11/17 - Home Values Continue to Decline - Offset by Declining Defaults

CoreLogic: Home Values Continue to Decline

Home prices fell 1.1% in September after falling 1.2% in August, according to the just released CoreLogic house price index. Mortgage Originator 11/17/2010

Defaults Continue Decline
It has been nearly a year since monthly mortgage delinquency has risen. www.mortgagedaily.com/Delinquency111610.asp

Housing Starts Fall to a Near Record Low, Multifamily Hurt Too

Single-family housing starts fell to an annualized rate of 436,000 units in October, a near low that comes despite rock bottom mortgage rates. - Mortgage Originator 11/17/2010

Analysts: Low Mortgage Rates Sustain Historic Home Affordability

Historically low mortgage rates are a crucial component of record affordability for home buyers, but lack of confidence in the market and fear of further price declines are challenges that are outweighing that factor, Credit Suisse analysts wrote Wednesday. Mortgage Originator 11/17/2010

Expected Loan Limit Drop Could Fuel New Nonagency Business

An expected drop in the conforming loan limit could make new nonagency mortgages more compelling, according to executives at Invesco Mortgage Capital Inc. Mortgage Originator 11/17/2010

Rates Jump, Apps Down

An 18 basis point rise in rates for 30-year fixed-rate mortgages resulted in a decline in mortgage application volume of 14.4% last week on a seasonally adjusted basis, according to new figures released by the Mortgage Bankers Association. The data was not adjusted for Veterans Day. Mortgage Originator 11/17/2010

Slate writer Bethany McLean examines the home-appraisal industry for the online magazine.

McLean is skeptical that either the Dodd-Frank Act's provisions on appraisal practices or the Fed rule implementing them will effectively shield appraisers from bullying lenders' demands that they inflate valuations. "If appraisal independence wasn't enforced the last time around, why should we believe it will be enforced this time?" She notes that when New York Attorney General Andrew Cuomo proposed the Home Valuation Code of Conduct in 2008, federal regulators protested that the issue of appraiser independence was already "adequately addressed." 11/17 US Banker

Acting OTS Chief Attacks Dodd-Frank Law as Burdensome, Ineffective
WASHINGTON — John Bowman, the acting director of the Office of Thrift Supervision, lashed out Wednesday at the Dodd-Frank Act, arguing it made his agency the scapegoat for the financial crisis and could spell doom for the thrift charter. 11/17 American Banker

FDIC Conducting 50 Investigations at Failed Banks

The Federal Deposit Insurance Corp (FDIC) is conducting about 50 criminal investigations at U.S. banks that have failed since the start of the financial crisis, the Wall Street Journal said. The FDIC, which is responsible for dealing with bank failures, is probing former executives, directors and employees at failed U.S. banks and is taking efforts to punish alleged recklessness, fraud and other criminal behavior, the Journal said. Compliance Exchange 11/17

CSBS Adds New Credit Report Functionality to NMLS

On November 1, the Conference of State Bank Supervisors (CSBS) announced that the Nationwide Mortgage Licensing System and Registry (NMLS) now can process credit histories for individual mortgage loan originators (MLOs) and that, effective immediately, all licensed residential MLOs participating in the NMLS must complete a credit authorization process, regardless of prior state requirements. 11/17 - InfoBytes Buckley and Sandler

Cutting Losses on Loan Defaults
A growing number of borrowers with negative equity are opting to abandon their mortgage obligations, though a Wharton professor has a possible solution for such strategic defaulters. But for those loans that cannot be saved, an expanding array of service providers promise to make the disposition process more efficient and less costly.

In an article entitled Home is Where the Money Is: A New Incentive Program Aims to Slow Rising Mortgage Defaults, Wharton finance professor Alex Edmans claims that an incentive program could prevent strategic defaults for borrowers with negative equity. Dubbed "responsible homeowner reward," the incentive provides a "sizeable cash reward" for borrowers who repay their entire mortgages.
www.mortgagedaily.com/DefaultServices111510.asp

FHA DPA Losses Could Exceed $13 Billion
Losses on loans where the seller provided down payment assistance are ultimately expected to exceed $13 billion at the Federal Housing Administration. Had such programs been banned, FHA asserts, its capital reserve ratio would be in compliance with congressional mandates.
www.mortgagedaily.com/FhaAnnualReport111610.asp

States Pushing Loan Mods:

The Journal said a probe by state attorneys general of foreclosure problems has expanded to include other things, like the fees servicers charge. The states want banks to modify mortgages in instances where doing so would result in a cash flow from the borrower that is greater than the likely proceeds of a foreclosure sale, Iowa Attorney General Tom Miller told the paper. The Post said the states are pushing lenders to create a nationwide fund to compensate borrowers who can prove they lost their home to a faulty foreclosure. "Among the most contentious issues, besides how much each lender would contribute, are the time period to be included and who would decide which homeowners deserved access to the fund." Wall Street Journal, Washington Post 11/17 - US Banker

Loan Officer Selling: My Marketing Plan - Week 1 - Choosing Prospects

My Marketing Plan - Week 1 - Choosing Prospects

Choosing prospects is one of the most important elements in developing a marketing plan.  Once I identified how many loans I needed, I knew how many referral sources I needed.  Too few prospects and I am not active enough.  Too many and I cannot possibly reach them all. 

Unqualified prospects

When I don't know what that prospect would want from me, I have no business reaching out to that person.  It shows I don't really understand what I have to offer.  I need to think it through because every prospect should have a need that I can fulfill.  More on this later. 

The Math

I decided I needed 6 or 7 loans a month to earn my desired income.  Based on average production sources producing one referral a month, I need 7 referral sources.  How many prospects will I need  to source to get to 7?

Statistics say that you will go through 40 prospects to generate 1 referral source.  Can that be right? I need to call 280 people to get to 7 referral sources?  Now you know why it takes so long to get up to speed as a loan originator.  I have to make a large number of calls, but they also must be to good prospects.  How do I manage this?

First, I have to figure out how many people can I meaningfully follow up with in the course of a week.  Is it 280?  No WAY.  What about 5?  I can do that in a day.  Maybe even 6 or 7.  When you get down to it and start actually calling you will realize that these 5 calls are a lot of work.  You have to plan the call, make the call and then do the follow up.  Then there are other things I have to do, like go to meetings, fill out paperwork, and pick up the kids.  Also, if I set myself up to do an unreasonable number of calls, I will become disenchanted with the process.  

If I call on 5 people a day, that's 25 people a week.  My initial prospect list is 25. 

You have heard the adage, 80% of sales happen after the 5th call, but most people don't even get to the 2nd call.   I have to call the prospect at least 6 times, because the sale will happen AFTER the 5th call.  I do this because I have to give people a chance to be my customer. 

How long will this take?

Following this system I should get my first full time referral source between week 6 and week 12,  because I will have moved completely through 50 prospects.  I should pick up my second full time referral source within the next 6 week cycle (75 prospects).  I hope I am doing better at choosing more suitable prospects, and also doing better at closing them by this point.  But if not, I am going to continue working through this cycle and the next customer should come within the next two 6 week cycles. (125 Prospects) ..

Under the worst-case, where I am having to really churn through prospects, it has taken me about 6 months to get 3 full time referral sources.  I AM HALFWAY TO MY GOAL!!  Assuming I am not improving any techniques or choosing any better prospects initially, I will reach my final goal of 6 referral sources in about 13-14 months. 

Mortgagee Letter 2011-02 - Quality Control - Much Ado About Nothing

BULLETIN - Detailed treatment to follow

We reviewed the mortgagee letter over and over to look for what was actually "NEW" in this mortgagee letter, relative to what we have been telling people to do all along.  Everything listed is currently in effect, so there is nothing "NEW".  Perhaps this is emphasis that lenders must take certain responsibilities more seriously 

TPO QC Reviews

Since brokers aren't being approved anymore, HUD has stated that sponsors of brokers must review brokered loans in the same way that direct originations are reviewed. 

• If you wholesale, you must establish sampling methodology for brokers
• Example: 10% to include one from each originator/MLO that submits a loan per review period (week, month or quarter) or other statistical model.

All Lenders must

• QC all early payment defaults
• QC a sampling of denials, and should QC all denials for Fair Housing Compliance
• Report Loan Sales and Servicing Transfers
• Report all fraud and material deficiencies to your HOC immediately

For our QC Customers, the only thing that changes is you must reflect your sampling method for your brokers if you wholesale. 

Deciding About an In-House Training Program

Is it the end of contract private training companies in the mortgage industry?

The advent of the Nationwide Mortgage Licensing System (NMLS), and the incumbent centralized education approval that it includes, presents a tremendous opportunity for companies with multiple employees to develop their own internal training programs for certification purposes.  The legacy 50 state licensing ad-hoc system with its patchwork quilt of requirements made the education certification process difficult even for full time compliance companies.  The new protocol makes it easier for smaller companies to have a state or even national certification education program.  

While the state licensing systems previously in place now have a uniform “overlay”, the states are still in charge of licensing.  But the new system forces states to “get out of the education approval business.”  The SAFE Act requires that the NMLS approve course material and certify that federally mandated minimums are included.  Some states, such as Utah and Texas, have robust and heavy education requirements and are very invested in the review process.  These states may maintain their own separate additional requirements.  Most states, however, see that having a separate state education approval function is a duplication of effort.  These states are more than happy to turn over the education certification function. 

This means that in the future it will be much simpler to get an instructor, a course or course material approved.  In addition, unlike virtually every other piece of legislation spawned by the housing finance crisis, the cost is substantially reduced.  Under the old systems, multi-state course licensing meant a training company would have to spend over $28,000 just to get a course approved nationally.  In the new system the cost is $600. 

Generating Your Own Program – Is it Worth it? 

The question of internal training program feasibility is a calculation that will vary as the market determines the per person cost of the comprehensive curriculum.  With as few as 3 employees, it makes sense to have an internal training program.

Unfortunately, it is never that simple.  This model does not take into account the cost of developing a course, the application and approval process, and having an instructor to run the course.   

Of these impediments, course development is the most troubling.  A course book can be 400 pages long and, particularly these days, the content is a constantly moving target and a challenge to update.  Otherwise, filling out the application form is easy to do internally.  As to the instructor, most companies have a manager or senior person who enjoys teaching, so that’s not a problem either.  

This means that, if you purchase or lease a course, you can arrange a training program for your employees at a substantial cost savings while getting all of the other benefits of an in-house training program at the same time.  Does it still make sense? 

What is clear from this calculation is that, if you have at least 11 originators, it makes sense to at least consider an in-house course. 

What are the benefits of an in-house training program?

Control the Message - One of the most frequent complaints regarding outside trainers is that they do not understand how your company runs.  Combining an in-house program with other vocational training can reinforce your company’s standard procedures, values and methods.  In addition, regular meetings can be used as time to deliver required training topics that would be covered as a matter of the course of business.   

Manage the Time – The most expensive part about training origination personnel isn't the cost of the training, it’s the time spent away from phones or sales related activity.  In an in-house program, compliance training can be combined with vocational skills training.  This means your origination staff spends less time in training and more time doing what you pay them to – bring in business. 

When and Where you Want It – Instead of having to coordinate a far clung event at an outside party’s convenience, you can provide training at a moment’s notice, at whatever location is convenient.  Having a company meeting?  Schedule some training as part of the event. 

RESPA 2010 Update - Understanding “Changed Circumstances”

The intent of the new GFE regulation is to require a FIRM cost estimate.  Once issued a GFE cannot change unless there are “changed circumstances.”  This eliminates the “bait and switch”.

The original information cannot be a basis for the change, unless it is later found inaccurate.  If there is a changed circumstance, then it can only change that aspect of the costs that it affects; i.e.: title problem > title insurance or credit score > interest rate.  Any changes have to be issued within 3 days of discovery – by whoever discovers the change.  The lender or broker can revise the GFE, so communication is crucial.  Retain documents that relate to the change for 3 years.

Not Changed Circumstances	Maybe, depending	Yes
·         * Any accurate information provided prior to GFE borrower ·         * Broker issued GFE inconsistent with wholesaler’s ·         * No property address at application ·         * Broker changes from one investor to another ·         * Market changes	·         * Borrower delays closing ·         * Original vendor goes out of business	·         * Acts of God, war, disaster, emergency ·         * Borrower changed: credit quality, loan amount, property value ·         * New information ·         * MIP/PMI factors changed ·         * Credit policy/Regulatory change ·         * Incorrect legal address initially supplied ·         * Undisclosed title or property issues ·         * Borrower changes occupancy status ·         * Borrower selects POA closing ·         * AVM – “No hit” ·         * Credit score change