Fannie’s New G-fee Policy Concerns Lenders; CFPB’s Busy Summer Season Including QM


What is
33.9%? According to Inside Mortgage Finance it’s Wells Fargo’s market share
of the mortgage business
for the 1st quarter, the most ever for any firm.
Rounding out the top players were Chase (10.6%), U.S. Bancorp (5.2%), and Bank
of America (4.2%). More

Other lenders
are only too happy to step into BofA’s, MetLife’s, and ING’s void. Affiliated Mortgage Company (AMC) is expanding
its Retail Division in Texas, the Southwest, and Midwest. This expansion
would include top producing LO’s, producing managers, senior DE/LAAP
Underwriters and/or retail branch teams that form enduring and useful
relationships with borrowers/referral sources. AMC, the Home Loan Division
of Benchmark Bank based near Dallas, is also lenders to its Correspondent
Division. Interested individuals and/or teams looking for an opportunity to
join a top tier mortgage bank should contact Todd Potter at amcjobs@benchmarkbank .com.

On the
other side of the continent, Sterling
Bank is searching for underwriters
for its Retail Mortgage group in its North
Seattle corporation center in Mountlake Terrace. Sterling has nearly 500
employees, originated $2.1 billion in 2011, and is on track to do $2.5 billion
in 2012 with a full product menu. For more information on the bank, go to,
and if you know someone who is interested in a position, they should contact
Kristy Benson at kristy.benson@bankwithsterling .com. 

“Rob, what is this rumor I hear that Fannie
can now change our g-fee at will,
with little or no notice? What if we have a large pipeline of loans, locked or
closed, priced using a lower g-fee, and Fannie raises the fee – do we take the
hit? And can Fannie base our g-fee on repurchase requests, or base g-fees on
the states in which we originate? And do we now have to build a g-fee reserve
into our pricing model, the cost of which is once again passed on to our
borrowers, in case the government asks Fannie to pay for something and it is
raised?” My answer to that is plain simple: that your head of Capital
Markets should ask their Fannie Mae rep about it. But…

That being
said, Fannie did release “Selling
Guide Announcement SEL-2012-03”
which will be directly quoted here: “Changes
to Pricing Terms – Fannie Mae is updating the terms that pertain to Fannie
Mae’s ability to change the pricing applicable to lenders’ deliveries of
mortgage loans under the standard Selling Guide provisions as well as under any
existing Master Agreements and related MBS contracts. Accordingly, Fannie Mae
may change the base guaranty fee, loan-level price adjustments (LLPAs), and/or
guaranty fee adjustments for MBS Express or rapid payment method remittance
cycles (‘Pricing’) applicable to mortgages delivered under MBS contracts or as whole
loans as follows: Fannie Mae reserves the
right to change the Pricing one or more times during the term of any Master
Agreement or related MBS contract at any time

announcement goes on, “In each case, prior to the date on which the new Pricing
will become effective (‘Pricing Effective Date’), Fannie Mae will provide the
lender with written notice of the proposed Pricing to be implemented. If the
lender and Fannie Mae are unable to come to acceptable terms on the new Pricing
prior to the Pricing Effective Date, either party may cancel the affected MBS
contract(s) or the related Master Agreement by delivering written notice to the
other party on or before the scheduled Pricing Effective Date.” This is
effective immediately for Master Agreements and related MBS contracts entered
into on or after May 1, at Fannie’s discretion for the time of amendment for
existing Master Agreements and/or related MBS contract(s) that are amended on
or after May 1, and October 1 for all other Master Agreements and related MBS

Servicing is not a walk in the park, given capital requirements, rules,
regulations, possible loss, and potential liabilities. Here is some light
reading for anyone considering servicing: “Conflicted Out: When Must a Servicer
Follow FHA Guidelines over the Global Foreclosure Settlement Servicing
Standards?”. – Link

I remember
being on the trading desk when Drexel Burnham blew up. It certainly gave us all
a lesson in limiting counter party risk. The heads of some of the largest banks
in the U.S. have met, or will meet, with Daniel Tarullo, governor of the
Federal Reserve, to discuss proposed changes, particularly a proposal to limit the lenders’ exposure to companies and governments.
Bank executives say the rule could hinder liquidity and hurt growth. SIFMA and
other industry groups recently sent a letter to the Fed raising concerns with
the proposed policies. “We submit that an approach grounded in a ‘too big’
or ‘big is bad’ concept is not only contrary to Congress’ intent but is
misguided and detrimental to a sound, strong banking system and a strong
economy,” according to the groups’ letter.

of bureaucracy, and how it has changed our landscape, the CFPB has become a force to be reckoned with: it is expected to come
out with a final rule shortly on the definition
of a Qualified Mortgage/Ability to Repay provision
; other proposed rules in
the pipeline are expected to address Home
Ownership Equity and Protection Act
triggers and ceilings, designed for
more loans to be covered; mortgage
, in which the CFPB will be more involved; and the Truth in Lending Act and the Real Estate
Settlement Procedures Act
, which should come out this summer. And the line
is certainly becoming blurred about regulatory structures for banks, nonbanks,
and other real estate finance entities. Institutions
who believe that they are too small to be impacted might just be surprised one
…It is one-sided, however, to say the least: the CFPB is a
consumer-based agency, so its focus is on fraud and actions against consumers,
not fraud committed against lenders.

While the
theory of QM is sound (“don’t lend to anyone who can’t repay the debt”) Section
1412 of Dodd-Frank provides that a qualified mortgage under its “ability to
repay” standards cannot have points and
fees in excess of 3 percent of the loan amount
. Try asking any lender or LO
to originate a $100,000 loan for that. The MBA and numerous other trade groups
have said an unnecessarily narrow definition of QM that covers only a modest
proportion of loan products and underwriting standards and serves only a small
proportion of borrowers would undermine prospects for a housing recovery and
threaten the redevelopment of a sound mortgage market. They want a broadly defined
QM using clear standards so that lenders are not afraid (any more than they are
now) of a higher risk of an ability to pay violation and even steering
violations, and a “safe harbor” provision that would protect lenders and
servicers from billions of dollars in litigation.

HARP 2.0
continues to breed uncertainty. A few weeks ago Grand Bank’s Icon Residential turned some heads by drastically changing
its HARP 2.0 requirements
. On April 19th brokers received a
bulletin saying, “Icon Residential is revising Icon Announcement 12-16 issued
April 10, 2012 as follows: Icon will no longer require HARP loans to be in
“approved” status to be locked.  HARP 2.0 loans may now be
locked prior to loan approval subject to Icon’s published lock policy which is
posted on Icon’s website at
under the Rates/Matrices link. (Here) is a summary of the recent changes to the
Portfolio DU Refi Plus/HARP program: Expanded Approvals (EA I, II and III) are
no longer eligible for submission regardless of lock status;
“Approve/Eligible” is the only acceptable DU Finding. Loans with an
EA I Finding, submitted and locked on or before April 10th, will be
underwritten, evaluated and decisioned on a loan level basis and these loans
must fund by the original lock expiration; lock extensions or re-locks are not
eligible. The maximum LTV/CLTV is now 150%. Loans with an LTV/CLTV 150%
that were approved and locked on or before April 16th must fund by the original
lock expiration; lock extensions or re-locks are not eligible. Loans with an
LTV/CLTV 150% that were not in approved status and locked on or before April
16, 2012 are not eligible.”

Icon went
on to say, “A CoreLogic ValuePoint4 AVM, with a Confidence Score of 80% or
higher, or a FNMA 2055 is required on loans that receive a property inspection
waiver (PIW) with a stated value 125% LTV/CLTV.  This requirement was
effective with new submissions on or after April 11, 2012. Second home and
investment properties are no longer eligible. Loans 125% LTV with a PIW
(without an AVM or 2055) and loans secured by a second home or investment
property must have been locked on or before April 11, 2012. Second home and
investment properties are still eligible under the Agency DU Refi Plus
guidelines.  Refer to the matrix posted on Icon’s website.”

The markets are quieter than quiet,
which tends to help mortgage originators focus on originating mortgages rather
than reacting to volatility.
Yesterday we had the ADP Employment Report
Private Payrolls number which increased by 119,000 in April following a revised
201,000 in March and weaker than the median forecast for a 170,000 advance. (Tomorrow’s
Bureau of Labor Statistics’ nonfarm-payroll data, which includes government
workers, is expected +160k and an unchanged unemployment rate of  8.2%.) Factory
Orders fell 1.5% in March, the biggest loss in 3 years. With numbers like that,
and continued problems in Europe, you’d think we’d rally more, but we didn’t. Some
of the Fed governors were speaking around the nation, and given their comments
it seems that QE3 (another round of Quantitative Easing) is unlikely. The 10-yr
closed at 1.92%, MBS prices were better by about .125, and mortgage banker
selling was well below its recent average levels. Hey, low rates can only help refi’s for so long, right?

Today, for
action-packed excitement, we’ll have Initial Jobless Claims (expected lower), the
preliminary Q1 readings for Productivity and Unit Labor Costs (expected at
-0.5% and +2.8%, respectively), and at 10AM EST is the ISM Non-Manufacturing number
for April. Thursday is starting with rates right about where they were at
Wednesday’s close, with the 10-yr at
1.93% and MBS prices unchanged.

(An oldie but goodie.)

A guy is
driving around the back woods of Montana and he sees a sign in front of a broken
down shanty-style house: “Talking Dog for Sale.”

He rings
the bell and the owner appears and tells him the dog is in the backyard. The
guy goes into the backyard and sees a nice looking Labrador retriever sitting
“You talk?” he asks.
“Yep,” the Lab replies.
After the guy recovers from the shock of hearing a dog talk, he says “So
what’s your story?”
The Lab looks up and says, “Well, I discovered that I could talk when I
was pretty young. I wanted to help the government, so I told the CIA. In no
time at all they had me jetting from country to country, sitting in rooms with
spies and world leaders, because no one figured a dog would be eavesdropping. I
was one of their most valuable spies for eight years running.”

“But the
jetting around really tired me out, and I knew I wasn’t getting any younger so
I decided to settle down. I signed up for a job at the airport to do some
undercover security, wandering near suspicious characters and listening in. I
uncovered some incredible dealings and was awarded a batch of medals. I got
married, had a mess of puppies, and now I’m just retired.”
The guy is amazed. He goes back in and asks the owner what he wants for the
“Ten dollars,” the guy says.
“Ten dollars? This dog is amazing! Why on earth are you selling him so
“Because he’s a liar. He’s never been out of the yard.”

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