October 16, 2014

Latest from Inside Mortgage Finance

Total GSE repurchases rose by 142.8% from the previous quarter according to estimates from Inside Mortgage Finance

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GSE Buybacks Up Sharply in Second Quarter as More Disputes Over Old Business Are Resolved

Mortgage lenders continued to work through a huge pile of repurchase demands related to loans securitized by Fannie Mae and Freddie Mac before the housing market crash. The two government-sponsored enterprises reported a total of $1.269 billion of repurchases by sellers during the second quarter of 2014, according to a new analysis by Inside Mortgage Trends, an affiliated newsletter, of Securities and Exchange Commission filings by the two GSEs. That compared to just $522.5 million in repurchases during the first quarter of this year. As has been the case since the buyback issue mushroomed several years ago, most of the second-quarter repurchases focused...[Includes one data chart]

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A New Player Involved in Mortgage M&A Activity: Mid-Sized Commercial Banks

Mid-sized commercial banks are starting to turn up as potential buyers of mortgage banking franchises again, a trend that has not been seen in years, according to investment bankers that ply their trade in the space. “I’m working on two deals right now where the buyers are well capitalized commercial banks,” said Larry Charbonneau, a principal in Charbonneau & Associates, a boutique advisory firm based in Spring, TX. Charbonneau said he cannot identify the buyers due to non-disclosure agreements, but hopes to eventually. He noted that both banks have assets in the $2 billion to $3 billion range. “One of the banks isn’t...

State Regulators Propose Major Expansion Of Data Collection for Lending, Servicing

State regulators recently proposed expanding the data that state-licensed lenders must report on the Nationwide Mortgage Licensing System and Registry’s mortgage call report. The State Regulatory Registry said the data help state regulators supervise licensees, determine examination schedules, monitor compliance and calculate assessments. The SRR was established by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators. The SRR owns and operates the NMLS and has required state-licensed lenders to submit quarterly call report data since 2011. On Oct. 1, the SRR proposed...[Includes one data chart]

Feature Stories

Inside Mortgage Trends

3Q14 Preview: Solid But Unspectacular Earnings, Unexpected Growth in Volume

Most mortgage industry experts had expected loan origination volume to drop off significantly in the third quarter of 2014, but early indicators suggest just the opposite. An Inside Mortgage Trends analysis of earnings reports from seven large banks with major mortgage operations shows their combined loan originations increased by 8.7 percent from the second quarter. Together, the group racked up $97.4 billion in mortgage originations during the third quarter ...

Inside The GSEs

Judge Denies Former Fannie CFO Discovery Access in GSE Lawsuit

GSE shareholder advocates remain undeterred following a federal judge’s decision late this week to deny a former Fannie Mae executive access to confidential evidence unearthed as part of the discovery process in an investors’ lawsuit against the government. Earlier this year, Fairholme Funds hired former Fannie Chief Financial Officer Timothy Howard as a consultant to assist its law firm Coopers and Kirk. Lawyers for the government want to deny Howard access to some 800,000 pieces of discovery in investors’ litigation challenging Uncle Sam’s “net-worth sweep” of GSE profits.

Inside MBS & ABS

Wall Street Urges Caution on GSE Single Security; Lenders Say Full Speed Ahead

Waiting several years to unify Fannie Mae and Freddie Mac securities into a single MBS could pose a huge risk to its successful completion, warned the mortgage banking industry, but Wall Street thinks it’s worth the wait to get market participants totally behind the move. The Federal Housing Finance Agency’s proposed single security for the government-sponsored enterprises met with conflicting views as the comment period ended this week. The proposal is aimed at eliminating Freddie’s pricing disadvantage and improving liquidity in the to-be-announced market. The Securities Industry and Financial Markets Association urged...

Inside the CFPB

CFPB Proposes Updates to TILA/RESPA Final Rule

The good news is the CFPB is proposing updates to its integrated disclosure final rule under the Truth in Lending Act and the Real Estate Settlement Procedures Act. The bad news is the CFPB is proposing updates to its integrated disclosure final rule under the Truth in Lending Act and the Real Estate Settlement Procedures Act. The final rule – commonly known as the “TRID” – has been high on the mortgage lending industry’s list of concerns ever since it came out nearly a year ago. And with every rule issued, there are calls from one segment of the industry or another for various additions, deletions or modifications. As happy as industry representatives are when the CFPB makes such a concession, they ...

Inside Nonconforming Markets

Jumbo MBS Issuance Spikes in 3Q14, Volume Still Down From Last Year

Some $3.05 billion in jumbo mortgage-backed securities were priced in the third quarter of 2014, nearly triple the volume seen in the previous quarter, according to a new ranking and analysis by Inside Nonconforming Markets. Issuance through three quarters is still below the level of jumbo MBS activity in 2013 but industry analysts suggest that the jumbo MBS market looks strong heading into the fourth quarter and beyond. Credit Suisse was the top issuer of jumbo MBS ... [Includes one data chart]

Inside FHA Lending

Loan Reviews Continue to Find Defects

Missing or incorrect files was the most common defect found in 49 percent of the loans, of which 29 percent were deemed initially unacceptable. Flawed credit or underwriting came in second at 26 percent, of which 67 percent were rated unacceptable. Program eligibility and operational deficiencies each had a 9 percent share while defective appraisals were common in 7 percent of all reviewed loans. Properly mitigated, the percentage of initially unacceptable loans usually drops to about 7 percent. The FHA tends to blames lenders for the defects but the bottom line is mistakes cut both ways, according to compliance experts. “Lenders make mistakes that can easily be corrected,” said one compliance consultant. “FHA also can be guilty of causing a mistake.” For example, poor communication and lack of clarity caused lenders to check a yes/no box to confirm whether or not they ...

Poll

Over the next six months we plan to hire this many more additional loan officers:

1 to 10 (We're being careful.)

31%

11 to 30 (We're optimistic.)

10%

More than 30 (We're in a growth mode as the banks get out.)

31%

We're cutting back. (Are you nuts? It's ugly out there.)

29%

Housing Pulse