cash Back – Texas, Clarifications FHA VA Funds
Reimbursed Paid by Credit Card, Conventional, VA and USDA Funds to
Close Access Letters.

First Community Mortgage Wholesale posted guideline changes effective August 31st. These changes include DU Refi Plus and LP RR, FHA, USDA, and Conventional program updates.

Kinecta Federal Credit Union, effective 9/3/14, the Jumbo Fixed Rate product matrix is updated to match investor guidelines. Updates include cash-out refinance and a DTI of 43%.

Mountain West Financial Wholesale
matrix changes and updates include: USDA limited to 3% Platinum and
Sapphire Grant, Mortgage Insurance required on HomePath loans, and
removal of Second Homes as eligible for FHA Streamline Refinance.

New Leaf Wholesale
has reduced LPMI rates. The reduced rates will benefit NewLeaf’s LPMI
offering as MGIC has introduced additional credit buckets to deepen the
discount on higher credit scores. New credit buckets are as follows: 680
– 719 un-changed, 720 – 739 lowered, 740 – 759 deeper discount, 760+
deepest discount. USDA loans are subject to the increased guarantee fee
regardless of when a loan was submitted for review. If the RD
Conditional Commitment is issued on or after October 1, 2014, it will be
subject to the higher guarantee fee. No exceptions to this policy are
possible. Initial disclosures must reflect the new fee effective

a la mode spread the word of its Community Partnerships Program.
“This program gives real estate appraiser organizations tools to grow
their ranks, reduce member and operating costs, and increase

West Coast’s Bay Equity
has rolled out its Good Neighbor Next Door program. This program offers
a 50% discount* from the list price of eligible single-unit HUD homes
in designated revitalization areas** for these community centric
occupations: Teachers Pre-K through 12th grade, Emergency Medical
Technicians, Law Enforcement Officers, and Firefighters. This program
has all the benefits of an FHA mortgage except the minimum borrower
contribution is only $100.00.

By now, many know that bank holdings of agency MBS has been decreasing.
This is an important statistic, once which gives some insight into bank
views on prepayment risk, cash flow valuations, and general market
risk. As I received a few emails over the past week inquiring if I had
any data on the subject, I thought I could combine a few reports I have
read. The National Information Center has released consolidated
financial statements for bank holding companies, and although the data
is not as comprehensive as the Quarterly Banking Profile (which also
includes savings institutions), soon to be released by the FDIC, they
provide a good early estimate of changes in bank assets and liabilities.
What we find is: agency MBS holdings decreased by $4.0 billion for the top 50 banks; a
majority of the decline came in conventional agency MBS holdings, which
fell by $4.2 billion; agency collateralized mortgage obligations
(CMO’s, which can be viewed as MBS’ eccentric younger brother) holdings
decreased $900 million, while the GNMA holdings increased by $1.1
billion; U.S. Bancorp had the largest increase in agency MBS holdings, adding $4.0 billion,
while Bank of America reduced its holdings by $8.8 billion; holdings of
non-agency MBS of the top 50 banks decreased by $4.4 billion, while
commercial mortgage backed securities CMBS (which is MBS’ over-achieving
cousin who went to an Ivey League school and reminds everyone about it
at Christmas time) holdings rose by $7.4 billion; and treasury holdings increased by $48 billion.

might be a little noise in the data.” That, and, “I couldn’t figure out
how to make a pivot table,” are two things you never want to hear
coming from your Capital Markets department. However, often times there
is a lot of noise in data sets-if there wasn’t, then I guess my first
boss was correct: you really could turn a monkey into a mortgage trader.
Part of the challenge of being an analyst is identifying variables
which alter financial models; the good ones make the necessary
adjustments, the bad ones ask if you if you all the veggies on your foot
long sandwich. BAML writes in Home Prices: Noise Reduction, “We
had been using the SP Case Shiller national composite, released
quarterly, in our models. However, this series has been discontinued and
replaced with a monthly aggregate, which has a different history. It
shows more stable prices, with less of a decline during the housing bust
and a more steady recovery since bottoming at the end of 2011.
According to this new national composite, home prices only fell 26%
peak-to-trough (versus the prior estimate of 34%) and have increased 19%
from then.” The consequences of the new composite, according to the article, is the revised data suggests home prices will be up 3.9% this year (4Q/4Q) compared to BAML’s prior forecast of 5.1%, and 3.4% next year.

Things are heating up in the pipeline hedging biz. Compass Analytics, LLC announced that it is opening a new office in Midtown Manhattan
on Lexington Avenue. “The new office is 2 blocks from Grand Central
Station and provides easy access to all neighborhoods in New York City
and the surrounding areas.  This
Midtown Manhattan office allows us to continue to add to our presence
on the east coast, making it more convenient for our customers to visit
with their account managers and to also allow for more regular visits to
many our Clients based in the North East.”

For the bond markets, lack of volatility continues to be the case although by the end of Tuesday the
30-yr agency MBS “stacks” finished about .125 higher and the 10-yr
risk-free U.S. T-note closed at a yield of 2.53%. So far this morning
we’ve had the MBA’s application numbers (not the same as locks) for last
week. They dropped over 4% with purchases down slightly but refis down
7%. And at 8AM MST (MST since I’m in Denver today) will be New Home
Sales for August; it is seen gently improved versus the prior print
(+412k).  In the early going we’re roughly unchanged at 2.54% on the 10-year and agency MBS prices better by a smidge.


Jobs and Announcements

For jobs today, Midwest Equity Mortgage is seeking a Director of Secondary Marketing. Midwest Equity Mortgage
is a fully delegated, 100% retail, independent mortgage banker
headquartered in Oak Brook, IL and  licensed in 8 states (IL, CA, WA,
KS, MO, WI, IN, FL) funding approximately $50 million per month (an
average $1.7 million per month per LO). “We are looking to expand into
mandatory and to sell directly to Fannie and Freddie-cash window,
co-issue, etc.  The right candidate will be willing to relocate at
company’s expense to the Chicago area, and should have
knowledge/experience in managing sub-servicing, managing best execution
(best efforts and mandatory), working with outside hedging advisory
firm, obtaining Agency Direct Seller approval, and managing investor
relationships and negotiating best pricing. We are seeking someone who
is looking to grow with us as we expect to double our production in
18-24 months.  This individual will be a part of the Senior Management
Team and work directly with our principals in making this happen.”
Confidential inquiries and resumes should be directed to Eric Meadow.

Under the heading of “growing companies and looking for talent, “If you
want to be at the top, it is important that you’re with a company that
expects the best,” said Karen Thompson, Vice President of ClearVision Funding‘s new Chicago Fulfillment Center (CFC).
Thompson, an industry veteran since 1996 adds “ClearVision is growing
at a staggering rate, and their extensive management experience,
commitment to building wholesale relationships and ability to keep up
with regulatory changes is nothing close to what I’ve seen from other
mortgage bankers before.” The company recently announced its Chicago office opening,
having reached their $5 billion in fundings milestone since their
inception in May 2010. Lending nationwide, to find out more about
ClearVision Funding, visit its website at www.clearvisionfunding.com.

Congrats to Brad Nease, Mortgage Capital Management (MCM)’s new Senior Vice President of Sales.

Lastly, congratulations to Doug Reilly, the new president of FFC Mortgage Corp.
FFC is a New York based lender to oversee the company’s continued
expansion (currently in 10 states) while working to further enhance the
company’s strategy and execution. Mr. Reilly is the founder and former
CEO of Consumers Mortgage Corp. and the Home Lending Source. As it turns
out, the company is currently engaged in merger discussions with
several companies and plans to execute its first letter of intent next
week. FFC will begin discussions with potential new branch locations in
early October. (Send him a congratulatory note.)

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