Housing and Economic Trends; Bank vs. Mortgage Bank LO Comp; Reminder of FHA’s Change


a lot of data swirling around the demographic black-hole of lending
known as “the Millennials.” I’ve come to the conclusion that this is
because the majority of analysts fall into that age category and deep
down they enjoy writing about themselves. It’s just a theory right now. Zillow writes, “Consider
the diverging cases of Boston-Cambridge, Massachusetts and Washington,
D.C. They are both versions of the archetypal, walkable cities that many
associate with the modern 21st century knowledge economy. And both have
large populations of young adults in school or just starting their
careers. In this analysis, we compare the housing choices of
Millennials-young adults ages 18 to 33-in these two cities.” Archetypal? I’ll have to look that up – anything with more than three or four syllables and my brain skips over it.

Speaking of jobs and production, the
STRATMOR Compensation Connection Survey showed that LO compensation was
up 13%
in 2013 driven by higher production volumes and that LOs at
independent mortgage companies made on average 25% more than bank LOs. 
Don’t miss the opportunity to participate in STRATMOR’s Compensation
Connection Survey. By popular request, STRATMOR has reopened all of the
original modules for a second round of evaluation but will be closing
the survey to participants soon. Be armed with compensation data from
40+ participant companies as you head into budget season.  The results
will be cumulative from both rounds.  For full details, visit the 2014 STRATMOR Compensation Connection Survey website or email Angie Middlebrook for more details.

U.S. Census Bureau’s Survey of Construction, which is jointly funded by
the Department of Housing and Urban Development, has released its 2013 New Housing Characteristics
tables. This release includes never before published data on
age-restricted developments, presence of homeowners association, sewer
and water systems, framing material and laundry. The report provides
estimates of new privately owned residential structures in the U.S and
the four regions.

Are we suffering from first-time home buyer blues?
We’ll try to overlook student debt ratios, relatively stagnant wages
over the past six years, and assume those looking for homes fall outside
the current beliefs surrounding millennials; in a nutshell, there are still some challenges for these people. As Michelle Jamrisko and Alexis Leondis write in a recent Bloomberg article, “The
median down payment for the cheapest 25 percent of properties sold in
2013 was $9,480 compared with $6,037 in 2007, the last year of the
previous economic expansion, according to data from 25 of the largest
metro areas compiled by brokerage firm Redfin Corp. The higher bar is a
symptom of still-tight credit that is crowding out first-time buyers
even as interest rates remain near historical lows. Younger adults, who
would normally be making initial forays into real estate, are among
those most affected, weakening the foundations of the housing market and
limiting its contribution to economic growth.” There are a number of factors at work here, one being the down payment. As pointed out in the article, “the
median down payment for the lowest 25% of homes was 7.5% of the sales
price last year, which is up from a low of 3.1% in 2006 and compared
with an average 4.2% from 2001 through 2007.”
For properties in the middle 50%, the share rose to 8.8% in 2013 from
an average 8.2% in the seven years leading to the last recession, and
for the top quarter it climbed to 20.9% from 19%. As many know, a
contributing factor is that fewer first-time buyers are applying for
loans backed by the FHA, which require smaller down payments, after the
government agency boosted mortgage-insurance premiums.

Most knew going into 2014 that business probably wasn’t going to be anything to jot down in your memoirs. Wells Fargo’s Economics Group
is normally a straight shooting bunch, rarely are they too bullish, or
too bearish, which is good because bi-polarity affects many companies
these days. The group writes, “The
housing market continues to have a difficult time putting the legacy of
this past decade’s epic bust behind it. Sales of both new and existing
homes have been disappointing through the first seven months of this
year. Although the sales and new home construction numbers have been
disappointing, the housing sector continues to gradually chip away at
many of the challenges hanging over the industry.”
Coming out of an “unseasonably” cold winter, into an “unusually” hot
summer, right into an election year, I can’t think of another excuse to
explain lackluster mortgage numbers than to say demand just isn’t there
at the moment.

too long ago the topic du jour in banking was all the REO’s weighing
down the market
, causing home price stagnation and turning gentlemen
into tyrants….that’s right, I’m looking at you Florida. OK, so maybe it
wasn’t that bad, and maybe Florida wasn’t the whole problem (or was it?),
but things have slowly been improving as Zelman Associates, write
that total REO inventory is down 57% from the peak. “While the 2Q14
pipeline of loans in delinquency and the foreclosure process was down
approximately 17% year over year and 44% lower than the peak in 4Q09,
there was still an excess of 1.4 million more homes in some form of
delinquency or foreclosure relative to a more normal level. The pace at
which these homes enter and exit the REO process impacts home price
trends, investment opportunities for single-family REITs, potential
for-sale inventories and existing home sales. We summarize all of the
moving parts in this monthly report, including notices of default and
REO filings, REO inventory trends and lender-owned REO listings.
Encouragingly for home pricing, the various measures across the
foreclosure spectrum, including default notices, REO filings and
distressed inventory levels, have posted consistent year-over-year
improvement while incremental supply coming to market has stabilized.
For the existing sales market, the continued reduction in REO sales is a
net negative to closings, but as the pipeline shrinks the impact is
becoming less onerous.”

a reminder, last week in the Federal Register (79 FR 50835), the FHA
published a final rule
. Effective for FHA-insured mortgages closing on
or after January 21, 2015, it
revises FHA’s regulations to prohibit an FHA approved mortgagee from
charging the mortgagor interest through the end of the month in which
the mortgage is being prepaid, allowing them instead to charge interest
only through the date the mortgage is prepaid, and prohibits the
charging of interest beyond that date.
This change to FHA prepayment regulations is in response to the
Ability-to-Repay and Qualified Mortgage regulations (ATR/QM Rule) that
became effective January 10, 2014. The ATR/QM Rule defines “prepayment
penalty” in closed-end transactions as “a charge imposed for paying all
or part of the transaction’s principal before the date on which the
principal is due.” The ATR/QM Rule specifically excludes a post-payment
interest charge currently allowed by FHA regulations as a prepayment
penalty for FHA loans closed before January 21, 2015. For FHA loans
closed on or after January 21, 2015, a post-payment interest charge will
be considered a prepayment penalty by the ATR/QM Rule, thus making it
necessary for FHA to amend its regulations. Here is one take on the change.

prompted one vet to write me, “I find the new HUD Rule rather amusing.
HUD makes it sound like the EVIL lenders have been perpetuating a scam
on unsuspecting consumers by charging post payoff interest when in fact
it is HUD itself that has been REQUIRING the post payoff interest for
more years than I can remember.  It is amazing how accountability is so easily transferred.  HUD has no culpability, only the greedy Lenders.’)

PennyMac Financial increased its servicing credit facility.
A look at its 8-K shows it stated it amended its revolving credit
facility used to finance the acquisition of mortgage servicing rights
with Credit Suisse. The credit facility was increased to $157mm from
$117mm. The total amount that can be borrowed under the credit facility
is based upon a percentage of the market value of the servicing rights.
Although the increase in the facility is relatively small compared to
the overall debt financing available at PFSI, it does indicate PFSI is
actively looking to purchase additional MSRs

Homebridge Wholesale accepts Conventional transferred appraisals.

First California Mortgage
recently announced a spate of branch openings, including a Dallas
branch (in addition to San Antonio, Amarillo, Bryan and Houston), San
Diego, a second branch in Los Gatos, CA and now has a branch in Davis,

Franklin American
is requiring VA IRRL loans to include a comparison document between the
loan to be refinanced and the proposed new loan such as VA IRRL Comparison statement. In addition, USDA loans do not allow electronic signatures.

an old joke about two hikers confronted by a bear, and one starts to
run. The other yells, “You can’t run faster than a bear,” and his
“friend” yells back, “I don’t have to – I just have to run faster than
you!” That is exactly what we’re seeing in economies around the world.
France and Switzerland are flat, China is questionable, Germany’s
economy shrank by 0.2% last quarter, Italy and Brazil are in a
recession, and the Russia/Ukraine conflict is dampening things even
further. That leaves the United States, where the slowly improving
economy looks good on a relative basis.

was filled with job news. Applications for unemployment benefits in the
U.S. were little changed last week, about as expected. But the total
number of people on benefit rolls fell to the lowest level in more than
seven years. ADP’s numbers…well, once again ADP did not give us a great
correlation to today’s numbers.

job news continued today with August payrolls and employment data.
Non-farm payrolls (+209k prior, expected around the same), came in at
+142k – disappointing (and June and July were revised downward); the
Unemployment Rate (6.2% previously) came in at 6.1%; and average hourly
earnings came in at +.2%.

Soon after the employment numbers bonds have rallied. The 10-yr T-note is sitting around 2.41% after closing Thursday at 2.45% and agency MBS prices are better by .250-.375.

Jobs And Announcements

Homestar Financial, a Georgia-based mortgage banking firm is seeking qualified Retail Branch Managers in Florida
“who will enjoy extraordinary commissions and manager compensation.
With over 40 offices, Homestar is a leader in the Southeast in USDA,
FHA, VA, conventional and jumbo loans.  Homestar
is a company that is focused on closing loans for originators and
compensating them for what they accomplish. If you would like to join a
company that you will never leave, contact John Berry, Division Manager, for a confidential conversation.”

And The
Wholesale Lending Division of Carrington Mortgage Services, LLC
announced that it has appointed David Grosteffon as divisional sales
manager for Strategic Accounts. In his new position at Carrington, Grosteffon will manage the company’s focus on establishing strategic alliances with leading community banks and credit unions.
For community banks and credit unions interested in learning more about
Carrington’s government programs with qualifying credit scores down to
550, contact David Grosteffon and/or visit www.CarringtonWholesale.com. Carrington,
by the way, just became a Ginnie Mae Master Sub Servicer, announced
plans to expand its operations in the state of Indiana creating up to
360 new high-wage jobs by 2019, and is licensed in 45 states.

For those wondering about your career, Carrington Mortgage Services is having a Career Webinar next
Thursday, September 11, from 10-11AM PDT. “Join Carrington Mortgage
Services and Ray Brousseau, EVP Mortgage Lending, to learn about
opportunities for Loan Officers, Managers and Branches…great
compensation, benefits and wide variety of programs that can help you
take your performance and sales to the next level.” Here is the Registration Web Link.

Congrats to Jon Mulkin who is leaving BBVA Compass and going to New York City to run mortgage for Morgan Stanley.


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