My Perspective

FHA Watching For Excessive TPO Fees
The Federal Housing Administration is closely monitoring all fees charged by mortgage brokers and other third-party originators who are sponsored by FHA-approved lenders, agency officials said during an unusual industry conference call this week. The officials said they will examine closely fees charged by all FHA-approved lenders and TPOs, and will question lenders about those which do not appear to be reasonable and customary for that particular geographic area. They also said lenders will be held accountable for any fees found to be either bogus or excessive. The conference call was hosted by the FHA to summarize new regulatory changes regarding loan correspondents and net worth requirements that took effect in May. Although the agency has been "very responsive" to questions about the new regulations, including the issuance of two separate mortgage letters offering guidance about how to comply with the changes, lenders and brokers are still flooding the government with questions, said Washington regulatory attorney Phillip Schulman of K&L Gates, who participated in the conference call discussion. FHA officials on the call said they plan to issue a third mortgagee letter, hopefully by mid-August and with a mid-September effective date, to address industry concerns. Among other things, that letter is expected to cover entering TPO information into the FHA Connection system. Meanwhile, participants were told during the discussion that  TPO employees could be paid either on a W-2 or 1099 basis under the new rules, and that TPOs could even have dual employment status, acting as both a real estate agent and a loan broker.  But as it did in a previous mortgagee letter, the government warned lenders to be certain their TPOs comply with state laws.

Couple of STUPID things in this news piece from Friday

GIve Me Liberty ….

" … One thing the new bill does is slam the door on subprime lending and securitization. That game has been over for two years anyway, and isn't coming back. I would guess that if the subprime ever returns it will mirror what it was in the 1960s and 1970s: high equity loans, high rates with the paper held by finance companies that get their backing from private (rich) individuals, hedge funds or Wall Street. It's back to the future…." THAT'S the analysis Friday of the Editor Paul Moulo, of the National Mortgage News (our industry's premiere source), some of which I agree with.

Knowing Paul as I do, I sent him a comment, reminding him there's more than the 'Big Five Banks' in the industry – in fact 7,500+ Banks and 10,000+ credit unions who fund loans daily that are not destined to be securtitized … plus … a look backward to smarter times when B/C, non-conforming, subprime, non-vanilla, non-agency, portfolio quality loans were done wisely is a terrific idea – AND EXACTLY WHAT I PLAN ON DOING HERE SHORTLY.

And to be specific and not vague, my former company funded, closed, and sold tens of thousands of individual subprime mortgage loan transactions, and sold them into the secondary (NEVER to a big-name buyer), but to buyers who NEVER securitized any of them … my point? Not all loans get securitized!

So, we are not all doomed to end our careers in twenty minutes ….

As of this morning, I can only find a '1,400+ page' version from google and a 'Senate Discussion Draft' on bing … can't find the final version which will be handed to Obama to sign. And, since it's the biggest deal to impact our industry in 80 years (and our careers too); I want to read it word for word and not merely take somebody's word/version of what they think they understand it says. For example – what's a "qualified mortgage" EXACTLY … or is this vague as hell (and politics as usual) so the Democrates and keep from being tossed out on their ear in November… "Hey we did something for you!" 

If you can direct me to where I can find it (it's 2,000 pages), please contact me

I spoke about this here just 3 weeks ago today, happy all those Government workers have come out from 'under the ether' finally! 

Fannie Getting Tough on Strategic Defaults

Fannie Mae is getting tough on borrowers who default on their mortgages and walk away from the house even though they have the financial capacity to make the payments. The government-sponsored enterprise said it will take legal action against borrowers who opt for a "strategic" default and seek to recoup the remaining mortgage debt in jurisdictions that allow deficiency judgments. In addition, such borrowers will not be eligible for a Fannie Mae-backed loan for seven years under the new policy. "Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting," said Terence Edwards, executive vice president for credit portfolio management.

"Treasury secretary Timothy Geithner early next year plans to present a proposal for "fundamental reform" of Fannie Mae and Freddie Mac along with other facets of the housing finance system. He told a TARP Congressional oversight panel that Treasury officials are examining options for restructuring the GSEs which have been in conservatorship for almost 20 months and could wind up costing taxpayers $400 billion. Together, the two account for about 70% of all originations in the nation. FHA accounts for most of the balance with portfolio lending (mostly jumbo) making up a sliver of all originations. The secretary said the agency will not stop with its study of Fannie and Freddie. "The range of things that contributed to this mess went well beyond the basic incentive problems and moral hazard problems that prevailed at the GSEs," he said. He told the Troubled Asset Relief Program panel that today Fannie and Freddie are being managed more conservatively. "At our insistence, they have put in place much more conservative underwriting standards. They are charging more for their guarantees to remedy some of the mistakes they made earlier," he said.

So … I'll translate this for you: Yep, we finally have come out from under the ether and realize we need to do somthing about this — we'll start thinking on a solution 'manana' … and BTW kiddies, don't set your watch for "6 months from now either!

The June issue has been sitting on my desk for about a week now (I'm a little behind in my industry reading/learning) and TWO particular articles caught my eye.

On the front page is: "Brokers Face YSP Caps in Senate Bill" one which I didn't bother to read, ya know why? Because from 1914 (when non-conforming lending began), right on through when I began in the biz (1966) and through 1972 when 'conforming' started up and on until August 1998  mostly there was no such thing … next the YSP practice exploded onto the landscape (and the beginning of the most fraudulent period in industry history)… so HOW did LO's and Mortgage BROKERS survive without it? Since … it was called … now wait for it … we had to WORK to make our money!

The second article I saw (on page 3) "Basing LO Pay on Credit Quality vs. Volume" - didn't read it either, because it probably is telling me the industry is just now figuring out that is a smart idea (like it was when I stated and how I have paid my employees forever). Now, I DO agree it may be a good article, but I have given up trying to influence people in the industry to do the right thing and forgetabout 'sales" and "YSP" and paying LO's as if they were/are 'salespeople' THEY ARE NOT. IT's a customer service/help-desk (junior underwriter/processor) position

The national Mortgage Fraud Risk Index was 151 in the Q1 2010 Mortgage Fraud Risk Report from Interthinx Inc.  The index was up 11 percent from a year earlier. The increase was driven by the risk of property valuation fraud, which shot up 46 percent from a year prior.

This actually surprises me, and it takes some to do that anymore

Former GSE Regulator Named Advisor to Securitization Group

Armando Falcon Jr., a consultant that formerly headed up the Federal Housing Finance Agency's predecessor during the Clinton administration, has joined the American Securitization Forum as a senior policy advisor. Several other high profile mortgage industry executives also were named as new members of the group's board during the group's annual meeting in New York. WL Ross & Co vice chairman James Lockhart III, who also once headed up the government-sponsored enterprise regulator, was named as a new board member; as was Chase Home Finance senior vice president Jerome "Garry" Cipponeri and industry attorney Larry Platt of K&L Gates LLP. William "Bill" Moliski, managing director at MBS investor and issuer Redwood Trust, the company responsible for the first recent origination jumbo deal in some time, has been named the group's treasurer. Andrew Davidson, president of mortgage-backed securities analytics provider Andrew Davidson & Co., also was named to the board as the first vendor executive in that post. In addition, Davidson was named co-chair of the group's newly-added data and analytics subforum along with Ned Myers, chief marketing officer of Lewtan Technologies.

Can we just get away from some of these clowns – they screw up in the Government and elsewhere - then punish us all again when they join their croneys … jeeeeeez

In today' news:  Wave of Deficiency Lawsuits Ahead

Lenders will file a tidal wave of lawsuits against homeowners in the next few years as a way to recoup losses when home sales or foreclosure auctions don't result in enough money to pay the mortgages in full, real estate and legal analysts say. "It will be a dramatic problem because the borrowers will not know it's coming," said Frank Alexander, a law professor at Emory University in Atlanta. Laws vary from state to state. In Florida, banks have five years from the date of the sale to file for so-called deficiency judgments and up to 20 years to collect. Lenders can garnish wages or make claims on borrowers' assets.

Sorta funny, how I wrote about this in our Mortgageland Journal monthly newsletter 3 days ago and also in this blog week before last … I COMPLETELY advocate that action by lenders, especilaly those who were subject to a 'strategic default.'

Fannie Effort on Loan Quality Causing Consternation

Fannie Mae is putting mortgage lenders in a Catch-22 situation with its "loan quality initiative" which takes effect June 1. One of the new requirements is that lenders have to check any undisclosed liabilities a borrower has taken on between the initial loan application and the closing. In order to check a borrower's debt-to-income ratios, a lender typically would have to pull a second credit report. Fannie has only recommended that lenders pull a second report. "It is not a requirement," said Fannie spokeswoman Janis Smith. Teresa Grove, a senior vice president at Kroll Factual Data in Loveland, Colo., said lenders "are between the proverbial rock and a hard spot," adding that the GSE "does not require a credit report, but the fact is that there is no better source for detecting undisclosed liabilities." When pressed, Brian Faith, a Fannie spokesman, said the GSE did not want to mandate any specific method and that there are other "processes" a lender may choose to fulfill the requirement. "In all likelihood, in the overwhelming majority of instances, pulling the credit report a second time in some manner will be the method used."

Then, leaving that sccond credit report in the file, proves you did 'double check' (as required) BUT, you also shot yourself in the foot! The new lower credit score changes your pricing! You now get to earn less, cute huh? Do you think for one minute that's an unintended PLUS for Fannie? Unintended? Hell no! They still get the loan, but now will pay you less for it THAT'S how the Government works!