LenderNews by Rob Chrisman
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Nov. 1: Underwriting & MI jobs; LO training info; Wells’ appraisal settlement, trends in collateral valuation; non-prime MBS

November 1, 2016

Who is 29-year old Pete Kostelnick? No, he’s not the cute new AE covering your region. Pete just set a world record for fastest run across America: 3,067 miles from San Francisco’s City Hall to New York’s in just more than 42 days. Isn’t that about the average rate lock period? And it is certainly faster than foreclosing in New Jersey, which has now stretched out to 3 ½ years. It doesn’t take advanced math to figure out why this impacts servicing values in the Garden State. While we’re talking about numbers, the per-gallon gasoline tax rate in New Jersey just jumped from 14.5 cents (one of the lowest in the nation) to 37.5 cents (one of the highest), to fix the state’s road system.
 
MGIC is seeking an “ambitious sales professional to join the West Central Region Sales Team as an Account Manager. As an Account Manager, you will develop and maintain strong, long-lasting client relationships as well as grow business by identifying new business opportunities in the Oklahoma, Arkansas, and some accounts in Northern Texas markets. The ideal candidate must have a college degree, strong presentation and communication skills, and the ability to travel with occasional overnight. This person will report directly to Jeff Raich, Sales Manager. If you are a self-motivated, entrepreneurial spirit and experienced sales professional, then MGIC may be the right fit for you! Please send your resume Nancy Vang-Lee, Talent Acquisition Partner.
On the Ops side, Nations Lending is “looking for top notch talent in underwriting. If you are an experienced underwriter, and you would like to work with a great team, and earn top dollar, please call us today! Nations Lending offers very good benefits and gives you the flexibility to work remotely.” Contact Justin Fitzhugh (216-503-7059) for details and confidential inquiries.
 
And for LO training, “As featured in The Mortgage Professional’s Handbook, the chapter, Source, Train, and Assimilate New Loan Officers, is now available to download for free. Use this chapter to build and grow a productive sales team to ultimately increase your production. Written by Casey Cunningham, CEO and Founder of XINNIX, The Mortgage Academy, this chapter provides incredible value for managers looking to grow their team’s production. Download your complimentary copy now!
 
National MI announced its newest sales team member, Diane Miley as Account Manager in the South Central Region. Diane comes to National MI with a wealth of experience in the mortgage insurance industry, and resides in Mississippi. Diane will cover both Alabama and Mississippi for the South Central Region.
 
And American Advisors Group (AAG), the leading reverse mortgage lender in the nation, named industry sales veteran Jesse Allen as the company’s Senior Vice President of National Field Sales. Congrats!
 
Bank M&A continues for various reasons – not the least of which is the age of the owners and the rising cost of doing business. Heartland Financial in Dubuque, Iowa, has agreed to buy Founders Bancorp in San Luis Obispo, Calif. The $8 billion-asset company will pay $29.1 million, or $21.87 a share, in cash and stock for the $199 million-asset Founders. The deal is expected to close in the first quarter. Founders has four branches, a small-business lending center, $107 million in loans and $180 million in deposits. And First Tennessee Bank’s ($28.3B, TN) FTN Financial will acquire Coastal Securities (TX) for about $160mm in cash. Coastal securitizes and trades SBA loans and securities.
 
When it rains, it pours for “The Coach.” Wells Fargo (WFC) Friday agreed to pay a $50 million settlement arising out of allegations the bank (retail side, not correspondent) padded appraisal fees for roughly 250,000 homeowners. The settlement, which still awaits approval by an Oakland, CA court, is centered around alleged appraisal markups the banks charged to homeowners who defaulted on mortgage loans on a lawsuit filed in 2012. Homeowners who default are traditionally charged fees for appraisals with Wells Fargo typically charging $95 to $125 for the type of expedited appraisal at issue. Per the complaint the actual cost was $50 or less. The fees were difficult to detect since they were shown as "other charges," the lawsuit says Tom Goyda, a spokesman for Wells Fargo, says the bank stands by its procedures and is settling this suit to avoid prolonged litigation. He says the settlement is part of a private class action lawsuit where the payment goes to members of the class but also legal costs and attorney fees. "While we believe our practices related to Broker Price Opinions were proper and disagree with the claims in the lawsuit, we have agreed to settle the matter to avoid further litigation," Goyda told USA TODAY. (Editor’s note: I hope that Mr. Goyda didn’t grow up in New Jersey – the teasing would have been unmerciful.)
 
On the correspondent side, Wells Fargo’s Risk Advisory Bulletin 16-07 references the Uniform Standards for Professional Appraisal Practice (USPAP) Compliance. The intent of its communication is to share observations and recommendations to avoid noncompliant valuations. The first observation regards Prior sale(s) are to be disclosed for the subject property within three years from the effective date of the appraisal, including foreclosures, voluntary transfers, sales, short sales, etc. In addition, USPAP requires the appraiser to provide analysis of any agreements of sale, contracts, options, or listings that are current as of the effective date of the appraisal. Some appraisers only disclose the most recent listing and/or offering price for the subject property, and not the full history, which includes price changes and dates. Omitting this, or any pertinent information, could be misleading and not provide a clear representation of the property’s exposure to the market.  Its second observation, references updates to USPAP guidelines which became effective in January 2012. At that time, common errors were related to the appraiser’s simple omission of the disclosure of prior services or reporting of exposure time. More recently, the issues identified are related to misstatement of these two USPAP requirements, often related to using an outdated USPAP Addendum. Wells suggests that lenders require use of the current USPAP Addendum. Implementing this addendum alone will likely correct most USPAP errors currently identified in our reviews of prior service and exposure time. Also, require appraisers on your panel or appraisal management companies to review USPAP and/or schedule training.
 
Pacific Union issued a reminder regarding Stationary Storage Tanks. If the subject property line is located within 300 feet of an aboveground or subsurface stationary storage tank with a capacity of 1,000 gallons or more of flammable or explosive material, the property is ineligible for FHA insurance and the Appraiser must provide notification of the deficiency of Minimum Property Requirements (MPR) or Minimum Property Standards (MPS). This requirement includes domestic and commercial uses, as well as automotive service station tanks.
 
Everyone knows to treat Zillow’s Z-estimates with a grain of salt. Pre-crisis, they generally overstated property values and post-crisis, they have generally been low. Their median error rate is something like 8% (which is calculated by measuring the difference between the modeled value of a house and what it actually sells for). Now Redfin is rolling out their own model, which they claim has an error rate closer to 2%. 
 
FHA announced that, under certain circumstances, it will lower its required owner-occupancy standard for approved condominium developments effective immediately.  FHA currently requires that approved condominium developments have a minimum of 50 percent of the units occupied by owners.  However, the agency determined this requirement can be lowered to 35 percent for existing condo developments provided the project meets certain conditions.  Read FHA’s mortgagee letter.
 
FAMC’s Principal Reduction Policy/Texas State Limitations has been revised to reflect that a principal reduction to bring the cash to borrower at closing to zero is permitted. This change is effective immediately. Also, the guidelines for all products have been updated to reflect that properties with sinkholes are ineligible.
 
NYCB requires that all loans registered within Gemstone reflect the factual and accurate representation of the transactions’ occupancy. In addition, borrowers are required to read and sign security instruments upon loan closing that again confirm that they agree with the occupancy terms that they are closing the loan under.
 
Effective immediately for both pipeline loans and new originations, M&T is updating its product pages removing an overlay to reflect 1-4 Family Investment Properties and Second Homes are eligible for credit qualifying streamline refinance transactions when applicable.
 
M&T Bank published declining markets by county on October 25th for its Treasury loan products. Check with your Rep for details.
 
Fifth Third Correspondent has updated Ineligible Condo list and is available in the Correspondent Connect Online Guides and Forms.  In addition, all files with FNMA DU findings must include the last run DU report and if the last run was performed after closing, evidence the loan was run prior to the loan closing.  All files with FHLMC LP findings must include the last run LP report and if the last run was performed after closing, the last LP run prior to closing. 
 
FHA published Mortgagee Letter 2016-15 which establishes FHA’s condominium project approval owner occupancy percentage requirement, as mandated by the Housing Opportunity through Modernization Act of 2016 (HOTMA). FHA believes this requirement offers a balanced approach between providing affordable, sustainable housing opportunities and managing risk to FHA’s Mutual Mortgage Insurance Fund (MMIF).
 
Here’s a little something for folks to notice about the capital markets. Shelter Growth Capital issued its first “nonprime” mortgage-backed security. Brandon Ivey with IMF wrote that the investment firm issued a $113.71 million nonprime MBS late this week. “RPM Mortgage was the top contributor to SG Residential Mortgage Trust 2016-1, accounting for 15.3 percent of the collateral. Oaktree Funding was second at 14.6 percent, followed by 5th Street Capital at 12.7 percent…Many of the mortgages in the MBS are jumbos. The average size is $512,226 and 23.1 percent have balances greater than $1 million. The deal includes 222 mortgages, all with 30-year terms. Some 57.9 percent of the loans are adjustable-rate mortgages. The average weighted interest rate is 6.449 percent.”
 
We all love the interesting concept of rambling off numbers but they are (possibly) important. The U.S. economic data released during one week in September, which I think has continued to today, shows a modest increase in economic activity through the third quarter. We still have a U.S. economy that is fundamentally challenged in its ability to sustain real GDP growth above about 2.5 percent. Nominal personal income increased in August by 0.2 percent. Wages and salaries, which account for about half of total income, were flattish, gaining only 0.1 percent for the month. Inflation, as measured by the PCE price index, was weak for the third consecutive month, up in August by just 0.1 percent. Initial claims for unemployment insurance ticked up by 3,000 for the week ending September 24, to hit 259,000. Continuing claims fell by 46,000, to hit a very low 2,062,000. We expect to see about 180,000 payroll jobs added to the U.S. economy, on net, in September. Even though there were flat consumer spending numbers in August, it seems consumer confidence is showing momentum. The Conference Board reported that their consumer confidence index increased in September to 104.1, the best number since August 2007. We’ve been receiving mixed economic data for quite some time.
 
Rates edged slightly lower Monday with the yield on the 10-year slinking back to 1.83% although agency MBS prices were nearly unchanged from Friday. Blame it on oil prices falling sharply, stocks selling off, personal income coming in lower than expected (I know mine does every month!), the Chicago Purchasing Managers survey coming in low, election news…
 
This morning the markets are ruminating on news from the central banks of Australia and Japan – as expected neither changed rates. We have a bunch of 2nd tier numbers usually of little consequence except to those toiling to send them out: weekly chain store sales from Redbook, Markit Manufacturing PMI, ISM Manufacturing for October and Construction Spending for September, the Dallas Fed Service Sector Outlook Survey, and October Auto and Truck Sales. The FOMC begins its two-day meeting, with no change expected in its announcement Wednesday. In the early going the 10-year is at 1.86% with agency MBS prices worse .125 versus Monday night.
 
 
Cartoon Laws of Physics (Part 1 of 4)
Cartoon Law I
Any body suspended in space will remain in space until made aware of its situation. Daffy Duck steps off a cliff, expecting further pastureland. He loiters in midair, soliloquizing flippantly, until he chances to look down. At this point, the familiar principle of 32 feet per second per second takes over.
Cartoon Law II
Any body in motion will tend to remain in motion until solid matter intervenes suddenly. Whether shot from a cannon or in hot pursuit on foot, cartoon characters are so absolute in their momentum that only a telephone pole or an outsize boulder retards their forward motion absolutely. Sir Isaac Newton called this sudden termination of motion “the stooge’s surcease.”
Cartoon Law III
For every vengeance, there is an equal and opposite revengeance. This is the one law of animated cartoon motion that also applies to the physical world at large. For that reason, we need the relief of watching it happen to a duck instead.
 
 
If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “How Consumers Influence Interest Rates.” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.
Rob
 
(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are over 300 mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2016 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)