Judge Rejects Mortgage Suit; New Penn Buys Shelter; New Liquidity Rules for Big Banks


A Synergy survey finds Gen Y find the following to be the most important bank features and services: ease of
doing business (88%), continual access to ATM, internet and phone (85%) and
online banking (80%). Not listed is the ability of having the CEO of your bank,
a leading mortgage lender, doused
with ice water

Switching gears, here is something we sure don’t see happen very
often! A judge has
tossed out 
mortgage-backed securities
 brought by the Federal Deposit Insurance
Corp. against Credit Suisse Group and Deutsche Bank. The judge ruled that
the FDIC had filed its action too late.

Do you think that only a
written notice is required to effectuate a right of rescission? Think
again! The US Supreme Court will soon decide whether a lawsuit must be filed to
exercise the right of rescission within three years of a residential mortgage
loan’s consummation – in order to make the rescission effective. In “TILA
versus TILA: Rescission by Notice or Lawsuit,”
 a White Paper
authored by Jonathan Foxx, the President Managing Director of Lenders Compliance Group, you will read an analysis
of the startling maze of conflicting court findings that must now be resolved
by the US Supreme Court. Are the courts about to be inundated with a huge
number of lawsuits by borrowers seeking rescission?

Yesterday was a heady day in terms of reminding us of government’s
impact on all facets of lending and financial services. The Federal Reserve Board, the Federal Deposit Insurance
Corporation, and the Office of the Comptroller of the Currency finalized a rule to
strengthen the liquidity positions of large financial institutions.
The rule will for the first time create a standardized minimum liquidity
requirement for large and internationally active banking organizations.
“Each institution will be required to hold high quality,
liquid assets (HQLA) such as central bank reserves and
government and corporate debt that can be converted easily and quickly into
cash in an amount equal to or greater than its projected cash outflows minus
its projected cash inflows during a 30-day stress period. The ratio of the
firm’s liquid assets to its projected net cash outflow is its ‘liquidity
coverage ratio,’ or LCR. The LCR will apply to all banking
organizations with $250 billion or more in total consolidated assets or $10
billion or more in on-balance sheet foreign exposure and to these banking
organizations’ subsidiary depository institutions that have assets of $10
billion or more. The rule also will apply a less stringent,
modified LCR to bank holding companies and savings and loan holding companies
that do not meet these thresholds, but have $50 billion or more in total
assets. Bank holding companies and savings and loan holding companies with
substantial insurance or commercial operations are not covered by the final

New Penn Financial, LLC is buying Shelter
Mortgage Company, a full-service mortgage lender
headquartered in Milwaukee, WI. Shelter has certainly had its share of
personnel issues, and rumored attempts at merging the company with other
lenders did not work. The press release notes that Shelter has a
partnership-based model with realtors, builders, and relocation companies and
focusing on purchase money loans. Upon completion of the acquisition, Shelter
Mortgage and its subsidiaries will become a wholly owned subsidiary of New Penn
Financial/Shellpoint Partners, LLC, doubling the size of New Penn’s retail
channel. “Shelter Mortgage represents a strategic addition to our
comprehensive family of mortgage-based companies.” said Bruce Williams,
Co-CEO of Shellpoint Partners LLC.

Not to be outdone, BBT will acquire additional Texas branches from Citibank. The
acquisition includes 41 branches with $2.3 billion in deposits and $87 million
in loans in the Dallas, Houston, Midland and Odessa markets (0.15 percent
average cost of deposits). It is a 5.3 percent deposit premium paid on total
deposits, and this follows a 21 branch acquisition completed in June.

In Pennsylvania Mid Penn Bancorp, Inc., headquartered in
Millersburg, and Phoenix Bancorp, Inc.
headquartered in Minersville, announced the signing of a definitive merger
agreement which calls for Mid Penn to acquire Phoenix in a transaction valued
at approximately $14.5 million. The transaction expands Mid Penn’s footprint in
Schuylkill County and into Luzerne County. On a pro forma basis, the
consolidated assets of the combined company will be approximately $875 million.

Let’s keep going with some company-specific news – it seems like I
am always playing catch up.

Capital Markets Cooperative, LLC (CMC) announced that its wholly owned
subsidiary, CMC Funding Inc., has been selected by the Federal Home Loan Bank
of Cincinnati (FHLB Cincinnati) and the Federal Home Loan Bank of Indianapolis
(FHLBI) as its partner for the servicing-released portion of the Mortgage
Purchase Program (MPP). “CMC shares a common philosophy and we all provide
our members outstanding value along with superb support” said Tom Millon,
CEO and President of CMC. “CMC is focused on flexibility, adaptability and
service for the MPP customers. We developed state-of-the-art technology for the
delivery of the servicing asset, and will provide liquidity and more product
options to the FHLB’s community lenders.”

Mortgage insurance company United Guaranty has introduced
SecureCert, a suite of five options that allow lenders to choose
the maximum rescission relief available in the MI industry-at no added cost.
The Federal Housing Finance Agency (FHFA) is requiring all mortgage insurers to
adopt new master policies, effective October 1, to provide more uniform,
industry-wide standards for rescission relief and claims handling. SecureCert
provides comprehensive rescission relief-except in instances of first-party
fraud. Also, with its Day One Protection options, United Guaranty assumes
responsibility for MI underwriting mistakes when it reviews loan file
documents. SecureCert offers two options that provide rescission relief at 36
months and three options that accelerate rescission relief from 36 months to 12
months with the submission of additional documents.

AllRegs spread
the word that VA announced new appraisal requirements: VA will now require
appraisers to include the Fannie Mae Form 1004MC (Market Conditions Addendum),
in all VA appraisal reports.

Mountain West Financial
Wholesale Credit
Policy Updates
 include adherence to mortgage debt discharged through
bankruptcy, even if a foreclosure action is subsequently completed to reclaim
the property in satisfaction of the debt, the borrower is held to the
bankruptcy waiting periods and not the foreclosure waiting period. The Waiting
Period after a Short Sale or Deed-in-Lieu of Foreclosure and Charge Off Accounts
of Mortgage Debt are effective with applications dated on and after August 16,
2014 have been REDUCED to a 4 year waiting period, or 2 years if extenuating
circumstances can be documented per guidelines (The 7 year waiting period for
deed-in-lieu of foreclosure and short sale has been removed). In addition the
previous LTV restrictions tied to different waiting periods for Deed-in-Lieu of
Foreclosure, Short Sale or Mortgage Account Charge-Off have been removed.

NewLeaf Wholesale’s Jumbo Fixed and ARM guidelines
have been updated Product
. Changes include information on payment shock, appraisal
requirements, subordinate financing, residence converted to investment
property, subordinate financing, rental income, and departing residence updates
and changes.

Kinecta Federal Credit Union Wholesale posted updates to
coincide with Fannie Mae updated Selling Guide. Additionally, Kinecta has
simplified and improved its Lender Paid Mortgage Insurance (LPMI) credit score
bands and adjustments for Conforming and Super-Conforming (Fixed and ARM)

AMX Wholesale requires following list
of BROKER disclosures to be included on every loan, at submission, and must be
dated within 3 days of the initial application: Written List of Service
Providers, Intent to Proceed with Application, GFE, Servicing Disclosure
Statement, MLOA (Mortgage Loan Disclosure Statement), Anti-Steering Disclosure
(if applicable), Borrowers’ Certification and Authorization, Fair Lending
Notice, Equal Credit Opportunity Act (ECOA), Privacy Policy Disclosure,
Homeownership Counseling Disclosure, Appraisal Valuation Acknowledgement and
Affiliated Business Arrangement Disclosure Statement Notice.

These investors are sure interested in yield, and
with the supply of MBS dropping, demand beat out supply again and we had a
little rally. “Little” is the operative word since the 10-year note
was higher by 2+/32s (2.41%), while prices on 30-year FNMA 3s through 4.5s
ranged from +1 tick to +2+ ticks, respectively. There was no real market-moving
news although we did have the Fed’s Beige Book which told us that barely half
of the Districts reported stable or growing residential real estate activity
related to the construction of new homes and sales of existing homes, demand
for residential mortgages was less robust, and credit standards remain
generally unchanged in most Districts.

Today we have a full menu of releases, including soup (August ADP
Employment expected +220k), salad (Initial Jobless Claims expected +300k),
pasta (July International Trade), steak (final Q2 Productivity/Unit Labor
Costs), and chocolate cake (August ISM non-manufacturing PMI). We’ll enjoy a
fine wine (the ECB monetary policy decision) with an aperitif (the Treasury
announcement of next week’s auctions of 3- and 10-year notes and 30-year
bonds). We had a 2.41% close on the 10-year, and in the wee hours of this
morning we’re roughly unchanged. 

Jobs and Opportunities 

Last month, I
shared my theory
 that the market is ripe for rental properties to boom
on the secondary market. In related news, Overland Park-based CapWest
, a division of Farmers Bank Trust,
recently announced the launch of its new Investor Pro product for
all third party origination (TPO) clients. Features of the new product include:
30-year fixed rate, DTI based solely on cash flow of subject property, and unlimited number of financed properties a borrower can own. The
product is available for purchase and refinance (rate term and cash-out)
borrowers with a minimum FICO score of 620. (In addition to the Investor Pro
product, CapWest is also launching its new Jumbo Express product which features
a maximum loan amount of $1 Mil. This product is also available for all TPO
clients.) To inquire about any of these programs, please contact Jake Stadler, Director of TPO
for CapWest Mortgage.

Bayview/Lakeview continues
to expand its mortgage business. Management is
seeking to hire Correspondent lending business
development directors for the Northwest, Upper Midwest,
Texas (including several surrounding states) and the
Southeast. Additionally, Bayview/Lakeview is seeking to hire a wholesale division leader and wholesale AEs in
Los Angeles, the Bay Area (CA), Texas, Upper Midwest, Northeast and
Southeast. “Bayview companies are well established in the mortgage
investment and servicing industry with experience in managing mortgage assets
since 1995. Bayview/Lakeview offers a broad product line, including non-QM
portfolio loans along with conventional government. If you are
interested in joining a great company, please send your questions and resume to Jeff
.” (Bayview Asset Management is minority-owned by
affiliates of The
Blackstone Group, L.P
 (NYSE: BX).)

There have been a number of postings here recently about Vendor Management.
Compliance is inescapable and a careful read of the regulations make it fairly
clear that compliance has to be more than just collecting some limited
information and putting it in a file. Each lender is now required to have
vendor management policies and procedures that support an active monitoring and
management program. RML Advisors, headed by Regina M.
Lowrie, former MBA Chair, has developed a Vendor Management
Toolkit that enables lenders to quickly implement a
compliant program. The Toolkit is risk-based so that the full vendor
management efforts are focused on high and moderate risk vendors and a more
simplistic approach is used for low risk vendors. The kit has a practical
price and the firm will support either a Do-It-Yourself approach by the lender
or will provide a turnkey solution. If you’d like more information please contact Regina

As Managing Editor of MortgageCompliance
, Dr. Rick Roque in the September issue highlights an article
written by Mitch Kider, Managing Partner of Weiner Brodsky Kider PC on the
expanding role of the CFPB in their focus on non-depository mortgage lenders,
especially as it pertains to expanding HMDA and other compliance tools; such
moves will only increase compliance costs, legal fees, technology costs and
regulatory scrutiny for mini-correspondent and full mortgage
bankers. “This is why many origination groups – doing $2,000,000 per
month or more are contacting me looking for more stable options,” says Dr.
Roque, “I speak to independent mortgage companies doing $10-$20M/mo
from the west coast or smaller retail production groups doing $2M-$4M/month in
the Midwest looking for competitive rates, service friendly underwriting and
growth oriented marketing.  If loan officers and retail
focused mortgage groups are looking for options in any of the 50 states,
inquiries can be directed to Dr. Roque, or visiting MENLO’s website to learn

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