have saved countless billions by refinancing over the last few years.
But they aren’t the only ones saving money: the Treasury Department
reports that the average interest rate paid by the US government on the country’s interest-bearing debt has been cut in half
over the last 6 years, dropping from 5.034% on 12/31/06 to 2.534% as of
11/30/12 – and I am sure this continued into 2013. The bulk of that
debt is fixed, as it is for mortgages in the U.S., but the latest MBA
numbers showed ARM applications making up 8% of the survey of retail
Following lawsuits, or preparing for them, is the name of the game for many lenders – and here’s a ruling that helps originators.
Yesterday the First Department of the New York state Supreme Court,
Appellate Division held that a $330 million mortgage securities lawsuit
brought against a unit of Deutsche Bank AG was barred by New York’s
six-year statute of limitations, ruling that the statute of limitations
began to run at the time of execution of the contract between the
parties, “when any breach of the representations and warranties
contained therein occurred.” The decision overturned a May, 2013 ruling
which had held that the statute of limitations did not begin to run
until the bank refused its investor’s demands that it repurchase
allegedly defective loans. The impact of this ruling is significant
in that it directly supports the argument that many suits brought
stemming from loans originated during the financial crisis are untimely
and reverses a decision which investors have relied on heavily since its
entry in May 2013. The case is entitled ACE Securities Corp v. DB Structured Products Inc., — N.Y.S. 2d —, 2013 N.Y. Slip Op. 08517.
“Rob, this a huge development in mortgage buyback cases:
the statute of limitations for putback claims begins running when
representations are made, not when a repurchase demand is refused,
according to this New York appeals court decision.” So wrote attorney
Phil Stein, with Bilzin Sumberg Baena Price Axelrod LLP; if you want to reach him to discuss how this important ruling could be to your advantage, write him at PStein@bilzin.com.
Earlier this month (on the 13th and 16th),
Residential Funding Company, LLC (“RFC”) filed approximately sixty-six
(66) lawsuits in the United States District Court of Minnesota, alleging
in each case that the defendant(s) breached the representations and
warranties of the contract by selling defective mortgage loans to RFC.
As a result, RFC alleges, amongst other allegations, that it suffered
substantial losses/damages and that it was forced to file bankruptcy, at
least in part, because of the dozens of lawsuits relating to the
allegedly defective loans. Many of the originators are being defended by
the American Mortgage Law Group, P.C., and it, along with the Community Mortgage Lenders of America (CMLA) is will be hosting a
complimentary national webinar on how to defend your companies against
the recent spike in repurchase/make-whole demands and litigation going
into 2014 (e.g., concerning GMAC/RFC, Bank of America, Lehman Bros.,
FDIC, Flagstar, Wells Fargo, etc.). In the event you are interested in
attending this complimentary national webinar, please feel free to
contact the AMLG’s Managing Member, James W. Brody (email@example.com), and/or register by following the instructions contained within the attached webinar overview.
Speaking of lawsuits, yesterday
Ocwen announced that it had entered into an agreement with the Consumer
Finance Protection Board (CFPB) and other regulators related to its
servicing practices – or perhaps pertaining more to the practices of
companies Ocwen has acquired. Ocwen is required to make a cash
payment of $127.3 million, which includes a payment for administrative
expenses, to a consumer relief fund. The cash will be distributed to
borrowers by an independent administrator. As a result of
indemnification and loss sharing agreements, about half the cost will be
shifted to sellers of the servicing portfolios. In 2Q13, Ocwen had
established a $66.4 million reserve and the company expects this to
cover all but around $0.5 million of its portion of the required cash
payment. Ocwen also committed to continue its principal forgiveness
modification program for delinquent and underwater borrowers in an
aggregate amount of $2 billion over the next three years. This will not
involve an expense to Ocwen. Since principal reduction modifications are
net present value (NPV) positive, they benefit investors as well as
Ocwen since re-default risk is reduced and therefore extends the life of
the loan which helps offset the impact of the principal reduction.
Lastly, Ocwen will also commit to meeting specified servicing guidelines
and will be subject to oversight by a national monitor. The company is
already subject to similar guidelines on the portion of its portfolio
that it purchased from ResCap in early 2013. This agreement essentially
brings Ocwen under the servicing requirements of the national servicing
other servicers are wary. Special servicers like Nationstar and Walter
could be subject to similar settlements. While this is possible, the
modest size of Ocwen’s settlement suggests that any settlement costs for
those companies are also likely to be small. In fact, the Ocwen
agreement prompted one broker to write, “I’d call that a victory for
Ocwen, the servicer. You lie to borrowers to get them out of the house
and then you have to pay them about $1,100 each. Heck BofA was paying
borrowers up to $5k alone for moving expenses.”
have 13 business days until QM, and MBA Education unveiled its
Compliance Essentials Ability to Repay (ATR)/Qualified Mortgage (QM)
the only manual currently available that explains not only the effects
of the ATR/QM rule on the real estate finance industry but also how
organizations should adjust and operationalize to comply with this new
federal regulation. “The complexity and obligations under the ATR/QM
rule will be burdensome for many companies in the real estate finance
industry,” said David Stevens, president and CEO of the Mortgage Bankers
Association. “Because of this, MBA Education has created the only
resource manual that helps organizations understand and adjust to this
new reality. The January 10 deadline for compliance is fast approaching,
making it critical for those affected by this new regulation to get up
to speed immediately and begin properly conforming to these
guide is worth a gander, since it includes a clear understanding of
what is required for all employees including loan officers, processors
and underwriters, a basis for training staff to be aware of the new
demands to better support organizations and reduce their risk, and a
description of how to operationalize the rule requirements in an
organization’s day-to-day business. “The MBA has worked with a leading
law firm, Weiner Brodsky Kider PC, to produce this useful and
affordable guide. This book is the equivalent of many hours of legal
consultation and is available to MBA members at a reasonable cost,
considering its value.” The ATR/QM resource guide can be purchased and
downloaded here. To view other recent rules and resources, please visit the Compliance Essentials homepage.
MBA Education is the education division of the association and enables
companies the ability to increase their efficiency and productivity in
order to stay competitive in the real estate finance industry.
Let’s keep catching up with vendor, agency, lender, and investor updates!
FHA lender Greystone has
provided $24.3 million in HUD financing for the Belmere Luxury
Apartments in Houma, LA in the form of a 40-year fully amortizing
223(a)7 loan. The complex contains 249 rental units and lies within the New Orleans MSA.
Blackstone is asking for investors in its properties. Let’s hope they don’t start selling them on a widespread basis.
As a reminder, the FHFA published a request for comment for its plan to gradually reduce the GSE maximum purchase limit. In
areas where the statutory maximum loan limit for one-unit properties is
currently $417,000, the plan being contemplated would set the loan
purchase limit at $400,000-approximately a four percent reduction. The
loan purchase limit would be reduced by the same percentage in other
parts of the country, including those areas where current limits are at
$625,500. Those loan purchase limits would be set at $600,000.
In anticipation of QM, EverBank is eliminating its Interest Only option and is no longer accepting locks. All transactions locked before December 2nd must have an EverBank file received date by the close of business on December 13th (last Friday) and fund within their original lock period. In
addition, EverBank has ceased to originate any loans that fall under
the HPML umbrella, any of which were locked before December are subject
to the December 13th deadline.
has aligned its policy on private transfer fees covenants with that of
the Agencies; effective immediately for loans not closed as of November
15th, mortgages on properties encumbered by select covenants are ineligible for purchase.
prepare for the implementation of QM and ATR, EverBank has implemented
new 5/1 ARM product codes that reflect the revised 2/2/5 cap structure,
which will be replacing the current 5/2/5 on January 10th. As
a reminder, all loans locked under the 2/2/5 cap structure are subject
to an adjustment of -.375, and the option to lock under 5/2/5 will
remain available until January 9th. Any loans that currently use the 5/2/5 structure may be switched but will incur the same pricing hit.
Software provider ValuTrac has integrated CoreLogic Flood Services into
its platform, which allows users to streamline the flood determination
ordering and retrieval process by loading the results directly to their
individual portal. The
new integration is available with ValuTrac Pro and ValuTracPro Plus
products, which allow for automated submission and retrieval. For more information, contact John Lovallo at firstname.lastname@example.org.
revised its flood insurance policies such that lenders are required to
provide an in-force insurance policy or acceptable Declarations page as a
trailing in instances where the loan is purchased 60 days or more after
the note date. The address required for a Mortgagee Clause has been updated as well. The changes went into effect for all Best Efforts locks and Mandatory commitments dated December 10th or after.
Per Dodd-Frank, Chase has revised the qualifying rate for 7/1 and 10/1 Non-Agency and FHLMC ARM transactions to the higher of note
rate or fully indexed rate (the qualifying rate for 7/1 and 10/1 ARMs
run through DU is subject to the changes that went into effect on
November 16th with the implementation of Version 9.1). As
LP is not programmed to qualify 7/1 and 10/1s at the higher of the note
rate or fully indexed rate, the rate must be entered manually. This goes into effect on December 9th for Non-Agency transactions and on January 10th for FHLMC transactions.
immediately, Chase is no longer purchasing loans associated with
current or former non-United States officials (Foreign Politically
Exposed Persons), their immediate families, or close associates.
As of January 10th,
Chase will apply a minimum FICO requirement of 60 and a maximum DTI of
45% to all Chase-serviced DU Refi Plus HPML transactions.
will be revising the calculation used for Best Efforts renegotiation
pricing to use the base price (current 60 days pricing) minus the cost
to break the lock (25bps); the price adjustments, including extended
rate lock fees; and prior extension and re-lock fees; plus the SRP. This went into effect for all renegotiation requests received December 17th and after.
is right around the corner, but lenders aren’t seeing much to
celebrate. Agency MBS prices were worse Thursday about .125 – although
that was an improvement over where things began in the morning. Here on
the Friday before Christmas, we wrap up with the final reading of 3rd quarter GDP. Expected to come in at 3.6%, it came in at 4.1% – much of it attributed to increasing inventories. Looking
at prices and yields, the 10-yr closed Thursday with a yield of 2.92%
and this morning we’re up to 2.96%; agency MBS prices are worse about