In today’s dramatically changed mortgage lending and regulatory environment, lenders must aggressively manage their originator compensation structures if they want to guarantee their compliance with all applicable laws and regulations, according to a top industry consultant. The first step is “to eliminate all incentive arrangements that pay commissions or bonuses based on any of the terms or conditions of the loans such as interest rates, demand features, prepayment penalties or proxies for these loan terms,” said Henry Oehmann, national executive compensation services executive director for Grant Thornton. Lenders...

Many mortgage lenders are concerned about a new fee-for-service compensation plan proposed by Fannie Mae, Freddie Mac and their federal regulator – including a change in how servicers get their fees. Under the current minimum servicing fee system, servicers take their slice of compensation out of the interest payments being passed through from borrowers to the government-sponsored enterprises. Under the proposed fee-for-service plan, servicers would pass through the entire consumer payment and then get their compensation from the GSEs. Beyond the economics of the proposed change – servicers would get a flat fee, perhaps...

Freddie Mac reported that 82 percent of homeowners who refinanced in the third quarter kept the same loan amount or reduced their principal balance by paying-in additional money at the closing table. Of this group, 37 percent reduced their principal balance and 44 percent maintained around the same loan amount. The other 18 percent were cash-out borrowers, who increased their loan balance by approximately 5 percent. For refi borrowers taking a new 30-year FRM, the median interest rate reduction was about 1.2 percentage points. In practice, that means a borrower with a $200,000 loan saves $2,500 in interest payments during...

Despite buying back some $5.4 billion in mortgages during the third quarter of 2011, mortgage lenders made only a small dent in the huge number of unresolved disputes with Fannie Mae and Freddie Mac over representations and warranties. According to third-quarter financial reports from the government-sponsored enterprises, Fannie and Freddie still had a whopping $12.2 billion of outstanding repurchase claims as of the end of September. That was down only slightly from the $12.7 billion in unresolved buybacks at the midway point in the year. The GSEs reported that seller-servicers...(Includes one data chart)

The prototype mortgage disclosure forms that the Consumer Financial Protection Bureau has been testing are getting generally positive responses for their content and overall design. But they aren’t well suited for the ways in which consumer shopping is adapting to modern technology, according to the Consumer Mortgage Coalition. “Recently, software available on mobile web access devices such as smartphones and tablets has streamlined the home and mortgage shopping process,” the CMC pointed out in its comments on round 5 of the CFPB’s integrated consumer mortgage disclosure project. “This technology is evolving rapidly ... [and] the amount of information available to consumers will continue to increase rapidly in the future.” Given this reality, it does not appear that the Loan Estimate disclosure will be used as a shopping tool because the consumer will have finished shopping by the time they apply for a loan.

Credit rating agencies appear to be more generous in rating structured finance products over other bond types because they tend to bring in more revenue, according to a recent study by academics. Researchers at Indiana University, American University and Rice University said that, contrary to assertions by the top credit rating agencies, asset classes are not equal when it comes to ratings. The study “Credit Ratings Across Asset Classes: A=A?” claims there is overwhelming evidence that structured products, such as MBS, receive significantly higher, more optimistic ratings than those assigned to bonds issued by...

Mortgage banking profits rebounded in the third quarter of 2011 as loan production levels began to climb, according to a new ranking and analysis by Inside Mortgage Trends. A representative sample of 15 major mortgage lenders revealed aggregate net income from mortgage banking activities rebounded back into positive territory after thudding to a whopping loss in the previous quarter. The group posted aggregate mortgage banking income of $4.72 billion in the third quarter, compared to a combined $11.40 billion loss in the previous three-month period. The group’s massive second-quarter loss was largely...(Includes one data chart)

It has been four years since fault lines in the subprime market sent tremors through the rest of the mortgage industry and three years since the global collapse of financial markets, but lender behavior today remains driven by fear. Originators ask themselves three questions in the current market, said William Rayburn, CEO at mortgage technology provider FNC, during a panel session at the ABS East conference sponsored last week by Information Management Network. Lenders want to know whether the application will close – it costs them money if it can’t – and whether they can sell the loan if it closes, he said. Just as important...

Consumers who shop for their mortgages online are increasingly of a higher overall credit quality, and their approach to shopping online is growing more sophisticated, according to a new benchmarking study by Mortgagebot LLC. And that raises the ante for mortgage lenders that want to compete in cyberspace, said officials at the Mequon, WI-based information technology provider. The three most significant take-aways for lenders from the new survey have to do with growing borrower sophistication (and the resultant increase in customer expectation), the lender rate of online technology adoption and what online mortgage lending experts call...

Overwhelmed by the tidal wave of foreclosures and under intense scrutiny by lawmakers and regulators, the mortgage industry and default servicers in particular are being challenged like never before to keep up with complex, ever-changing compliance rules and they are in dire need of a technology solution to keep up with the changes. Compliance technology vendors such as Irvine, CA-based DecisionReady are striving to keep up with the demands of their clients, who may not exactly know what they want but know they need a solution that keeps them connected and on top of the latest legal and procedural changes, according to...