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Volume 2014 - Number 41

October 30, 2014

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Loan Origination Volume Up Again in 3Q14 But Trends Vary Widely Among Top Lenders

2014 is going to go down as the worst year in new mortgage origination volume since the turn of the century, but it’s clearly not as bad as many have feared. Mortgage lenders produced an estimated $335 billion in new single-family loans during the third quarter, a solid 9.8 percent increase from the previous period, according to a new Inside Mortgage Finance ranking and analysis. Significantly, the first and second quarters of this year were...[Includes two data charts]

The Recent Rate Decline Isn’t Expected to Slow the Mortgage M&A Train; Guild is Still Hungry for Deals

When rates take a noticeable dive – as they have the past few weeks – mortgage lenders contemplating a sale sometimes have a change of heart, opting to ride the new production wave. But this time around, that doesn’t appear to be the case. “Most every lender I speak to understands this to be a very temporary event prior to a relatively cold and uncertain winter,” said M&A advisor Rick Roque of Menlo Company. Over the past two months, Inside Mortgage Finance has found 10 publicly announced M&A transactions with several more likely signed that weren’t disclosed. Roque, who’s working on several deals, said...

Underwriting, Compensating Factors Seen as Key For Limiting Risk When Originating Non-QMs

While originations of loans that don’t meet standards for qualified mortgages can subject lenders to increased liability, underwriting and compensating factors can help limit risks from non-QMs, according to Moody’s Investors Service. “Non-QM loans typically carry higher default risks than QM loans, but lenders can mitigate those risks by originating loans with attributes that compensate for the weaknesses that put the loans outside of the QM guidelines,” analysts at Moody’s said in a report published late last week. The rating service said...

Injecting Unrealistic Data Integrity Standards into HMDA Could Cause Havoc, Industry Tells CFPB

Mortgage lending industry representatives urged the Consumer Financial Protection Bureau to establish workable data integrity standards as it substantially expands reporting requirements under the Home Mortgage Disclosure Act. “Our members are committed to reporting accurate data and strive to do so, but the current supervisory expectation of a near-zero error rate is virtually impossible to achieve,” said six industry trade groups said in a joint comment letter. “As community banks and other small lenders pointed out to the bureau during the Small Business Regulatory Enforcement Fairness Act panel, the doubling of the number of reported fields can be expected to cause the error rate to increase exponentially.” Some small business participants raised...

Servicing Sales Mostly on Flow Basis Now, But Observers Expect More Bank Activity Ahead

Although most of the mortgage-servicing sales in recent months have been flow transactions of new production, more banks – especially mid-tier institutions – are expected to unload servicing in response to regulatory constraints, according to experts at last week’s Mortgage Bankers Association annual convention in Las Vegas. Many banks continue to focus on capital risk management and serving their core customers, said David Hisey, executive vice president of Nationstar Mortgage, during a panel session on servicing. Many servicing transfers are driven by a desire to deal with one or both of those issues, he added. Most mortgage servicing rights transfers now are...

Ocwen Sets Aside $100 Million for Possible Settlement; Counterparties Cautious About Dealing With Firm

Late this week, Ocwen Financial Corp. announced that it has set aside $100 million for a possible regulatory settlement with the New York Department of Financial Services, a move that couldn’t come too soon for the troubled “high-touch” servicer. But the company also cautioned that a settlement with the NYDFS is hardly a sure thing. More-over, some Ocwen watchers believe a deal with New York could spur other state regulators to take action against the company. One consultant who has done work for Ocwen told...

Experts: Obama Admin. Should Look to Release Fannie, Freddie From Conservatorship to Build Policy Legacy

The Federal Housing Finance Agency and the Obama administration could secure their legacies during the next two years by releasing Fannie Mae and Freddie Mac from conservatorship as two stable and smaller government-sponsored enterprises, say some experts. Speaking during a conference call sponsored by GSE shareholder rights group Investors Unite, Clifford Rossi – founder and principal at Chesapeake Risk Advisors – reiterated his call for an administrative solution that would recapitalize the GSEs and bring them out of conservatorship under strict conditions. “Knowing that it’s going to be an uphill battle to get any sort of resolution from Congress, it could be...

Rural Housing Guarantee Loan Volume Expected to End 2014 on a Low Note Despite Third-Quarter Surge

Production of rural housing loans with a Department of Agriculture guaranty is expected to end 2014 far below the record volume originated last year, according to agency estimates. USDA Section 502 guaranteed homeownership obligations in fiscal 2014 totaled $19.1 billion, down from last year’s $22.4 billion, according to data recently disclosed by the agency. Texas led...[Includes one data chart]

Mortgage Market at a Glance

Weekly mortgage rates and application survey data as well as indexes for ARMs.


What is it going to take to convince lenders to loosen the credit box (i.e., remove underwriting overlays)?

The recent rep and warranty changes announced by the Federal Housing Finance Agency should go a long way in protecting lenders from future buybacks and help expand mortgage credit.
There won’t be any significant elimination of underwriting overlays until the government stops seeking huge mortgage-related penalties and settlements from lenders.
There shouldn’t be any expansion of the mortgage credit box since looser underwriting is what caused the recent mortgage crisis.

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